Elliott Wave Analysis

[Trader Skillset]

We wanted to start with the daily chart for EURUSD because it shows a clear impulse wave to the downside from this summer’s high. It also shows a “throw under” in wave (v) to the downside into a “panic type” low. Prices have now returned to the underside of that broken channel line, and a push above 1.1534 would reverse over leveraged bears, spark a return as high as the “Resistance Zone” and set up the next phase of the decline.



Drilling down to the 240-minute chart, we see a couple of notable technical items: Prices held 1.1262 support this week. RSI turned up from the “bull trend support” (lower blue zone). Five waves down from the wave (iv) high are complete. The action down from the wave a/i high appears to be corrective. Even if we took the view that EURUSD is going to head down directly to par, to fulfill our longer range objective, a corrective bounce could still see the 1.1680 area first (prior fourth wave extreme). We are nimble bulls here looking for at least that level, but potentially more.

 

[Trader Skillset]

GBPUSD 240-minute Wave Count

The pound is a little further along in its rally than the euro versus the dollar. Last week’s successful test of the 1.5200 area lets us know that it is an important level. As long as prices are above there, we can look for the head and shoulders target near 1.5600, and potentially up towards the prior fourth wave extremes near 1.5800 and 1.6200. RSI is has touched “sustainable bull territory” twice since the low, so contrary to many, we’re looking for further upside action to reset prices for the next down phase.

 

[Trader Skillset]

AUDUSD 240-minute Wave Count

There’s little question that something is wrong Down Under. The AUDUSD continues to look much weaker than GBPUSD or EURUSD. But, that’s not to say we’re near term bearish. In fact, we have several near term bullish items to point out: Last week’s low held, leaving support intact. The action down from wave .a/.i high is clearly a three wave move. The broken down trendline was successfully retested after the wave .a/.i high in an example of reverse polarity. Channel support held at this week’s low. So, we’re looking for at least a push higher, potentially to the former support, now resistance, from the wave iii low near .8000, which is also near the upper line of the down channel. We’re not ruling out further strength beyond that, but as our recent GBPAUD tweet pointed out, Aussie should remain weaker than most currencies going forward.

 

[Trader Skillset]

NZDUSD 240-minute Wave Count

Last week we wrote, “An early week low, followed by late week strength is our play here too.” It took until Thursday for the NZDUSD to bottom, but the late week strength was right on the money. A corrective decline is complete at last week’s wave b/ii low, and now we’re looking for a minimum of two equal waves up from the low at .7589. There’s further bullish potential towards the extreme of the prior fourth wave at .8036 as well. It’ll take a break of .7314 to alter our near term bullish view.

 

[Trader Skillset]

USDCAD 240-minute Wave Count

Wave b/ii looked like a triangle early in the week, although it pushed higher as the week went on. Nonetheless, the rally from the wave a/i low is clearly corrective, which opens the door for prices to decline near the 1.2200 area at a minimum. We’re holding our bearish view against this week’s top at 1.2698. I’d imagine that there’s been a lot of late to the party “oil weakness means CAD weakness” traders that will get whipped out prior to the resumption of the larger rally.

 

[Trader Skillset]

USDCHF 240-minute Wave Count

The USDCHF is a bit of a mess. Notice that our RSI goes from sustainable bull, to bear, and then back to bull again – before and after the CHF peg announcement. We’ve altered our count a bit, although we’re still looking for a slight push to the upside to complete a five wave move. The action after that will be telling to the larger trend. We’re only going to participate here if we see something that’s terribly clear, and as of now, that’s not the case.

 

[Trader Skillset]

USDJPY 240-minute Wave Count

We jumped the gun last week suggesting that wave (4) was complete, although we alerted Twitter followers to that possibility mid-week. It’s still possible that last week’s count (this week’s alternate) is valid, and that wave (5) is already underway. However, it’s usually best to assume that a range is in effect until it is broken. As such, with three waves up from 117.17, we’re looking for wave E to complete with a small up, then down, sequence. We’re going to be aggressively bullish on any dips next week, as long as prices remain above the wave C low, and we closed out the week as small bulls. We’ll eventually be looking towards 123-125.00 area before the eventual top.

 

[Trader Skillset]

Please feel free to add your Elliott wave counts, questions and thoughts.

I've been using Elliott wave as my main technical analysis tool since 2005. Although it's not a stand along trading system, I feel it gives me a feel for what's probable.

 

[Trader Skillset]

EURUSD 240-min Wave Count

We have a clear five waves down from the wave (iv) high. So, even if our larger count is off base, we could still see an upward correction of that impulse reach 1.18 or so. We can’t rule out that the larger trend is still down per the alternate count, or even something more bearish, but the action down from the a/i high looks corrective. As long as prices are above 1.1265 we can expect prices to head higher near term. Even a break of that level might only mean a flat correction for wave 2 was underway. There’s plenty of resistance overhead, but we’re going to stick with our count, unless evidence suggests otherwise. Lastly, notice the behavior of RSI, where it pushed into the upper blue zone (sustainable bullish territory) at the wave a/i high, held above the lower grey area for the past two weeks, and has pushed back above 50 on Friday. All of that supports further upside, albeit as nimble bulls. So, both Context and Momentum are bullish – now we look for Signals.

 

[Trader Skillset]

GBPUSD 240-minute Wave Count

Prices have pushed significantly above the down trendline keeping the larger rally count alive. The action down from this week’s high appears corrective, so we’re still expecting prices to reach the head and shoulders target near 1.5500. That also coincides with former support, now resistance, so prices may have some trouble pushing through that area. But, with RSI having pushed into “sustainable bull territory,” and only having pulled back to support, we’ll say the near term trend is up, unless the 1.5200 key support is broken.

 

[Trader Skillset]

AUDUSD 240-minute Wave Count

Aussie had a decent week, but it’s still below trendline resistance. We’re looking higher, into .8000, at least, prior to significant resistance. It’s hard to be really excited here, but the prior decline is fully developed. Even a return to the previous fourth wave, of one lesser degree, would be a shock to most market participants. Perhaps our uncertain tone is a reflection of just how one sided this market has been for the past several months. We’re not going to fight this budding uptrend, but would suggest being nimble considering the heavy structural resistance overhead.

 

[Trader Skillset]

NZDUSD 240-minute Wave Count

The Kiwi will have two equal legs up at .7587, and that’s also former support which is now resistance. So, any significant move beyond that level, would suggest that our count is correct, and that a larger rally was indeed underway. And, as long as prices are above .7450 we can leave the idea on the table that an impulsive rally is underway. So far there’s only three waves up from the low, but as long as prices remain inside, or above, the base channel, there’s potential for substantially higher prices (.7800 is the 38.2% retracement, and .8000 is the prior fourth wave extreme and 50% retracement).

 

[Trader Skillset]

USDJPY 240-minute Wave Count

We kept Twitter followers updated on our USDJPY thoughts this week, as this seems to be the most actionable market right now. Triangles happen to be my favorite pattern to trade because they give you so many reference points. For instance, if wave E of (4) is still underway (per the “alt” count), it should remain above 117.11, where there would be two equal waves down from the wave D high. Below 117.11, and it seems more likely that we’ve been witnessing a massive distribution pattern that is going to break substantially to the downside (an alternate not shown on the chart). Until that happens, though, our top count remains in force. We’re bullish near term against Friday’s low, targeting 122-124.00. If we see an early week pullback, below Friday’s low, then that’ll activate the alternate count where we’ll be looking for the wave E of (4) bottom above 117.11. A break of 117.11, though, would mean that there’s likely some bigger problems here, and in global markets, and that we should look for an unwind back to the previous fourth wave 105.42 at a minimum.

 

[Trader Skillset]

USDCAD 240-minute Wave Count

The descending triangle pattern we’ve drawn is not an Elliott pattern. It’s a classic technical analysis formation, though, that is indicative of distribution, since you’ve got lower highs and flat lows. We’re going to stick with our wave (3) top in place count, unless prices are able to push above the wave b/ii high. Until then, we’ll be looking for wave c/iii to the downside to correct the massive rally we’ve seen in USDCAD. Like the other dollar pairs, a correction will reset this market for another impulsive move, in USDCAD’s case, to the upside. Even a push to new highs won’t turn us into bulls; instead, we’ll be considering an expanded flat pattern for wave (4), or a significant top in wave 5 of (3).

 

[Trader Skillset]

USDCHF 240-minute Wave Count

Prices retraced to the 78.6% level of the panic decline after the SNB peg break. What’s interesting is that’s also resistance from the wave a of (iv) and c of (iv) low. Prices immediately turned back down from there and have now broken the flattest trendline we can draw. That spells trouble for the dollar versus the franc, and we’re bearish against this week’s high. It’s tough to trust that the SNB won’t reinstate its peg at some point, but we should at least see a return to support in the .9000 range, even if the larger trend is up. If the larger trend is down, prices are about to collapse. It’s a nice asymmetric outcome (i.e. little risk, a lot of potential reward).

 

[fxstrategist]

great analysis and follow up, thanks.

 

[Trader Skillset]

great analysis and follow up, thanks.

Glad you like it, thank you. I'll be posting each weekend on these 4-hour charts.

 

[Trader Skillset]

USDCHF 240-minute Wave Count

The pattern is a bit of a mess, given the peg panic. But, RSI is telling a clear tale, in that prices pushed to a new high above last week’s, but RSI didn’t even make an attempt. This bearish divergence bodes ill for a further rally. So, we’ll be awaiting a reversal signal, especially given the abundance of overhead supply here. Given the lack of strength in other pairs versus the dollar, the franc may actually be our best bet for playing further dollar weakness, so don’t forget about this pair this week. We’ll update Twitter followers this week should we see something actionable.

 

[Trader Skillset]

USDCAD 240-minute Wave Count

Not much changed this week for USDCAD. The dips were bought and the rallies were not, so the triangulation continues. We’re still of the belief that the pattern will break lower, but that seems close to even odds today. We’re certainly not going to fight any weakness that nears 1.2350, since the pattern projects lower down to the 1.1900 area, while the upside rally would be of the terminal variety, in all likelihood. We have added the alternate count which suggests wave (3) is still in progress, in the event of a push beyond last week’s high.

 

[Trader Skillset]

USDJPY 240-minute Wave Count

The situation in USDJPY is a bit what I’m talking about when it comes to EURUSD. After Tuesday’s reversal, it seemed almost a forgone conclusion that wave E was still underway. But, the action to end the week suggests otherwise. “What seems obvious, is obviously wrong.” While it’s still possible that we’ll get wave (c) down to complete E of (4), that’s not going to be our top count heading into next week. There’s still significant resistance at the top of the range around 119.80, but a push above there will eliminate any other bearish potential. A break of the up trendline drawn off of the wave C and y lows would likely mean (c) was underway. Until that happens, we can look for prices to push to a new high, in potentially a straight line type of a move. 122.00-124.00 seem to be likely stopping areas, although higher potential does exist.