Elliott Wave EUR/USD: Trading Strategy

This week the EUR/USD pair showed a slight upward trend with little movement and low volatility because of Thanksgiving day in the United States so we hope that the price movement will return to normal next week. During sideways markets with low volatility, it is almost impossible to operate in day trading mode, while swing traders may plan their investments with a cool head, and enter or be ready to react when the opportunity presents itself. If you are a day trader going in and out of the market once or several times during the day, and corrective waves do not present obvious opportunities, it is better to have a few alternative pairs to watch that provide better conditions for running positions during slow markets, like the faster trending USD/JPY, EUR/JPY and AUD/USD pairs.

Our Elliott Wave study applied to the EUR/USD pair on the daily chart provided the first confirmation for the end of the wave “(b)” magenta, also confirmed by a few technical analysis tools. The likelihood of success increases exponentially as you add tools to create convergence between confirmations. In this case we have the break of the trend line highlighted in black, and following this break the technical pattern called the “123” which in practical terms will be triggered once the price passes the 1.3300 area where the wave “i” denoted in black color ended.

From the end of the first wave “i” black, price began to develop wave “ii” black, and this structure concluded with a “pull back” to the previous trend line; the analysis of last two weeks has focused on this structure, with price finding strong resistance at the trend line, because each new high merely tested the trend line resistance without breaking through it. Our Elliott Wave count is at a critical juncture, and if price rises and manages to enter the territory of the previous trend line top the likelihood of invalidation increases considerably. The point of invalidation of the count is at 1.3832 where the wave “i” began.

From an internal point of view to evaluate wave black “ii”, we are implementing the validation check list for its end, using an internal trend line denoted in blue, which, when this breakdown completes, the probability of the bearish count grows and establishes the next short term target in the 1.3300 area. Once price breaks below 1.3300 the bearish count from the daily point of view is confirmed. We will closely monitor the trend, to find 5 bearish internal waves accompanied by 3 rising waves on a smaller time frame to establish the down trend. By analyzing different time frames, other than the daily, the faster you can find the trade entry. By waiting for daily confirmation, even though it takes longer for the trade to set up, it will be more secure but the profits will be less. Therefore, the trading plan must contemplate a balanced entry between the risk of the trade and the appropriate reward that meets the requirements in your trading plan.

We are confident that this week price will show us the next step to find trades, and if price can confirm the count we can continue trading the internal wave structure. In the case of an invalidation we will have to react fast to get the most out of the situation. Remember that those who survive are not necessarily the most intelligent or the strongest; rather, they are the ones who have a greater ability to react to change and adapt to it as Charles Darwin said referring to the theory of evolution. Have a great weekend!

Daily Elliott Wave Chart

EURUSD-Elliott-Wave-Main-Count-Nov-29-2307-PM-1-day

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