Elliott Wave Analysis

[Trader Skillset]

USDCHF Daily Wave Count

Similar to USDCAD, we’re looking for a turn higher. But, the bounce from the wave (ii) low is only in three waves, so a decline to complete wave (ii) is still possible. In addition, there’s an awful lot of overhead resistance, unlike the other pairs. That’s not a reason to completely dismiss the upside here, though, especially since many may not be positioned for franc weakness. Should prices push above the wave (i) high, many traders may scramble to cover shorts and become new longs.

 

[Trader Skillset]

EURUSD Wave Count

Prices rallied sharply early in the week, but were unable to hold those gains. The failure from below the trendline leaves the possibility open for a decline to complete wave C of (B) or (X), prior to the next rally wave. Notice that daily RSI failed to reach into Sustainable Bull territory, which suggests a trendless market.



We can see the clear three wave decline for wave A, or its alternate (B). Either way, the three wave decline means that the one larger trend is higher. One could argue that the rally up from the wave A low is a five, so we do have an alternate count that suggests it’s 1 of (C) to the upside. But, the top count is still leaning on a deeper decline to complete wave C of (B). That will be the case as long as prices don’t eclipse 1.1280. A push above that level will leave a three wave decline and that would likely mean a powerful move up in wave 3 of (C) was ready to take EURUSD up towards the 1.1500 area.

 

[Trader Skillset]

GBPUSD Wave Count

We knew something was wrong with GBPUSD on Thursday when it couldn’t push past the wave A low, and was underperforming. We sent a Tweet out that pointed out that failure, and if you’re not following us on Twitter, @TraderSKillSet, you should be. That’s a great way to get our latest thoughts and interact with us. We’re sticking with the idea that the decline from 1.5809 is a correction, but we’re a break below this week’s low and one could argue that we’ve seen five down. We’re going to need to see some evidence before getting too bulled up here.


Short term RSI pushed into Sustainable Bull territory, but prices weren’t able to push above the down trendline drawn off the recent highs. The fact that structural resistance held, with no overlap of the wave A low, means the bulls are in trouble near term. Allow prices to show us what they want to do, because the action is a bit sloppy now. A push above the trendline in an impulsive manner, and a small corrective set back would at least allow us to look for a bullish trade.

 

[Trader Skillset]

AUDUSD Wave Count

The rally to start the week was sharp, but the Sustainable Bear RSI reading, after the bearish divergence into the wave B top, was a tell that the rally wasn’t sustainable. That didn’t make it easy to turn bearish, although the failure below the wave (i) low likely keeps the top count on track. Since there are only three waves down from the suspected wave B high, it’s possible that the decline is only wave (b) of B with a small rally wave to push up towards .8000. But, that’ll remain the alternate unless last week’s high is taken out. Until then, we can look for an early week small corrective bounce to turn bearish for a break of support. We’re not confident that there will be a tremendous amount of downside follow through, but lower seems likely.



You’ll notice the push into Sustainable Bull on the smaller timeframe with last week’s rally. Here’s where multiple time frame coordination comes into play. Even though the 120-minute push registered bullish RSI, the larger timeframe didn’t. It’s when two timeframes agree that we can be confident of a signal. We are bearish against the wave (iv) high, although realistically prices shouldn’t push past Friday’s high under the bearish view.

 

[Trader Skillset]

NZDUSD Wave Count

The top count remains on track for the bird. RSI is in Sustainable Bear, although a slight bullish divergence suggests a temporary, wave iii low is close at hand. Prices should remain beneath the down trendline, although critical resistance for the bearish case is the wave (i) low. It’s too early to think about a bottom here, but we wonder how far off it is. Perhaps, we’ll see an ending diagonal for wave (v) which will keep the downside limited. Regardless, there’s no near term structural support to speak of, and keep in mind that wave (ii) was sharp, so wave (iv) should be a sideways correction according to the guideline of alternation.

 

[Trader Skillset]

USDJPY Wave Count

The Wolf wrote professionally as an analyst for years. As an analyst it’s easy to count five waves and call a top. As a trader, it’s more difficult to make money on such moves. For instance, we’ve been bullish since the wave (a) of E of (4) low, against the wave C of (4) low. But, it hasn’t been “easy” to make money. Yes, we’d like to send a bouquet to the dynamic currency destruction duo of Abe and Kuroda, but when capital is on the line it’s always a challenge. We point this out because while we can now count five waves up from the wave 2 (or (4) low), there’s no reason to turn bearish. Yes, we could stick the wave 3 (or red 5) at the top now, but check out daily RSI in Sustainable Bull.


In addition, notice that shorter term RSI is sending the same bullish signal. That means any decline should be a correction. Regardless, with prices so far extended from the breakout, not to mention the wave 2 low, we had no desire to sit with an overnight position. While we remain long term yen bears, there’s now a greater risk of a larger pullback in USDJPY, now that the rally appears fully formed from the all-time low. In addition, there’s now some chatter out of Japan that the yen may already have been “weak enough.” We’d like to turn bullish into a corrective decline for a trade, but at this point we’re not going to force anything. The set-up will have to be clean.

 

[Trader Skillset]

USDCAD Wave Count

The wave 2 correction has become a bit more complex, but the five wave rally up from the wave (4) low is awfully clear. Similar to AUD and NZD we’re bullish USD against these “commodity” currencies. Daily RSI was unable to push into Sustainable Bull into the wave 1 peak, which fits with a deeper pullback for wave 2. We’re looking for support to hold, though and launch another push higher.



Here we see the clear five wave rally for wave 1 which channels nicely. In addition, we can see two different three wave moves to new highs, one for wave b of (a) and the other for wave (b) of 2, which mean the one larger degree trend is still down. We’ll look for support in the 1.2300-1.2367 area to hold, and an upside reversal to launch another big wave up. Perhaps that says something for oil (i.e. lower), natural gas (which is already near its lows) and other commodities.


Happy Trading!
The Wolf

 

[Trader Skillset]

EURUSD Wave Count

Last week we were unsure whether wave (B)/(X) would become more complex - not so this week. In fact, we're super bullish heading into next week, which does suggest some sort of deal on Greece, perhaps. Here's what we see:

1. A three wave decline for (B)/(X) retraced 61.8% of the wave (A)/(W) rally.
2. A five wave rally for 1 pushed past the wave B high, cited last week as the level where the bullish count was best.
3. A clear three wave decline for wave 2 (see chart below).
4. A clear five wave rally for (i).
5. Daily RSI into Sustainable Bull territory into the wave (A)/(W) top.
6. Daily RSI remains in Bull Support (lower blue zone) at the wave (B)/(X) low - above Sustainable Bear (lower grey zone).

Prices are at natural resistance with the apex of the prior wave 4 triangle, long term down trendline and wave (A)/(W) top. A push above those levels next week will turn sentiment bullish and allow for a further rally up towards the 38.2% retracement of the decline since last summer's top, which is around the 1.1800 level. This is an almost perfect set-up for a longer term swing trade.

Here we can see the internals for wave 1 and 2. In addition, we can see five waves up for wave (i). Now, the internals for wave (ii) aren't clear, but we can see that both waves 2 and (ii) retraced approximately 61.8% of their respective wave ones. We are aggressively bullish against the wave (ii) low, since the turn up from it was almost vertical, and therefore likely a resumption of the uptrend. A push through 1.1400 will likely turn many traders bullish.

 

[Trader Skillset]

GBPUSD Wave Count

Wednesday's rally left little doubt about the near term trend. While prices are still below the wave B high, it's still possible for a bearish outcome, but it seems the top count is on track for now. A break of the up trendline would caution bullish traders. Notice the behavior of RSI, which really tilts the scales in favor of the bullish outcome. It's essentially the same story as in EURUSD, Sustainable Bull followed by a hold in Bull Support (above Sustainable Bear). This proprietary concept allows us to clarify and rank Elliott counts by probability. Some say that there are too many possibilities in Elliott, and sometimes an unclear start to a rally (like 1 and 2 after (B)'s low) can be a hindrance. But, there's nothing like the clarity Elliott can provide in a situation like EURUSD above.

Here we're showing the five wave rally for wave 1 followed by an expanded flat for wave 2 which retraced almost 100% of the wave 1 rally. In addition, wave (b) failed to push above the wave A low, which allowed for further price declines. However, the rally above the down trendline leaves the near term trend up and in a possibly powerful wave 3 of (C) rally. Also, notice that the wave (B) decline held support at the wave 4 low, which means we still have a series of higher lows.

 

[Trader Skillset]

AUDUSD Wave Count

Aussie failed to reach a new low beneath the wave (iii) bottom, so it's possible that the larger trend is still lower. However, there's significant support which we've seen time and again near the .7600 area, and with EUR and GBP looking to rally, it's possible that we need another wave higher to test .8000 again prior to a break of support. We see nothing here from a swing trade basis for next week, and even the internals on the shorter term charts show us nothing of significance. Look elsewhere.

 

[Trader Skillset]

NZDUSD Wave Count

We wrote last week, "Prices should remain beneath the down trendline, although critical resistance for the bearish case is the wave (i) low." Sure enough kiwi failed just below the down trendline along with structural resistance from the wave A and (b) lows earlier this year. That keeps the top count on track despite the bullish divergences. The latest bullish divergence comes from just above Sustainable Bear territory, so it warns of the wave (iv) bounce, which does fit with a bullish week for EUR and GBP. We'll look for one more final low to complete the five wave decline from the wave B top, but a push above the red line will warn that the low is in place. A push above critical resistance from the wave (i) low, means a much larger advance may already be underway.

 

[Trader Skillset]

USDJPY Wave Count

Last week we were reluctant to call the top, although we weren't bulls because, "we can now count five waves up from the wave 2 (or (4) low)." Last week's collapse fit our scenario, and you'll notice that at the low, prices came very near the wave B of (4) peak, in a retest of the breakout level. We still think the top count is best, which is supported by the Sustainable Bull RSI reading into the top, even though there was a slight divergence.

The Sustainable Bull reading doesn't mean the pair hasn't topped, only that odds suggest another new high is coming. Based on a proprietary study completed by Laszlo, the odds of a new high after a Sustainable Bull reading are in the neighborhood of 87%.

Here we can see the three wave decline for wave 4 which has retraced nearly 50% of the wave 3 advance. Given that the wave 2 decline was deep, wave 4 should be shallow to alternate. So, a decline beneath the 50% retracement shouldn't be seen, and that would be a warning that the red count was best. A push above the wave (b) high at 124.62 would likely mean that wave 5 was underway.

 

[Trader Skillset]

USDCAD Wave Count

Prices found structural support last week, although the bounce on Thursday and Friday was lackluster. Also, notice that into the wave 1 top, RSI was unable to reach the Sustainable Bull zone. The pullback appears to be corrective, and we're looking for a rally, but we'd rather see some evidence that the pair has bottomed.

Here too, it looks like the decline from the wave 1 high is corrective, although as you can see, prices up from the wave 2 low isn't an impulse. We can't rule out one more decline to complete wave 2, or perhaps something more bearish (like a larger wave (4)). We're going to await clarification here. Is it possible that EURUSD & GBPUSD will see substantial rallies, but USDCAD & USDJPY will rally too. If that's the case, there seems to be opportunity in the cross rates of the European crosses versus JPY and CAD.

 

[Trader Skillset]

USDCHF Daily Wave Count

It seems that traders are divided on the direction of the Swiss franc. That can be seen in the behavior of RSI which went back and forth between Sustainable Bull and Bear, to be followed by a narrower range lately. While the count calls for another push higher, there's nothing implusive to the upside in wave (iii) yet. As such, allow for additional downside early in the week, and await a clear upside reversal before getting involved.

 

[Trader Skillset]

EURUSD Wave Count

So, here we see the decline back into the channel along with Tuesday's big bear bar, which are bearish developments. Notice though, that RSI has remained near the 50 area, certainly not indicating bearish tidings near term. We've identified the red up trendline as key support since it sits near the 61.8% retracement of the wave 1 advance, along with former support and resistance (wave 2 low and wave A of (A) high). In addition, we're showing two alternate interpretations. One suggests wave 2 is about to bottom in an expanded flat, and the other suggests something more immediately bearish with the Alt 2 count.That will become the favored view should prices fall back below the red up trendline, possibly on a disorderly default in Greece.

Here we see a possible five wave decline that is complete for wave c of (ii). There was a slight bullish divergence into Friday's low, although we'd feel more comfortable with this view after a push above the down trendline in an impulsive manner and a corrective set back. It's after that corrective set back, that we would look for a "turn and follow through bar" on an hourly basis.

 

[Trader Skillset]

GBPUSD Wave Count

We saw a similar breakdown in GBPUSD this week, although it's possible that this pair has already turned higher, as there was a bullish divergence with EURUSD on Friday, since the euro broke to a new low, but the pound didn't. The Momentum profile on a daily basis is still bullish as is the Context. We did see a weakish turn higher after the low on Wednesday, and unless prices break the up trendline, we're sticking with the bullish view here. That's not a license to fight weakness, it's simply the idea that we should favor bullish action once the market shows us it wants to head higher.

In the shorter term view we can see support offered by the up trendline and the wave (i) high. A push above Thursday's high will likely turn the tide in favor of the bulls. Until then, we can't rule out one more small stab lower to complete (iv), since there's only three waves up from the wave (iv) label right now.

 

[Trader Skillset]

AUDUSD Wave Count

Friday's breakdown may signal the resumption of more sustained selling pressure. We can lower critical resistance to the wave (iv) high, although it seems unlikely that prices will exceed .7772 if the top count is correct. We've been thinking that one more new low will complete a significant Elliott wave, although there's little reason to fight additional weakness. We'll want to see a weekly bullish reversal candle prior to wanting to pick a bottom here considering the potential issues in China (Australia's largest customer).

Notice the 120-minute breakdown on RSI into Sustainable Bear territory. Targets to the downside include a 100% range expansion of the wave (iv) rally which targets .7347. We could use Friday's high as an aggressive risk control point, and unless something less bearish is underway, prices won't be back above there, and certainly not .7772.

 

[Trader Skillset]

NZDUSD Wave Count

There's little reason to be bullish on the Kiwi, even if prices are approaching a target. The Sustainable Bear readings on daily RSI continue to put odds in favor of continued weakness. Our opinion is that .6600 will provide support that sees a very significant rally develop, but, as with Aussie, we're going to want to see actual evidence of that fact before we decide to put capital behind that opinion.

 

[Trader Skillset]

USDJPY Wave Count

The caption of the daily chart says about all we need to say - the evidence remains in favor of the top count. Until the longer term up trendline or the 61.8% retracement level of wave 3 is broken, we'll continue to favor the upside given the Sustainable Bull reading into the high on RSI, and the bullish behavior of RSI into the wave 4 low.

The closer look shows not only the support from the 50% retracement of the wave 3 rally, but also the broken trendline off the high. The decline from the wave 3 top is corrective looking, and the action up from the wave 4 low looks impulsive. A push above the wave (i) high will likely make calls for 130.00 come out of the woodwork. Of course, once a new high is seen, we'll be looking for a much bigger top and turn back down.

 

[Trader Skillset]

USDCAD Wave Count

Unfortunately, the rally up from the suspected wave 2 low isn't clearly impulsive. In fact, it appears to be more of a correction, which suggests a more complex wave 2 may be underway. So, perhaps prices will fall back towards the wave 2 low prior to a more sustained advance. A push above the down trendline would likely mean that our top count was correct, and that either a leading diagonal has kicked of wave 3, or a series of ones and twos. Clearer counts present themselves elsewhere for now.