FOREX PRO WEEKLY, October 05-09,2015

Sive Morten

Special Consultant to the FPA
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Fundamentals

Reuters reports the dollar slumped on Friday, stung by a September U.S. jobs report depicting slower hiring, which raised doubts the economy was strong enough for the Federal Reserve to raise U.S. interest rates this year as had been widely anticipated.

Losses for the dollar against the euro and Swiss franc topped 1 percent, and the dollar index was off nearly 1 percent after touching a low last seen on Sept. 24.

Payrolls outside of farming rose by 142,000 last month and August figures were revised sharply lower to show only 136,000 jobs added in August, the Labor Department said on Friday. Economists had expected employers to have added 203,000 jobs in September, according to a Reuters poll.

The data marked the smallest two-month gain in employment in over a year and could fuel fears that a China-led global economic slowdown may sap America's strength.

"This is a weak report that will probably push back the timing of the Fed rate hike to 2016," said Vassili Serebriakov, currency strategist at BNP Paribas, New York. "The dollar will suffer the most against the yen in the short term, although not really against commodity currencies because I would imagine this data would be negative for risk sentiment."

The dollar fell sharply two weeks ago after the Fed once again kept rates at historic lows. But the currency had gained around 2.5 percent through Friday, as Fed Chair Janet Yellen and other U.S. policymakers kept alive the prospect later this year of a rate rise, which would be the first in nearly a decade.

The dollar on Friday hit a three-week low against the yen below 119 yen and was last down 0.71 percent at 119.07 yen. Against the Swiss franc, the dollar was off 1.2 percent.

Speculators increased bullish bets on the U.S. dollar, after hitting their lowest level in more than a year in the previous week, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.

The value of the dollar's net long position rose to $21.73 billion in the week ended Sept. 29, from $20.48 billion the week before. It is interesting still how this balance will change on results of NFP data.

Speaking on details, mostly all parts are stay the same - Open Interest, speculative short and long positions:

Open Interest:
CFTC_EUR_OI_29_09_15.bmp
Speculative Longs:
CFTC_EUR_Longs_29_09_15.bmp
Speculative shorts:
CFTC_EUR_Com_Shorts_22_09_15.bmp

Technical
Monthly

On Friday, guys, our happy was so close and we even have prepared nice technical trading plan on EUR. As you can see, despite strong correlation between ADP and NFP, surprises could happen and our words that "everything looks perfect, but NFP will be major risk factor for us" have become a prophecy for Friday. But this is just one of the factors that nobody could predict and that's why reaction on poor NFP was so strong. (This is by the way the reason why I always try to avoid trading or keeping positions during data releases.)

Despite strong rally on Friday, monthly picture has not changed much. October still stands as insider month to September and our bearish grabber here is still valid. The major question for 1-2 weeks will be probably to understand the consequences of NFP, whether it will lead to significant sentiment changes or will fade out.

Other tools mostly stand the same. Overall shape mostly reminds bearish flag and logically it better agrees with all this stuff that now stands in EU.

Finally on monthly chart we have another issue - bearish grabber that was formed in September.

It means that next possible target @1.22 currently stands under question. It should follow from DRPO, but due to the reasons that we've placed previously, we can't rely on it.

Finally despite the depth of current upside retracement, we still will treat it as bounce, if even EUR will reach 1.20-1.22 area. Market too long stands in downward action, especially during recent year and market has solid bearish momentum. Also take a look at butterfly pattern. Here we see definite acceleration right to 1.27 target point. Usually it leads market to next 1.618 target after retracement.

That's being said monthly analysis mostly tells that even phantom bullish patterns, such as mentioned DRPO gradually disappears as a smoke and bearish context crystals better. Grabber has target at 1.04 lows but our opinion that this will be a road to parity...

Still there is new intrigue growing on markets. As our forum member Stelore tells that he has read somewhere in the news, as Zero Hedge Fund reported previously - we could get QE4 and further rate decreasing by Fed. I'm not sure about the rate by two reasons. First is because previous Fed never talks on increase but then takes decrease of rate. Second - because further rate drop when it already stands at 0.25% will not have significant effect, if even it will be negative...
On QE4 - it is possible, just because only money printing could support US market, all other sources have been utilized already....

http://www.zerohedge.com/news/2015-09-27/qe-infinity-calls-continue-qe4-will-be-their-next-move

eur_m_05_10_15.png


Weekly

Here, as you can see changes are not significant as well. Mostly because EUR was dropping whole last week and only on Friday we've got rebound. But it was insufficient to change situation drastically.

By letter guys, we have bullish trend here. But recent action, market mechanics tells that something has broken in this bullish mechanism. After market has completed upside AB=CD pattern and hit overbought - we've got logical retracement down.
But take a look what has happened next. EUR was not able to re-establish upside action. Market already was out from overbought burden, and couldn't continue move higher. Last week EUR has dropped below MPP.

That's being said may be overall setup theoretically is bullish. At the same time overall action, especially in recent time looks poor. Final confirmation of bearish breakout will happen when trend will shift to bearish and market will move below 1.08 lows. Taking in consideration the market's pace - it should meet major support around 1.10 - where trend, MPS1 and trend line will cross. (if, of cause we will get this continuation)
eur_w_05_10_15.png


Daily

Usually when you get strong action in any direction as a result of data release or due some other reason, the primary task that you will have to resolve is the stability and timing of this upside action. Other words speaking, we need to estimate the status, quality of the action. Whether it will be the event that will become the starting point of some tendency or, this is just short-term reaction, that soon will be forgotten.

Currently, on daily chart it seems that the second scenario looks preferable. Market still stands inside long-term channel. Trend has remained bearish, despite recent reaction on NFP data. And take a look, market even has formed bearish grabber, that suggests moving below 1.11 area.
In general two recent Sell-offs look more solid rather than following upside actions that mostly remind retracement.

Speaking on other tools, they are mostly the same. Trend stands bearish, but the moment of truth probably will come around 1.10 area. This is a clue to next action. Bearish breakout will open the road to the sequence of targets - 1.08, 1.04 and parity. While if market will hold above it - it could move higher inside the flag for some time more.
Also, do not expect that market will move through 1.10 as knife through butter. Probably not. This will be oversold, accompanied by Fib support, MPS1 and trend line. Breakout will be difficult and may be EUR will challenge this level not once or even twice.
Since we do not have bullish setup, because trend is bearish - we can't take long-term bullish position right now. If market will move above recent top and shift trend bullish - then short-term picture could change, but not right now.

eur_d_05_10_15.png


4-hour

Even taking in consideration recent upside rally, it is difficult to call upside action of last week as trend. Mostly it takes the shape of bearish flag and reminds consolidation after market has hit minor 0.618 target of large bearish AB-CD pattern.

On Friday market has completed inner minor AB=CD pattern and reach Agreement resistance around 1.1335 area. May this even could be treated as bearish "222" Sell pattern. To confirm bearish sentiment we would like to see bearish breakout of this flag, erasing of NFP candle and moving below 1.1080 lows.

If market will show upside breakout then short-term bearish setup will be destroyed, since trends will shift bullish, daily grabber will fail. And this could lead to appearing of large upside butterfly.
eur_4h_05_10_15.png


Hourly

Here we see that market didn't develop upside success and shows rather deep return. So, since we have bearish grabber on daily chart, for those who would like to trade it - here some levels. 1240 area seems interesting, because this is Fib level and area around WPP and MPP. IF market will test it and fail to move higher, this will be early confirmation of bearish sentiment. Stop should be placed above the top, since this is invalidation point of the grabber. WPR1 will give additional protection and indicator. If price will move above WPR1 then it is not just retracement...
eur_1h_05_10_15.png


Conclusion
Despite significant rally on Friday, NFP release has not made significant impact on long-term picture. If any consequence will follow, it will probably come on October Fed meeting when Yellen could change rhetoric.
But right now technical picture has not changed significantly.
On short-term charts our attention will stand upon Friday candle. We have bearish grabber in place. If it will be valid, then market probably will show bearish development, while moving above it's top will erase short-term bearish setup and could lead to medium-term reversal in butterfly shape.

The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
 
Good morning,

Reuters reports today the dollar stood tall versus the yen on Tuesday as improving investor risk appetite worked against the safe-haven Japanese currency, which was also under pressure from the prospect of the Bank of Japan eventually easing monetary policy.

Better risk appetite in turn helped the Australian dollar to a 2-week high, with the Aussie further boosted when the Reserve Bank of Australia held rates steady for a fifth month.

Australia's central bank kept its cash rate unchanged at a record low 2.0 percent on Tuesday for a fifth straight month in a widely expected decision as it waited to judge the impact of past easings.

"It is difficult to see why the Aussie responded to the RBA decision. There were expectations in some quarters that the RBA would touch upon a further cut, which was not really the case," said Masashi Murata, a senior strategist at Brown Brothers Harriman in Tokyo.

"The Aussie's rise does not look sustainable. The statements were by no means hawkish and the RBA clearly stated that monetary policy needed to be accommodative," he said.

Buoyed by the Aussie's rise, the New Zealand dollar advanced 0.2 percent to $0.6503 and edged back to a 6-week high of $0.6532 struck on Monday.

Elsewhere, the dollar fetched 120.44 yen after gaining 0.5 percent overnight to touch a 1-week high of 120.55.

Investor risk appetite improved after last Friday's weak U.S. nonfarm payrolls report was seen cutting the chances of the Federal Reserve hiking interest rates this year.

Even as the Fed could be forced to hold off tightening this year, the policy divergence theme that has supported the greenback remained in place.

Following a two-day meeting the BOJ makes a policy decision on Wednesday and the market will be watching for any hints of further easing.

Inflation has undershot central bank forecasts in Japan and there has been speculation that the BOJ could downgrade its growth and economic forecasts this week, leaving the door open for more monetary easing later in October.

Analysts also saw the yen coming under longer-term pressure against the dollar after 12 Pacific Rim countries, including the United States and Japan, finally reached the Trans-Pacific Partnership (TPP) pact on Monday.

Seen as the most ambitious trade pact in a generation, TPP aims to liberalize commerce in 40 percent of the world's economy.

While TPP negotiations were still underway, the dollar's approach to 125 yen was seen as politically undesirable as such gains were seen stimulating those on both sides of the Pacific opposed to the talks.

Osamu Takashima, head of FX strategy at Citigroup Securities in Tokyo, reckoned that scrutiny of the stronger dollar should ease now that the negotiations are over.

Takashima also suggested that Prime Minister Shinzo Abe's government could try to drum up popularity, which sagged when Abe recently pushed through controversial national security laws, by compiling economic packages while mustering the BOJ's help as well.

"We believe both are essentially negative for the Japanese currency," he wrote.


So we continue to watch on market response on Friday rally, since we suspect that it could over very fast, at least we see some patterns that point on this chance. On daily chart we see some hints that failure and bearish continuation really could follow. First sign is the price shape - it does not show any sign of thrust, and looks mostly as bearish flag consolidation. Second - market has failed to hold above MPP and finally we have 2 grabbers in a row. While they are valid - bearsh scenario is possible.
Besides taking in consideration the sequence of siwngs, it looks like market has failed upside continuation. If we would suggest that Friday rally was upside continuation, then, market right now shows too deep return that is not typical for action that should be upside continuation.
eur_d_06_10_15.png


That's being said, all that we've discussed in weekly research is valid. We could watch for longs only if market will erase daily grabbers, exceed recent top and turn trend bullish. Otherwise we have bearish context.
On hourly chart market stands in upside retracement after completion of bearish AB=CD pattern. If we would suggest that Friday rally could get some minor continuation, say, if market will form 0.618 AB-CD, then EUR could reach resistance around 1.1260 or 1245 which is 50% Fib resistance. This area could be suitable for short entry for those who would like trade grabbers and has bearish view on the market. For more conservative traders it would be better to wait real breakout of 1.1080 lows.
eur_1h_06_10_15.png
 
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Good morning,

Recent comments from Reuters on market - The yen rebounded modestly against its peers on Wednesday after the Bank of Japan stood pat on monetary policy.

The yen was pressured earlier amid some speculation that the BOJ would ease in the wake of weak economic data and flagging inflation, but the central bank kept monetary policy steady, preferring to save its limited options.

The focus is now on Governor Haruhiko Kuroda's news conference at 0630 GMT and the market will sift through his comments for any hints of future easing.

The dollar was down 0.2 percent at 120.03 yen , pulling back from the day's high of 120.36.

The euro dipped 0.2 percent to 135.27 yen after gaining about 0.6 percent overnight. The yen also pulled away from a 2-1/2-week low of 86.26 to the Australian dollar touched before the BOJ's decision.

"The slip by dollar/yen is limited as speculation that the BOJ would ease today was not strong to begin with. It appears some speculative players simply shorted the dollar as planned in case the BOJ held steady," said Masafumi Yamamoto, senior strategist at Monex in Tokyo.

"There is still speculation that the BOJ will ease on Oct. 30, and that is limiting the dollar's downside," he said, referring to the BOJ board's next policy review.

"I still expect the BOJ will ease policy further later this month when it is likely to cut its economic projections," said Yasunari Ueno, chief market economist at Mizuho Securities in Tokyo.

"There was no reason to act today given relatively firm readings in the latest tankan and stability in financial markets. Further easing today would be ill-timed just as the premier reshuffles his cabinet."

Elsewhere, the Australian dollar retained its bullish momentum from the previous day and touched a 3-week high of $0.7179 .

Aussie bears beat a hasty retreat after the Reserve Bank of Australia on Tuesday disappointed by offering a neutral statement despite growing market worries about a hard landing in China, Australia's biggest export market.

There is also increasing doubt the Federal Reserve can afford to hike interest rates this year with U.S. jobs growth slowing. That has weighed on the dollar and lifted risk sentiment to the benefit of currencies like the Aussie.


So, we do not have many changes on EUR since yesterday. In the beginning of our update, we would like to remember our talks on NZD and AUD. Recall that month ago we've said that these currencies have met very significant supports on monthly chart and market could turn to solid upside action. Now we see that it is happening.
Soon we could get reversal patterns on them. As soon as it will happen - we will get targets and could try to trade them.
Meantime we see dollar weakness accross the board, including commodities market. That's why, although market still has not erased totally bearish picture on EUR, we should be careful. This rally "against dollar" accross the board probably is not occasion.
On daily chart market only partially has completed "bullish reversal" procedure. Thus, price has turned trend bullish but has failed to erase grabbers and break flag up. Thus, probably we are not ready yet for playing on long-side of the market and need to wait a bit more:
eur_d_07_10_15.png


On intraday charts, say on 4-hour, the Friday's range keeps all following action. Trend is bullish here but price mostly coiling around WPP and still reminds consolidation -deep returns and retracements.
eur_4h_07_10_15.png


On hourly chart our suggestion has been completed - market has reached minor 0.618 AB-CD target around 5/8 Fib resistance and turned down. So, if you trade right now bearish grabbers here - tight stops because markets across the board are not bearish and sooner or later this could impact EUR.
If market will drop below WPP and MPP, or even 1.1170 - this will increase chances on further downward continuation. Right now we see mostly struggle and attempt of the market to choose direction:
eur_1h_07_10_15.png
 
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Good morning,

Reuters reports today The dollar eased against the yen on Thursday, struggling to gain traction as investors awaited minutes of the last Federal Reserve meeting for clues on monetary policy.

Although Shanghai shares climbed 3.4 percent as Chinese markets resumed trade after being on holiday since the start of the month, risk sentiment was subdued overall with U.S. equity futures slipping 0.7 percent .

That helped the yen edge higher against the greenback.

The dollar eased 0.2 percent to 119.82 yen , inching away from this week's high of 120.57 yen set on Tuesday.

Later in the session, the Fed will release the minutes of its September meeting. Investors will be scrutinising the text for clues on whether the Fed will implement the first interest rate increase since 2006 later this year or wait until 2016.

Some market players, however, said market reaction to the minutes may turn out to be limited, since weak U.S. jobs data last week have strengthened expectations that the timing of the Fed rate hike will be pushed back to next year.

"Unless there is something extremely hawkish, I don't think it will become much of a factor," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, referring to the Fed minutes.

Against a basket of major currencies, the dollar last traded at 95.461, staying within its range so far in October of 95.218 to 96.490.

The euro edged up 0.2 percent to $1.1260.

Expectations that the Bank of Japan could unveil more stimulus steps as early as this month helped temper gains in the yen.

The BOJ held monetary policy steady on Wednesday, but slumping exports and falling oil prices have kept pressure on the central bank to come up with an additional stimulus plan that might be announced after at its next meeting on Oct. 30, when it is also expected to cut its long-term economic and price forecasts.

Data out on Thursday underscored the declining momentum in Japan's economic recovery. The government cut its official assessment of machinery orders to say that they are stalling, as core orders in August dropped 5.7 percent from the previous month, confounding consensus expectations for a 3.2 percent gain.

Sterling eased 0.1 percent to $1.5312 , staying below a two-week high of $1.5340 set on Wednesday ahead of the Bank of England's latest policy decision later on Thursday.


So, nothing special in today's comments, as well as price behavior on market. First wave of upward splash has happened and market is turning to some pause, closer to weekend.
Still on EUR situation has become less bearish compares to previous week and even to beginning of current week. Although price still stands inside rectangle, i.e. flag and this consolidation still has no signs of thrust and mostly reminds retracement after 0.618 AB-CD target - EUR moves above MPP. And action inside the flag has a tendency to upside.
On daily chart we could make only the same conclusion as yesterday - Market needs to show "unexpected" upside flag breakout and action above 1.15 to confirm it's bullish ambitions. Trend holds bullish here, but this is not sufficient.
eur_d_08_10_15.png


On 4-hour chart we see not quite bearish action inside the flag. Normally, if this indeed was a bearish market, it should continue move down after the point where we've taken short position. Yesterday we've called you to move stop to breakeven and was right. The action that we see right now does not correspond to bearish market.
Without diving in sophisticated details, market is following with upward AB-CD and comes to WPR1, Fib level for the second time. Upward breakout will lead market to 1.1422 area - 1.618 target of AB-CD. Currently it seems that it is possible, but it is not worthy to be hurry right now with taking long position, since risk is rather significant. So don't be short and wait. If upside breakout will happen - it will mean that short-term context is bullish. We already see shift in sentiment - market stands above MPP and WPP...
eur_4h_08_10_15.png
 
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Good morning,

Today Reuters reports the Australian dollar hit a six-week high and emerging Asian currencies rallied on Friday, as the greenback came under pressure due to increasing doubts that the U.S. Federal Reserve will raise interest rates this year.

Commodity currencies and emerging Asian currencies have enjoyed a banner week as many investors pushed back expectations for the timing of Fed liftoff into next year after last week's lacklustre U.S. jobs data.

The minutes of the Fed's September meeting released on Thursday helped reinforce such views, giving a broad lift to riskier assets and putting the greenback under pressure.

Emerging Asian currencies also rallied. The Indonesian rupiah surged 4 percent versus the dollar at one point and the Malaysian ringgit climbed more than 3 percent.

In addition to short-covering by speculators, the rupiah and ringgit seem to be benefiting from some inflows of overseas investor funds, market players said.

Both the rupiah and ringgit had slumped to 17-year lows against the dollar in September, hampered by falls in commodity prices and concerns that the prospect of rising in U.S. interest rates could lead to more capital outflows.

Signs of stability in Chinese equities and a bounce in oil prices have helped improve the market's sentiment and are likely helping the rupiah and ringgit attract some inflows, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

"The type of anxiety we saw back in mid-August has gone away, at least for now," Murata said.

This week's rallies in the rupiah and the ringgit are probably a corrective bounce in the wake of their sharp falls since August, and could prove short-lived, Murata added.

China's surprise devaluation of the yuan in August had stoked concerns about the health of the Chinese economy and a slowdown in global growth, triggering a slide in emerging Asian currencies.

Moves among major currencies in Friday's Asian trading were generally subdued, with the dollar holding steady against the yen at 119.96 yen , while the euro inched up 0.1 percent to $1.1284 .

Against a basket of six major currencies, the dollar last traded at 95.220. The dollar index had slipped to 94.984 on Thursday, its lowest level in about three weeks.

The minutes of the Fed's September released on Thursday revealed a deeply cautious central bank that delayed a long-anticipated tightening because policymakers wanted to make sure that a global economic slowdown was not a threat to the U.S. recovery.

"The minutes were viewed as mirroring the dovish tone to the September 17 Fed statement rather than the more hawkish message delivered by a number of Fed speakers in the aftermath of the meeting," analysts at Barclays wrote in a note to clients.


Today we will take a look at NZD, but mostly on medium term perspective. EUR is still coiling around and no clarity has come yet. Still, now we see risks for dollar growth and based on action that we see on commodity currencies, Dollar Index we could say that bearish setup on EUR right now is not as strong as it was even 1-2 weeks ago.
So, NZD... Last time we've talked on it in July. Our major suggestion was bounce up, because market has hit major monthly support - Fib level, AB-CD target and oversold. This deadly combination should trigger upside retracement, if even market wll continue drop later.
Right now upward action has started and it is taking the shape of Morning star pattern, although October is not closed yet.
nzd_m_09_10_15.png


Now is our finest hour coming. On weekly chart NZD has reached overbought and Fib resistance, which is give us bearish weekly "Stretch" pattern. Also may be we will get B&B "sell". That' being said, NZD ripe for retracement. And we need the bullish reversal pattern to take long position. This pattern should be large, because we have monthly setup:
nzd_w_09_10_15.png


On daily chart NZD also has reached a bit strange AB-CD target, Here it is overbought as well. You probably, already could recognize the pattern, that we will be watching for. This is reverse H&S pattern. If our suggestion on bounce is correct, then we will be watching for 0.65 area support for possible long entry:
nzd_d_09_10_15.png
 
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Thank you Sive for insights into the USD analytical which are, as usual, most informative and extremely helpful in my trades.

Given the weaker than expected NFP and jobless claims figures which reduce USD strength, somehow that makes me to to suspect that the FED might quite possibly use a weaken USD for a sudden all important 1st rate hikes which will help to absorbed some of the expected & feared volatility from the forex market.
 
Hello Sive,

thanks a lot for the detailed analysis.
Is it time to go Short on GBPUSD?
I maybe see a Gartley on 4H.

Can you talk about it tomorrow?

Thanks a lot again
Ronald
 
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