Monthly Currencies Analysis – December 2018

Basic Edition - December 2018 Monthly Currencies Analysis & Projections

This is a new monthly ezine post that will be published every month. Its purpose is the give an overview of what we expect to happen during the month and beyond. It is NOT meant to give detailed in-depth trade SHORT TERM trade recommendations as in the SHORT TERM, market fluctuations must be updated on a daily basis if not hourly in order to capture SHORT TERM profits. That is not the intention of the analysis contained in this ezine. The aim is to provide you with a higher level overview of the possible market direction so that you can stay on the RIGHT SIDE of the trend....if there is one! As you know, the "TREND IS YOUR FRIEND" and you don't want to be on the WRONG SIDE of a trend! Trade with the trend is the easiest, most pain-free way to trade! By being able to see things from the "top-down", you are much better able to drill down to the shorter terms and look for trading opportunities GOING WITH THE OVERALL trend!

Of course, most all markets spend much more time in corrections than they do trending. Usually about 80% of the time is spent correcting! But there are trends within corrections as well! And using the analysis in this ezine, you can spot better trading opportunities available to you during the month!

November Summary

November turned out to be moderately successful and profitable month trading currencies. It could've been quite a bit more successful except that there was a high number of still ACTIVE trades that have been carried over to December. And when the month of November ended, ALL the carry-over trades were in profit! Some were in BIG profit. Had some of all of them been closed and booked into November's totals, last month would've been a HUGE month! But no matter. Those trades carried into December should end up giving us a December to Remember! 

So here is the November Trade Analysis & Results:

November turned out to be somewhat of an aberration as we actually ended up with 4 more losing trades than we had winners. That yielded a low 38.9% conversion percentage yet we still banked a profit of +900 pips. This is further proof that you don't need a winning percentage in order to make profits and that the "winning %" metric is way overblown as a measure of success. By maintaining a solid 1:2 risk:reward ratio on all trades and "closing the losers while letting the winners run", we are able to to profit without a greater than 50% winning percentage. Last month is proof positive of that fact. 

November was also the third lowest number of trades taken so far this year. Only May and September were lower. In May, we took only 21 trades that resulted in a loss of -814 pips for a conversion % of only 38.10%. September, we took only 13 trades and made +82 pips for the month with a 38.46% conversion rate. 

So taking less trades this year has not resulted in better and more profits. Nor did it result in a higher conversion %. 

But with November also being another positive, profitable month, that makes it 6 straight winning months in a row now! 

But with November also being another positive, profitable month, that makes it 6 straight winning months in a row now! 

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Analysis - The Majors (Covered Under Basic Subscription)

USDJPY

Short Term Bearish; Long Term Bullish

Analysis Preferred Bearish Scenario
USDJPY Bearish Preferred Scenario

USDJPY Bearish Preferred Scenario

Wave Count

In this short term bearish scenario of USDJPY, what we see is that there was 5 waves up from the March 2018 low to the October 2018 high. Since we marked the March low as a completed wave (b)[ALT (x)], then that means that this impulse wave up from March should be a wave 1[ALT A] of a higher degree wave (c)[ALT (y)]. If that is the correct wave count, then the next move will be a wave 2[ALT B] and that should drop far enough to retest the broken MAJOR down trend line as well as a STRONG SUPPORT zone.

What to watch for:

For this scenario to happen, look for prices to move back up towards the upper blue trend line but not to reach it. Likely, prices should move about 50% of the way towards it and reverse back down towards the MAJOR up trend line (UTL) that defines the tail end of this wave 1. But in order to unlock lower prices and see this wave 2 drop take place, prices will need to break that MAJOR UTL. If it does that, then look out below! 

Recommendation:

Full disclosure - we are already short in this pair. If you are not short, then a good thing to do is to wait for prices to actually break that MAJOR UTL before looking to enter short. Otherwise, if you go short on any pull back higher, your SL will need to be above the current wave 1 high. Obviously, if prices were to break above the wave 1 high, then this wave count is invalid and that would no longer be the wave 1 high.

ALT Scenario
USDJPY ALT Short Term Bullish Wave (iv) Triangle Scenario

USDJPY ALT Short Term Bullish Wave (iv) Triangle Scenario

This is my ALT short term bullish scenario in USDJPY. What would happen is that prices move back up to the upper trend line and complete the leg ((d)) of that triangle and then would need to complete the leg ((e)) as well. That would complete the Elliott Triangle pattern and send prices higher to then complete the wave 1. In this scenario, we would expect to see a much deeper wave 2 as well. So if prices do follow this ALT scenario, then we will be looking to make a very good profit on the wave 2 retrace. 

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AUDUSD

Short Term Bearish; Mid-Term Bullish; Long Term Bearish

Analysis Preferred Bearish Scenario
Wave Analysis

Since nearly from the beginning of this year till the end of October, AUDUSD fell sharply in a pretty strong down trend. Not until last month did prices finally have a true break of that trend. That can be easily seen when prices broke the MAJOR down trend line (DTL) and headed higher. It never did that this entire year! Not even in my wave count marking did the wave (ii) even break that down trend! But if you know price action the way I do and seen this action hundreds of times, then you also should know that usually, the first break of any major trend is usually a correction and not a reversal. 

In this case, you see that I have marked that November break as a wave (iv) correction and that wave (iv) may now be completed and done for. You can see that it unfolded there as an expanding diagonal. Diagonals whether expanding or contracting are pretty common patterns to occur in wave 4's. 

So what my wave count and price action are both suggesting is that we are going to be seeing prices dive back down now in the wave (v) to complete the one degree higher wave 1. Yes, that whole down trend I am marking as just the wave 1 of a MUCH, MUCH larger 5 wave move down! My apologies to my Aussie friends but the Aussie is in for some big trouble somewhere years from now! But of course, there will be some hope in the retracement wave 2 for some years to come. It should be a pretty steep pull back.

What to watch for:

Look for prices to continue lower out of that completed ending expanding diagonal wave (iv). We will need to see prices follow-through on the drop out of that diagonal in order to see this scenario succeed. 

Recommendation:

Wait to see prices follow-through on the drop out of the diagonal and then pull back up into the lower trend line of that diagonal to see if that trend line will reject prices from going any higher. That would be a retest of the break out. Then look to sell.

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ALT Bullish Scenario



USDCAD

Short Term Bearish; Mid-Term Bullish; Long Term Bullish


GBPUSD

Short Term Bullish; Mid-Term Bullish; Long Term Bearish

Analysis Preferred Bullish Scenario
GBPUSD Bullish Scenario

GBPUSD Bullish Scenario

After completing the wave (W) back in April, prices took a dive back down correcting that wave (W). If that move back down is part of a larger correction of that wave (W), then that wave down which was impulsive needs to be a wave A. And that is how I have it marked. Following that logic, then if that is a completed wave A, then the next thing we expect to see is a 3-wave wave B. And in this scenario, that is what I am looking to see. 

The way I have it, the wave (w) of that possible wave B completed and right now, we are looking for the bottom of that wave (x) of B and looking to BUY into the wave (y) of B.

What makes this difficult is that the ALT scenario is bearish and calling for another wave down to come soon in a continuation of that wave A. Meaning that the wave A hasn't actually ended. 

However, right now there is a valid "Corrective Double-Bottom" trade in place. 

What to watch for:

Look for prices to break out of that small bullish channel that is just about to complete which would signal that the wave (x) is done. If it breaks up and out of that bullish channel, then expect prices to move quickly towards that red upper trend line. From there, would need to see prices break over that red trend line in order to continue higher

Recommendation:

Wait for prices to break up and out of that bullish channel DECISIVELY before looking for a BUY

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EURUSD

Short Term Bearish; Mid-Term Bullish; Long Term Bearish

Analysis Preferred Bearish Scenario
EURUSD Preferred Bearish Scenario

EURUSD Preferred Bearish Scenario

In this daily chart of EURUSD, what you can see is that prices are still in the down trend from that February high which I labeled a completed wave A. That would mean that EURUSD is now in a corrective phase wave B. If that is the correct wave count, then this long multi-month 5-wave down trend has to be the lower degree wave (A) of the higher degree wave B. What I am looking for now is to estimate the end of this down trend wave (A). And according to my break down of the 5 waves, it has not ended yet. There should be another move down yet to come. 

Currently, it is in the corrective wave (iv) of (A). And it is very likely that the wave (v) of (A) down should take place this month and maybe into January of the new year. But starting some time in the 1Q of 2019, we should see that wave (B) back up occur.

But first, at this time it is still in a small correction wave (iv) and that has not yet finished. I am looking for prices in this wave (iv) to reach up to a STRONG RESISTANCE zone that was a STRONG SUPPORT zone. A rejection by that zone will send prices down in the wave (v) of (A).

What to watch for:

Watch for prices to move up into the STRONG RESISTANCE zone. From there, we will need to see prices get rejected and not break that zone and head back down. Watch the price action at that zone for a possible good sell setup

Recommendation:

Wait for prices to reach up to that resistance zone first before looking to execute any trade. Don't jump the gun and sell on the expectation of a rejection. Wait for price action to actually confirm a rejection in order to sell. 

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USDCHF

Short Term Bearish; Mid-Term Bullish; Long Term Bullish

Analysis Preferred Bullish Scenario
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