„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 still struggling to defend the lower limit of the support zone that is currently being tested. Unfortunately, there wasn’t sufficient demand in that zone and no major correction occurred. The resistance will probably be breached and the pair will head towards the 1.1860 level, which has been tested several times so there might be some reaction there that will lead to an impulse and resumption of the trend. For the time being, we are still in sub-wave 3 of wave 3C. If a correction takes place, it should be wave 4 of wave 3C.
On the daily Ichimoku chart, the price moved away from the Kijun and Tenkan line, thus confirming the strength of the trend. The Chikou line is also at a maximum distance from the price. The downward-moving cloud has begun to expand. Even though sentiment is still at a neutral level all the time, it does not justify taking a position. The pair is still trading away from the line and the line on the daily chart and generates no signals to take any positions. There is no other choice but to wait for a correction and look for an entry based on sub-wave 5.
GBP/USD
GBP/USD remains within a broader support zone. Currently the pair is testing its lower limit and the trend line. The price reacted a bit to that level, but it was so insignificant that the odds for breaking out of the levels being tested are increasing. The pair is in wave 3 and should be nearing its completion – therefore we may see another leg down below the support and only then there will be a reaction on the demand side. Otherwise, judging by the sub-waves, where waves 1 and 3 are equal, an extended wave 5 may be expected, leading to a break out of the zone right now and a move towards the 1.3300 level.
The situation on the Ichimoku resembles that of EUR/USD. All the lines confirm a strong downward trend and a lack of correction prevents a signal on a lower TF from occurring. Sentiment has been also neutral for a longer time and is staying at a steady level. Waiting is the only solution
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USD/JPY
On USD/JPY, we are still observing a continuation of the reaction to the support level. Two small pin bars and one candlestick of indecision appeared. As I wrote before, the move down is wave 5 and should constitute wave A if it is a to play out as a correction and the current attempt to rise – wave B. The extreme of that move should end on the left shoulder of the potential H&S formation. Then another wave down should follow. A move above the top would negate this scenario.
On the Ichimoku chart, following the pair’s failure to penetrate the Kijun line and Senkou B from the weekly chart, the pair tested and then breached the Tenkan line on the daily chart. Yesterday we retested it from the bottom. The Chikou line bounced off Senkou Span B and retreated inside the cloud. On the H4 chart, the price is sitting inside the cloud and a strong break out upwards will trigger a signal to take a position, which is backed up with neutral sentiment. However, I am expecting another wave down and a test of Senkou Span B on the H4 chart and only then will I focus on looking for a position.
Translation: Mirosław Wilk
