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Hello fellow traders. In this technical blog we’re going to take a quick look at the Elliott Wave charts of NZDUSD. As our members know, NZDUSD is showing incomplete bearish sequences in the cycle from the February 2021 peak. Recently the pair gave us 3 waves bounce against the 0.7217 peak. Recovery unfolded as Elliott Wave Zig Zag pattern ABC. Once the price reached equal legs A-B sellers appeared and we got the turn lower. In the further text we are going to explain the Elliott Wave Pattern and the Forecast.

Before we take a look at the real market example, let’s explain Elliott Wave Zigzag pattern.

Elliott Wave Zigzag is the most popular corrective pattern in Elliott Wave theory . It’s made of 3 swings which have 5-3-5 inner structure. Inner swings are labeled as A,B,C where A =5 waves, B=3 waves and C=5 waves. That means A and C can be either impulsive waves or diagonals. (Leading Diagonal in case of wave A or Ending in case of wave C) . Waves A and C must meet all conditions of being 5 wave structure, such as: having RSI divergency between wave subdivisions, ideal Fibonacci extensions and ideal retracements.

NZDUSD H4 Elliott Wave Analysis 01.12.2022

NZDUSD is correcting the cycle from the 0.72174 peak. Recovery looks incomplete at the moment. So far we got 5 waves up from the lows, which is uggesting we have ended only first leg of potential Elliott Wave Zig Zag Pattern . Consequently we are calling for another leg up toward 0.6892 + area to complete (B) blue recovery as Elliott Wave Zig Zag pattern. Proposed leg up which should be also made out of 5 waves.We don’t recommend buying the pair and favor the short side from higher levels once (B) recovery reaches its extremes. ( blue box)

As our members know Blue Boxes are no enemy areas , giving us 85% chance to get a pull back.

NZDUSD H4 Elliott Wave Analysis 01.12.2022

The price almost reached equal legs area at 0.6892 ( blue box) and made turn lower from there. Entry zone was missed by a few pips. At this stage we are calling recovery completed at 0.68912 high. Now we would like to see further extension down and break below (A) blue low – 12/15 low which would be confirmation wave (C) is in progress.

Keep in mind market is dynamic and presented view could have changed in the mean time. You can check most recent charts in the membership area of the site. Best instruments to trade are those having incomplete bullish or bearish swings sequences.We put them in Sequence Report and best among them are shown in the Live Trading Room.

Rollercoaster start to the week

It’s been an awful couple of months for bitcoin , plunging more than 50% from its highs and looking extremely vulnerable to further losses.

What started as a correction in the cryptocurrency has morphed into part of a broader sell-off that’s pummelled bitcoin along with other risk assets. The concerning thing for bitcoin is that there is still plenty of anxiety in the markets and it is not far away from a massive support level .

Some may be encouraged by the rebound in the second half of today’s session but it’s still early days. Risk assets have taken a beating and this rebound only erases a small portion.

What’s more, prior to the rebound there was still plenty of momentum in the sell-off, as you can see on the 4-hour chart. What will be telling is how the momentum indicators react to the next move lower.

In the meantime, the rebound brings some relief. But I’m not sure the anxiety in the markets has passed. There’s a lot to come this week that will influence risk appetite – the Fed on Wednesday, tech earnings , developments in Ukraine.

By the end of the week, we should have a much better grasp of whether the worst is behind us or there’s more pain to come. In the interim, the key level is $30,000. A major barrier of support for the last 12 months and if that falls, things could get much worse and fast.

After a brighter start to the new week, it was more of the same since the European markets opened. US index futures have turned negative, along with European indices as investors continue to shun risk. Indeed, it is not just stocks that are taking a hammering. Cryptos, commodity dollars and emerging market currencies were also sharply lower.

The key question is this: will the sentiment turn positive any time soon? It is impossible to say, but we do have the Fed meeting this week and there is a chance Jay Powell may talk down the prospects of aggressive tightening. What’s more, the upcoming tech earnings could lift the mood after what has so far been a weak start to the reporting season. Additionally, the spread of omicron in Europe appears to be slowing and governments have reduced travel restrictions, while workers in the UK have been encouraged to go back to the office. So, we may see some improvement in the economy in the months ahead.

But for now, the trend is clearly negative. The loss of appetite for risk comes on the back of overindulgence last year. This year, investors have realised that the era of zero-interest rate policy is coming to an end faster because inflation is soaring. On Wednesday, the Fed is widely expected to provide the clearest signal yet that the first rate hike since 2018 will be coming our way in March.

What’s more, tensions around Ukraine and a relatively poor start to the US fourth quarter reporting season have not helped sentiment whatsoever. It is unquestionable that the sell-off has been turbo-charged because of technical selling as more and more support levels have broken down in popular stocks or indices.

Speaking of which, the Nasdaq has just broken below yet another support: the October 2021 low of 14380ish ahead of earnings from Microsoft, Tesla and Apple:

NasdaqSource: ThinkMarkets and TradingView.com

With the Relative Strength Index at oversold levels of sub 30, I wouldn’t be surprised to see some “bargain hunting,” possibly as early as today or this week.

If we do see the indices such as the DAX and Nasdaq come back strongly here, I would like to see the formation of a strong hammer candle such as the one I have drawn on the chart.

• EURGBP reversed from long-term support level 0.835
• Likely to rise to resistance level 0.6800

EURGBP currency pair recently reversed up from the long-term support level 0.835 (which has been steadily reversing the pair from 2016), strengthened by the lower weekly Bollinger Band.

The upward reversal from the support level 0.835 stopped the previous downward impulse waves 5 and (C).

Given the strength of the term support level 0.835 – EURGBP currency pair can be expected to rise further toward the next resistance level 0.6800.

The cryptocurrency fear and greed index was down to 11 on Sunday and slightly up to 13 by early Monday. Crypto market capitalisation lost another 1.1% overnight to $1.61 trillion, the lowest since August.

As is often the case with prolonged sell-offs, altcoins are falling with acceleration to the first cryptocurrency, causing BTC’s share gains, which already stands at 41.3% against lows of 39.3% in mid-January. Bitcoin’s share of 40% seems like a turning point, twice triggering a correction in the crypto market.

This level stood like an informal threshold that optimism about altcoins had gone too far.

However, the rise in bitcoin’s share does little to help its price. We saw the sixth consecutive bearish daily candlestick on Monday morning, and the price rolled back to $35K. The bears may well be able to sell the price down to $32.5K, closing the gap of July and returning the rate to last summer’s support area.

Alarmingly, the sharp reversal on Friday was not followed by any meaningful bounce. Some observers point out that this is a worrying signal, suggesting further market declines, as we have not seen a final capitulation. Without capitulation, the markets will remain with an overhang of sellers.

The price of ether has fallen to $2400, which is less than half of its peak price in November.

Events are developing in a bearish scenario, so far broadly repeating what we saw in 2018 in terms of overall sentiment. Long-term buyers can avoid buying at prices above 30k for bitcoin and 2k for ether.

We believe long-term investors will look out for purchases in the 20-30k per bitcoin area. Whether these purchases will be at the upper or lower boundary depends, among other things, on the situation in the stock markets. The return of buyers there will support the demand for risk among institutional investors. But as long as we see only steady selling from them, it is too early to talk about buying.

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The Canadian dollar has started the week with losses, continuing the downswing we saw on Friday. USD/CAD is up over 1% since Thursday, as the US dollar is broadly higher against the major currencies.

The week ended on a sour note for the Canadian dollar, due to weak Canadian data. November retail sales were weaker than expected. The headline reading came in at 0.7% (1.2% exp.) and core retail sales rose 1.1% (1.3% exp.). As well, the New Housing Price Index slipped from 0.8% to 0.2% and missed the forecast of 1.0%.

If you’re guessing that these weak numbers will inhibit the Bank of Canada, guess again. The markets have priced in a whopping 85% likelihood of a rate hike at the bank’s Wednesday meeting. The drivers behind the expected hike are the usual suspects, employment and inflation. Employment is at a record level of 19.4 million and the unemployment rate fell below 6% in December, for the first time since the Covid crisis began.

Inflation is red-hot and has climbed to its highest level in 30 years, as December CPI rose 4.8% in December YoY. A recent BoC survey found that consumers and businesses expect inflation to remain high, and inflation expectations often manifest into actual inflation. A rate hike is close to a certainty, even though the BoC is expected to revise downwards its growth forecast for the first quarter.

This week’s highlight out of the US is the FOMC policy meeting on Wednesday. With inflation running at its highest level in almost 40 years, the Fed is poised to commence a series of rate hikes, with the likelihood of a March hike at 88%, according to FedWatch. The markets have priced in four rate hikes this year, but the Fed may have more in store. Goldman Sachs sent out a note on Saturday saying that its baseline forecast stands at four hikes, but the surge in inflation could push the Fed to respond with even more rate hikes this year.

USD/CAD Technical

• There is support at 1.2495 and 1.2405
•  USD/CAD is testing resistance at 1.2632. Above, there is resistance at 1.2679

Markets

Markets finished last week in a classical risk-off setting. This morning in Asian trading, there were tentative signs that the risk-off could slow. However, European markets almost immediately returned to last week’s habits. Mounting risks with respect to the Russia-Ukraine conflict and markets pondering what path the Fed will outline on more aggressive and faster policy normalization later this week continue to haunt investors in riskier assets. Selling in the EuroStoxx 50 accelerated after the index last week dropped below the 4231 neckline. The Euro zone January PMI showed a mixed picture. The headline composite index eased for the second consecutive month from 53.3 to 52.4, slightly lower than expected. The spread of the omicron variant according to Markit took an increasing toll on the region’s economy. Especially activity in the services sector slowed (from 53.1 to 52.1). Even so, Markit still denominates the setback due to omicron as rather muted. On the other hand, alleviating supply chain delays provided a welcome support to manufacturing (59.0 from 58.0). Average selling prices across in both manufacturing and services matched the survey’s historic all-time high. At the same time, input prices in manufacturing show signs of cooling raw material costs. Regarding individual countries, activity in Germany surprisingly accelerated from 49.9 to 54.3 (composite) with both manufacturing and services improving. Still, the data weren’t able to change a downbeat investor mood. Selling on equity markets even gain traction when US traders got involved. The EuroStoxx 50 is losing 3.75%. US indices show open with additional losses of up to 2.30% (Nasdaq). The risk-off is keeping core bond markets better bid despite expectations for faster Fed tightening. US yields decline with the belly (5 & 10-y declining >4 bps) outperforming the wings (2.5 bps and 1.6 bp for the 30-y and 2-y respectively). German yields are ceding 3.5/4.0 bps across the curve. The 10-y yield is revisiting the -0.10% support area. Until now intra-EMU spreads are little affected by the global risk-off trade. This also applies to Italy, where the Parliament is will decide whether premier Draghi will be appointed as President (10-y Italian spread vs Germany 1 bp wider, in line with the rest of Europe). After opening stronger Brent crude oil also eases off recent cycle highs currently trading in the mid $ 86 area.

FX markets don’t fully return to a standard risk-off reaction function. The yen outperformed early in European dealings but the dollar easily restored the balance with USD/JPY currently even trading in positive territory (113.90). The DXY trade-weighted index jumped back above 96. The euro suffers. Near 1.13, EUR/USD is at risk of falling below a STupward sloping trend channel. The Swiss franc initially was the preferred European safe haven. EUR/CHF tested the 1.03 big figure, but rebounded. Is the SNB (finally) coming to the fore? CE currencies (CZK, and even more PLN and HUF) all face growing headwinds despite expectations for more interest rate support.

News Headlines

Polish (real) retail sales rose by 14.8% M/M and 8% Y/Y in December, falling somewhat short of consensus (14.9% M/M and 9.6% Y/Y). The largest increase came from textiles, clothing and footwear sales. After eliminating for seasonal factors, retail sales at constant prices in December 2021 were 3.4% lower in comparison to November 2021. The Polish zloty lost significant ground today, but that’s mainly due to the risk-off market environment. Hawkish comments by NBP governor Glapinski over the weekend can’t fight that context. EUR/PLN surges from 4.53 to 4.56+.

The January UK composite PMI unexpectedly fell from 53.6 to 53.4 while consensus expected an increase to 54. Both manufacturing (57.9 to 56.9) and services (53.6 to 53.3) indices declined and came in below forecasts. The Omicron wave meant a third steep downturn for the hospitality sector, but this one should be brief with restrictions now easing. Business confidence in the outlook picked up, driving sustained solid jobs growth. Inflationary pressures remain elevated at near-record levels, boosting the probability of follow-up BoE rate hikes. EUR/GBP again tested 0.8381 resistance in today’s hostile risk environment.

US PMI Manufacturing dropped from 57.7 to 55.0 in January, a 15-month low. PMI Services dropped from 57.6 to 50.9, an 18-month low. PMI Composite dropped from 57.0 to 50.8, also an 18-month low.

Chris Williamson, Chief Business Economist at IHS Markit, said: "Soaring virus cases have brought the US economy to a near standstill at the start of the year, with businesses disrupted by worsening supply chain delays and staff shortages, with new restrictions to control the spread of Omicron adding to firms' headwinds.

"However, output has been affected by Omicron much more than demand, with robust growth of new business inflows hinting that growth will pick up again once restrictions are relaxed. Furthermore, although supply chain delays continued to prove a persistent drag on the pace of economic growth, linked to port congestion and shipping shortages, the overall rate of supply chain deterioration has eased compared to that seen throughout much of the second half of last year. This has in turn helped lift manufacturing optimism about the year ahead to the highest for over a year, and has also helped bring the rate of raw material price inflation down sharply. Thus, despite the survey signalling a disappointing start to the year, there are some encouraging signals for the near-term outlook "

Full release here.

AUDJPY’s recent selloff, which started just below the 83.00 level has extended below the 81.00 handle. The bearish 50- and 100-period simple moving averages (SMAs) are endorsing the drop in the pair. Additionally, a negative crossover of the 200-period SMA by the 50-period one would be another bearish signal, which could confirm elevated selling in the pair.

The diving Ichimoku lines are indicating selling forces are dominating, while the short-term oscillators are skewed to the downside, but are reflecting a minor pause in downward impetus. The MACD, in the negative region, is declining beneath its red trigger line, while the downward drive in the RSI and stochastic lines, which freshly dipped into their oversold territories, is stalling a tad.

If the current price direction persists, the 80.19-80.48 support section could attempt to provide buyers with footing. However, should this boundary fail to dismiss extra loss of ground, the pair may meet the 79.83 barrier. In the event this obstacle breaks down too, traders’ eyes could then turn to the 78.76-78.83 support belt, which is connected to the September and December 2021 troughs.

If buyers re-emerge and step over the 81.00 hurdle, initial upside constraints could evolve around the 81.25 and 81.47 levels. If buying interest persists, the 81.82 and 82.07 highs could come under fire. From here, buyers would need to push north of the converging 200- and 50-period SMAs at 82.36 and 82.46 in order to tackle the Ichimoku cloud and try and reignite upside momentum.

Summarizing, AUDJPY is exhibiting a bearish tone beneath the SMAs and the 81.82 high. A break below the 80.19-80.48 border could reinforce negative tendencies, while a price climb beyond the region of highs between the 100-period SMA and the 83.07 level, would be necessary to reinstate a neutral-to-bullish demeanour in the pair.