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FOREX PRO WEEKLY #2, October 23-27, 2017

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Oct 22, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greeting guys,
    today I thought that may be it makes sense to take a look at aussie dollar instead of gold. It's long time passed since we've talked about it last time. We continue gold discussion in our daily videos.


    Fundamentals

    (Reuters) - Gold prices fell on Friday after the U.S. Senate approved a budget blueprint that paves the way for tax cuts, causing stocks, the dollar and bond yields to rise. The Republican-controlled Senate voted by 51-to-49 late on Thursday for the measure, clearing a hurdle for tax cuts that would add up to $1.5 trillion to the federal deficit over the next decade.

    Investors betting on faster economic growth as a result bought riskier assets while bond holders reduced their positions on worries that inflation and federal borrowing could rise.

    U.S. Treasury yields rose further Friday afternoon, reversing a modest pullback after a White House official said Federal Reserve Chair Janet Yellen was in the White House for lunch with U.S. President Donald Trump's economic adviser Gary Cohn. Trump could announce his choice for the next chair of the
    U.S. central bank as early as next week after he interviewed five candidates including Yellen. A report on Thursday suggested Trump was leaning towards Fed Governor Jerome Powell, perceived as a less hawkish candidate.

    Higher bond yields increase pressure on bullion because gold does not offer a yield, while a stronger dollar makes it more expensive for holders of other currencies. Investors may also see tax cuts as a cause for higher U.S. interest rates, said INTL FCStone analyst Edward Meir. Higher rates would push up bond yields and the dollar.

    Spot gold was down 0.77 percent at $1,279.44 an ounce by 2:41 p.m. EDT (1841 GMT), down about 1.9 percent on the week. U.S. gold futures for December delivery settled down $9.50, or 0.7 percent, at $1,280.50 per ounce, 1.8 percent lower on the week.

    The net long position of money managers in Comex gold has fallen from a peak in early September but is still elevated.

    "Right now, you could see a lot of open interest being abandoned if we don't have another big move (in gold) next week," said George Gero, managing director of RBC Wealth Management in New York.

    The European Central Bank is expected to say on Oct. 26 it will start trimming its monthly asset purchases to 40 billion euros from 60 billion euros in January, a Reuters poll showed.


    COT Report

    Aussie dollar holds rather high net long position. It stands not at ultimate high, but close enough and makes pressure on AUD dynamic. Last four weeks we see clear action, that is typical for retracement. Net long position was dropping simultaneously with decreasing of open interest - some longs were closed, and probably by short-term traders.
    At the same time, the pace of this decreasing is slow which also tells about retracement nature of recent action.
    upload_2017-10-22_12-50-39.
    Thus, right now we could suggest that sentiment mostly is still bullish here, but market has taken pause in upward action.

    In our last report, dedicated to AUD
    we've prepared wide fundamental analysis of situation in economy and RBA view on AUD rate. As a result we've come to conlcusion that -
    " the only driving factor for AUD could be inner ones, as commodity export and it's prices. If overall commodities bullish trend will continue - then AUD will keep chances to proceed to higher levels, but in short-term perspective, within 1-2 months its upside potential looks limited and stands around 0.8150-0.82 area. At the same time, hardly we will get strong sell-off as well, as situation around AUD mostly looks positive by far."
    And now indeed, it seems that market keeps this scenario.

    Technical
    Monthly

    On monthly chart we have one important change compares to what we saw in September. Price has not quite reached major target here, but formed bearish reversal candle, that was also a kind of W&R. Take a look that price has shown spike up and closed almost below August lows. This type of action calls as "reversal candle". And usually it leads at least to more extended retracement down.

    Among other patterns we still have the same AB-CD pattern stands in focus. Trend is bullish here. Right now market has limited upside potential. As we can see, 0.81-0.82 is very strong resistance that includes YPR1, major 3/8 Fib resistance, AB-CD target @ 0.8165.

    It means that there are big chances that in 0.8150-0.8250 area we need to keep an eye on bearish reversal pattern on daily time frame. Still, market should try to show some upside continuation as major monthly target has not been reached yet.

    The only thing that hesitates me is our reversal candle. Usually markets form it out of target, when it has been met. In our case it has not been reached for ~40 pips. This is very small distance for monthly time frame. But, as you understand it could lead us to opposite analysis, depending how we will treat this target either as been hit, or not been hit yet...

    So, as a result, monthly analysis doesn't give us a lot of clarity. Although major target has not been hit yet, reversal candle in September assumes slightly greater retracement down before upside reversal will happen again, if it will happen of course. Now we're mostly are interested with this retracement and its final point.
    aud_m_23_10_17.

    Weekly

    On weekly chart trend stands bearish, but there are two moments that suggest deeper upside retracement. (It is difficult to suggest it, because now we have different setups on EUR, AUD, NZD and GBP - although all of them stand in relation to USD.)
    First moment is bearish reversal swing itself. As market has reached strong support area of former top, MPS1 and 3/8 Fib level - aussie has turned to upside bounce. Usually after reversal swings opposite retracement is deep.
    Second - bullish engulfing pattern that has been formed recently. So, it seems that some kind of AB=CD pattern should happen on lower time frame:
    aud_w_23_10_17.

    Daily

    Daily chart brings nothing special, except may be K-support area in addition to weekly single Fib level. That's why I use it to draw approximate action that should happen in nearest future based on technical picture that we have.
    Take a look that daily AUD also has formed small reversal swing but it stands upward. It means that we should get minor bearish AB=CD pattern that mostly has been completed already.
    Next step should be up as final "CD" leg of AB=CD retracement.
    And finally third step is final leg of downside AB-CD retracement that is suggested by monthly candle.
    aud_d_23_10_17.

    Now let's see what to expect on coming week and what patterns we will watch for. Why, we suggest particular this kind of action...

    Intraday

    Indeed, most interesting stuff we could find on intraday charts. Here is why we expect higher AB=CD retracement - just because we have reverse H&S pattern on 4-hour chart. If it will start right at the moment as we've drawn - it's target will be around 5/8 Fib level @ 0.7975 and this is potential area where we should watch chances to sell:
    aud_4h_23_10_17.

    This upward action, in turn, could start from perfect "222" Buy on hourly chart:
    aud_1h_23_10_17.

    Theoretically downside action should stop around 0.78, but CD leg is rather fast and it also takes the shape of butterfly. That's why it could happen that price will dive a bit lower, to 1.618 extension. It doesn't change the major idea, just minor technical detail.

    So as you can see all patterns on different time frames stand in fascinating harmony to each other. But, besides of positive moments that stands due, it also has one negative feature if some pattern will fail - it will lead to chain reaction of consecutive failings, so just keep your eyes open and control key levels.

    Conclusion:

    AUD has positive sentiment but in perspectives of 1-2 months it has limited upside potential, mostly because of absence of driving factors. USD weakness probably will take a pause, RBA policy right now mostly stands flat and only driving factors for AUD that we see are Trade Balance, Export volume and Import/Export prices. But within 1-2 months we will not get big update on this stats. That's why currently we see upside ceil around 0.8150-0.8250 area.

    In shorter-term perspective, we mostly intend to trade inside monthly reversal candle as a lot of clear patterns have been formed there.


    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.
     
  2. Joh

    Joh Sergeant Major

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    Thank you Sir Sive, Clear as a Bell report now hopefully the markets follows :) so great to be able to rely on you reports. Thank you for your hard work week after week, brilliant.:)
     
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  3. scharf

    scharf Recruit

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    That's excellent, thanks a lot Sive. I was just looking at this earlier and saw pretty big K-support around .763 - .764 between fib levels, S3, and a trendline. You think that would be a pretty good LPO after the upside bounce?
     

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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Well, very probable. Actually it also will depend on downside AB-CD destination. Safer is to use what will be closer.
     
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  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - Gold inched up on Tuesday on the back of a slightly weaker dollar, but traded in a tight range amid possibilities of an early announcement on the next U.S. Federal Reserve chair.

    Spot gold was up 0.1 percent at $1,282.80 an ounce by 0337 GMT, after hitting its lowest since Oct. 6 at $1,271.86 in the previous session. U.S. gold futures for December delivery rose 0.3 percent to $1,284.60 per ounce.

    "Nothing really spurring a big selloff for gold yet. We're waiting for currency direction... maybe people are anxious about an early announcement from Trump on the Fed chair," said a Hong Kong-based trader.

    The dollar slipped against a basket of major currencies and the yen , after climbing to a more than
    three-month high against the latter in the previous session, as attention turned to who would be the next Fed chairman. President Donald Trump told reporters on Monday he is "very, very close" to making his decision on who should chair the Fed.

    He is said to be considering Fed Governor Jerome Powell and Stanford University economist John Taylor for the position. Current Chair Janet Yellen, whose term expires in February, was one of the five candidates Trump interviewed for the job. A less hawkish candidate would be expected to favour lower interest rates, reducing the value of the dollar and making the greenback-denominated metal cheaper for holders of other
    currencies.

    The Fed will raise interest rates in December and twice next year, according to a Reuters poll of economists showed, who now worry that the central bank will slow its tightening because of expectations that inflation will remain low.

    "I'm very surprised we're up here. Risk is still on if you look at stock markets. Generally gold should be lower... I was expecting gold to drift down to $1,260 area," said the Hong Kong-based trader. "We'll probably consolidate around $1,275-$1,285 until some Fed news comes out."

    Reuters technicals analyst Wang Tao, however, said spot gold may break a resistance at $1,283 per ounce and rise into a range of $1,289-$1,295.


    On gold market finally we've got some clarity and mostly situation corresponds to our expectations. Downside action that mostly was a result of daily bearish engfuling is finished. Now we have to recall weekly "morning star" pattern and gold stands right now in a point that potentially could become a reversal one. On daily chart we've got bullish grabber:
    gold_d_24_10_17.

    As a result, on 4 hour chart we have a kind of "222' Buy, that is accompanied by MACD divergence:
    gold_4h_24_10_17.

    On hourly chart reversal point was determined by butterfly "Buy". here is MACD divergence stands also:
    gold_1h_24_10_17.

    So, bulls could try to stick with this grabber, while bears should wait when situation will be resolved in one or other way - either grabber will fail or price will rise to 1320 area.
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - Gold prices edged lower on Wednesday, pressured by stronger equities and a firmer dollar amid
    speculation over who will be the next U.S. Federal Reserve chief.

    Spot gold was down 0.2 percent at $1,273.70 an ounce by 0633 GMT and U.S. gold futures for December delivery were 0.2 percent lower at $1,275.20 per ounce.

    "Gold fell overnight, and continues to point south this morning as market appetite improves on better Wall Street prints amid stronger-than-expected corporate earnings results," said OCBC analyst Barnabas Gan.

    Asian shares inched higher on Wednesday, while U.S. Treasury yields and the dollar got a lift following a report that Republican senators were leaning towards John Taylor to be the next Federal Reserve chief.

    "Moreover, the strengthening dollar on news of rising probability for John Taylor to be the next Fed chair is a key driver for softening gold prices into the week ahead," Gan said.

    U.S. President Donald Trump used a lunch with Senate Republicans on Tuesday to get their views on who he should tap to be the next leader of the Fed, according to senators who attended. A source familiar with the matter said Trump polled the Republicans on whether they would prefer Stanford University economist Taylor or current Fed Governor Jerome Powell for the job, and more senators preferred Taylor. Taylor is seen as a hawkish candidate who would prefer higher interest rates in the United States.

    Market participants are widely anticipating one more interest rate hike this year. Higher rates tend to boost the dollar and push bond yields up, adding pressure and denting the greenback-denominated, non-yielding gold's appeal.

    Benchmark Treasury yields climbed to their highest in more than five months on Tuesday, with robust earnings adding to overall risk appetite.

    Spot gold may test a support at $1,271 per ounce, with a good chance of breaking below this level and falling more towards the Oct. 6 low of $1,260.16, Reuters technicals analyst Wang Tao said.

    Meanwhile, investors were also looking ahead to a European Central Bank meeting on Thursday, where the bank is expected to announce a reduction in its monthly bond purchases. "Should the central bank surprise with a somewhat more aggressive tightening stance, funds could use the opportunity to liquidate some recent length and provide gold with an element of support," INTL FCStone analyst Edward Meir said in a note.


    On Gold market situation is also not simple. Market looks weaker than it seems on first glance, because reaction on support and clear bullish patterns are irrational. This is not the one that should be shown by normal bullish market.
    As market moves lower chances on upside reversal are melting. Thus, now we see that yesterday's bullish grabber mostly has been erased. Yes, gold keeps some phantom chances on upside action until it stands above 1262 lows, but they become smaller and smaller while gold is moving lower.
    If price will break 1260 lows, nearest destination will be 1250, and potentially we could talk even about daily AB-CD pattern:
    gold_d_25_10_17.

    On intraday chart some bullish patterns could be formed, but it is still a question how strong upside action will follow. As market shows no reaction on daily patterns - what reaction will be on intraday ones, that are weaker.
    on 4-hour chart 3-Drive buy could be formed and gold still keeps door open for larger "222" Buy:
    gold_4h_25_10_17.

    While on hourly chart we see wedge consolidation accompanied by divergence:
    gold_1h_25_10_17.

    But, don't be too fascinating with that, as wedges very often break with acceleration down. Personally, guys, I do not want to trade gold market long right now, because of irrational reaction on clear situation. Normal bullish market should react up on setup that we had yesterday. This has not happened. It means that something is wrong and something is pressing on gold (Fed chairman rumors, good corporate earnings etc.)
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - Gold prices inched up on Thursday, after hitting a two-and-a-half-week low in the previous session, as the dollar eased ahead of a key European Central Bank meeting later in the day. The ECB is all but certain to cut back on its bond-buying stimulus, taking its biggest step yet in unwinding years of loose monetary policy. However, as low inflation remains a primary concern for the bank, any reduction in monthly asset purchases would be expected to come with an extension of the programme.

    "We suspect that the central bank could come across as somewhat more hawkish than what the market is currently expecting," INTL FCStone analyst Edward Meir said in a note. "As a result, we could see the euro strengthen post-policy statement, which would be short-term constructive for gold."

    The euro inched up 0.1 percent to $1.1819 , while the dollar eased 0.1 percent to 113.60 yen . A stronger euro against the dollar could favour gold as it would make the greenback-denominated metal cheaper for holders of other currencies.

    Spot gold was up 0.2 percent at $1,279.96 an ounce by 0353 GMT. It hit its lowest since Oct. 6 at $1,270.63 an ounce in the previous session. U.S. gold futures for December delivery rose 0.2 percent to $1,281.20 an ounce.

    "Gold has been spurred higher as U.S. yields fell overnight and the dollar weakened ahead of this afternoon ECB meeting where the beginning of tapering is expected to be announced," said Jeffrey Halley, a senior market analyst with OANDA.

    The dollar's losses were seen limited, as the U.S. currency was broadly drawing support from strong Treasury yields, progress in tax reforms and speculation that next Federal Reserve chair could be a policy hawk.
    President Donald Trump had on Tuesday polled the Republicans on whether they would prefer Stanford University economist John Taylor or current Fed Governor Jerome Powell for the job, and more senators preferred Taylor.

    "A hawkish governor like Taylor could lead to a rise in bond yields and be negative for the gold price," said John Sharma, an economist with National Australia Bank.

    Spot gold may edge up to a resistance at $1,283 per ounce, a break above which could lead to a gain to $1,289, Reuters technicals analyst Wang Tao said.


    On gold market, guys, situation stands not as interesting as on EUR, but we also need to come to some conclusion here. In fact, on daily chart price stands in a range of bullish grabber that has been formed in the beginning of the week. That's why, mostly we could call it as "indecision" action as price was forming inside sessions day by day.
    gold_d_26_10_17.

    On 4-hour chart we see some bullish patterns and signs, but the shape of the price action looks not very attractive - it's too choppy, no clear signs of thrust. Here we still have our "222" Buy and market even has turned down a bit earlier, prior 3-Drive reversal point has been met:
    gold_4h_26_10_17.

    We have multiple bullish divergences with MACD, and even upside wedge breakout on hourly chart:
    gold_1h_26_10_17.

    But take a look at the shape of price action here - long shadows, a lot of deep retracements, no thrusting action. Market looks heavy. That's why our thoughts mostly stand the same - gold definitely is not among most attractive markets for trading right now. If you have bearish view - there is nothing to do here yet, as we need either upside action to complete bullish setup of breakout of important levels.
    For bulls... well, may be some position could be taken on retracement, but, as I said, overall price action doesn't look very fascinating.
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - Gold prices drifted in a narrow range on Friday after hitting a near three-week low in early trade as the dollar gained against the euro after the European Central Bank extended its bond buying programme.

    Spot gold was roughly unchanged at $1,266.81 per ounce, as of 0543 GMT after touching its lowest since Oct. 6 at $1265.08. Gold was headed for an about 1 percent weekly decline. U.S. gold futures for December delivery shed 0.2 percent to $1,267.50.

    "How gold finishes the week will now be entirely at the whim of the U.S. dollar and U.S. yields with little to no
    geopolitical safe haven premium left in the price," said Jeffrey Halley, a senior market analyst with OANDA, in a note.

    The dollar stood tall on Friday, on track for weekly gains, while the euro slumped to three-month lows after the European Central Bank extended its bond purchases and reduced the chances that it would hike interest rates in 2018. A strong greenback makes dollar-priced gold costlier for non-U.S. investors.

    "It looks like we are going to be heading a bit lower from here, from both the fundamental and technical points of view," INTL FCStone analyst Edward Meir said. "The next support for gold prices is the Oct. 6 low and if it breaks that, next support is around $1,257. The key support lies around the $1,262.80 level and once it breaches that, it could spur more fund selling."

    Spot gold may revisit its Oct. 6 low of $1,260.16 per ounce as it has broken a support zone of 1,271-$1,268, according to Reuters technical analyst Wang Tao. An impending decision on the U.S. Federal Reserve's next chair could also be an important driver for the metal, analysts said.

    President Donald Trump's search for the next Fed chair has come down to Fed Governor Jerome Powell and Stanford University economist John Taylor, Politico on Thursday cited one source as saying, while another counselled caution.

    Meanwhile, the U.S. House of Representatives helped pave the way on Thursday for deep tax cuts sought by Trump and Republican leaders, underpinning the greenback.

    Gold is likely to flatline for another year in 2018 as rising U.S. interest rates clip momentum, a Reuters poll showed on Thursday.


    So, gold mostly confirms our suspicions about hidden weakness. As it has vanished bullish patterns and broken intraday support levels - now we could talk about bearish position. Nearest target that we have is 1245 - butterfly target, MPS1 and AB-CD minor extension.
    gold_d_27_10_17.

    4-hour chart shows that some retracement could happen from 1263 area - this is daily Fib level, but this is also AB=CD target here. So, retracement hardly will be significant and we have just 2 levels to watch for. They are 1272 and 1278-1279 K-resistance.
    gold_4h_27_10_17.

    It seems that today gold market will continue slow drift lower, right to 1263 daily support area.
     
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