FOREX PRO WEEKLY, October 12-16, 2015

Sive Morten

Special Consultant to the FPA
Messages
18,564
Fundamentals

Reuters reports U.S. dollar hit multi-week lows against the euro and Swiss franc on Friday, the day after minutes from the Federal Reserve's September meeting bolstered expectations for a later interest rate hike, while growth-linked currencies surged.

The dollar index, which measures the greenback against a basket of six major currencies, was set for its second straight week of losses after the minutes focused on external factors depressing the outlook for inflation.

Investors "certainly looked at what the minutes of the meeting said, and that encouraged people to position themselves for the dollar to sell off," said Lane Newman, director of foreign exchange at ING Capital Markets in New York.

The euro hit a three-week high against the greenback of $1.13875 and was set to mark its highest percentage gain against the dollar in four weeks, at 1.3 percent. The dollar hit a three-week low against the Swiss franc of 0.95870 franc, while the dollar index also hit a three-week low of 94.692.

The dollar rose, however, against the safe-haven yen as the outlook for accommodative central bank policy around the world drove traders into riskier currencies.

The Australian dollar hit a 7-week high against the greenback of $0.7344 and was set for its strongest weekly performance since late 2011 on gains in commodity prices and the view that accommodative central bank policies would support global growth.

The New Zealand dollar, another commodity currency, hit a more than 10-week high against the dollar of $0.6722 .

Some riskier emerging market currencies also gained against the dollar on the outlook for accommodative central bank policy. The dollar was last down 0.82 percent against the Brazilian real to trade at 3.7522 reals after hitting a more than five-week low of 3.7239 reals earlier in the session.

"Metals had a good day, which is good for commodity currencies, and central banks are not removing accommodation, which is good news as well for risk appetite," said Richard Franulovich, senior currency strategist at Westpac in New York.

External news background shows nothing new though. As we've said recently, it is definitely, geopolitics stands on first stage right now - not Fed rate, not crude oil storage, but geopolitics. This leads us to conclusion that degree of uncertainty will hold for considerable period of time, since specific of geopolitical games stands mostly in secrecy that stands under curtain of events that you see on TV and in the net. The point is that activity of political leaders increases tremendously during events of this kind, situation changes very fast. Since just small part of information comes to public, this holds markets in tension. That's why it seems that commodity currencies could become more interesting for trading activity in nearest future.

Today we will continue to create our portfolio of trading setups on commodity currencies. Thus, on Friday we've talked on NZD. Today we will take a look at CAD. Besides, CAD is close to us, since just recently we've traded very cool setup that was completed by reaching of 1.34 target.

As usual, let's start with COT data.
CFTC shows solid drop in open interest in CAD since August:
CFTC_CAD_OI_06_10_15.bmp

Speculative long positions stands at very low level ~ 28K contracts. This is almost lowest level since 2002. Every time when market reached this level previously - it turns to upside action.
CFTC_CAD_Longs_06_10_15.bmp

Shorts also has started to decrease, but the pace is not as strong. Still, take a look as soon as CAD has reached our 1.34 target - almost 15K contracts were closed.
CFTC_CAD_Shorts_06_10_15.bmp

Right now short-to-total range stands around 70%. This is not critical value, but close to it. Besides, critical level was reach in mid-August where ratio was around 80%. That's being said, current action could mean the process of reversal.

CAD, as we know has great correlation with Crude Oil. Here we see some shift are coming. Mass media have explained last jump in oil prices by changes in US storage. But we doubt that this is real reason. Too strong for reaction on weekly data.
CAD_Crude_09_10_15.png


Finally, recall our recent talks on monthly Dollar Index. It has confirmed DRPO "Sell", but simultaneously has formed bullish grabber. And there was a bit contradiction here. But right now market is starting move down and grabber stands under the menace of failure, as soon as price will drop below its low.
At the same time market has untouched 1.618 target, but appearing of DRPO does not contradict to it. Market could reach 50% support of DRPO thrust and then turn to the upside. What is more important to us, is that in short-term perspective bearish action for USD could continue:
dxy_m_12_10_15.png


Thus, by keeping all this stuff in mind, let's turn to technical part.

Technicals
Monthly

Right now we see that market has hit our 1.34 long term target. In general this target is very strong resistance. Although market is not at overbought, but combination of AB=CD target and major 5/8 Fib level creates an Agreement resistance. If even market will continue move higher later, it should show respect to this resistance by at least minimal retracement, which is 3/8 Fib support @ 1.19 area.
That is our major assumption here. Currently it is difficult to imagine what could become a reason for further CAD weakness, if even crude will drop to 15-20$, hardly CAD will reach next 1.60 target. It probably will need some domestic problems. Anyway, currently we don't care. What is important for us - CAD at rock hard resistance and is starting show response. W&R here has little chance to happen, because major target already has been hit.
cad_m_12_10_15.png


Weekly
Here trend has turned bearish already. Market shows three important things here. First of all - it has finalized upward action and monthly AB=CD by reversal pattern - bearish 1.618 Butterfly. Second - market has dropped below MPS1. This moment tells that we're not in just retracement within bull trend. We're on a new bear trend. Third moment - market stands at oversold and very close to support area of 1.2870. This is not just Fib level, this is also previous top area.
As soon as market will reach it, we could get:
a) Completion of minimal butterfly target;
b) Bullish Stretch pattern which suggest upside retracement;
c) Possible B&B "Buy" pattern.
This gives us two major conclusions. First is we could trade weekly B&B "Buy" + Stretch setup on long side of the market. But major one - we should get upside rally that we will be able to Sell and take short position on our major setup on CAD
cad_w_12_10_15.png


Daily
Daily trend also stands bearish. Since downturn was really fast, here, guys we do not have any clear patterns or extensions that could clear show us possible destination of first leg down. Market also stands at oversold.
Meantime we could use as approximation of possible support the same 1.28-1.2850 area. Probably market will touch it and use as background for upside retracement.
It is interesting that this level also will be WPS1. Based on action on higher time frames and taking in consideration market oversold at weekly and daily chart, retracement should be significant, I would say 50-61.8%. It means that it could reach WPR1 and this will become another check point. If market will fail pass through it - this will be another confirmation of CAD bearishness (I mean USD/CAD of cause).
cad_d_12_10_15.png


4-hour
On intraday charts, guys, we do not have any clarity yet. Probably some pattern should be formed that will put the foundation to upward reversal, but now we see no hints yet, only steep downward channel. Lower border coincides with 1.2850 area, but nothing more yet.
cad_4h_12_10_15.png


Conclusion:
As CAD has hit major monthly target it should response on it. No matter what fundamental factors will stand behind CAD, they could be super bullish for it, but technically market should show at least minor bounce. This "minor" means at least 1.19 area. Our monitoring of the CAD will have an aim to join this possible action.
At the same time in short-term perspective we could get minor bullish setups, since market right now oversold on weekly and daily chart and needs some relief.


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 yen benefited from a flight to safety on Tuesday as regional equities fell, while the dollar languished near three-week lows against a basket of currencies as expectations faded that the U.S. Federal Reserve will raise interest rates this year.

Mixed Chinese trade figures released on Tuesday provided little relief. Exports fell less than expected, while imports sank more than predicted.

"A lot of trading is driven by crosses today," said Bart Wakabayashi, head of foreign exchange for State Street Global Markets in Tokyo.

"The general consensus seems to be for stronger yen, but there's no event on the horizon that's going to knock it out of its range for the moment," he said.

The dollar index, which tracks the U.S. currency against a basket of six major counterparts, edged slightly higher in Asian trade to 94.880, but remained close to its overnight low of 94.619.

Against the yen, the dollar was down about 0.1 percent at 119.90 yen , still solidly in the middle of its well-worn range against the Japanese unit.

One-month dollar/yen implied volatility , which measures the cost of hedging against sharp swings in the yen, stood at 8.440 percent on Tuesday, its lowest since Aug. 21, and far below two-year highs above 13 percent touched as recently as late August.

The euro also slipped about 0.1 percent to 136.24 as the yen got a safe-haven lift from skidding Asian equities.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 1.0 percent from a two-month high touched on Monday.

The Australian dollar tumbled 0.8 percent against the Japanese unit to 87.63 yen . It also shed 0.7 percent against its U.S. peer to $0.7308 , down from a two-month peak of $0.7382 touched on Monday.

The U.S. central bank will hold just two more policy meetings in 2015, on Oct. 27-28 and Dec 15-16.

Forty-six of 66 foreign exchange strategists surveyed by Reuters last week said a further delay posed a significant risk to dollar strength and two said the risk was very significant.

Atlanta Fed President Dennis Lockhart said on Monday that the central bank will have a "lot more" data to ponder at its December review than at its meeting later this month.

Market activity was light on Monday due to the U.S. Columbus Day holiday, which shut U.S. bond markets. Monday was also a national holiday in Japan.

The yield on benchmark 10-year Treasuries slipped to 2.054 percent in Asian trading from its U.S. close of 2.099 percent on Friday, further undermining the dollar's appeal.

The euro was steady at $1.1359 , after scaling a three-week peak of $1.1397 on Monday.

Yves Mersch, a European Central Bank executive board member, said on Tuesday that it is too early to say whether negative factors such a slowdown in emerging market economies will derail the long-term path of inflation in the euro zone.


Today guys, we again will take a look at CAD, while EUR has not turned yet to activity. On CAD we see completion of our first suggestion - market has hit Fib support on daily, accompanied by oversold. This is bullish Stretch pattern and now we're coming to next step - upside retracement. Since market is oversold, then at least 3/8 retracement should happen, but 50-61.8% even more probable. Anyway, right now we will be watch for 1.3120 resistance - Fib level + natural area:
cad_d_13_10_15.png


On 4-hour chart we've suggested that market could take the shape of reverse H&S pattern and now we still stand at the same opinion. At least we do not see what other patterns could be formed here. Probably Stretch will start to act by this pattern.
Take a look that potential target leads CAD to solid resistance area and agrees with daily level of 1.3120. But here it will be also AB=CD target (i,e, Agreement) and WPR1. If you would like trade CAD long, then you could try to stick with this H&S...
cad_4h_13_10_15.png


Finally on hourly chart we could get, say, DRPO "Sell" (red line on the chart is MACDP, not MA) that will lead market to 1.2965 Fib support area and creates the bottom of right shoulder. As you can see CAD potentially could form 3-4 patterns on different time frames at any taste. Just choose what you like more:
cad_1h_13_10_15.png
 
Last edited:
Good morning,
I do not know guys, why yesterday's charts have not been attached correctly. I have tried again today, but no...

Reuters reports today The U.S. dollar wobbled near a 3 1/2-week low against a basket of currencies on Wednesday as further signs of weakness in China fanned expectations that the U.S. Federal Reserve will have to wait longer before any policy tightening.

The Australian dollar slid further from two-month highs as a relief rally in various commodities and risk assets appeared to be running out of steam.

"It seems the rally in risk assets is over after investors covered their short positions. I suspect share markets will not have an easy time for now as investors look to earnings, so the dollar is likely to be capped as well," said a trader at a major Japanese bank.

China's price data showed annual consumer inflation slowed more than expected to 1.6 percent in September, below market expectation of 1.8 percent, from 2.0 percent in August.

The inflation number, coming a day after data showed Chinese imports fell 20 percent in September, suggested the economic picture in China is still cloudy, likely constraining the Fed's ability to raise interest rates.

The dollar index stood at 94.692, just above Tuesday's low of 94.539, which was its lowest since Sept 18.

Against the yen, the dollar dipped 0.1 percent on Wednesday to 119.61 yen , near Tuesday's low of 119.55, its lowest level since Oct. 2. But the Japanese currency was hampered by expectations that the Bank of Japan could unleash stimulus at the end of this month.

The euro on Tuesday rose to $1.1411, its highest in 3 1/2 weeks, and last stood at $1.1394 , with its Sept. 18 high of $1.1460 seen as a possible target.

The U.S. dollar's weakness against other major currencies has not been helped by the latest comments from Fed officials.

Fed Governor Daniel Tarullo told CNBC television he does not expect the economy to be ready for a rate hike this year, while St. Louis Fed President James Bullard said an October rate rise is unlikely.

The Australian dollar slipped 0.3 percent to $0.7211 , taking it further away from Monday's two-month peak of $0.7382.

Against the New Zealand dollar, it fell 0.7 percent to a four-month low of NZ$1.0811 as the kiwi rose after markets digested comments from New Zealand's central bank chief Graeme Wheeler.

Although Wheeler highlighted concerns on China's economic outlook, he made no fresh effort to talk down the kiwi while there was mention of the risk low interest rates can bring.

Against the U.S. dollar, the kiwi rose 0.4 percent to $0.6670 .

The Singapore dollar also rose 0.5 percent, to around 1.3950 to the U.S. dollar after the country's central bank eased its monetary policy only slightly, less than some players had expected.

The markets will be looking to more data from Europe and the United States later in the day, including euro zone industrial output and U.S. retail sales.

The UK will report the August jobless rate, a day after sterling lost momentum on a surprise fall in British consumer prices last month, which further reduced expectations of a rate hike by the Bank of England.

The pound stood at $1.5277 , down from a three-week high of $1.5388 hit earlier on Tuesday.

The pound fell to an eight-month low of 74.93 pence per euro on Tuesday. It last stood at 74.62.


Guys, today we have a lot of currencies to take a look at. Thus, CAD is interesting, EUR... But today we will take at AUD. It just has nice short-term setup. We will not make any fargoing conclusions based on it, this is just tactical issue.
So, on daily chart market has hit overbought and completed AB=CD pattern. Now it stands in logical pullback and has reached 3/8 Fib support. This is B&B "Buy" setup, guys. Minimum target will stand around 0.7311 area
aud_d_14_10_15.png

So now we need to estimate possible entry point...
If you will take a look at 4-hour chart (not shown) you'll see that you could get either B&B "sell" or DRPO "Buy" It will be clear in few hours. But both of them suggest appearing of deep retracement down - B&B as target, DRPO as second bottom before upward reversal.

That's being said, we need to watch for deep Fib level on hourly chart of most recent thrust - either K-support or even 5/8 :
aud_1h_14_10_15.png

If you're brave heart you could try to trade even scalp patterns on 4-hour, hourly chart in opposite direction. But for us major pattern is daily B&B "Buy". We also do not exclude possibility that this B&B will be foundation for further upside action, not just to 0.7311 minimum target...
 
Last edited:
Good morning,

Reuters reports today dollar wallowed around seven-week lows against a basket of currencies in Asian trading on Thursday, after weak U.S. sales data prompted investors to scale back bets that the U.S. Federal Reserve would hike interest rates by the end of 2015.

The dollar index was last nearly flat from late U.S. levels at 93.945, after tumbling as low as 93.845, its lowest since Aug. 26.

The euro stood at $1.1479 after edging up as high as $1.1491 earlier, its highest since Aug. 26.

U.S. retail sales barely rose in September, edging up only 0.1 percent and falling short of expectations for a 0.2 percent rise, according to a Reuters poll of economists. Producer prices recorded their biggest decline in eight months.

Against its Japanese counterpart, the dollar fell as low as 118.61 yen , its lowest since Sept. 7, and was last trading at 118.98 yen.

The yen's overnight gains were held in check by speculation that the Bank of Japan might take further stimulus steps to bolster the flagging economic recovery.

Japanese manufacturers' confidence worsened for the second straight month and is expected to fade further, a Reuters poll showed, adding to lingering fears of a recession and keeping pressure on policymakers to offer support.

"People don't want to touch the dollar yen," for big directional bets, said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

The pair remained solidly mired in its familiar range, between 118-121 yen in which it has traded since late August.

The disappointing U.S. sales data on Wednesday increased demand for the safety of U.S. Treasuries, pressuring yields and further sapping the dollar's appeal.

The yield on benchmark 10-year Treasury notes was at 1.992 percent in Asian trading, not far from its U.S. close of 1.982 percent on Wednesday.

Also on Wednesday, the Fed's Beige Book showed the U.S. economy grew at a modest pace, keeping alive hopes that the U.S. central bank is on track to eventually raise interest rates for the first time since 2006.

U.S. interest rates futures implied traders see about a 1-in-4 chance the Fed would raise rates by year-end, according to CME Group's FedWatch program. The U.S. central bank will hold two more policy meetings in 2015, on Oct. 27-28 and Dec. 15-16.

The Fed opted to hold policy steady last month as policymakers fretted that a slowing global economy, particularly China, might threaten the U.S. economic outlook. Figures released on Wednesday showed the pace of China's consumer inflation slowed.

The Australian dollar was up 0.6 percent at $0.7344 after briefly blipping lower earlier on downbeat employment figures.

The data showed a fall of 5,1000 in jobs in September against forecasts for a gain of 5,000.

The Reserve Bank of Australia (RBA) is still expected to keep rates at a record low of 2.0 percent at its next meeting on Nov. 3.


So guys, today is time to return back to EUR. Our yesterday AUD B&B "Buy" has worked perfect, thus, this tactical setup mostly has been completed. Now on EUR...

On daily chart we see some bullish signs. Market has moved above recent top and erased bearish AB-CD pattern. Also this top is the one of monthly bearish grabber. With having DRPO "Sell" on monthly Dollar Index chart, our expectation to see 1.19 on EUR looks rather realistic.
Second, market stands above WPR1 and MPR1 which suggests existing of new bull trend here. Finally, EUR has broken up potentially bearish flag pattern. Taking this all together we're turning to butterfly "Sell" pattern with 1.19 destination point:
eur_d_15_10_15.png


On 4-hour chart market has completed AB=CD pattern and now is turning to logical retracement. But since this swing up is new impulse move, or let's call it upside continuation swing (to not confuse EW followers), we do not want to see deep retracement. Thus 1.1350 is acceptable level. This is K-support, but what is more important - this is broken border of the flag. Returning back inside it's border will be worrying sign. Thus, let's wait for 1.1350 and watch could we use it as background for long entry
eur_4h_15_10_15.png
 
Last edited:
Good morning,

Reuters reports today the dollar rebounded from 7-week lows on Friday thanks to stronger-than-expected U.S. inflation data and after European Central Bank policy maker Ewald Nowotny raised expectations for further euro zone easing.

The dollar index <.DXY> stood at 94.487 after bouncing from 93.806 touched overnight, its lowest since late August.

Indicators on Thursday showed a surprise 0.2 percent rise in the September U.S. core consumer price index, boosting the year-on-year gain to 1.9 percent and pushing it closer to the Federal Reserve's 2 percent goal.

The upbeat inflation data gave the dollar some relief, which has been battered by a run of poor U.S. indicators and concerns about China's economy undermining prospects of the Fed hiking rates this year.

"It is doubtful the market tried to factor in the possibility of the Fed raising rates this year on the inflation number, but the Fed is 'data dependent' so it reacts positively to upbeat data," said Shinichiro Kadota, chief Japan forex strategist at Barclays in Tokyo.

"Nowotny's comments also hurt the euro, so the stage was set for participants to cover shorts in the dollar," he said.

The euro slipped 0.1 percent to $1.1380 , having slid from a 7-week peak of $1.1495 scaled the previous day after ECB's Nowotny said it was "obvious" the central bank must seek more ways to stimulate the euro zone economy.

The common currency was on track to end the week effectively flat.

"Nowotny's comments hit the euro just as it was beginning to firm, and the currency could weighed down if other ECB official hint at the need for further easing," said Masafumi Yamamoto, a senior strategist at Monex in Tokyo.

The market is keeping an eye on ECB executive board member Benoit Coeure's speech later in the day.

The greenback rose 0.2 percent to 119.13 yen , pulling away from a 7-week trough of 118.065 struck overnight. The U.S. currency was still poised to lose 0.9 percent this week.

The New Zealand and Australian dollars lost some lift as they ran into profit taking after two days of large gains.

The kiwi inched down 0.2 percent to $0.6835 after flying to a 3-month high of $0.6897 earlier this week on expectations that the Reserve Bank of New Zealand might pause in cutting rates.

The Aussie was down 0.5 percent at $0.7292 . It was still on track to gain 0.5 percent on the week, having drawn support from firmer commodity prices and growing doubts the Fed will raise rates this year.


So, markets across the board have turned to relief after strong rally. Some patterns have worked (as our AUD B&B "Buy"), others have not been formed (as our CAD H&S pattern).
EUR today has completed our expectation on retracement due better than expected US Inflation numbers. On daily chart still, picture is not very positive for bulls, since EUR has formed bearish engulfing pattern, that potentially could lead EUR back to flag body. It could be "bullish trap" by J. Shwager terminology and will be bearish pattern. So let's keep watching how market will behave around this support
eur_d_16_10_15.png


On 4-hour chart EUR stands at "moment of truth" - K-area and flag border support has been reached:
eur_4h_16_10_15.png


Following our "bullish" logic we should watch for bullish patterns here, on hourly chart. Currently we do not have any yet:
eur_1h_16_10_15.png


May be we will get butterfly or something of this kind. So how to act around this area? As usual, you could try to be invoved in support strength testing or join upward action later, when market will move above recent top again. Last way is most safe.
If you will take the risk and will try to take position around support, you need to follow next steps:
1. Wait for hourly reversal pattern and take position according to this pattern.
2. Place stop initially somewhere below 50% Fib support (next to K-support area).
3. As soon as market will start upside reaction on support area - move stop at breakeven or at least slightly below K-support.
Logic is simple - if market will return back, then it is no need to move stop farer, because as soon as K-support will be broken, hardly any other single Fib level will hold market...
 
Last edited:
Good morning Sive,
Just to say that Charts are attached and visible to me.

Thanks a lot for you effords (and I hope tomorrow will be EUR turn ;))
Best wishes

Good morning,
I do not know guys, why yesterday's charts have not been attached correctly. I have tried again today, but no...
 
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 today?

Thanks a lot again
Ronald
 
Back
Top