“Search, Analyse, Trade” is a series of analyses for Price Action and Elliott Waves. Its detailed step-by-step description can be found over here. I invite you to today’s review of selected currency pairs and potential trading opportunities.The analyses are based on the Dukascopy sentiment that can be seen here.
EUR/USD is still above supply zone and if we look closer on the waves which were created since last top we’ll see that three of them are already finished. Current reaction to mentioned supply zone might be a fourth wave in five-waves-move and it should end in the area of top of wave four in the third wave. If this setup isn’t going to be fulfilled, the head and shoulder formation will become even more probable.
On the sentiment chart we can spot a slow but steady increase in long positions. But I’m waiting for creation of right shoulder of probable H&S formation and rejection of resistance zone or breaking actually tested demand area.
Nothing interesting happens on GBP/USD so let’s look at its monthly chart. Looking up from above we see a strong downward impulse, which is a wave 1A. Extended correction in wave 2B and another down wave, ie 3C wave, which is not finished. Wave 1A is the fifth, so the one forming now should be the same. The observed growth from the low should be the beginning of the fourth wave 3C. Since wave ii was a straight wave, wave iv would probably be extended. It seems that the increase from the bottom that stopped on the correction 38.2 of wave 3C and important resistance zone is just wave a. It looks like an impulse, so in the nearest future we should see more correction on this pair and then increase in wave c, wave iv and wave 3C. Wave iv may also take the form of a triangle.
More interesting situation is on USD/JPY. The pair stays in a Inside Bar on daily chart, but consolidation slowly forms of a triangle. If so, then wave d should be created. Any wave e can be used to find a long position. It should end around the tested currently area. If this is a continuation triangle, in the near future we should see a break out of Inside Bar and move towards level 114.300.
The sentiment is bearish, but since we are dealing with uptrend and formation of possible triangle, I will wait for a break down or creation of the wave e and rejection of the level of support and its lower limit.