ETH is currently in the neutral zone, so we are tracking two counts at this stage. As a primary count, this could be actually still an (A)-(B)-(C) correction within wave 4 of a daily ending diagonal pattern that can be now followed by a new three-wave (A)-(B)-(C) rally which can still retest the highs and potentially 5k area for the final wave 5. However, if bears are too strong and if ETH goes back below that 3500 spike level, then keep an eye on secondary count, where we are looking for a bearish five-wave impulse as part of a daily expanded flat.
Ethereum 4h Elliott Wave Analysis
XRPUSD is making bigger intraday recovery in the 4-hour chart on speculation for winning the case vs SEC, but ideally just a complex (W)-(X)-(Y) corrective rally only in wave 2. So, bears are still in control for now with room for much more weakness within a five-wave cycle, but probably after a retest of 1.00 – 1.10 resistance area. However, keep in mind that we are still tracking two daily counts at this stage..
Litecoin, LTCUSD remains bearish after we noticed five waves of decline from the highs and now that is even accelerating lower in the 4-hour chart, seems like it’s unfolding a higher degree five-wave bearish cycle. So, be aware of more downside pressure and more weakness, ideally towards July lows and below 100 level after a pullback in wave 4 which can also turn into a bearish triangle pattern if the price stays slow and sideways.
Litecoin 4h Elliott Wave Analysis
Dash coin, DSHUSD remains nicely bearish after completing bearish triangle in wave B on a daily chart. Well, now that is accelerating even lower, seems like a higher degree wave C is in progress, which should be completed by a five-wave bearish cycle. So, be aware of more weakness in the 4-hour chart, ideally towards June lows and 90-60 support zone before bulls show up again, but after current pullback in wave 4 that can also form a triangle pattern if stays slow and sideways. Invalidation level remains at 165.
We are still looking for more weakness after recent sideways and corrective wave structures. If we take a look at Crypto total market cap chart, we are still tracking wave (4) correction that can be already completed or still in progress as a bearish triangle pattern. Anyway, in both cases we can expect more downside pressure within wave (5) in upcoming days, which should be completed by a five-wave cycle of the lower degree.
Crypto Total Market Cap 1h Elliott Wave Analysis
Bitcoin, BTCUSD is accelerating even lower in the 4-hour chart, seems like there’s now room for more weakness within a five-wave cycle for wave C, which can send the price much lower, ideally towards June Lows and 29k-20k support zone, just be aware of shot-term pullback in wave (4) that can be also a sideways consolidation within a bearish triangle pattern.
Bitcoin 4h Elliott Wave Analysis
However, according to quite big intraday recovery, we have also prepared count #2, where BTCUSD may have a completed five-wave cycle that can be now followed by a higher degree A-B-C pullback in wave (2) back to 57k resistance area before bears show up again.
DSHUSD remains nicely bearish as expected after we noticed a completed bearish triangle in wave B on a daily chart. Well, now that is accelerating even lower, seems like a higher degree wave C is in progress, which should be completed by a five-wave bearish cycle. So, be aware of more weakness in the 4-hour chart, ideally towards June lows and 90-60 support zone before bulls show up again, but after current pullback in wave 4 that can also form a triangle pattern. Invalidation level remains at 165.
Dash 4h Elliott Wave Analysis
BCHUSD is coming even lower in the 4-hour chart after we mentioned and highlighted about a completed bearish triangle in wave (B). So, with current sharp and impulsive break below July lows, seems like wave (C) is already in progress with room down to 300-200 support area that can be reached within a five-wave cycle. Current recovery still looks to be wave 4 correction, which can be already completed or still in progress as a bearish triangle formation, however, in both cases be aware of a continuation lower for wave 5 of (C), while the price is below 540 invalidation level.
On US index we see a nice and strong recovery, a clear impulse meaning more upside can be expected after set-back which at the same time can be bullish for commodity currencies while USD will have hard time breaking above the resistance. Support on S&P500 is at 4640-4670.
SP500 bounced sharply after we noticed a corrective decline within wave 4 and it’s currently in strong and impulsive rally, ideally back to highs for wave 5. So, be aware of more upside, while the price is above 4493 level, just watch out for short-term pullbacks. Keep also in mind that previous decline from the highs can be also alternatively wave (A), so any sudden strong decline would be signal for more complex correction.
S&P500 4h Elliott Wave Analysis
As expected, DAX is sharply and impulsively down in the 4-hour chart after we noticed a completed five-wave bullish cycle from 14800 to 16400. So, seems like a new, higher degree A-B-C corrective decline is now in progress on a daily chart, which can send the price even lower, ideally back to the former wave 4 and 14800 support zone if not even lower. However, more weakness can be seen after a corrective a-b-c recovery in wave B that can be now coming to an end, as we see it approaching strong 15800 – 16000 resistance area, but only sharp reversal down would confirm our view for wave C.
And, with recent sharp decline and broken channel support line on Crypto total market cap chart, there’s a chance for more weakness within a five-wave cycle, but only if the price manages to stay below 2.5T level.
Crypto Total Market Cap 1h Elliott Wave Analysis
Bitcoin, BTCUSD is accelerating even lower in the 4-hour chart, which was expected based on a projected daily flat correction. So, seems like there’s now room for more weakness within a five-wave cycle for wave C, which can send the price much lower, ideally towards June Lows and 29k-20k support zone, just be aware of shot-term pullback in wave (4). We remain bearish as long as the price is below 55k invalidation level.
Ripple, XRPUSD is bearish as expected and seems like a bearish triangle in wave B has been completed earlier, so with current acceleration lower in the 4-hour chart, we are tracking a higher degree wave C that can be finished by a five-wave bearish cycle. So, watch out for more downside pressure in upcoming days, ideally towards June lows and 0.50 – 0.20 support area, just be aware of a pullback in wave 4. We remains bearish as long as it’s below 0.95 invalidation level.
Gold is coming sharply down from the upper side of a triangle range, so it appears that wave D is finished and that market is already in wave E. But even wave E should be made by three sub waves; now seen in A) that can be approaching some support at 1758, so be aware of a limited weakness. At the same time we also see a divergence on the RSI that suggest a bounce into wave B).
GOLD 4h Elliott Wave Analysis
Silver is coming down on the 4h time frame from 25.40 resistance, much more than we thought, so it appears that metal is in a higher degree three-wave drop. Ideally, that will be an A)-B)-C) decline, either a corrective one down to 22-21 support zone or maybe even back to September lows as part of the final leg of an ending diagonal pattern as shown on daily ALTernate count. Wave A) can be now approaching the end, so after a pullback in wave B) with resistance around 23.70 level, watch out for more weakness within wave C).
The main reason for more downside pressure is that we can see risk-off sentiment in full swing, as stock markets are massively down, which can easily take the Crypto market lower, especially Crypto related stocks like Galaxy Digital Holdings. We have already shared it back in October and as you can see, it’s now turning sharply down after we noticed a corrective rally in wave B. If we see decisively broken 28 level and channel support line, then BTC could be easily headed much lower, maybe even back to June lows.
With current sharp rebound from the intraday lows, BTCUSD looks to have a completed wave »v« of A/1. So, we can now expect a three-wave a-b-c pullback in wave B/2 before a continuation lower within wave C/3. First resistance would be at the former wave »iv« swing high, while second one would be at the wave »i« swing low.
Bitcoin 4h Elliott Wave Analysis
ETHUSD is acting quite strong, but we are still tracking an A-B-C correction within wave (B)/(2) that can retest 4500-4600 resistance area before we will see more weakness within wave (C)/(3).
European shares have seen sharp sell-off, as DAX made five waves down so looks like more weakness are coming after rallying in three waves. Frist resistance is at 15544, at former wave four, while the second resistance area is at 15900-16k. More weakness on DAX can cause limited upside on the euro as well.
DAX is sharply and impulsively down in the 4-hour chart after we noticed a completed five-wave cycle. So, seems like a new, higher degree A-B-C corrective decline is now in progress on a daily chart, which can send the price even lower, ideally back to the former wave 4 and 14800 support zone, but more weakness can be seen after a pullback in wave B.
German DAX 4h Elliott Wave Analysis
SP500 is coming nicely lower within wave 4) correction into projected support zone 4630 – 4550 support zone, from where we can expect a continuation higher for wave 5). However, in case if SP500 goes below 4500 decisively, then wave 5) and temporary top can be already in place labeled as ALTernate count.
Of course, there are some shitcoins with much bigger rallies, but once majors Cryptos complete their intraday corrections, this is when most of these coins could hit the wall.
Ripple, XRPUSD is coming nicely lower as expected, but the wave structure is still mostly sideways, so considering that triangle pattern in wave B, a new intraday recovery for subwave E may not be far away, just keep in mind that bears may now easily take the lead. However, there are still many other options, maybe even bullish triangle pattern in case if XRP jumps by itself, so previous highs can be potentially still retested before real bears show up.
Ripple 4h Elliott Wave Analysis
Bitcoin Cash after reaching lower triangle line for wave D, can be now making the final wave E of a bigger bearish triangle pattern in wave (B), which means that a sell-off for wave (C) may not be far away. So, in case if BCH breaks back below 530 bearish confirmation level, then we can start tracking wave (C).
Good morning Crypto traders! No big changes from yesterday, Crypto market remains under bearish pressure and there can be room for more weakness, especially now when we see strong daily reversal on stocks, just watch out for intraday pullbacks. Two days ago Microstrategy CEO Michael Saylor Discussed that Bitcoin Can Become $100 Trillion Asset Class, but looking at the Microstrategy chart compared to Bitcoin, we can see a corrective movement within downtrend, so »buy the rumor, sell the news« ?
Microstrategy Vs Bitcoin Elliott Wave Analysis
BTCUSD is sharply and impulsively down in the 4-hour chart after we noticed 5th wave, so seems like temporary top is in place and we can expect much bigger decline at least in three waves A/1-B/2-C/3. Currently we are tracking a pullback in wave B/2 or alternatively still wave A/1, however, in both cases be aware of short-term corrective recovery only before the downtrend within wave C or 3 resumes.
Bitcoin 4h Elliott Wave Analysis
BTCUSD remains under intraday bearish pressure and seems like it’s trying to retest the intraday lows, but there’s still a chance for a flat correction in wave B/2, where wave »c« is still missing. On the other hand, current drop could be also still as part of wave »v« of A/1 from the highs, however, in both cases we will have to be aware of a pullback before a continuation lower within wave C/3.
We also see a bounce on German DAX after it bottomed around 16200 as expected and sent index back into a new high for the fifth wave of 3. As such, be aware of a new minimum three wave retracement.
DAX is at a new high, now seen at the end of a five-wave rally within wave 3 on the 4h chart, so there can be some slowdown coming into a higher degree wave 4, especially if we also consider a divergence on the RSI. Potential support is 16000 psychological level, at the previous highs from August.
German DAX 4h Elliott wave Analysis
S&P500 is coming nicely higher for the last few weeks, unfolding a nice and clear bullish five-wave impulse on the 4h chart with price trading at all-time highs after a broken base channel that normally puts wave three of three in play. As such we will expect more upside after any retracement, especially after red wave 4) set-back. The upward projection for the current fifth wave of 3) is at around 4760-4800.
No change on oil since yesterday’s US session, when energy came sharply to the downside, so it appears that energy is making a complex correction away from the highs which can still be a seven swing move for the fourth wave. Support is now at 75-76, but we need to rally back above 80.73 to change the direction of an intraday trend.
On 4h chart, Crude oil is making bigger decline, but still looks corrective as part of wave 4, however, we see key do/die support here in the 76-75 area, so only in case of strong bounce and recovery back above 80.76, only then we can expect it back to highs for wave 5. Any early and big drop below 75 region towards 70 level would be definitely signal for deeper, higher degree correction on a daily chart.
Crude Oil 4h Elliott Wave Analysis
Silver remains bullish and looks like it has room for further strength as we see current price action as a potential fourth wave set-back into 24.80 support.
On 4h chart Silver is higher, now at a new high as expected, possibly in wave 5) of an impulse from September low which can be still in progress as we see an unfinished five-wave cycle. At the same time, we see the price at the neckline of H/S bottom formation now so we would not be surprised if current levels near 25.50-26.00 will act as a strong resistance for a new potential corrective setback.
As mentioned and highlighted, Crypto Total Market Cap is now breaking below channel support line after a completed 5th wave of a five-wave cycle exactly at the projected target, so we will have to be very careful. Three down or five down next?
Crypto total market cap Elliott Wave Analysis
BTCUSD is coming nicely lower and trading around key 60k-58k support zone, but any bigger decline below base channel support line and decisively beneath 58k region, then we will start tracking bearish impulse.
On 4h chart, BTCUSD is breaking below channel support line after we noticed a completed 5th wave, so we are now tracking either wave C or maybe even wave 3. If BTCUSD manages to stay above 58k level, then this could be still wave C, but in case of decisive break below 58k region, then be aware of wave 3 of a five-wave bearish impulse.
BTCUSD 4h Elliott Wave Analysis
ETHUSD is coming down and we see key do or die support her around 4200-3900 area, however, any bigger drop and decisive break below 3900 region would be a serious signal for bearish cycle from the highs.
On 4h chart, ETHUSD is down after we mentioned and highlighted ending diagonal (wedge) pattern within wave (5). With current break below channel support line, we are now tracking wave (C) with key support around 4000 – 3900 area or maybe even wave (3) if we see a decisive break beneath 3900 region.
Crypto Total Market Cap is trading in wave (5), but there’s still room for slightly higher levels to complete a five-wave cycle of the lower degree. But, on the other hand, we see ALTcoin market cap already finishing a five-wave cycle within wave (5).
Crypto Total Market Cap 4h Elliott Wave Analysis
In intraday chart, ETHUSD can be still forming/finishing ending diagonal/wedge pattern and by all the rules, each leg of a five-wave movement has to be completed by three waves a-b-c. So, even ETH can see another and final jump into a wave »c« of 5 towards 5k level before a reversal down. But of course, any early decline back below lower ending diagonal line and 4300 level would be signal for a completed wedge pattern within wave (5).
ETHUSD 1h Elliott Wave Analysis
Ethereum is coming even higher in the 4-hour chart as expected, but notice that it’s running out of steam, so we are still tracking final stages of a potential ending diagonal (wedge) pattern within wave (5) that can stop here around 5000 level and from where we should be aware of bigger and deeper decline at least in three waves. Broken channel and 3900 level would be definitely signal for top/resistance.
Volatility can again be seen today when traders will focus on FED Power and BoE Bailey speeches. Any CB divergence may offer interesting developments.
From an Elliott wave perspective, we should be aware of a potential turn down on DXY if we consider that wedge pattern on a daily can be coming to an end after recent three waves up in wave five as shown on 1h chart below. A drop put of a channel will likely bring in more weakness while EUR, CHF, GBP and JPY may recover.
USD Index 1h Elliott Wave Analysis
Swiss franc is trading south for the last few weeks after it stopped at the 78.6% Fib level where the market completed a corrective rally with three waves up. So it appears that the pair is now back in bearish play after a broken channel support which opens door for a third wave of decline back to 0.8923 when looking at the daily time frame.
“The thought is not something that observes an inner event, but rather it is this inner event itself. We do not reflect on something, but, rather, something thinks itself in us.”
You buy or sell a pair. You then either exit with a gain, a loss or you breakeven. The hardest part of it all is finding may be finding a reason to pull the trigger in the first place.
Many people believe they can forecast currency prices by getting the interest rate forecast correct (and are gearing up for the Fed Reserve Bank interest rate decision). But in reality, it’s a mug’s game. If we can forecast interest rates then why bother with currencies; we should just trade bonds on the Chicago Board of Trade and retire very wealthy.
That being said, there is meat when it comes to interest rates, and it flows from the yield and inflation differentials. It is these differentials that seem to be the basic fundamentals of currency analysis. Change in these differentials is what moves prices, and in currencies, changes in real yield differentials are a basic value benchmark.
Remember, the currency equation as we shared with you in our last issue:
This equation says the primary rationale for holding a particular currency is to maximize total return. What we as currency traders are attempting to solve for it the Future Exchange Rate. And we know a surprise in interest rates (surprise hike or cut by a central bank; or surprise in degree of the rise or cut) are the things that move currency prices immediately.
But that is not the whole puzzle. The real yield component is embedded in the equation which is a function of the inflation rate. So, we can plug in the inflation rate for each local currency to degerming the real yield from holding said currency. Knowing this doesn’t shield you from a significant change in a country’s expected inflation rate.
And of course, we have to remember there are also two primary pools of global capital to consider when it comes to currency forecasting: 1) hot money (or speculative capital flow)—short-term flows of capital in search of the highest current yield; and 2) the portfolio (non-speculative capital flow)—this is long-term investment capital drawn to a particular country for multi-year opportunity. Of the two, at the margin, it is hot money flow that is the bigger driver of currencies in the time frames we trade.
In the chart below we show the EUR/USD overlayed with the spread between the local currency 2-year benchmark yield and the US dollar 2-year benchmark yield (purple line). The bottom two panes are correlations.
Now some traders swear by these types of correlation. But to them we say “good luck.” We say that because what is perceived as a correlation, really isn’t much.
If you notice the middle pane of the chart above, it represents the 200-day correlation between the EUR/USD and 2-yr benchmark spread. It ranges from +92% to negative 80% since 2012. The lower box is the is the 50-day correlation, and that is all over the board.
The bottom line is this: Trying to forecast currency price action based solely on interest rate differentials is never as easy as many make it sound. Almost every other major currency correlation you can think of—gold, oil, stocks, etc.—display the same tendency. It proves again correlation is not causation.
Other than the differentials in real yield as a fundamental, causation is the same thing it has always been in all actively traded markets: real people moving real money for lots of different reasons; aka more buyers than sellers in an uptrend, and more sellers than buyers in a downtrend.
And it is for this reason we rely on the Elliott Wave Principle as our key forecasting tool. The Wave Principle, by its very nature, embodies the price action, or pattens of buying and selling in markets.
You can think of Elliott Wave as the mechanism that best identifies this tug of war between buyers and sellers as it plays out in all time frames. In short, this battle between buyers and sellers is a fractal boom-bust pattern. We have depicted it below:
The Wavetraders service is designed to guide our subscribers in an attempt to exploit these boom-bust cycles in differing time frames in order to build wealth in a trading/investment account. And the best way to do that, in our opinion, is through the Wave Principle.
No doubt, we should see some volatile price action on the release of the Federal Reserve Bank interest rate decision tomorrow as traders do their best to discern the impact on markets. The thing is, they don’t know what the Fed will do. And they don’t know how markets will react after the Fed says what it will do. Nor do we. But we do have a view and we let Elliott Wave be our guide.
Below is our view on the direction of the dollar.
USD Index is in a recovery mode since start of the year but notice that index is retracing back the previous fourth wave area, as well as 2020 spike low. In fact, move into that region is so far with three waves from the low, plus a potential wedge in C. As such, we think that traders should be aware of a potential slow down of the DXY, especially if FED will again disappoint and delay with a tapering.
Daily Wave View:
You can learn more about us, and subscribe to our service at our website. We also have live customer chat support to serve you.
Gregor and Team…
If you like what you see here, and would like our Macro Views sent directly to your mailbox, free, just click on link below and register.
However, this JPY weakness may not be seen only vs majors, but vs USD as well, as USDJPY pair shows only three wave set-back followed by a nice break out of a channel. As such, we think more upside can be coming this week, to around 115.00
USDJPY came once again slightly lower on 4h time frame, but not in five waves yet, so it can be just another correction within the uptrend especially after a bounce from 113.20 support. We see that retracement as a wave four so there is room for 115.00-115.50 this week.
USDJPY 4h Elliott Wave Analysis
As expected, EURJPY is making a nice correction within wave 4) in the 4-hour chart, which looks to be still in play or maybe already finished after reaching 38,2% Fibonacci retracement. Anyway, support is still good here in the 132.0 – 131.0 zone, so sooner or later we can expect a continuation higher for wave 5), while the price is above 130.40 invalidation level.
EURJPY 4h Elliott Wave Analysis
GBPJPY is slowing down in the 4-hour chart after a push above May highs, which we ideally see as part of wave iv) correction of a five-wave bullish impulse, mainly because of slow and corrective price action. So, more upside is in view for wave v), probably from current 13 May swing high that can act as strong support here in the 156-155 zone.
Crypto traders, keep in mind that current rally in the Crypto market is not smart money, it has been pushed mainly by BTC whales like Mike Novogratz who is big BTC investor and CEO of Galaxy Digital Holdings(GLXY). If we take a look at GLXY chart, we can clearly see a five-wave drop from the highs, so current rally should be as part of a complex W-X-Y correction that can be approaching important resistance. So, still be aware of limited gains here around all-time highs and watch out for a sell-off at the end of the year.
Galaxy Vs Bitcoin Elliott Wave Analysis
Ethereum is back to highs, but still into 4300-4500 key resistance area around all-time highs in the 4-hour chart, so seems like wave (5) can be now approaching the end with room up to 4500-4700 levels. However, any earlier sharp or impulsive decline back below channel support line and 3900 region would be signal for the top.
Ethereum 4h Elliott Wave Analysis
Ripple didn’t jump by itself and it’s still trading sideways in the 4-hour chart, so we have slightly changed the count. According to other cryptocurrencies, there’s a chance that XRP is trading in a bigger bearish triangle pattern in wave B, so a drop into a wave C may occur sooner than we think.
Let’s keep in mind that ECB may not do any hawkish actions if we consider that Eurozone inflation is below that in the US, so I think they will wait on FED first. However, if inflation will continue they will be forced to act; rather sooner than later, and such remarks can still stabilize the pair. Technically, we see pair still in a contra-trend movement because of overlapping decline, but we need that strong break and close above 1.1626 resistance for a resumption higher.
EURUSD is coming higher very nicely back towards 1.1663, the former lows, after a bottom formation at 1.1520/25 area that we recognized because of a five-wave drop and break out of a downward channel. As such, we think there can be more gains coming, ideally after a current pullback. However, break and daily close above 1.1670 can be very bullish for the pair.
EURUSD 4h Elliott Wave Analysis
Cable did not change much in the last few sessions, still looking slow and corrective so ideally, it’s in the middle of an impulsive recovery. Important support remains at 1.3747 ‘-1.37 area, where pair may stabilize and find new buyers. The invalidation level is at 1.3645.