Introduction:
In this we report, we analyze technical analysis through the lens of many indicators and try to understand market structure. The key concepts, we want to emphasize is the interplay between Volume, Price and Trend. We provide a distinctive analysis to Market study through the interplay of many of these Indicators. This weekly chart analysis covers EUR/USD, GBP/USD, USD/JPY and XAU/USD. Through this thorough analysis we hope to decipher key many market biases and develop a deep understanding on how trends develop over time. We also provide a 3 scenario Forecast, which will help traders in understanding market structure and how Volume plays an important role in the evolution of Market Perceptions and Trends. The two main concepts we want to emphasize on is Change of Character (CHoCH) and Break of Structure (BOS).
BOS: The BOS points identified in the chart suggest shifts in market direction after those points.
CHoCH: CHoCH can signify a possible shift in momentum or direction and can be indicative of a change in market sentiment or structure.
EUR/USD
The predominant trend observed on the chart portrays a bullish bias over the long run and short term bearish bias, with a clear upward movement. This is indicated by a series of higher highs (HH) and higher lows (HL) during the early and mid-stages. The recent price action, however, shows a sharp retracement, possibly indicative of a trend reversal or a deeper pullback in the ongoing uptrend.
The market from a preliminary standpoint, we are able to discern a pattern that closely follows the Elliott Wave Theory. The pattern commences at the highest point of the chart, marking the beginning of a 5-wave downward structure with Wave 1. This wave progresses downwards, concluding its course near the ‘BOS’ marking. Following this initial descent, Wave 2 introduces a pullback, taking an upward trajectory and ending around the location marked by the first ‘ChoCH’ label. The pattern continues with Wave 3, which, adhering to typical Elliott Wave behavior, stands out as the longest and strongest wave, stretching down from the ‘ChoCH’ to reach the ‘(3)BOS’ label. Subsequently, Wave 4 brings about another pullback, this time ending around the next ‘ChoCH’ indication on the chart. Finally, the 5-wave structure is completed by Wave 5, which takes the price down to a new low, concluding around the ‘(3)(5)’ marking.
Post this comprehensive 5-wave descent, the chart exhibits a 3-wave corrective structure making its way upwards. This can be interpreted as the ABC correction pattern as per the Elliott Wave Theory, signaling a potential reversal or pause in the prevailing downtrend.
The VWAP appears to be serving as a dynamic level of support and resistance for the market. The market has experienced multiple oscillations around the VWAP, showcasing behavior that is commonly observed in such scenarios. In the more recent movements of the market, the price has positioned itself below the VWAP, potentially signaling a bearish momentum in the short-term outlook. This continual interaction between the market price and the VWAP underlines its significance as a key indicator for traders and analysts monitoring the market’s behavior.
In the market’s behavior, the Break of Structure (BOS) plays a significant role, appearing numerous times and signaling shifts in the market’s structure. Particularly noteworthy is the occurrence after the third BOS, where the market embarks on a prolonged downtrend. Meanwhile, the Change of Character (ChoCH) is indicative of alterations in momentum or the ongoing trend. The market features several instances of ChoCH, each correlating with brief reversals or phases of consolidation.
On another note, the volume profile of the market is displayed on the right side, with the high volume nodes, marked by thicker areas, pinpointing zones of heightened interest or consolidation. A key point of equilibrium for the market seems to be situated around the values of 1.05792 and 1.06207, areas that bear substantial volume. Furthermore, the terms ‘Premium’ and ‘Discount’ are utilized to denote regions where prices might be excessively stretched, with the market typically reverting back to a state of equilibrium from these zones.
Analyzing the highs and lows in the market, a clear pattern emerges. The sequence of higher highs (HH) and higher lows (HL) that leads into the 23rd is indicative of a downtrend. However, post the 23rd, this pattern undergoes a disruption, signaling a potential shift in the prevailing trend of the market. In the market’s structure, certain key levels stand out, such as the Previous Week High (PWH), which is clearly annotated and hovers around the 1.07000 level.
Adjacent to this, a probability table is situated at the bottom right of the market, offering insights based on the count of bars. This table is indicating a leaning towards a bullish scenario, presenting a 62.53% probability over a span of 24 bars. This piece of information adds another layer to the market’s analysis, assisting in gauging potential future movements.
The market, after embarking on a clear upward journey marked by successive higher highs and higher lows, has recently encountered a sharp descent, ushering in whispers of potential bearish tendencies or perhaps a more substantial correction within its bullish trajectory. This shift in momentum has not gone unnoticed, capturing the attention of those deciphering its moves through the lens of technical analysis.
Employing the Elliott Wave theory in tandem with the concepts of Break of Structure (BOS) and Change of Character (CHoCH), the market narrates a story of completing a 5-wave bullish cycle, potentially positioning itself in the ABC correction phase. This interpretation finds further support and depth when viewed through the additional layers of Volume-Weighted Average Price (VWAP) and Volume Profile, which together enhance the understanding of the market’s current state and potential future movements.
As the market navigates through this period of transformation, it seems to be pausing its bullish charge, possibly entering a corrective phase. In this delicate dance of price action, key levels identified by the Volume Profile and VWAP are poised to play critical roles, potentially serving as future zones of support or resistance.
In the realm of biases and decision-making, the recent sharp downturn has sown seeds of a short-term bearish sentiment. Yet, it’s crucial to view this within the context of the larger picture, where the overarching bullish trend might transform this moment of decline into a ripe opportunity for those with a longer-term bullish outlook.
Turning to the Fibonacci Extension tool for further guidance, it’s observed that the market could seek solace and possibly revert back to the 0.618 level, marked at 1.05792, as part of its corrective journey. This projection aligns with the Elliott Wave theory, providing a confluence of technical signals that paint a vivid picture of the market’s current disposition and potential paths forward.
3 Scenario Forecasts:
- Bullish Scenario: Based on the volume profile and recent price action after the 23rd, prices could revisit the PWH level at 1.07000, especially if the market considers the recent downtrend as a corrective wave.
- Neutral Scenario: Prices might consolidate around the equilibrium levels marked by the volume profile (around 1.05792 and 1.06207), especially given the significant volume node.
- Bearish Scenario: If the previous downtrend resumes, prices might head towards the next significant volume node below the current levels, possibly around the 1.05000 area.
XAU/USD
The Gold spot market has been exhibiting a pattern of fluctuations, capturing the attention of traders and analysts alike. From the onset of October 16th, the market embarked on an upward trajectory, lifting the price from the vicinity of the 1920s. This bullish momentum continued, culminating in a peak around the 2010s dated on October 24th. However, this zenith in price marked a turning point in the market’s demeanor. Following the peak, a noticeable downtrend took precedence, steering the price down to linger in the 1970s range as the month drew to a close. This series of movements paints a vivid picture of the market’s volatility and the shifting dynamics within the Gold spot during this particular time frame.
The Gold spot market demonstrates a textbook example of Elliott Wave patterns, revealing the intricate dance of market psychology and trader behavior. Wave 1 sets the stage with an initial bullish surge, lifting the market from the 1920s to a local high in the vicinity of the 1980s. This upward momentum is temporarily halted as the market enters Wave 2, a corrective phase, which gently nudges the price down to the mid-1950s. With the foundation set, Wave 3 emerges, characterized by a robust and determined bullish drive. The market climbs from the mid-1950s, reaching an impressive peak around the 2010s. However, as is the nature of markets, this strength gives way to another corrective phase in Wave 4, pulling the market back down to the 1980s. Wave 5 follows suit, initiating a final bullish thrust that revisits the 2010s, demonstrating the market’s resilience and vigor. Yet, as the old adage goes, “what goes up must come down,” and the market is no exception. Following this 5-wave sequence, an ABC correction makes its presence known, aligning perfectly with the downtrend observed post the last peak.
The Volume Weighted Average Price (VWAP) significance becomes especially evident around October 24th and 25th, where the price makes an attempt to sustain itself around the VWAP, only to break down subsequently, underscoring the VWAP’s influence in the market’s movements. Diving deeper into the market’s structure, there are several instances of Break of Structure (BOS), where pivotal shifts in price movement are observed. Around October 24th and 25th, a notable BOS(5) is witnessed, marking the end of a prolonged uptrend as the price takes a bearish turn. Earlier in the timeline, instances such as BOS(3…) and another BOS(5) provide further examples of the market’s tendency to break structural levels. Additionally, a Change of Character (CHoCH) becomes evident post the last peak on October 24th, indicating a transition into a more aggressive downtrend, as the market adjusts its course.
Examining the market’s volume profile, which is displayed on the right, a concentration of trading activity in the 1980s range emerges, establishing this zone as a crucial level of equilibrium. In terms of market extremes, the premium zones appear to be situated around the 2010s, while the discount zones find themselves closer to the 1950s, offering traders key areas to watch for potential reversals or continuations.
The market also presents a series of highs and lows, with two significant Higher Highs (HH) making themselves known around the 2010s range on October 23rd-24th and then once again on October 27th. In conjunction, a notable Higher Low (HL) is established around the 1970s towards the end of October, adding to the market’s tapestry of key levels and turning points.
Lastly, the probability analysis and cones provided offer a glimpse into potential future movements. Given the prevailing downtrend, it seems there is a heightened probability that the price might explore the lower bounds of the cone, offering traders and analysts a statistical lens through which to view the market’s potential paths.
- PWH (Previous Week High): Around 2010s.
- PWL (Previous Week Low): Close to the 1950s.
- PDH (Previous Day High): Looks to be near the 2000s.
- PDL (Previous Day Low): Around the mid 1970s.
In the short term, the market displays a 60% inclination towards bearishness, primarily influenced by the apparent Change of Character (CHoCH) and the unfolding corrective wave structure. As the lens widens to a mid-term perspective, a 40% bullish sentiment is discerned, taking into account the overarching upward trend since mid-October.
Delving into a synopsis of the current market conditions, it’s observed that following a pronounced bullish chapter encapsulated by Elliott Waves, the market now finds itself amidst a corrective phase. The volume profile, with its emphasis on the strong support near the $1,978 level, together with the recent dip below the Volume Weighted Average Price (VWAP), paints a picture of potential consolidation or an impending trend reversal.
Adopting an interconnected perspective, which harmoniously blends Elliott Waves, volume profile, VWAP, and the Break of Structure/Change of Character (BOS/CHoCH) analysis, the market appears to be catching its breath following a substantial period of bullish activity. The distinct volume zones emerge as significant areas of interest, poised to play a crucial role in the market’s forthcoming movements.
In summary, the bullish vitality that permeated the market from mid to late October is showing signs of dissipation, paving the way for potential short-term consolidation or a mild bearish shift. When it comes to biases, the confluence of Elliott Waves, BOS & CHoCH, and VWAP steers the short-term outlook towards bearish territory, while maintaining a cautious bullish stance in the mid-term.
Bringing Fibonacci extensions into the analysis, the market reveals the 0.618 retracement level around $2,004 as a formidable resistance. Should the corrective wave ‘c’ persist, the market might navigate towards the $1,989 level (0.382) and possibly extend its descent to $1,969 (0). This intricate web of technical elements paints a comprehensive picture of the market’s current state and potential future directions.
3 Scenario Forecasts:
- Bullish Scenario: Price consolidates above the $1,978 mark and resumes its uptrend, targeting the $2,025 level and beyond.
- Neutral Scenario: Price continues to consolidate between the $1,978 and $2,004 marks.
- Bearish Scenario: The price breaches the $1,978 support and targets the $1,969 level.
- The rising trendline from Oct 16th was broken in late October, indicating potential trend weakness.
USD/JPY
The markets movement exhibits a clear pattern of upward trends and temporary dips, over the observed time period. Despite experiencing a downturn the market manages to maintain its position above the long term trendline showing resilience. The Elliott waves tell a story of five waves followed by a phase labeled as ABC. Currently we seem to be in Wave 4 which’s a retreat before an expected ascent in wave 5.
Wave 1 started around 149.000 and reached its peak at approximately 151.334.
Wave 3 showed strong momentum and concluded around the level of 152.813.
Wave 4 gracefully dipped to, around 149.941 before participating in the markets movement.
Now lets shift our attention to Volume Weighted Average Price (VWAP). It seems that the market is currently moving harmoniously around this dynamic level.
The Break of Structure (BOS) in the market is noticeable, particularly around October 16th when the price broke past the previous resistance level from October 11th. The Change of Character (CHoCH) is evident around October 21st, where the market’s rapid upward momentum shifts to a consolidation phase.
In the volume profile on the right side of the market, there is a clear indication of high trading activity between the 149.867 to 149.941 JPY range, suggesting that this could be a crucial support or resistance level in the future.
Observing the highs and lows, the market has formed a Major High (HH) at approximately 152.813 JPY on October 25th, an Equilibrium High (EQH) around 152.2 JPY on October 24th, and a Lower High (LH) at about 151.7 JPY on October 23rd. On the lower end, there is a Major Low (LL) close to 149 JPY on October 9th, an Equilibrium Low (EQL) near 150 JPY on October 19th, and a Higher Low (HL) around 151 JPY on October 21st.
The probability cones show that as time progresses, the range for potential price movement increases, indicating a growth in uncertainty. The Previous Week High (PWH) is near 152.813 JPY and the Previous Week Low (PWL) is around 149 JPY.
Looking at the probability table it suggests a 58.29% chance of an increase in prices over the next 24 bars, and a 41.71% chance of a decrease. This bullish probability is even more pronounced when looking at the last 120 and 480 bars.
The market currently exhibits characteristics of a corrective phase within a broader uptrend, as indicated by the Elliott Wave pattern. After completing an impulsive third wave, the market is now retracing, yet this seems to be a temporary setback before an anticipated resumption of upward momentum.
Combining insights from Elliott Waves, VWAP, and Volume Profile provides a multi-faceted view of the market’s behavior. Despite the current retracement, the bullish trend appears to be firmly established. Critical levels that require monitoring include the Previous Week High (PWH), Previous Week Low (PWL), and zones highlighted by the Volume Profile. The Elliott Wave pattern projects potential for an upward trajectory, however, market participants should remain vigilant and consider the signals provided by the Change of Character (CHoCH) and Break of Structure (BOS).
In terms of market bias, the evidence from Elliott Wave analysis suggests a bullish stance. Nevertheless, the recent signals from BOS and CHoCH introduce an element of caution. Important levels for validation include the recent Higher High (HH) at 152.813 for confirmation of bullish continuity, and the recent Higher Low (HL) at 149.941 as a potential indicator of trend reversal.
Employing the Fibonacci extension tool, the market has potential upside targets in sight. The 0.618 extension level near 151.715 may pose as initial resistance, while the 0.786 and 1 extension levels at 152.198 and 152.813 respectively, offer additional upside objectives.
3 Scenario Forecasts:
- Bullish: Price respects the recent HL, uses the 149.867 volume node as support, and moves towards the 152.813 level, following the Elliott Wave prediction.
- Neutral: Price oscillates between the recent HH and HL, awaiting further market cues, potentially consolidating before the next big move.
- Bearish: Price breaks below the recent HL and the 149.867 volume node, targeting the PWL and potentially indicating a deeper correction or trend reversal.
GBP/USD
From October 16th to October 26th, the market displayed a bearish demeanor, consistently forming lower highs (LH) and lower lows (LL), showcasing a downtrend. However, as the calendar flipped past the 26th, the market entered a phase of consolidation, stabilizing and showing signs of leveling out from the prior bearish trend. The transition from a clear directional movement to a more stagnant state marks a significant change in market behavior during this period.
The market has unveiled a potential Elliott Wave sequence, with the initial wave (1) climaxing near 1.2300, followed by a correction in wave (2) to approximately 1.2240. The third wave (3) brings a significant impulsive drop, landing around 1.2115. Wave (4) sees a rebound to the vicinity of 1.2200, and finally, wave (5) concludes the sequence near 1.2150. This completes the 5-wave pattern, which is then succeeded by a 3-wave corrective structure, labeled (a, b, c).
While the Volume Weighted Average Price (VWAP) is hovering around the “Equilibrium” line, estimated to be at 1.2254, given its typical placement in the center of price activity. In terms of market structure, a Break of Structure (BOS) is noticeable around the 24th, marked by a sharp decline in price. This incident hints at a potential shift in market sentiment. Following this, a Change of Character (CHoCH) becomes apparent around the 26th, as the market begins to stabilize and demonstrates signs of recovery.
The Volume Profile highlights a zone of concentrated trading activity between 1.2150 and 1.2180. Here, “Equilibrium” is established at 1.2254, serving as a central point within the price range, with “Premium” areas situated above and “Discount” areas located below. Examining the highs and lows, Higher Lows (HL) are evident around 1.2115 and 1.2140, indicating a presence of bullish pressure. Conversely, Lower Highs (LH) near 1.2320 reflect bearish pressure. A notable Lower Low (LL) is also observed following the initial HL, situated around 1.2115. This intricate dance of highs and lows paints a detailed picture of the market’s recent behavior and potential future direction.
The market, through its probability analysis and cones, presents a balanced view for its near future. There’s a 50% chance that prices will navigate within the range of 1.2115 to 1.2279 over the next 24 bars, highlighting the market’s uncertainty and providing traders with critical levels to watch.
In terms of historical points of interest, the Previous Week Low (PWL) is found around the 1.2115 mark, while the Previous Week High (PWH) is situated near 1.2320. These levels are vital as they offer insights into past market behavior, aiding in the identification of potential support and resistance zones.
Shifting focus to the probability table, it indicates an almost even odds scenario, suggesting a near 50% chance for prices to either rise or fall across different time frames. However, there’s a slight tilt, about 2%, favoring a downward movement when extending the observation to 480 bars. This subtle bias introduces an additional layer to consider, as it might imply a potential shift in the market’s sentiment over a more extended period. In essence, the market is at a crossroads, with its immediate future finely balanced, and traders would do well to pay close attention to these probabilistic cues and historical levels.
In the recent unfolding of events, the GBP/USD market has displayed a bearish demeanor over a substantial period, yet it’s now hinting at signs of stabilization, potentially indicating a pause or a reversal in trend. The market’s storyline, painted by the Elliott Waves and the Break of Structure (BOS), points towards the possibility of continued bearish momentum. However, the emergence of higher lows introduces a new narrative, suggesting a brewing change in market sentiment.
Connecting the dots across various technical perspectives, the Elliott Wave analysis, BOS, and Change of Character (CHoCH) collectively propose that the bearish stronghold might be weakening. The market stands at a crucial juncture, possibly transitioning into a consolidation phase or on the verge of a trend reversal.
To summarize the market’s current state, while the bearish trend has been a dominant force, a confluence of indicators and evolving patterns is now painting a picture of potential sentiment shift. In terms of biases, the Elliott Waves lean towards a bearish continuation, yet the trend analysis coupled with the formation of higher lows carves out space for a potential short-term bullish bias.
Focusing on the Fibonacci Extension, the market has identified key retracement levels at 0.236 (1.22007), 0.382 (1.21687), 0.618 (1.21170), and 0.786 (1.20802), using 0 and 1 as the start and end points of the initial downward move. These levels are poised to play significant roles, acting as potential battlegrounds for support and resistance, further enriching the market’s unfolding narrative.
3 Scenario Forecasts:
- Bullish: Prices rebound off the current level, breaking past the “Equilibrium” at 1.2254 and targeting the previous highs near 1.2320. This can be further validated by the Elliott Wave correction pattern (a, b, c) and the bullish Higher Low formation.
- Bearish: Prices break the recent lows around 1.2115, targeting Fibonacci levels such as 0.786 at 1.2082 or even the 1 level at 1.2033. The Lower High formation and significant drop on the 24th might be indicators for this scenario.
- Neutral: Prices continue to oscillate between the “Premium” and “Discount” zones, particularly between 1.2120 and 1.2280, without any significant breakout. The sideways trend observed and the equal probabilities from the table can validate this
Disclaimer: This is not an Investment Advice. Investing and trading in currencies involve inherent risks. It’s essential to conduct thorough research and consider your risk tolerance before engaging in any financial activities.
