FOREX PRO WEEKLY # 2, August 07 - 11, 2017

Sive Morten

Special Consultant to the FPA
Messages
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Today, guys, we replace regular gold research on AUD analysis as it seems to be more interesting for trading. But we will cover gold view in our daily videos, as long-term picture has not changed significantly yet.


Fundamentals

(Reuters) Gold fell 1 percent on Friday after better-than-expected U.S. jobs data boosted the beleaguered dollar and potentially cleared the way for the U.S. Federal Reserve to raise interest rates for a third time this
year. U.S. employers hired more workers than expected in July and raised their hourly earnings by the most in five months, signs of labor market tightness and offering the Fed some assurance that inflation will radually rise to its 2 percent target.

The U.S. dollar , which was wallowing near 15-month lows prior to the figures, rallied after the release, making dollar-priced gold costlier for non-U.S investors.

"The strong rise in non-farm payrolls together with the drop back in the unemployment rate to a joint 16-year low suggests the Fed will still need to raise rates again later this year, even if inflation remains subdued," said Simona Gambarini, commodities economist at Capital Economics.
"In the absence of substantial geopolitical risks, we think that Fed tightening will prove too strong a headwind for gold prices this year. We expect the gold price to end the year at $1,150 per ounce."

Spot gold was down 0.8 percent at $1,257.66 an ounce by 2:02 p.m. EDT (1802 GMT), after falling 1.1 percent. It was on track to end the week down 0.9 percent following three straight weeks higher. U.S. gold futures for December delivery settled down 0.8 percent at $1,264.60.

"This triggered a sell from safe haven buyers of gold and silver," said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York. "Though the U.S. dollar's strength weighs on (gold and silver), the market is still not convinced that this data does anything to change the Fed's trajectory."

More evidence that the U.S. economy is on a sustainable path of growth is needed to for the dollar to make a more meaningful comeback, said Fawad Razaqzada, technical analyst for Forex.com. Limiting steeper losses in gold was escalating political turmoil in Washington which has cooled expectations for growth and inflation, and boosted safe haven assets like the precious metal. On Tuesday, bullion rose to a seven-week high at $1,273.90 an ounce.


Chart of the Week: Divergence Between Unemployment and Wages in The Euro Area
by Fathom Consulting
divergence.png


Steadily falling unemployment in the euro area has not translated into any significant increases in wages; increases in quarterly compensation per employee have averaged only 1.3% since 2014. This has been a key reason for why core inflation has flatlined since then. We suspect that labour market slack might be significantly higher than that suggested by the headline unemployment data. Despite the unemployment rate falling to pre-euro-crisis lows, a more detailed look into the composition of unemployment paints a bleak picture for wage growth going forward. As people are unable to secure a full-time job, they may instead take a part-time job, work on a temporary contract or become self-employed. Therefore, labour market slack might be better reflected by broader unemployment figures, rather than just the headline unemployment figure.

Broader measures of joblessness point to a softer market for jobseekers. There are still around seven million underemployed part-time workers in the euro area, up from just over 5.5 million in 2008. By definition, those are “people employed part-time who want to work more hours and are available to do so”. This suggests a significant number of people would rather work more, and that takes away some of their bargaining power when it comes to wage demands. Rather than pushing for wage increases, underemployed part-time workers are likely to push for full-time employment, which could undermine wage growth. As a result, despite an uptick in June, from 1.1% to 1.2%, core inflation is unlikely to see a “self-sustaining” pick-up anytime soon.

COT Report

AUD data shows good bullish performance as net speculative long position is growing on a background of positive dynamic in open interest. It means that new longs are coming and coming on market. At the same time AUD net long position is far from total saturation. If you will take a look at historical chart, you'll see that total long position stands around 50-60% from the peak. It doesn't mean that AUD will rise due this factor, but it tells that we have no barriers of sentimental quality.
upload_2017-8-6_12-57-29.png


Technical
Monthly

In a stubborn counter standing on monthly/weekly charts of flat resistance around 0.77-0.78 area and higher lows - bulls has won. Higher lows that were started to form in September 2015 indicates bullish dynamic pressure, but only in July 2017 this breakout has happened.

Trend stands bullish (at least by letter) since 2015 here, price neither OB nor OS right now. So AUD has free space to continue upside action.

Last 2 month price strongly acts above YPP. As price moves above YPP, next destination should be YPR1 that stands around 0.81 area.

Upside action has started from a kind of "222" Buy" pattern (but not quite, as "D' point of inner AB-CD stands slightly higher than "B" point), and now we have wide AB-CD in progress that has the same target - 0.8165 and stands in a Agreement with major Fib resistance level. So, this is next target here.

Despite strong rally in past few weeks - market has not quite reached major target. It means that if even we will get deeper downside action on coming week - it should be treated as retracement and through the prism of better chances to go long.
aud_m_07_08_17.png


Weekly

On weekly chart trend is bullish as well, and here we have two important issues. First is big butterfly "Sell" pattern is forming. Its 1.618 target coincides with monthly AB-CD Agreement around 0.8160 area. Thus - another target at the same monthly area.

Second - right now market has reached 1.27 extension of the same butterfly. This level coincides with 3/8 major resistance @ 0.7946 and weekly overbought. Last week as you can see is inside one and AUD starts to feel some barrier around this level. As we've suggested 2 weeks ago - aussie could show meaningful bounce as reaction on strong resistance and 1.27 target.

Taking in consideration these two issues we could make two conclusions. First - in nearest 1-2 weeks odds suggest retracement. We do not know how deep it could be, but even minor 3/8 respect of butterfly and daily overbought will be significant bounce for daily/intraday trading.

Second - after some time, upside action to 0.8165 area should continue. Despite all other moments that we already have discussed - take a look that price forms clear acceleration to 1.27 butterfly target. As a rule this leads price to 1.618 target after retracement will be over.

aud_w_07_08_17.png


Daily

Daily chart shows some important nuances. At the first glance - we have very similar situation to GBP. But in reality it is not quite so. The point is that fundamental background for AUD and GBP is different. AUD looks stronger and Bank of Australia has different rate policy to BoE. It means that reaction on recent USD strength could be different.

Take a look, by letter we have DRPO "Sell" pattern here. But even strong NFP was not able to push aussie significantly lower. Thus, as on GBP we're watching for 2-leg downside retracement - here it could just triangle consolidation. This is the major point that we have to keep an eye on here.

This very common situation - when reaction after DRPO confirmation stands lazy - it's a big step in favor of triangle consolidation and upside continuation after some time.

On coming week, at least in first 2-3 days we have a floor around 0.7875 area as daily has OS there, Fib level and MPP. Thus, all our trading process will stand mostly inside of this triangle.

aud_d_07_08_17.png


Intraday

On 4-hour chart we bring alternative scenario - the same as on GBP. If still, downside pressure will be strong enough to trigger 2-leg retracement down, here we also could get some kind of AB-CD pattern. Take a look that it's target coincide with daily K-support as well.
Still, even on this chart MACD bullish divergence hints that it could be just triangle, not H&S:
aud_4h_07_08_17.png


Whether we will get H&S and DRPO, or it will be just a triangle - it seems that next leg should be up. Either another swing in triangle or starting of shoulder shape. It means that we should keep an eye on possible bullish reversal patterns somewhere around on hourly chart. If we will get it - we could possess ourselves for both scenarios. If it will be triangle - we already will have position for upside breakout. If bears will be stronger than we suggest right now - no problem, we will out either at b/e or even with small profit on backward action to neckline....

Conclusion:

AUD looks strong on long-term basis and our next target is 0.8150. In shorter-term perspective, we have a floor around 0.7875 area, at least for 2-3 sessions, and also suspicious that aussie could form just triangle consolidation but not compounded 2-leg retracement down. That's why in the beginning of the week we should keep an eye on bullish reversal patterns on intraday charts.


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) - Gold prices edged up on Tuesday as the dollar eased slightly, with investors waiting for U.S. inflation numbers later this week for hints on the pace of monetary tightening by the Federal Reserve.

"Gold appears to be in a holding pattern with the increasing risk that stale long positioning may see traders head for the door until some directional clarity is restored," said Jeffrey Halley, senior market analyst at OANDA.

Spot gold had risen 0.2 percent to $1,259.43 per ounce by 0415 GMT. U.S. gold futures for December delivery advanced 0.1 percent to $1,265.70 per ounce.

"There aren't many players in the market, nor is there much incentive (for prices) to move right now, so I think it's going to be very quiet for the rest of the month," said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank. "I expect prices to creep higher (in the short term) as the dollar is still weak and that is the prevailing trend."

Asian shares went flat on Tuesday as disappointing Chinese trade data clouded the otherwise upbeat outlook on global growth, leaving currencies and commodities becalmed in summer doldrums.

The U.S. dollar inched down, not far from multi-month lows touched last week, as investors awaited data due later this week that will offer clues about the extent to which the strengthening labour market is spilling over into inflation. The dollar index, which tracks the greenback against a basket of six major rivals, slipped slightly on the day to 93.333. A weaker dollar makes bullion cheaper for non-U.S. investors.

Spot gold may retest support at $1,255 per ounce, a break below which could cause a further loss to the next support level at $1,247, said Reuters technical analyst Wang Tao.

"Given the move towards tighter monetary policy ... the developing bullish chart picture may be a warning that investors are buying more gold as an insurance against heightened risk of trouble ahead," ScotiaBank analysts said in a note.

Meanwhile, holdings at the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell to 786.87 tonnes on Monday.


So, today, guys, let's take a look at gold finally. Here, actually we have very similar setup to EUR. On daily chart, it seems that all this harmonic stuff is working - market indeed has turned down at spike that we've calculated using harmonic swings:
gold_d_08_08_17.png

But now it gives us no advantage as we do not have any clear patterns there. Potentially we could get some DiNapoli B&B or DRPO - but not yet.

ON 4-hour chart our channel finally has been broken and we could recognize H&S shape here. If it will work - gold could drop at least to 1247 Fib support to complete H&S AB-CD target. As Friday's drop has not bad momentum, we probably should search chance for scalp short trade:
gold_4h_08_08_17.png


The most regular guest at the top is "222" Sell pattern. That's what we will be watching here. It seems that more proper will be to wait action to 1264 area as it more harmonic to overall H&S shape. There we could thing above short entry with acceptable risk:
gold_1h_08_08_17.png
 
Good morning,

(Reuters) - Gold prices rose early Wednesday amid rising tensions between the United States and North Korea after the North responded to warnings from U.S. President Donald Trump with a threat to strike the U.S. territory of Guam.

"We've had some competing forces play out over the past 12 hours - the U.S. dollar was stronger off economic data, but that was quickly reversed with President Trump's comments about North Korea earlier today (Wednesday)," said ANZ analyst Daniel Hynes.

Spot gold rose 0.3 percent to $1,264.50 per ounce at 0324 GMT, while U.S. gold futures for December delivery rose 0.6 percent to $1,270.40 per ounce.

Pyongyang said on Wednesday it was considering plans for a missile strike on the U.S. Pacific territory of Guam, just hours after Trump said North Korea would face "fire and fury" if it threatens the United States, his strongest warning yet for North.

"I think (the North Korea situation) is going to continue to provide a little bit of support, but not enough to push prices significantly higher from here," said Hynes.

Asian shares and U.S. stock futures slipped while U.S. Treasuries, gold and the safe-haven yen rose in early Asian trading on Wednesday after tensions on the Korean peninsula escalated. On Tuesday, stronger-than-expected U.S. jobs data from the Labor Department weighed on gold, dragging prices to the lowest since July 26 at $1,251.01 an ounce.

"The weakness in gold abruptly ended later in the day as stocks turned south after President Trump issued a rather stern warning to the North Koreans," said INTL FCStone analyst, Edward Meir.

Geopolitical risks can boost demand for safe haven assets such as gold.

"We likely will continue to see more tension in the region (Korean Peninsula)," Meir noted. "This in turn suggests that at least for the balance of this week, we likely should be long gold as the heated rhetoric could
raise the odds of military action."

Investors are also awaiting U.S. inflation data due later this week for clues on when the U.S. Federal Reserve would begin reducing its $4.2 trillion bond portfolio.


On gold market our "222" hourly setup has been completed perfectly, but it seems that situation has changed significantly. On daily chart now we could say that we will not get B&B "Buy" pattern as gold has not reached 1247 Fib support yesterday. Hence, the only pattern that we could get is DRPO "Sell" or even upside 1275 breakout.
Gold again has got unexpected support from its surprising driving factor - geoplitical tensions. As we see big political shifts across the globe in 1-3 years, we mostly think that gold should keep upside action in long-term perspective:
gold_d_09_08_17.png


Our H&S pattern stands under perspective of distruction. Take a look that price has failed to break neckline and returned back to shoulder's area. Theoretically it could turn down again, but market mechanics indicates the crack in natural behavior. Besides, North Korea turmoil is just has started, what will happen if it will get negative progress. Besides, technically we have two side-by-side bullish grabbers here. Thus, it seems that we should forget about short trades as gold could reach at least previous 1275 tops, or even show upside breakout, depending on what will happen in geoplitical sphere:
gold_4h_09_08_17.png


On hourly chart you can see how our "222" Sell pattern has been completed. But right now, It seems that we should watch for bullish patterns, or may be AB-CD retracement and think about long entry:
gold_1h_09_08_17.png
 
Good morning,

(Reuters) - Gold on Thursday held steady near two-month highs hit the session before, bolstered by
safe-haven demand triggered by rising tensions on the Korean peninsula. North Korea dismissed on Thursday warnings by U.S. President Donald Trump that it would face "fire and fury" if it threatened
the United States as a "load of nonsense", and outlined detailed plans for a missile strike near the Pacific territory of Guam.

"(Safe-haven demand) has settled down to a certain extent, but the market is still expecting more news to come," said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore. "North Korea doesn't seem like they're going to back down and the U.S. has also made a very strong stance this time."

Geopolitical risk can boost demand for assets seen as safe-havens such as gold. Spot gold had eased 0.1 percent to $1,276.40 per ounce at 0322 GMT. The precious metal climbed 1.3 percent in the previous session, its biggest gain since mid-May, and touched $1,278.66 an ounce, it highest level since June 14.
U.S. gold futures for December delivery rose 0.2 percent to $1,281.90 per ounce on Thursday.

Asian stocks steadied and U.S. Treasury bond prices fell slightly on Thursday as the risk aversion triggered by tensions between the United States and North Korea began to settle.

"Amid all the sabre-rattling, we expect gold prices to continue to move higher and likely cross the $1,300 an ounce mark in relative short order," said INTL FCStone analyst Edward Meir.

The market was also waiting for data that would offer clues about the extent to which the strengthening U.S. labour market is spilling over into inflation.

"Investors tend to be more cautious ahead of economic data, especially when the prices are high. They might take profits first and wait to see what's going to happen before they move into the market again," said GoldSilver's Lan.


On gold market our suggestion on upside action to new top was correct. Indeed, gold market has reached 1280 area. Now, on daily chart we will be watching for possible DRPO "Sell". But, to be honest, as now gold is mostly driven by geoplitical tensions around N. Korea - to get DRPO, these tensions should be eased. But right now now signs of this yet.... Thus, it could lead just to upside continuation to next 1300 target:
gold_d_10_08_17.png


That's why, while we're wating what will happen around 1280 top and what patterns will be formed on daily chart - we could try to trade B&B "Buy" on 4-hour chart. Yes, this recent thrust up is suitable for separate B&B trade, if price will shows retracement to 1268 fib support. This will be very good setup for us. If gold will break 1280 we already will have long position:
gold_4h_10_08_17.png
 
Good morning,

(Reuters) - Gold prices held steady after touching their highest in more than two months on Friday, as
rising tensions between the United States and North Korea triggered safe-haven buying.

"Much of the rally (in gold) is because of the increased safe-haven demand," said OCBC Bank analyst Barnabas Gan.

Trump warned North Korea again on Thursday not to strike Guam or U.S. allies, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough. Geopolitical risks can boost demand for assets considered safe-haven investments, such as gold.

Spot gold inched down 0.1 percent to $1,284.64 per ounce as of 0616 GMT, but was set for a weekly gain of over 2 percent. Earlier in the session, it marked its highest since June 8 at $1,288.92 an ounce. U.S. gold futures for December delivery was mostly unchanged at $1,290.50 per ounce.

"Traders should closely watch global equities today, with further falls and risk aversion likely pumping more safe-haven flows into precious metals," said Jeffrey Halley, a senior market analyst at OANDA.

Asian equity markets extended a global slide on Friday, sending investors fleeing to less risky assets such the yen, the Swiss franc and U.S. Treasuries. The market also awaited U.S. consumer inflation data on
Friday that would offer more clues about the pace of the U.S. Federal Reserve's monetary tightening.

"I think with gold prices, we still have to be cautious. A lot of it (the rally) is due to the risk premium," said Gan.
"A quick unwinding of prices to below $1,250 an ounce is very possible, especially if the tensions ease quickly and if global growth continues performing the way it is, with most incoming economic data suggesting a rosy economic outlook."

Meanwhile, gold demand in India remained sluggish this week as local prices jumped to their highest level in nearly three months and a rally in global prices dampened fresh buying elsewhere in Asia.


I agree with Barnaba Gan about driving factor of this rally and it indeed could stop at any time as tensions start to ease while economy will continue to show positive numbers. Thus, foundation indeed looks rather fragile.

Still, technical picture currently looks strong. We have two tail closing sessions and market has broken the harmony of our figure on daily chart as it has jumped above the top. I'm not sure that we could talk on DRPO "Sell" pattern any more as it is too much difference between the tops.
Here we need to take a look at broader picture. We have some upside targets here. First is 1300 top, second 1320 - butterfly and weekly AB-CD target. Breaking of 1300 area could become a strong signal of re-establishing of bullish trend on gold market. Besides, in August gold starts seasonal bullish trend...
gold_d_11_08_17.png


Meantime, while we're waitng clarity on daily chart - we could get some setups on intraday chart. Thrust looks really nice and here we could watch for DiNapoli DRPO or B&B setups. Although they could be formed on next week only as it is too few time till the end of the session...
gold_d_4h_08_17.png
 
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