„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 pair, having broken out downwards from the consolidation that lasted two months, headed down towards an important support zone, which was breached yesterday, and the pair is slowly moving down towards another one. It seems that the move from the top down was wave 1, followed by a simple correction and currently we are in wave 3 of wave 3C. Soon, we should observe a bounce and a rise as part of wave 4. The upper limit of the support zone – now resistance, will make a good target for its completion and for identifying positions to trade wave 5.
The weekly Ichimoku charts shows that the pair, having breached the Tenkan line, reached the Kijun line and made an attempt to bounce off it. That line is flat and overlaps with a support zone. If it was an abc correction, it seemed to be an ideal target for wave c completion. However, the initial bounce turned out to be merely a correction and currently the pair is already sitting below the Kijun line. The Tekan line changed its direction and is likely to be heading towards Kijun. Sentiment, as has been recently the case with such stronger moves, is completely opposite to what it should be and does not justify opening positions. Yet a retest of the blue line will make a good place to trade wave 5.
The pair mirrors the steep decline on EUR/USD. It penetrated consecutive support zones reached the more crucial one. At a first glance, it can be observed that the support will be breached and we are likely to see continuation of downward moves. Currently the pair has reached the lower limit of the zone and one of the lines drawn along the bottoms. A reaction on the demand side is quite probable and an attempt to correct towards the last bottom. From the wave perspective, if we consider the last wave up as completed – where wave 5 was an expanding triangle, then the current falls constitute wave 1A and moves down should continue at least mid-term.
On the weekly Ichimoku chart, the pair broke through the Kijun line, which may indicate a bigger move down, even towards Senkou Span A. Chikou is edging towards Senkou Span B and that may prompt a reaction and a correction towards the Kijun line. Similarly to EUR/USD, its retest could be used to join an impulse down.
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Chances are that the move from the bottom is something more than a correction of the last wave down. As I mentioned before, it is quite probable that we have completed a simple correction of the 2016 impulse. If that is the case, the gains we are observing mark the beginning of wave 3C. The pair is slowly moving towards the resistance zone with a possible reaction on the demand side and a correction. The last wave sequence has just been completed and such a scenario is by all means possible.
The Ichimoku chart presents a very clear indication that the pair is about to face up a serious obstacle in the form of flat Kijun line and Senkou Span B. Once breached, the way towards the top is open but in the meantime a rejection of those lines may result in a local correction. I expect they will be breached and retested, which will create a buying opportunity. Although sentiment excludes going long, but that may change as a correction develops.
Translation: Mirosław Wilk