London’s session saw USD weakness in the market this morning. The AUDUSD, EURUSD and GBPUSD indeed made decent moves up, which is what I expected and wrote in yesterday’s article “Volatility Spikes Electrify Trading Day.”
The Cable was on fire today as it flew up 80 pips within 2 hours. It however could not find enough ground to push to higher price levels and retraced the impulsive move down to the 618 Fibonacci retracement. The move down could in Elliott Wave terms be explained as an ABC correction in Wave 2 or B of Wave 1 or A. This option would seem the most logical with the current information. If, however, the bottom at 1.58 is broken, then the counting would need to change and this up move actually finished a wave 4. However, for the moment, statistically speaking the upside seems more probable. Tomorrow will tell whether the Cable agree with the analysis! In the meantime you can read more important information on the GBPUSD in this article called “Is there bullish hope for the GBP/USD in the Forex market?”
In the mean the AUDUSD also pushed up but it did not manage to break the top. It is building a triangle on the 1 hour chart and trice is respecting both the tops and bottoms of the recent swing high and swing low. If we consider the fact that the move up had a strong AO reading to the upside, the chances of the Aussie breaking the top are higher than it break the bottom. I am, however, not particularly keen on taking a trade within this triangle and will await a break before re-analyzing and trading it.
The EURUSD acted in a similar fashion but the EURO, contrary to the pairs mentioned above, actually retraced all the way down. Plain and simple, the Euro is stuck in a sideways move and I will be sitting on the sidelines until more information is available. The long-term picture is bullish; however I am not willing to risk my capital in this sideways market. I am waiting for a clear break out of the top triangle and top, which would signal a continuation to the upside.
Last but not least: the USDJPY. The Yen broke the uptrend channel yesterday during the Asian session. The break itself did not surprise me, the moment when it broke did. The trend channel seemed a decent place for a small corrective bounce but the Yen thought otherwise and slowly pushed through the channel. The bottom at 87.80 however has not yet been broken and these levels can still act as support. However in the medium term the move down could signal a first bigger correction on the USDJPY. When we look at the day chart we can see the Awesome Oscillator has turned red and is moving down. The double divergence on the 4 hour chart also gives an indication that the impulsive move up, most likely, is over. That would end the impulsive wave 3 most likely. For a Wave 4 we need to see at minimum the Awesome Oscillator move back to the zero line, after which we can expect a new move up for wave 5. We can expect the wave 5 to break the current top.
For those of you who want more information on Elliot Wave, please look here.
That’s all the important information from my side. I wish you Good Trading!