NZD/JPY

[Nelsy-Boy]

Anyone using EW theory think the recent drop is the'A' of an up and coming ABC ? If so, has anyone got any targets in mind? I'm already short on this one and watching.

[Mercury]

Can you post a chart @Nelsy-Boy.  I don't follow this pair but can take a quick look to see if anything pops out.

[Nelsy-Boy]

Forgot to mention I am following the daily chart. I’ve not posted a chart yet so not sure how. Would you mind telling me how please @Mercury.

[Mercury]

Depends on which charting system you are using I think @Nelsy-Boy  if using ProRealTime there is an icon on the bottom left hand corner of the chart tile (3 connected dots).  Click this and save (as a picture) then click "choose file" below.  If using IG platform then it is as TF says above.

[Nelsy-Boy]

Thanks very much for the tips @TrendFollower and @Mercury. This is my first uploaded chart and would like to hear opinions on EW theory for this one. 

[Mercury]

So @Nelsy-Boy I have had a look and I think you may be correct with your EW label placement.  However context is king when using technical analysis so I wanted to start from the beginning with this market, which I have never looked at before.  Alas I cannot find sufficient historic data to set up a decent/credible long term picture but never fear I looked at the other Triad pairs to get a feel (USDJPY and NZDUSD, the former I look at regularly, the latter not at all).  So I will break this up into a few posts to look at each of the Triad pairs in turn and then attempt to zoom in on your NZDJPY piece.  Note I say attempt because as I have no feel for NZD I have no confidence I will be right.

Before I embark on this I have a few questions for you (well for you to think about really):

• Why do you choose to trade NZDJPY?  Not saying there is anything wrong with it but there is less data available and it is a less liquid market than the other 2.  If you are a Kiwi I get that you will have more of an affinity for NZD (no problem, it is good to have a feel for what you are trading).  PS: if you are a Kiwi, tough luck in the rugby v Ireland 😜
• Do you regularly analyse the other pairs in the Triad to assess relative strength/weakness vs the reserve currency (USD)?
•  Do you use other techniques alongside EWT to analyse the markets and do you have a set of rules to trigger a trade - note I only use EWT to analyse and get a sense for direction and use other triggers for an actual trade.

Ok on to the next post - USDJPY

[Mercury]

I will only show the big picture on the Triad pairs, you can see more details in USDJPY in a separate thread that exists already on the Forum.

The Monthly Chart is telling.  Basically the Yen has been very strong since before 1975.  This is not news, it is the backdrop to Abenomics as the Japanese central bank throws the kitchen sink at devaluation of the Yen to kick start export again, so far without success.  Personally I think the USD is coming to the rescue anyway and it is USD strength that will change things rather than Yen weakness per se.

So looking at the charts I see the following:

• You can see the long drop down of the first chart but the market seems to have bottomed out and is making a nice rounded bottom profile as it begins to lift.
• Zooming in on the Monthly you can see a double bottom and possible already a head & shoulders pattern (first purple 2rB) but also a potential final right hand shoulder further down (second purple 2rB).
• This offers 2 basic scenarios:
  1. Market drops down to a better H&S form and then rallies away (red lines)
  2. Market rallies up through the neckline (blue lines)
• This is what I am tracking on this pair but it is by no means clear yet what is going to happen next.  USDJPY has been roughly moving in line with stocks of late (weak Yen = strong Nikkei).  That will not last but for now it seems to be the prevalent correlation.  So you have to also watch stocks...
• Looking at the Weekly then, there was a very nice and clear H&S reversal pattern headed by the completion of Wave 1rA (Purple), a nice neckline break into a strong bearish move that was ended with a sharp and powerful pin bar (very bullish) and it ended on the Fib 50%, just about perfection and thereafter there was a period of consolidation before a breakout of the down channel into a strong rally to Pink1, which turned right on the Fib 78% off the wave C (note not from the wave 1 end point!).
• Since then the market has been in consolidation and has either recently broken through a down-sloping resistance trend-line (lower purple) or is still in a consol triangle (grey).  Until I see more price action I cannot tell much more and therefore am not actively trading this market.  I suspect we will see a run down to retest the purple line and then, if the big drop in stocks materialises, USD strength takes over everything.
• Net: maybe a small rally yet but then a fall off for a while and then let's see.  Note: if stocks hammer down from here USD strength kicks in. 

 

[Mercury]

So so now for NZDUSD, and here I get less sure because I don't normally look at this one.  I see the following:

• There is a nice double top on this, the second one being sightly lower so the first (X) is the current top of the market.  The run up to X was a 1-5, I can't see further back, which is a pain so let's assume the whole move was motive (large 1-5) and the sharp drop  was a Pennant.
• Since then the market has dropped off sharply and looks to now be in consolidation
• Looking at the weekly then we see that consolidation phase more clearly, it is in a Triangle form sloping against the trend, which is a Pennant (flies at halfway?)
• The Bearish run down from the double top is a strong 1-5 motion and the consolidation inside the Pennant is a clear A-B-C retrace.  We can also see a smart 1-2 retrace off the Wave C top, still inside the Pennant, before a breakout downward (Bearish signal).
• Another smart 1-5 down to what I have labeled Wave 1 (blue) and now a retrace rally, likely uncompleted as yet.
• Zooming in to the Daily chart we can see that wave 1 down more clearly and the current relief rally.  I would be expecting a retest of the Pennant breakout zone (could turn early at Fib 62% resistance but Fib 76/78% is favourite at this point for me).  Either way I would be looking for an A-B-C form on price action and then a 1-5 wave C up to the turn, after which we can expect another long bearish move, which will most likely coincide with massive USD strength across the board.

 

[Mercury]

Finally back to the subject of your original question.  Note the following first:

• I am unsure of the short term moves on USDJPY but long term I am convinced it will rally hard and long.  Likely to be some weakness short term before any serious rally but who knows...
• Looks like NZDUSD will rally for a while but will be a bit up/down in A-B-C until the retrace is over and then could drop hard and fast

When trading a market it is interesting to look for correlations from other markets but you have to take the individual market at face value and do not let other markets influence you analysis.  Then you trade what you see on the specific market in question.

Looking at NZDJPY then, again not a market I am familiar or comfortable with:

• On the Monthly there is little data and hard to draw any conclusions of merit.  If we assume that point X was the all time high and top of the market (very dubious given the lack of data) then we can add to that an A-B-C down to the second X (because I don't really know the history this could be the best start point for analysis
• After that then we have been in a rally phase which could conform to several scenarios as follows:
  1. An A-B-C and then Bear move (maybe in play?)
  2. A 1-2-3 and now into a wave 4 before a final wave 5 that exceeds the first point X high
  3. Rally up to a Flag consolidation pattern, currently in play
•  I prefer one of either 2 or 3 so let's assume the consolidation is a Flag (flies at half way) then the indicated next major phase is a rally.  However so long as price remains inside the flag channel nothing is clear in terms of direction and the consolidation can easily continue.
• Looking at the Flag in more detail on the Weekly chart we can see a 1-5 down off the top of the Flag, followed by an A-B-C and then a move down of indeterminate count (note EWT counts within a consolidation are subject to some special case "rules" so standard counts are not reliable until there is a consolidation breakout (watch out for false breakouts!).
• I think I can see the A-B-C you are alluding to on my Weekly but the C is not yet done.  If this holds then a C termination around the channel line is favourite, however each test of the line holds a possibility of a breakout so you would need to see a good bounce back off the line to go short.
• Looking at the Daily then, we see the small A-B-C in more detail.  Of the wave C looks like a 1-3 is down, now in wave 4 and will likely drop a little further before a final wave 5 push up to complete the C
• If this is all correct then we could anticipate a bearish move off the line down in the direction of the lower line BUT this is not a high probablity set up in my book, I would be waiting on this for an actual breakout of the consol channel and if my long term bias is for a rally I only want to trade with that trend.
• Note there is no need for the market to hit the lower line again so any bearish move may only just exceed the previous low 

 

[Nelsy-Boy]

@Mercury unbelievable amount of work you have done for this post and I really appreciate the charts which I will look through in more detail this weekend. I have yet to set a concrete strategy but have done enough research to completely understand your analysis in full. I’m not a Kiwi, but being English, I was extremely happy that NZ got turned over. Let’s hope that form continues in to next year 😀.

I tend to look at all markets to practice TA.  Thanks ever so much for your comments and I will be putting more posts and graphs up on other markets as and when.

[Mercury]

No problem @Nelsy-Boy, it is always good practice to look at a new market, blank sheet of canvass and all that.  Of yo spot anything you would like to challenge please do.  In terms of developing your analytical method, I would select a handful of markets and really try to get to know them, ideally those you might be interested in trading.  The key skill to develop is not just the purely use of technical analytical tools (which takes practice for sure) but crucially interpreting what these are telling you.  For this experience of the price actions and short term/long term drivers of a market is crucial.

[CrossLines]

Hey @Nelsy-Boy

With that particular set up:

I would go short and protect my entry with a stop loss above H&S head. (4 hourly), take profit @ ~ 75.7 and then place an order for long at ~ 75.7 and protect the set up with Stop loss  just bellow 73.4, see monthly with fake break out from 200 MA and bounce.  (if you really want to 'splurge' with stop loss, you can set it up bellow the quadruple bottoms). Take profit on long @ ~ 79.4 as monthly price meets 50 MA.

With the long position still open, I'll place a short entry @ 77.8  and 79.42, to profit on those retracements.

That's my analysis on that pair for the short term. But feel free to put in some Fibo calcs in it for confirmation. 

 

[CrossLines]

@Nelsy-Boy

Further more analysis on the chart and trying to decipher Elliot Wave

As a mentor once told me, if you ask 10 traders to do an EW analysis on a chart, you will probably get 10 different results. My result is explained bellow.   

To understand what we have in front of us, we need to look at the past.

As you can see, the previous wave concluded at ~73.3 (set point 4 must retrace and bounce from point 1, as point 1 sets a critical support/resistance), the total wave value from A to 3, will have a continuation of further 30%.

Current wave:

1. 77.7
2. 75.6 or 74.5
3. $$
4. $$$
5. 30% continuation 

75.6 is a major historical support line and that is one of the reasons I believe 75.6 will set to be point 2 on our EW that is forming, but keep in mind that prices could also bounce from 75 or 74.5 (but is lesser chances of that). 

There are 3 reasons I believe price will bounce from 75.6:

• Retrace from resistance break out
• H&S take profit (price usually bounce from that level)
• support from 50 MA daily

Trade safe and place stop loss at 1% of your balance.

Keep in mind, that 72.3 could be point 1 for a bigger picture. (as is has set a very strong support on monthly)

I hope that has helped.

 

 

[CrossLines]

4 hourly H&S is ~105 points and has already broken thru neckline.

 

[Nelsy-Boy]

Thanks very much for you input @CrossLines. Totally get where you are coming from. It will be interesting to see what happens in the coming week.

[Mercury]

Just looked at this again this weekend to see how it played out.  Quite surprised to see this pair followed my route map lines very precisely, that doesn't happen quite like this most of the time.  Maybe there is a lesson for me there in in looking with fresh eyes from time to time but more likely it is about sticking to larger time frames for route maps...

Anyway, it does suggest one thing, which is that without any prior knowledge or fundamentals knowledge a technical analysis can project credible route maps for a market than may offer trade entry opportunities.  In this case I also needed to look at the full Triad, something I cannot recommend too much to anyone trading FX as any assessment has to stack up across the Triad due to the arbitrage effect.

Long story short, the original A-B-C question has been answered by the price action, and it was pretty text book, but EWT alone is not sufficient for me so the channel lines (or Bollinger if you prefer that) were crucial.  In terms of this pair I would still be unsure of where it will go next without more data and experience of the market but another drop towards the bottom of the channel seems likely (where or not it actually reaches bottom.  For me the key trading opportunity would be an eventual breakout of the channel but have to watch out for fakeouts.

In the chart below I have kept the arrows of my route map unchanged vs the original post.  And some people say technical analysis doesn't work... 🤡