„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.
The EUR/USD pair ceased rising ideally at a resistance line. Yesterday I discussed a scenario in which we have an impulse and the beginning of an irregular correction as wave 2b. That scenario remains valid until there is a breakout up above the resistance line. If the pair starts moving up boosted by those levels, we should see a H&S formation play out and a test of the 1.1830 level. An alternative scenario is the development of wave c as a triangle, a breach of the tested level and resumption of the declines.
On the Ichimoku chart we can see that the pair, having retested the Tenkan D1 and Kijun H4 lines, broke out of the descending cloud, triggering a weak buy signal. With the current neutral sentiment, such a position could be considered; however, first, there was no correction in the form of a c wave that I expected would happen, and second, the Kijun D1 line is sitting very close to the price. I am staying on the side-lines until the said line is tested.
The GBP/USD is following the scenarios that I came up with yesterday. As for now, however, it is impossible to determine which of them will be the correct one 😉. The pair is building something that resembles a flag and is moving within an ascending channel. We are waiting for a test of its upper limit. If the pair rejects the line, we should see declines as part of continuation of an impulse or as part of wave B of a larger corrective structure. However, if the pair breaches the upper channel limit, a scenario with a 1212 sequence (or wave c) could be considered as well, and that should result in a test of the nearest resistance zone.
As in the case of the EUR/USD pair, the Ichimoku chart shows that the Tenkan Line D1 has been breached, retested and broke out of the descending cloud moving up. The Chikou line is sitting above the price in the cloud. There is an obstacle in the form of the Senkou Span B line that it is about to face. Sentiment is in favour of trading short positions. Since yesterday, we have been observing an increasing number of short positions and a drop in long ones. The very formation that we can see on the chart and the proximity of the Kijun D1 line justifies such behaviour.
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There is the least action going on the USD/JPY pair. It has been hovering around the resistance line. It seems that the upward-moving structure has been completed and it should correct in the form of wave 2B. However, it is quite possible that wave 5 will take the form of a triangle, which may imply an attempt to reach the resistance zone right above it and only from those levels will we see a bigger correction down.
On the Ichimoku chart, we can see that the pair is trying to breach the Kijun D1 line and exit the descending cloud for good. So far, neither move has been successful. What we can do is just wait until the price decides which way to go.
Translation: Mirosław Wilk