„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 EURUSD pair breached the resistance line yesterday that forms a neckline of the reverse H&S formation. My bet was a correction of the recent impulse in the form of wave c of an irregular correction, but the pair decided to build another wave up right after a simple correction. At present we are in sub-wave 3 od wave 3C1 that is heading towards a key resistance level. The whole sequence should end over there.
It seems that the pair will manage to breach the Kijun D1 line, which may mean we follow a scenario in which either an impulse or a 1212 sequence forms. In either case we should see a correction down and a retest of the Kijun line, followed by continued gains. However, if the pair doesn’t manage to permanently go above Kijun D1 but is strongly rejected instead, a resumption of the downtrend may be expected, at least as part of wave B of a larger corrective structure.
The GBP/USD, as I discussed recently, is moving within an ascending channel. Currently the pair is retesting its upper limits. If it is rejected, declines should follow. However, the problem is that there are a dozen or so potential scenarios and at the current stage it is hard to determine what exactly is playing out. My main scenario assumes that the current move up is just a correction of wave 5, which may potentially be extended (wave 1 and 3 are of equal length). However, if the pair breaches the channel’s upper limit, this scenario doesn’t make sense anymore and the whole impulse down could be considered as completed and the current advance as the beginning of a larger corrective structure.
Scenarios are meant to be traded. On the Ichimoku chart we can see that the pair reached the Kijun D1 line and rejected it several times – i.e. it is respecting it. However, we are still far away from an entry signal. Even though sentiment confirms the downward scenario (over the last several days we have observed an increase in shorts and a drop in longs), the pair is sitting above the descending cloud and all the lines are aligned in a manner signalling moves up. Therefore, there is nothing left but wait for a decisive move under the Senkou Span A and a possible correction.
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The USD/JPY has not completed its moves up and has breached a resistance line that is currently being tested. Right above the price chart, there is another resistance zone rejected by the pair yesterday. I assume that the pair is building wave 5 that may take the form of an ending triangle. The element needed for its completion is sub-wave 5, i.e. a retest of the supply zone.
On the Ichimoku chart, the pair managed to breach the Kijun D1 line, so I am expecting the price will continue moving up. The remaining lines are aligned in a way that signals gains and the price chart is situated above the cloud. I am waiting for a possible correction to the Kijun D1 and Senkou Span B and only in those areas will I be looking for entering a position.
Translation: Mirosław Wilk