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USDJPY and EURUSD Counter Trend Patterns Appear Incomplete

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Using Elliott Wave theory our analysis for USDJPY and EURUSD is that we may see shorter-term USD weak moves to retrace a portion of the 2018 USD rally.

The video above is a recording of a US Opening Bell webinar from June 11, 2018. We focused on USDJPY and EURUSD as they are offering some of the clearer patterns with forex trading.

USDJPY Elliott Wave Pattern may be incomplete to the downside

For the past couple of weeks, we have been discussing how the USDJPY patterns look weak and that counter trend patterns are at work.

Though USD/JPY reached our initial target zone for a correction by falling to 108.11 on May 29, we believe the correction to the downside is incomplete.

The rise in USDJPY witnessed last week may be the ‘b’ wave of a bearish Elliott Wave zigzag pattern. If that is the case, then USDJPY may correct further to retest the 108 low and possibly push 107.

If USDJPY does proceed through this zigzag pattern, then we can anticipate another five-wave move (possibly a bearish impulse wave) beginning from nearby levels. This bearish outcome will be more probable on a dip below 109.08 as that would create overlap with the May 30 high.

USDJPY chart with Elliott Wave labels forecasting a downtrend.

There is an alternative Elliott Wave count we are following as well which is bullish. The bullish alternative suggests the low is in place and USDJPY is rallying in a wave of similar size or Fibonacci proportions to the March to May 2018 up trend. This would imply multi-hundred pip move to the upside. For the time being, this is lower probability but if USDJPY bleeds into the 111 handle, we will reconsider its structure.

EURUSD Elliott Wave Chart Hints at a small relief rally

Last week we discussed how counter trends patterns are working in EURUSD and that a relief rally to 1.18-1.20 was the higher probability move. On June 7, EURUSD did make it to 1.1840, which is in the low end of the cited range. Based on the structure of the move higher, it appears as though the wave is incomplete.

From an Elliott Wave perspective, we are considering this wave higher to be the fourth wave of a five-wave bearish impulse. Therefore, the bump higher is considered a temporary move to alleviate the oversold pressures created at the end of May.

Though not anticipated, if EURUSD does move above 1.2154, then we will consider the Elliott Wave pattern to be less bearish and more sideways in nature. Should this occur, it would elevate the potential for an ‘X’ wave triangle and increases the probability of a near term retest of 1.25.

We have been short EURUSD with our first short entry at 1.2350 and our 2nd short entry at 1.2153 as prices hit our first target of 1.1554 on May 29. The Elliott Wave patterns still point towards lower levels over the medium term though several short-term patterns point to 1.18-1.20.

EURUSD chart with Elliott Wave labels included showing an incomplete downtrend.

The Elliott Wave pattern for gold prices suggest higher levels to come

Gold prices have traded nowhere fast. Using Elliott Wave Theory to assess the higher probability pattern, it appears as though gold prices are grinding in a sideways small degree wave two. This would suggest that a bullish wave three of an impulse is about to begin.

Once all five waves of the bullish impulse are in place, we believe that will put the final additions on the ‘Y’ wave of this complex move higher. Therefore, a bullish move above $1365 and possibly into the $1400’s is not out of the question for gold.

Gold price chart with Elliott Wave labels forecasting a rise above $1365 and possibly into $1400.

Elliott Wave Theory FAQs

What are Elliott Wave impulse waves?

According to Elliott Wave Theory, the market moves five waves in the direction of the near term trend followed by a three wave counter trend wave. An impulse wave is one of two types of motive waves that denotes trend direction. Therefore, if we see a bearish impulse waveform, then after a three-wave counter trend wave, we can anticipate at least one more bearish motive wave.

If you are seeking further study into Elliott Wave Theory, read about our expert tips in our beginners and advanced trading guides.

After reviewing the guides above, be sure to follow future Elliott Wave articles to see Elliott Wave Theory in action.

What is the biggest mistake traders make?

Regardless of the style of analysis, many traders do lose money because they do not take the time to study the market and the effect of leverage. At DailyFX, we have studied millions of live trades and boiled our study down into a Traits of Successful Traders guide. You will find how leverage and human nature affects our trading so you can be better prepared for the next correction.

Elliott Wave Theory can be applied to a variety of highly liquid markets. FX is one of my favorite markets to apply the Elliott Wave principle. Learn more about trading FX with this guide specifically designed for you.

You might also be interested in…

*What is a triangle pattern in Elliott Wave Theory and how do you trade it?

*Forex Education: Trading Elliott Wave Complex Corrections

—Written by Jeremy Wagner, CEWA-M

Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.

Communicate with Jeremy and have your shout below by posting in the comments area. Feel free to include your Elliott Wave count as well.

Discuss these markets with Jeremy in Monday’s US Opening Bell webinar.

Follow me on Twitter at @JWagnerFXTrader .



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Forex

Bitcoin Net-Longs Slide Into 1-Month Lows

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Bitcoin Client Positioning

Bitcoin Net-Shorts 5.2% Higher Since Last Week

Bitcoin: Retail trader data shows 76.8% of traders are net-long with the ratio of traders long to short at 3.3 to 1. The number of traders net-long is 1.1% lower than yesterday and 8.0% lower from last week, while the number of traders net-short is 0.5% lower than yesterday and 5.2% higher from last week.

Be sure to check out our Bitcoin Trading Guide if you’re new to cryptocurrencies!

Bitcoin Net-Long Dip Indicate Bullish Bias

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long.

— Written by Yayati Tanwar, DailyFX Research



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Canadian Dollar (CAD) Eyes Latest Inflation Report

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Canadian Dollar Price, News and Analysis

  • Inflation expected unchanged, but any uptick could seal another rate hike in October.
  • Canadian economy continues to grow strongly.

IG Client Sentimentshows retail are 46.3% net-long of USDCADa bullish contrarian sentiment indicator.

Canadian Dollar May Receive a Boost on Latest Inflation Report

The Canadian dollar is currently treading water ahead of the July CPI report with the market expecting a 0.1% month-on-month rise and a 2.5% annualized reading, both unchanged from last month’s strong report. Canadian CPI grew at its fastest rate in over six years in June, due to higher energy prices, and another strong reading today will increase pressure on the Bank of Canada to hike rates again, probably at the October meeting. The central bank has already hiked rates by 0.25% twice this year and by a total of four times in the last 12 months. Last week data showed Canadian unemployment falling to 5.8% from a prior 6% while employment grew by 54.1k against expectations of 17K and a prior month’s 31.8k.

USDCAD has remained in a 1.2950 – 1.3200 range over the last month, despite the strength of the US dollar and fears over the NAFTA negotiations. The pair currently trade at 1.3130, just above 23.6% Fibonacci support at 1.3118 and below the July 24 high at 1.3192. An inline or slightly stronger-than-expected reading would seal another 0.25% rate hike and see USDCAD break lower with the 38.2% Fibonacci retracement at 1.2952 the short-term target. A weaker-than-expected reading today would see the July 24 high under pressure.

We have recently released our Q3 Trading Forecasts for a wide range of Currencies and Commodities, including the Canadian Dollar.

USDCAD Daily Price Chart (January – August 17, 2018)

Canadian Dollar (CAD) Eyes Latest Inflation Report

DailyFX has a vast amount of updated resources to help traders make more informed decisions. These include a fully updated Economic Calendar, and a raft of Educational and Trading Guides

— Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1



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USD/CNH & Gold Price Action Point to Reversals Gaining Traction

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Gold, USD/CNH Technical Highlights

  • Gold price reversal and sentiment supportive of a low
  • Correlation between Gold & CNH extremely high
  • USD/CNH reversing hard from near Dec ’16 peak

For an in-depth intermediate-term technical and fundamental outlook, check out the Q3 Gold Forecast.

Gold price reversal and sentiment supportive of a low

On Wednesday, we were discussing the oversold, overly bearish backdrop in gold, but that first we needed to see some type of swift flush and reverse or something of that nature before looking for a low. We didn’t have to wait long, as the past few sessions qualified as flush-and-reverse price behavior, with silver, unsurprisingly and in silver-like fashion, displaying even more capitulation-like behavior, shedding 3 of its 4% in an hour on Wednesday.

As long as gold & silver can hold onto yesterday’s lows on a closing basis, we’re looking for at least a rebound back to the point of origination of the most recent leg lower (~1210 & 15.30). If another leg lower develops we’ll have to reassess.

Check out the IG Client Sentiment to see how other traders are positioned and why it can be used as a contrarian indicator.

Gold Daily Chart (Flush & Reverse)

Gold daily chart, flush and reverse

Correlation between Gold & CNH extremely high

If gold is reversing then so is CNH and vice versa. Gold and CNH have a 3-month correlation of 97%. They are effectively the same market at this juncture. How one plays it is up to the instrument of choice, but be mindful of total risk if trading both.

Gold/CNH Daily Chart (97% 3-mo Correlation)

Gold/CNH daily chart (97% 3-mo correlation)

USD/CNH reversing hard from near Dec ’16 peak

USD/CNH is in the process of carving out a weekly key-reversal bar just shy of the December 2016 high, assuming it doesn’t post a big rally from here. Trade a little higher today or lower and the reversal currently in place will stand as confirmed.

The candle development along with a break in the upward channel on the daily time-frame should usher in more selling, and perhaps in swift fashion. Looking lower, there are minor levels along the way that were carved out as the channel matured, but the broader target is the bottom of the upward grind since last month, right around the 6.60 mark.

USD/CNH Weekly Chart (Key-reversal nearly complete)

USD/CNH weekly chart, key-reversal as long as no sizable rally ensues today

USD/CNH Daily Chart (Channel break to send it lower)

USD/CNH daily chart, channel break to send price lower

Resources for Forex & CFD Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX



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