Sive Morten
Special Consultant to the FPA
- Messages
- 18,555
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:
Speculative Longs:
Speculative shorts:
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
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)
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.
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.
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...
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.
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:
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
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)
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.
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.
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...
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.