„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 day before yesterday the pair reached another support zone. An Inside Bar was formed between the zones. A break out from the IB should point to the phase the pair is in. A move towards the upper limit of the IB – that is to the lower boundary of the support zone, may trigger off a larger correction in the form of wave 4 of wave 3C of the resultant downward impulse. A rejection of the level or a break-out down will indicate a breach of the support zone and continuation of declines as part of wave 3C towards the 1.1820 level.
On the weekly Ichimoku chart, the pair has penetrated the flat Kijun line situated at 1.2060. That line has not been retested yet, therefore a correction towards it can be expected, which is applicable to the 4H TF as well. Such a correction could take place as part of wave 4 of wave 3C. Based on the Chikou line, we can see that the downward sequence has been almost completed at that stage, so a similar scenario is possible. Should the price go higher and reject Kijun , an opportunity will arise to trade a continuation of declines. At present, Sentiment is neutral, which will enable opening positions.
GBP/USD
Likewise, GBP/USD has reached a support zone and a trend line. Moving down from the top, so far three waves have been formed; however, wave 3 has not been completed. That may indicate a correction towards the upper limit of the resistance zone and a creation of wave 3. Once completed, I expect that declines will continue towards the 1.3450 level.
As in the case of EUR/USD, the pair has breached the Kijun line on the weekly chart, which now constitutes resistance and a move back towards that line may be expected. Though I think it will not happen right now (if at all). After a glance at Chikou, we can observe that the last sequence down in wave 3 has not been completed yet. If a correction occurs, it will be more in the direction of the Kijun line on H4 TF as wave 4 of wave 3C. Since in this case sentiment has been neutral for a longer time, it will be possible to look for trading wave 5.
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USD/JPY
The pair rejected the first resistance zone two days ago. As I commented before, the sequence of the last wave up had been completed, therefore the move down we observed was possible. We still don’t know whether it is going to be wave 4 followed by wave 5 of the impulse, or an upward wave 3 has been completed and bigger declines will ensue. We should get a clearer answer at the nearest support level, which, if the first scenario does not play out, should not be breached.
The Ichimoku chart shows that the pair reached the Senku Span A and the Tekan line on the daily TF. Their breach may result in a move in a direction of the Kijun situated quite far away from the price. Once the above-mentioned lines have been defended with the current sentiment (a decline in shorts and a rise in longs) it will be possible to trade based on continuation of upward moves. However, the last wave down is a 5 and at least one more wave down should be expected.
Translation: Mirosław Wilk
