Elliott Wave Analysis

[Trader Skillset]

NZDUSD 240-minute Wave Count

There’s several counts on the table with NZDUSD, but similar to the others, prices failed at resistance. There’s five waves up from the low, although it’s overlapped in two key areas, so the near term count is a bit fuzzy. It could be a leading diagonal up, which would have us looking for a deep retracement, or it could be an abc up with an ending diagonal for c (our “top” view). What’s clear is that price have rallied in two equal waves up from the low, and failed at structural resistance from former support at the wave (.b) low. Here, too, though, new lows directly aren’t guaranteed. It’ll be the nature of the early week decline (corrective or impulsive) that will tell the tale. Stay tuned to Twitter for mid-week updates. As long as prices are above last week’s low at .7421, there’s a chance for the B wave rally to develop further.

 

[Trader Skillset]

AUDUSD 240-minute Wave Count

Anyone else notice a theme here? The non-dollar pairs so far have all rallied in non-impulsive fashion, and all failed at resistance. That doesn’t mean AUDUSD can’t find support near .7700, though in a (b) wave, which would allow for an impulsive (c) wave rally. One problem with Elliott is that we’re always looking for “proper” waves. But, markets will do, what markets will do, and despite my desire for a “proper rally” I can’t argue at all with a bearish stance against Thursday’s high. I just have a hard time thinking that it’s as high of a probability as most traders think that new lows are directly ahead. In fact, wouldn’t it be a great time for the market to trace out an expanded flat for wave (b), followed by an impulsive rip to the upside? I guess my point is that traders should be nimble here in what seems to be either a late stage breakdown, or the middle stage of a larger corrective bounce. As expected, though, Aussie does seem to be acting much weaker than its cousin down under, NZDUSD.

 

[Trader Skillset]

GBPUSD 240-minute Wave Count

Here too, prices have rallied in a corrective manner, and on Thursday they failed at resistance. The rally reached the head and shoulders target, although it has fallen short of prior fourth wave, and the .382 Fibo, both near 1.5800. But, from an objective point of view, both pieces of evidence are bearish, and the only question is will it be bearish from a slightly higher level. Prior to the reversal, RSI poked into “sustainable bull territory,” so this pullback could be another (x) wave. But, the larger trend is down, so we’re certainly not going to fight that trend in anything but the most nimble manner. Prices should find some support near the broken resistance area around 1.5381, and any break of that area would suggest new lows are coming directly. Again, from an analyst’s perspective, a “proper” sized rally would be preferred, but from a trader’s point of view, we’d prefer to be on the side of the one larger degree trend.

 

[Trader Skillset]

EURUSD 240-min Wave Count

Thursday’s breakdown in EURUSD leaves little doubt that the action up from 1.1186 is corrective. The obvious interpretation is that a wave iv, or (iv), triangle is complete with EURUSD targeting the 1.07 equality area. That’s also what our RSI study suggests, that further weakness is ahead. In addition, notice how prices found resistance at the trendline drawn off of the wave (i) and iii lows. Market prices clearly operate within Elliott wave rules and guidelines, but they also seem to operate within a geometric realm as well. That’s why trendlines, Gann and Fibonacci measures often result in attracting or repelling prices. But, call me stubborn, I can’t seem to let go of the idea that EURUSD is going to fool the majority of market participants who are looking for further euro weakness, based on the eventual Grexit or ECB QE. Joseph Granville used to say, “What’s obvious, is obviously wrong.” I just can’t shake that idea right now, but there’s a difference between an analytic opinion, and a trader putting capital at risk for that concept. As an analyst, I can leave the top count in place, but as a trader, I won’t touch the long side of EURUSD while we’re below the (i)/iii and (iv)/iv trendlines. But, bears be warned, a push back above resistance near 1.1280 may cause a stampede of short covering.

 

[Trader Skillset]

EURUSD Monthly Wave Counts

First, we thought we should take a look at the longer term, monthly chart for perspective. If March closes down, that’ll be the ninth month in a row of lower prices. Even if you make the case that Greece is going to default, collapsing the European banking system and causing mass contagion, that doesn’t mean EURUSD has to be the “release valve.” Instead banks and bonds of Spain, Portugal, Italy and Greece should be the release valve, along with their currencies post-euro exit. I’m not saying the euro has to turn up now, but it’s worth noting the 20 month moving average is near 1.2800.

Our preferred thought is a bounce beginning not too much lower from here that retests broken support, now resistance near 1.2000. Then, after that bounce, another decline to break the lows set soon.

 

[Trader Skillset]

EURUSD 240-min Wave Count

We’re nearing a wave v of (v) bottom, but it’s been elusive, and RSI is pinned to the floor. It’s not time to be a hero calling a bottom without a solid daily reversal bar. We’ll look to call that reversal bar, and if it’s in five waves, we’ll look to buy a dip, but this market’s downtrend has been relentless. Nonetheless, after 9 months in a row of lower prices, a bounce back towards larger scale resistance won’t come as a surprise to us. We’ll need to see a break of the sharpest down trendline to indicate that something to the upside is afoot.

 

[Trader Skillset]

GBPUSD 240-minute Wave Count

RSI is telling an unmistakable story here too – new lows ahead. Will this be an ending type of a move, as we have it labelled, wave (v), or something worse? We’re betting on the former, but we’ll simply have to see how it plays out. A bounce back to the 1.5200 area is resistance (former support) while there should be a modicum of support at the former low 1.4951. Notice how both GBPUSD and EURUSD failed at structural resistance at the black horizontal lines. If the pound was in a larger rally wave, it most likely would have found support at the broken down tredline off of waves ii and iv of (iii), and the 1.5200 area which has been involved as both resistance and support in 2015.

 

[Trader Skillset]

AUDUSD 240-minute Wave Count

We’ve adjusted the wave (iv) label in light of the fact that prices were unable to push above the channel. We like a bearish stance versus Friday’s high, since that would push prices up out of the channel, per the alternate count. Notice that short term RSI is in sustainable bearish territory, and daily RSI failed right at 50 – both signs that lower prices are coming. Look for a test of the lower channel line in the next week or two.

 

[Trader Skillset]

NZDUSD 240-minute Wave Count

The failure of NZDUSD to reach the equality measurement at .7860, or even push past the wave a of high is a truncation that carries a bearish message. There may be some brief support in the .7300 area, around the wave b of (w) low, but new lows seem to be in store. Notice that prices failed to reach the down trendline drawn off of last summer’s high. RSI is pinned lower here too suggesting lower prices targeting longer term support in the .66-.7000 area.

 

[Trader Skillset]

USDJPY 240-minute Wave Count

Here too there was a bit of dollar strength this week. USDJPY has been correlated with “risk on” lately, so its rally on Friday given a “risk off” environment is telling. We’re looking for prices to reach 124.36 which is the point where wave (5) would be equal to the largest point of wave (4) (The distance from (3) to A.). We’ll also look at critical near term support as Friday’s low, although it would take a drop below 118.62 to derail the current count.

 

[Trader Skillset]

USDCAD 240-minute Wave Count

Certainly the recent action looks like a sideways consolidation, more than a reversal. So, we’re going to move the alternate count to the top view. As long as prices remain below the wave d high, it’s possible that the wave (3) top is in place, but given the evidence elsewhere, it’s hard to doubt last week’s rally here. A break of Friday’s low, however, likely means that prices are headed to test longer term support near 1.2000.

 

[Trader Skillset]

USDCHF 240-minute Wave Count

Last week’s RSI divergence turned into a rout this week. As we’ve said before, the SNB is tough to trust the way it has handled the franc in the past several years, but which central bank isn’t? The near term trend is up, until it isn’t, although we’ll kindly stand aside until something actionable comes up.

 

[Trader Skillset]

USDCHF Daily Wave Count

It’s easy to want to ignore this pair after its odd looking wave pattern. What we can say is that the near term trend is up, and we think that the “peg top” is likely to provide some resistance. However, RSI has reached into the sustainable bullish zone, which suggests that any decline will be corrective. We’ll likely be sitting on the sidelines with respect to this pair until something truly actionable shows up.

 

[Trader Skillset]

USDCAD 240-minute Wave Count

Here too, a triangle has yielded to a new high. It seems that further gains are to come to complete the advance, as long as prices remain above 1.2616. There’s a small bearish divergence, but that can safely be ignored, especially while prices are in the short term channel. The advance may prove to be limited, although without any sign of a reversal we’d be inclined to stick with the trend.

 

[Trader Skillset]

USDJPY 240-minute Wave Count

We sent a Tweet out this week about the clear three wave decline for wave (iv). We’re aggressively bullish against that low…did I mention aggressively? We have a clear triangle for wave (4), even if it’s not exactly clear how wave E developed. It’s either as depicted on the top count, or it ended at 118.43 and wave (ii) ended where we have the wave (4) label. Either way, a new high above 122.03 is in store. The 100% expansion of the wave (iv) decline yields a target of 123.39, which makes a nice target. The apex of the prior fourth wave triangle is at 124.14, which also makes a nice target. Certainly if the current advance is only wave 1 of (5) prices will exceed that level, but that’s a discussion for another week.

 

[Trader Skillset]

NZDUSD Daily Wave Count

The most prominent feature on this week’s chart for NZDUSD is Wednesday’s key reversal from support. One can argue that there’s five waves up on an hourly basis from this week’s low as well. That leaves the idea of a larger B wave on the table. Of course, the market has other options too. There’s the outright collapse scenario where wave C is going to be equal to wave A. And, then there’s the count of W, X, Y down from the all-time high. The fact that RSI dipped into sustainable bear territory prior to Wednesday’s reversal supports the bearish counts. In a situation where multiple counts are possible, it pays to be nimble, or look for opportunities elsewhere.

 

[Trader Skillset]

AUDUSD Daily Wave Count

There’s only three waves down from the wave (iv) high at this point, so there needs to be slightly lower prices before a larger bounce. Short term, we’re looking for the wave i of (v) to cap prices prior to a final low. Will prices reach the lower band of the channel? It’s hard to say, but that seems to be a stretch at the moment. A push above the trend channel would be a change in behavior, and it would suggest that the wave A low was in place.

 

[Trader Skillset]

GBPUSD Wave Count

The longer term view in the pound also suggests that a five wave decline is coming to an end. But, there’s nothing to indicate that a low is in place, quite the contrary. With the break of long term support from the 2010 low, there’s no structural support until 1.4227. We’re not interested in playing anything counter trend until a reversal is seen. In fact, as long as prices remain beneath the black down trendline, its hard to imagine anything but a temporary reprieve has been seen. Bears are firmly in control until a reversal day is seen.



From a shorter term perspective, the decline from the wave 4 high isn’t complete. There are some minor bullish divergences, but they are coming from sustainable bear territory. At a minimum, we’ll need to see prices push above the steep down trendline, and ideally back above the wave 3 low to suggest that support at 1.4813 is going to act on prices. A sharp rally into 1.4800 followed by an ending diagonal would be ideal to complete the decline.

 

[Trader Skillset]

EURUSD Wave Count

Last week’s action keep the pressure to the downside, especially given the weak close on Friday. Expect a small recovery, supported by the trend channel drawn off of the wave (1) and 3 of (5) lows. The equality measurement and the point where wave (5) will be 1.618 times the length of wave (3) is also just below current prices. There’s not much of a bullish divergence to speak of, and it’s occurring in “sustainable bear territory,” but it’s there nonetheless.



We can’t know that the decline from 1.40 is complete, but we can take a look at a mature decline from the 1.14 level, and the fact that it’s a thrust from a triangle to suggest that an upward correction is due. The magnitude of that correction is debate able, but that it’s due is not. We have a small bullish divergence present, and ideally, we’ll get an early week bounce into previous fourth wave resistance, and then another diverging new low near 1.03. But, don’t ignore any impulsive bounce that moves beyond resistance, which, combined with a daily reversal signal, would suggest an important low has already been struck.

 

[Trader Skillset]

EURUSD Wave Count

This week, we pointed out the corrective nature of the advance on Twitter and on our site. So, ideally, we’ll see EURUSD trace out one more new low to complete the decline since last summer. Volatility usually will pick up around major market turning points as bulls and bears fight for control of the market in this “phase transition,” not unlike how water molecules act erratically as water reaches its boiling point.

My least favorite market call is, “If the market goes up, it’ll keep going up, and if the market goes down it’ll keep going down.” But, that’s the short term call here. A break of 1.0695 would leave a three wave rally from near 1.06, that happened to retrace 61.8% of the decline from the post-FOMC rally extreme. It’s a fitting place for the decline to resume. However, a push beyond the down trendline and Friday’s high, leaves open a larger wave (iv), or potentially a leading diagonal to the upside. That’s right, just because a three wave rally is our call up from the low, doesn’t mean the rally can’t be wave i of a leading diagonal, or even a (i) (ii), i ii. Remain flexible, because the market has options.