The EUR/USD closed this week at the 1.3800 level. The price action during the first movement of the week was down, which began at 1.3773 and ended at 1.3643, moving 130 pips. Then price went up to 1.3827, creating a new high and hitting the daily pivot point R3, also at 1.3827. These strong movements are ideal for day trading, but the trader needs to react with the speed of the market and this ability is only achieved through a change of trend methodology and experience. The best technique uses “Price Action” and the use of daily pivot points. In order to protect your capital, it is important to enter the trade at R3, for if you miss the trade when it is near the daily pivot and you try to get in at R3 after it reaches that level, it may be too late! It is not common to see the price beyond R3 in a bullish market and S3 in a bearish market for a sustained length of time, which means that fading the market at those levels is a good strategy for day trading. Remember that pivot points are automatically recalculated with the new day according to the configuration of your platform, and the industry standard is at 5:00 PM EST. We recommend adding this filter to your trading plan as this will help you with taking late trades, at a time when the price will hardly move. This is like arriving at the end of a movie and you have to wait for next one. Now we invite you to analyze the EURUSD with us from the Elliott Wave perspective to prepare for next week, which we are confident will bring several opportunities.
Our main Elliott Wave analysis remains active with a slight modification. Wave black “ii” is still active, as this week the price did not confirm a reversal and instead went up to create a new high at 1.3826. We as Elliott Wave analysts, when looking for the end of a corrective movement, need confirmation of 5 waves in the opposite direction of trend, to increase the confidence and probability of success of the wave count. Let’s take a look at the price on the 4 hour chart between the wave orange “(A)” and the wave “(B)” of the same degree, 1.3773 – 1.3643. It has 3 waves inside, followed by price moving up again so this price action eliminates the possibility of a 5 wave sequence down. When this occurs, we realize that wave “ii” black remains active and it is necessary to label this movement as an “ABC” in green. During this complex cycle where the EURUSD is at this moment, the trader must follow each trade closely and be attentive to any failure of the structure to accommodate the stage of his trades.
What will the future be for this pair for the coming week?
You need to ask yourself this question when the market closes every Friday: “What is the best scenario for the EUR USD for the coming week, given the fundamentals and the wave count possibilities?” Then, choose your preferred scenario and start searching for trade setups using your trading plan. Our main scenario suggests that for the first few days of this week the pair may move lower to 1.3770/80 due to profit taking from those who managed to enter the bullish movement in an early stage. This small retracement down will create the wave “4” green, and after that wave “5” green will become active and the target zone will be in the area of the 1.3850. This target comes from our methodology of convergence between Elliott Wave, Fibonacci and Harmonics patterns. The plan is to take this bullish move from 1.3770/80 zone until the 1.3850 area, as soon as the market conditions show us the reversal at the end of wave 4 green. Invalidation of the main count is at the 1.3893 which would have a series of bullish implications for the pair. Eventually we will explain this event if it happens, but at the moment we have a high level of confidence in the count and only confirmation will bring us trades. We wish you success in your trading, and remember that a good analysis always brings positive results.
4 Hour Chart – Elliott Wave EUR/USD