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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 pair is currently sitting within a support zone. Last week an Inside Bar was formed and an attempt was made to break out of it down on Friday and thus to penetrate the lower support limit. Yet the price went back to the IB and an upward move may take place based on the Fakey formation. However, the candlestick that retreated is not convincing enough and that’s why I would not confirm the formation yet. However, if the pair manages to sustain the support, we should observe attempts to move up towards the support – now resistance zone breached recently. It should occur as part of wave 4 of wave 3C. Once completed and after a rejection of the resistance, it is quite probable that the price will head in the direction of the 1.1750 level and it should take place as part of wave 5 of wave 3C.

We are witnessing a robust move down on the Ichimoku chart. The alignment of the lines strongly confirms a downward trend. The only exception is the Chikou line that is edging towards the price, which translates into a weakening of the move and may lead to a bigger correction or a sideways move. On the weekly chart, the pair breached the flat Kijun line. Any moves up in its direction and a retest would fit into the wave sequence. On the chart above, these are areas of the Tenkan line from the daily chart. Sentiment remains unchanged and justifies opening a short position and trade wave 5 following a correction.

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USD/JPY

Following the completion of the last wave sequence, the pair reached and rejected the resistance zone. As a result, the price moved down and stopped within the support area. The pair is trying to defend the zone and any PA upwards should occur based on wave 5 of the last wave up.  In that scenario the pair should reach the 110.230 level. However, the problem is that the decline from the top, as can be observed on a higher TF, is wave 5. It may mean that what is taking place is merely wave 1 of a correction and one more leg down of that wave should develop, i.e. wave 3C.

On the weekly Ichimoku chart, the pair bounced off the Kijun line and Senoku Span B of the upward cloud, which resulted in a decline and a breach of the Tenkan line from the daily chart. Currently the price is sitting within the cloud and has already tested Tenkan from the bottom. As mentioned above, the move down is wave 5 and a resumed move up should be wave 2B, which would end up as a small Head and Shoulders formation. If the H&S plays out, it would mean a decline towards the Senkou Span B line. Sentiment, following a sudden fall in short positions, is neutral and positions could be opened based on that scenario. A strong break-out above the Tenkan line negates that scenario. 

Translation: Mirosław Wilk

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