Sive Morten
Special Consultant to the FPA
- Messages
- 18,659
Fundamentals
In second research, I think we need to take a look at JPY. We very rare make updates on this currency. Meantime, some really interesting patterns could be formed there in nearest time.
We do not have a lot issues on Japanese economy - mostly it stands as usual. Japan has no serious economical problems, no hot geopolitical tensions. Currency is stable and used as one among safe-haven ones. Every time, when it will be possible JPY will grow against USD.
Fathom sentiment indicator shows extremely positive numbers for Japan - it predicts 5% GDP growth, which significantly higher compares to Japan saw in last decade. This deviation explains by extremely high values of economy sentiment of business. Sometime Fathom sentiment indicator and GDP will converge.
The ESI is an objective measure that pulls together a wide range of sentiment surveys, covering both consumer and business confidence, into a single composite measure. The weights on the individual components are those that do the best job of tracking official GDP growth. Fathom’s Japan ESI points to GDP growth of 5.0% annualised — far ahead of anything the Japanese economy has enjoyed for many years. Confidence in Japan is high: very high.
If we take a look at domestic Japan sentiment indicators - all of them stand on a good pace - Tankan survey, Consumer confidence, total composite index. As Fathom points - In Japan as elsewhere, that gap will eventually close. In our view, in Japan most of that will be attributable to weaker sentiment rather than stronger growth — borne out by the fact that the more forward-looking elements of the sentiment surveys are generally weaker than the backward-looking elements, and by the fact that the composite ESI eased relative to Q4. But the risks to that view are clearly to the upside.
COT Report
Since the beginning of year we see massive short-covering on JPY, mostly due impact of external factors and geopolitical tensions. Now position mostly stands flat within few weeks and investors do not hurry increase longs. This could mean something.
Technicals
Monthly
On this time frame we have a pattern of incredible scale, huge reverse H&S pattern is forming here. As it usually happens - left side of H&S is a huge butterfly "Buy". Upside rally from the bottom of the right arm in 2015 was rather fast. Now yen stands in retracement of this upside action that already has started.
Upside targets stand rather far - it could be as AB-CD pattern, based on H&S itself, or butterfly "Sell" pattern, based on right arm. All these targets stand above 130 level and not very interesting for us now.
What is really interesting is when and how market will turn up and when. In fact there are more than single scenario. I would say, that we have at least three of them. First is - immediate upside action and triangle breakout, turning to butterfly pattern. Second - downside action to the lower border of triangle first. Finally, third scenario is triangle downside breakout by large AB=CD with butterfly "Buy" shape of CD leg. In this case potential reversal point will stand around 93.50-94. area...
Our task is find out which scenario will happen as soon as possible.
Weekly
Weekly time frame lets us to estimate very important support area, where major upside reversal could start.
So, 102.80 - 103.15 is a strong support cluster on weekly chart. First is, this is lower border of monthly triangle. Second - we have large AB-CD pattern. Once it will be completed - we will get "222" Buy pattern here.
Finally, CD leg of this pattern could take a shape of 3-Drive "Buy", as JPY keeps drive-to-drive extensions of this pattern very sharp.
So, 103 area, roughly, is the major one to keep an eye on. If, yen will break it down, this will significantly increase chances on further drop, at least to 93-94 level, according to monthly analysis and "222' here could turn to butterfly.
Daily
On daily chart yen starts at important resistance, which should clarify market perspective in nearest future. Price has completed XOP target right at daily K-resistance area. Now we also see tweezers top and hint on possible DRPO "Sell" pattern. Thrust is not perfect, but its final part looks fast enough.
Yesterday we've suggested upside retracement on EUR, thus, here as well, downside action doesn't look impossible.
This level is also important because if yen will break it up - this will turn advantage in upside continuation and makes in vain all our talks about deeper retracement and reversal patterns. Because in this case monthly triangle probably will be broken up.
While if indeed yen will drop, then we will keep an eye on our scenario with 103 level and large weekly "222" Buy pattern.
Intraday
4H chart also shows some bearish signs. AB-CD pattern inside of the channel has been completed. We have clear bearish MACD divergence right at daily K-resistance and Agreement area. Tops are equal and this could be Double Top pattern.
Take a look that top is enveloped by weekly pivot level. WPS1 stands precisely as a neckline. Breaking through WPS1 should confirm that downside action is continuation of bear trend. Otherwise WPS1 should hold price action.
Conclusion:
Long-term JPY chart has so big pattern which makes it to be interesting only from theoretical point of view. Now we're mostly focused on process of upside reversal and where it could happen. Currently we have a suggestion that it could happen around 103 area.
On a shorter term charts, yen stands at strong daily resistance, where scalp short position could be taken. At least minor respect of this level should happen, which lets us move stops to breakeven. Daily resistance is very important. Depending on whether it will be broken up or not we will understand further JPY direction.
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.
In second research, I think we need to take a look at JPY. We very rare make updates on this currency. Meantime, some really interesting patterns could be formed there in nearest time.
We do not have a lot issues on Japanese economy - mostly it stands as usual. Japan has no serious economical problems, no hot geopolitical tensions. Currency is stable and used as one among safe-haven ones. Every time, when it will be possible JPY will grow against USD.
Fathom sentiment indicator shows extremely positive numbers for Japan - it predicts 5% GDP growth, which significantly higher compares to Japan saw in last decade. This deviation explains by extremely high values of economy sentiment of business. Sometime Fathom sentiment indicator and GDP will converge.
The ESI is an objective measure that pulls together a wide range of sentiment surveys, covering both consumer and business confidence, into a single composite measure. The weights on the individual components are those that do the best job of tracking official GDP growth. Fathom’s Japan ESI points to GDP growth of 5.0% annualised — far ahead of anything the Japanese economy has enjoyed for many years. Confidence in Japan is high: very high.
If we take a look at domestic Japan sentiment indicators - all of them stand on a good pace - Tankan survey, Consumer confidence, total composite index. As Fathom points - In Japan as elsewhere, that gap will eventually close. In our view, in Japan most of that will be attributable to weaker sentiment rather than stronger growth — borne out by the fact that the more forward-looking elements of the sentiment surveys are generally weaker than the backward-looking elements, and by the fact that the composite ESI eased relative to Q4. But the risks to that view are clearly to the upside.
COT Report
Since the beginning of year we see massive short-covering on JPY, mostly due impact of external factors and geopolitical tensions. Now position mostly stands flat within few weeks and investors do not hurry increase longs. This could mean something.
Technicals
Monthly
On this time frame we have a pattern of incredible scale, huge reverse H&S pattern is forming here. As it usually happens - left side of H&S is a huge butterfly "Buy". Upside rally from the bottom of the right arm in 2015 was rather fast. Now yen stands in retracement of this upside action that already has started.
Upside targets stand rather far - it could be as AB-CD pattern, based on H&S itself, or butterfly "Sell" pattern, based on right arm. All these targets stand above 130 level and not very interesting for us now.
What is really interesting is when and how market will turn up and when. In fact there are more than single scenario. I would say, that we have at least three of them. First is - immediate upside action and triangle breakout, turning to butterfly pattern. Second - downside action to the lower border of triangle first. Finally, third scenario is triangle downside breakout by large AB=CD with butterfly "Buy" shape of CD leg. In this case potential reversal point will stand around 93.50-94. area...
Our task is find out which scenario will happen as soon as possible.
Weekly
Weekly time frame lets us to estimate very important support area, where major upside reversal could start.
So, 102.80 - 103.15 is a strong support cluster on weekly chart. First is, this is lower border of monthly triangle. Second - we have large AB-CD pattern. Once it will be completed - we will get "222" Buy pattern here.
Finally, CD leg of this pattern could take a shape of 3-Drive "Buy", as JPY keeps drive-to-drive extensions of this pattern very sharp.
So, 103 area, roughly, is the major one to keep an eye on. If, yen will break it down, this will significantly increase chances on further drop, at least to 93-94 level, according to monthly analysis and "222' here could turn to butterfly.
Daily
On daily chart yen starts at important resistance, which should clarify market perspective in nearest future. Price has completed XOP target right at daily K-resistance area. Now we also see tweezers top and hint on possible DRPO "Sell" pattern. Thrust is not perfect, but its final part looks fast enough.
Yesterday we've suggested upside retracement on EUR, thus, here as well, downside action doesn't look impossible.
This level is also important because if yen will break it up - this will turn advantage in upside continuation and makes in vain all our talks about deeper retracement and reversal patterns. Because in this case monthly triangle probably will be broken up.
While if indeed yen will drop, then we will keep an eye on our scenario with 103 level and large weekly "222" Buy pattern.
Intraday
4H chart also shows some bearish signs. AB-CD pattern inside of the channel has been completed. We have clear bearish MACD divergence right at daily K-resistance and Agreement area. Tops are equal and this could be Double Top pattern.
Take a look that top is enveloped by weekly pivot level. WPS1 stands precisely as a neckline. Breaking through WPS1 should confirm that downside action is continuation of bear trend. Otherwise WPS1 should hold price action.
Conclusion:
Long-term JPY chart has so big pattern which makes it to be interesting only from theoretical point of view. Now we're mostly focused on process of upside reversal and where it could happen. Currently we have a suggestion that it could happen around 103 area.
On a shorter term charts, yen stands at strong daily resistance, where scalp short position could be taken. At least minor respect of this level should happen, which lets us move stops to breakeven. Daily resistance is very important. Depending on whether it will be broken up or not we will understand further JPY direction.
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.
