Sive Morten
Special Consultant to the FPA
- Messages
- 18,648
Fundamentals
Now there mostly just two topics which investors care on - tariffs war with China and Fed policy. Tariffs war takes first place and overrule other factors as we saw on Friday.
Still NFP numbers, although were below expectations, but not all of them. U.S. nonfarm payrolls report showed an increase of just 103,000 jobs in March, well below the market forecast of 193,000 and February’s surge of 326,000.
At the same time there was a 0.3 percent monthly rise in wage growth, which pushed the annual wage growth rate higher. This is indicator of core inflation and now is tracking very closely by all markets.
Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, said wage growth, like core inflation, “is still muted, but there is clear evidence of an acceleration over the past few months in the monthly gains.”
“Overall, looking through the volatility, employment growth is trending higher and wage growth is starting to heat up,” he added.
Besides, there were really outstanding numbers for February - 326K and 103K now for March stand around average. That's why reaction on NFP release was not as strong as it could be in other circumstances.
Finally to complete this question - Jerome Powell tells about economy improvement and standing on course to Fed policy of interest rate rising.
Powell is saying that the U.S. economy is doing well and we’re getting these rate increases, even though they’re at a gradual pace.
So, from that standpoint, poor NFP numbers is an isolated event, and should not be treated as some started tendency. Thus, recent data has triggered volatility but, mostly has no solid impact on major trends in US economy.
What is really could get greater impact is tariffs piking. As Reuters reports China on Friday warned it would fight back “at any cost,” hours after U.S. President Donald Trump threatened to slap tariffs on an additional $100 billion in Chinese goods.
Losses in the dollar escalated after China’s Commerce Ministry spokesman Gao Feng said the country will not hesitate to respond if the United States adds further tariffs. He ruled out negotiations under these conditions.
The U.S.-China trade dispute outweighed a U.S. payrolls report that showed fewer job gains than expected, as well as generally upbeat remarks on the economy from Federal Reserve Chairman Jerome Powell.
Although nobody doubts on negative impact on mutual trade relationship or, even, global trade, there are still some doubts on seriousness of real steps. Markets become tired from opposite statements that were taken place day by day. First reaction was strong but now it is contracted. It seems that now investors mostly wait for real steps. Until they will come reaction on verbal mutual accusing will be muted, but it could be really strong as soon as real steps will come.
If you're interesting with US stocks market guys, as well - here is interesting article of 12-18 month perspectives for US market from Fathom consulting.In two words, they tell that US stocks have positive perspective within 12-18 month period. Although volatility will grow - market will keep upside direction.
Also Fathom’s US Economic Sentiment Indicator (ESI) points on positive upside momentum in US economy that should hold for some time more. Combining this with other valuation tools (such as Dividends Discount Model) lets Fathom to talk on positive sentiment in general, within 1.5 years:
COT Report
Somehow charts on different web resources were not updated, thus, we will use text version of report for 3rd of April. We do not have big shifts here. Open interest has dropped for 18K contracts, both sides were closed, but shorts were contracted a bit more.
This is not a surprise actually, because we see in what kind of action EUR stands right now. A bit chaotic type of contraction behavior, which doesn't fascinate for taking position by far.
Technicals
Monthly
Not much we could add to monthly picture. It stands in "Buy" mode, price is coiling under strong resistance of K-resistance 1.2516-1.26, accompanied by YPR1 @ 1.2617 area. There is not overbought on monthly chart.
Resistance area is rather strong and current retracement still looks too small to be treated as proportional respect to it. At the same time, market also could easily fluctuate inside the range till the previous top of ~1.26 and challenge them. So, monthly picture doesn't provide us something new. The one thing that we could add here is either price action should show deeper retracement or tight consolidation just under strong level will suggest upside breakout. Taking in consideration COT data, and the fact that positions were partially off-loaded, It is possible upside action to YPR1 around 1.26 area.
And, finally, as we've said above - saturated net long EUR position hardly will let price to break this area any time soon. Thus, our conclusion here is - "yes" to fluctuations below YPR1, while "no" to upside breakout and moving to next 1.3860 area.
Weekly
Last week we've talked about grabber and its most probable upside target, which is 1.2615 - Yearly Pivot Resistance 1. Major level here is, of course, grabber's low at 1.2150. While it will hold, from weekly point of view we do not need to search other entry points to fade weekly sell against monthly buy. Thus, monthly/weekly basis stands untouched.
As we've said two weeks ago - "If market will stand in this position 2-3 weeks more - this could take a shape of bullish dynamic pressure, as trend now is bearish here, while price doesn't show any downside action."
Indeed, weekly chart now has more signs of bullish market, rather than bearish. They are - classical flag formation, bullish grabber pattern and sign of bullish dynamic pressure. Besides, market has met rather strong support 2 months ago, but take a look at reaction - just minor 3/8 retracement.
So, despite bullish sentiment was stand unclear due choppy daily action, without any clear and bright patterns - here, on weekly, it is easier to recognize bullish sentiment by indirect signs.
Daily
So, Stag yesterday, as our EW expert, in valuable update points on bullish character of EUR behavior, speaking on "ending diagonal" pattern, which keeps overall setup bullish.
As I'm not an EW expert and feel myself more comfortable when market shows some direction. That's why we have concluded on Friday - "yes, EUR could go up, but we need clear signs of reversal". Stag also has specified in schematic picture - two upside breakouts of ED tops...
As usual, when market shows contraction mode, i.e. swings become smaller and smaller - it keeps door open for both scenarios. Here, for example, we draw upside butterfly, while you may argue that trend is bearish, market stands below MPP and the same butterfly could be drawn to the downside, and you will be right.
Currently we have rather weak bullish signs. As you can see, NFP numbers have provided muted support to the market and all that we could get - bullish engulfing pattern around deep 0.786 Fib support level. Now we need just watch - whether EUR will be able to build on success and turn this situation in something valuable.
That's being said on daily EUR conclusion is the same - yes, EUR keeps bullish chances valid, until it stands above 1.2150, but we need some clear bullish signs to make a decision on position taking.
Intraday
4H TF shows wide AB-CD pattern and reaching of COP target. Here is also we have some hint on bullish divergence with MACD, market will open around WPP.
At first glance overall situation is not bad - as price stands at support and Agreement. At the same time, last week we saw multiple breakouts of even stronger levels. So, demand for some bullish evidence looks reasonable.
Following this logic, I would like to get breaking of "lower-lows lower-highs" tendency. Second issue that we could watch here - reverse H&S pattern. This could become a first sign of possible upward reversal.
Conclusion:
So, our short-term bullish scenario will be valid until market stands above 1.2150 lows. While on long-term charts bullish sentiment and patterns look clearer and is confirmed by some indirect patterns, on daily and intraday charts - this is not as obvious due rather chaotic price action. Thus, we demand some clear upside reversal patterns that could point on re-establishing upward action.
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.
Now there mostly just two topics which investors care on - tariffs war with China and Fed policy. Tariffs war takes first place and overrule other factors as we saw on Friday.
Still NFP numbers, although were below expectations, but not all of them. U.S. nonfarm payrolls report showed an increase of just 103,000 jobs in March, well below the market forecast of 193,000 and February’s surge of 326,000.
At the same time there was a 0.3 percent monthly rise in wage growth, which pushed the annual wage growth rate higher. This is indicator of core inflation and now is tracking very closely by all markets.
Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, said wage growth, like core inflation, “is still muted, but there is clear evidence of an acceleration over the past few months in the monthly gains.”
“Overall, looking through the volatility, employment growth is trending higher and wage growth is starting to heat up,” he added.
Besides, there were really outstanding numbers for February - 326K and 103K now for March stand around average. That's why reaction on NFP release was not as strong as it could be in other circumstances.
Finally to complete this question - Jerome Powell tells about economy improvement and standing on course to Fed policy of interest rate rising.
Powell is saying that the U.S. economy is doing well and we’re getting these rate increases, even though they’re at a gradual pace.
So, from that standpoint, poor NFP numbers is an isolated event, and should not be treated as some started tendency. Thus, recent data has triggered volatility but, mostly has no solid impact on major trends in US economy.
What is really could get greater impact is tariffs piking. As Reuters reports China on Friday warned it would fight back “at any cost,” hours after U.S. President Donald Trump threatened to slap tariffs on an additional $100 billion in Chinese goods.
Losses in the dollar escalated after China’s Commerce Ministry spokesman Gao Feng said the country will not hesitate to respond if the United States adds further tariffs. He ruled out negotiations under these conditions.
The U.S.-China trade dispute outweighed a U.S. payrolls report that showed fewer job gains than expected, as well as generally upbeat remarks on the economy from Federal Reserve Chairman Jerome Powell.
Although nobody doubts on negative impact on mutual trade relationship or, even, global trade, there are still some doubts on seriousness of real steps. Markets become tired from opposite statements that were taken place day by day. First reaction was strong but now it is contracted. It seems that now investors mostly wait for real steps. Until they will come reaction on verbal mutual accusing will be muted, but it could be really strong as soon as real steps will come.
If you're interesting with US stocks market guys, as well - here is interesting article of 12-18 month perspectives for US market from Fathom consulting.In two words, they tell that US stocks have positive perspective within 12-18 month period. Although volatility will grow - market will keep upside direction.
Also Fathom’s US Economic Sentiment Indicator (ESI) points on positive upside momentum in US economy that should hold for some time more. Combining this with other valuation tools (such as Dividends Discount Model) lets Fathom to talk on positive sentiment in general, within 1.5 years:
COT Report
Somehow charts on different web resources were not updated, thus, we will use text version of report for 3rd of April. We do not have big shifts here. Open interest has dropped for 18K contracts, both sides were closed, but shorts were contracted a bit more.
This is not a surprise actually, because we see in what kind of action EUR stands right now. A bit chaotic type of contraction behavior, which doesn't fascinate for taking position by far.
Technicals
Monthly
Not much we could add to monthly picture. It stands in "Buy" mode, price is coiling under strong resistance of K-resistance 1.2516-1.26, accompanied by YPR1 @ 1.2617 area. There is not overbought on monthly chart.
Resistance area is rather strong and current retracement still looks too small to be treated as proportional respect to it. At the same time, market also could easily fluctuate inside the range till the previous top of ~1.26 and challenge them. So, monthly picture doesn't provide us something new. The one thing that we could add here is either price action should show deeper retracement or tight consolidation just under strong level will suggest upside breakout. Taking in consideration COT data, and the fact that positions were partially off-loaded, It is possible upside action to YPR1 around 1.26 area.
And, finally, as we've said above - saturated net long EUR position hardly will let price to break this area any time soon. Thus, our conclusion here is - "yes" to fluctuations below YPR1, while "no" to upside breakout and moving to next 1.3860 area.
Weekly
Last week we've talked about grabber and its most probable upside target, which is 1.2615 - Yearly Pivot Resistance 1. Major level here is, of course, grabber's low at 1.2150. While it will hold, from weekly point of view we do not need to search other entry points to fade weekly sell against monthly buy. Thus, monthly/weekly basis stands untouched.
As we've said two weeks ago - "If market will stand in this position 2-3 weeks more - this could take a shape of bullish dynamic pressure, as trend now is bearish here, while price doesn't show any downside action."
Indeed, weekly chart now has more signs of bullish market, rather than bearish. They are - classical flag formation, bullish grabber pattern and sign of bullish dynamic pressure. Besides, market has met rather strong support 2 months ago, but take a look at reaction - just minor 3/8 retracement.
So, despite bullish sentiment was stand unclear due choppy daily action, without any clear and bright patterns - here, on weekly, it is easier to recognize bullish sentiment by indirect signs.
Daily
So, Stag yesterday, as our EW expert, in valuable update points on bullish character of EUR behavior, speaking on "ending diagonal" pattern, which keeps overall setup bullish.
As I'm not an EW expert and feel myself more comfortable when market shows some direction. That's why we have concluded on Friday - "yes, EUR could go up, but we need clear signs of reversal". Stag also has specified in schematic picture - two upside breakouts of ED tops...
As usual, when market shows contraction mode, i.e. swings become smaller and smaller - it keeps door open for both scenarios. Here, for example, we draw upside butterfly, while you may argue that trend is bearish, market stands below MPP and the same butterfly could be drawn to the downside, and you will be right.
Currently we have rather weak bullish signs. As you can see, NFP numbers have provided muted support to the market and all that we could get - bullish engulfing pattern around deep 0.786 Fib support level. Now we need just watch - whether EUR will be able to build on success and turn this situation in something valuable.
That's being said on daily EUR conclusion is the same - yes, EUR keeps bullish chances valid, until it stands above 1.2150, but we need some clear bullish signs to make a decision on position taking.
Intraday
4H TF shows wide AB-CD pattern and reaching of COP target. Here is also we have some hint on bullish divergence with MACD, market will open around WPP.
At first glance overall situation is not bad - as price stands at support and Agreement. At the same time, last week we saw multiple breakouts of even stronger levels. So, demand for some bullish evidence looks reasonable.
Following this logic, I would like to get breaking of "lower-lows lower-highs" tendency. Second issue that we could watch here - reverse H&S pattern. This could become a first sign of possible upward reversal.
Conclusion:
So, our short-term bullish scenario will be valid until market stands above 1.2150 lows. While on long-term charts bullish sentiment and patterns look clearer and is confirmed by some indirect patterns, on daily and intraday charts - this is not as obvious due rather chaotic price action. Thus, we demand some clear upside reversal patterns that could point on re-establishing upward action.
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.
