Using Market Correlation to Time The Entries

Last year turned out to be great for GBP crosses as they managed to put in strong rallies in favor of GBP since December 2018 lows or highs. In this article, we would concentrate on two of the GBP crosses namely GBPAUD and GBPNZD because the rallies last year in these two instruments managed to break above their respective October 2018 high which created an incomplete bullish sequence. Let’s start by taking a look at the chart of GBPAUD below which shows the cycle and number of swings up from October 2016 low

GBPAUD Elliott Wave Cycle and Sequence from October 2016 low

GBPAUD  broke above May 6, 2019 high (1.888) which makes it a bullish sequence from October 2016 low and hence favour more upside. Pair reached 100% from Dec 2018 low (1.7246) and pulled back so we called cycle from Dec 2018 low completed at 1.9523 i.e wave ((W)) and wave ((X)) pull back is now in progress. As the pair has 5 swings up from October 2016 low, we expect wave ((X)) dip to find buyers in 3, 7 or 11 swings for 7th swing higher toward 2.0062 – 2.1816 area. Dec 2018 low (1.7246) needs to hold for this view to remain valid.

GBPNZD Elliott Wave Cycle and Sequence since Oct 2016 low

$GBPNZD managed to break above October 2018 (2.047) high which makes it 5 swings up from October 2016 low. The pair is now showing a bullish sequence from October 2016 low favoring more upside while dips stay above 1.812. Cycle from December 2018 low is proposed to be over at 2.0559 (Oct 14, 2019) and pair is now in a pull back to correct the cycle from Dec 2018 low before it turns higher again in the 7th swing toward 2.1596 – 2.2423 area. Pair has already done 3 swings back from the peak in October but we are calling for another push lower in the 6th swing before pair turns higher in 7th swing because we believe the timing is not there yet to start the 7th swing higher.

GBP Crosses - GBPNZD Bullish Elliott Wave Sequence from October 2016 low

EURNZD Blue Box should provide the Timing

EURNZD chart below shows when GBPNZD broke above October 2018 peak to make a higher high, EURNZD failed to break above the same peak and it formed a lower high in October and turned lower again. Decline from October peak (1.7718) appears impulsive, moreover the pivot at December 2018 low has given up which supports the idea of bounces failing below 1.7718 peak and pair trading lower toward 1.6094 region to complete a 7 swings double three Elliott wave structure down from October 2018 peak. Since lower high in October 2019 in EURNZD is the same as the end of 5th swing in GBPNZD, we like the idea of GBPNZD bounces failing below October 2019 peak for another extension lower and that we believe would take EURNZD lower toward the blue box area and once blue box area is hit in EURNZD, that should act as the ideal timing for the next leg higher in GBP crosses i.e. GBPNZD and GBPAUD to start. Market correlation plays an important role in the way we determine the timing in the market and that’s why we cover 78 instruments in total and not just a few because as analysts and forecasters we need to be searching for clues within different groups and instruments to get an edge.

EURNZD Daily Cycle from October 2018 peak