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„Searching, Analysing, Trading” is a series of analyses designed for an investment strategy based on Price Action and Elliott Waves. Its step-by-step description can be found in this link. We kindly invite you to follow our today’s review of selected currency pairs and potential opportunities for transactions.

Our analyses are prepared based on Ducascopy’s SWFX Sentiment Index, available here.

EUR/USD

The attempt to initiate a larger correction failed and the pair breached the support zone. As it tends to happen in strong trends without distinct corrections, Elliott Wave analysis proves to be useless and therefore it does not make sense to dig down into the impulse by force. It keeps breaking through consecutive zones and is slowly heading towards the key one. Once breached, it should change sentiment in the long run. Support is in the area of 50 percent retracement of the wave up and that’s why declines can be treated as a correction.

The support zone mentioned above coincides with the Kijun line from the monthly Ichimoku chart and should make a very strong demand zone. I keep trying to look for opportunities to trade continuation of the declines. Even though sentiment in some moments confirms a potential entry, yet the strength of the declines is so big that a lack of corrections makes it impossible. Since I try to enter positions only in the area of the Tenkan and Kijun line, the only thing that remains now is to wait for a stronger reaction in their direction

GBP/USD

Waves can be spotted much more clearly on the GBP/USD chart and as I mentioned before, currently we are witnessing what should be wave 5. The pair broke out of the Inside Bar yesterday, which was located right above the lower limit of the support zone and it should keep declining towards the 1,3150 level. As the wave being observed is wave 3 of 5, a possible retest of the breached zone may be used to look for positions to trade wave 5 of 5.

On the weekly Ichimoku chart, the pair reached the Senkou Span A and it is possible that a local correction in the direction of the daily Tenkan line will occur, which will allow us, considering that sentiment is neutral at present, to look for positions to trade wave 5 of 5. Based on what we can see on the H4 chart, the pair may handle successfully the Tenkan line and only once it has been breached, a larger correction up may follow.

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USD/JPY

After yesterday’s slide of the USD/JPY pair, I mentioned a scenario in which the pair breaches the support right away and starts to form wave 3c. The pair breached the support zone indeed and reached a major demand zone. Theoretically this slide could end here, and the wave down could be marked as 2 or A. Both sub-wave a and c are fives, therefore what developed is a simple correction. This correction, as well as a reaction to the breached level, will be of key importance. If the level is rejected, this may change the whole sequence into 1212, which may mean a continuation of declines as part of wave 33.

On the Ichimoku chart, the pair breached the Kijun line from the daily chart and reached the Tenkan line from the weekly one. While looking at the Chikou line, we can see that both waves are fives, therefore I am waiting for a retest of the weekly Kijun line that happens to run near the 50 percent retracement of the last wave down. If a signal that is consistent with the Ichimoku rules appears there, we could look for positions to trade wave 33.

Translation: Mirosław Wilk

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