Sive Morten
Special Consultant to the FPA
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Fundamentals
The major topic right now that stirs up in media and investors' mind is Syria strike. Tariffs tensions were moved on second stage, as well as economical issues.
“It had looked to many investors that the world was headed for a trade war and an escalating risk of war in Syria,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note. “But now it seems less clear,” he said.
“We are seeing really tight trading bands,” said Michael Diaz, head of FX for foreign exchange service XE, in Orange County, California. While Syria-related worries might have subsided a little, “we are really looking for some geopolitical certainty,” said Diaz.
Meantime, Michigan ISM index has shown good numbers, which indicates that sentiment and consumption should stand well and recent pit in statistics data probably was an exception rather than change of major trend.
Thus, investors still do not exclude that rate could be raised three times more in this year.
“Although it fell in April, the University of Michigan consumer confidence index remains at a high level by past standards and suggests that the slowdown in spending growth at the start of this year will prove to be a blip,” Andrew Hunter, an economist at Capital Economics, said in a note.
Speaking on Syria, guys, I suspect that this was planned and agreed action among major sides. Other conclusion seems irrational. First of all result of impact is flat - some airport (not in Damask) was hit, ammunition depot and some other objects. So overall damage is minimal.
Now just think, if this indeed escalation with Russia and potentially Russia is a major opponent - would you strike some secondary objects but taking risk of strong response from major rival. Russia has warned that it will response. This looks really stupid.
Besides, planes from Syrian airport were evacuated to Iran and Russian airbase... So my conclusion and I'm sure for 90% that this strike was agreed with Russia for resolving some economical and political problems.
Of course we can't know everything that stands under political curtain but, for example, - Europe and China right now pays almost 80$ for Russian (and US) oil, and 2-3 times greater for Russian aluminium. Trump now could strongly accuse those who still investigate Russian probe in US. Now Trump could say - " this is your fault that our relations with Russia stands on dead way. You have accused me and push me to do this step to prove my loyalty". Now you're getting what you want. This will turn public opinion against them.
Also, version that this was a "preliminary strike", just to test defense systems is not reliable. As a result of this "preliminary strike", US coalition could get massive response attack, so that "testers" could loose all ships. Other words, starting military operation against Russia with just three ships in the Sea and few planes in Cyprus base - this is suicide. Personally I do not believe this.And results of this attack mostly confirms my suspicions. It mostly looks like strike on Shairat airbase last year - when 50+ Tomahawks flew in unknown direction and just disappeared somewhere.
First official information that is available right now confirms my doubts. At least by Russian Military defense department - no casualties, 71 missiles from 103 were put down. It has nothing common with Iraq and Libya strike results... Such performance looks suspicious.
Speaking on tariffs, guys, this story is also stands far from the end. Although it was a hope that conflict is fading, but recently D. Trump said that new tariffs on Chinese electronic will be initiated. When Syria noise will silent a bit, this topic again will come on first stage, I suppose.
COT Report
Large speculators still keep longs on EUR and here we do not have significant changes. This relatively supports our suggestion that upside jump is still possible on EUR.
At the same time, as we already said - positions are highly saturated here, thus, it is difficult to expect action to extended target. Most probable that we will see reaching of 1.26 area.
Technicals
Monthly
As EUR has spent the whole week in relatively tight area, not much we could add to monthly picture. Something new we probably could get only on intraday charts.
Here 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 say 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, 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 yet. "No" is not because of bearish sentiment, but because of technical limitations that EUR carries right now. This is temporal limitation and gradually should be resolved.
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 resistance 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, daily chart also has not changed significantly. In fact, EUR stands in triangle consolidation. We've got upside action through the last week, but still it has not broken narrowing shape of price action. As you can see both extreme points are still valid.
It means that as previously EUR keeps chances for both scenarios - as butterfly "Buy" as "Sell" one theoretically could be formed. But, with relation to higher time frames analysis, we think that bulls have more chances to succeed.
Trend has turned bullish here as well. At the same time, it seems that primary drama will be played on intraday charts. Now we need to see that EUR indeed has got strong support at intraday levels and is forming upside reversal. Last week price behavior was logical and all steps that we've discussed were done.
Let's see what we will get next week, especially on background of geopolitical escalation around Syria, which will be more dollar supportive.
Intraday
As we suggest that dollar probably could get supportive jump on Monday morning, the pattern that we could keep an eye on is butterfly "Buy".
In general, around 1.2285 solid support area will be formed. Not just butterfly, but also AB-CD COP target which creates an Agreement with Fib support.
Besides, by reaching of 1.2285 EUR will complete two important issues - keeps harmony on 4-hour chart. Recall that we've talked about it last week, second - complete AB-CD shape of retracement after reversal swing.
That's being said, if somehow, we will be wrong and EUR will break short-term bullish setup, it anyway should show respect of 1.2285 area. That's why, attempt to go long at first touch of this level should be relatively safe - just don't forget move stops to breakeven, when upside bounce will happen.
Finally - don't be long, if downside action will be furious and take shape of collapse.
May be this setup is not as attractive compares to those that we saw previously in our long-term journey. But, right now we do not have anything else here....
Conclusion:
So, EUR still looks tricky on short-term perspective. On Monday we will check scenario that we've just discussed here. Because if EUR will hold it, this could become a starting point for strong rally to 1.2615 area and daily triangle breakout.
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.
The major topic right now that stirs up in media and investors' mind is Syria strike. Tariffs tensions were moved on second stage, as well as economical issues.
“It had looked to many investors that the world was headed for a trade war and an escalating risk of war in Syria,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note. “But now it seems less clear,” he said.
“We are seeing really tight trading bands,” said Michael Diaz, head of FX for foreign exchange service XE, in Orange County, California. While Syria-related worries might have subsided a little, “we are really looking for some geopolitical certainty,” said Diaz.
Meantime, Michigan ISM index has shown good numbers, which indicates that sentiment and consumption should stand well and recent pit in statistics data probably was an exception rather than change of major trend.
Thus, investors still do not exclude that rate could be raised three times more in this year.
“Although it fell in April, the University of Michigan consumer confidence index remains at a high level by past standards and suggests that the slowdown in spending growth at the start of this year will prove to be a blip,” Andrew Hunter, an economist at Capital Economics, said in a note.
Speaking on Syria, guys, I suspect that this was planned and agreed action among major sides. Other conclusion seems irrational. First of all result of impact is flat - some airport (not in Damask) was hit, ammunition depot and some other objects. So overall damage is minimal.
Now just think, if this indeed escalation with Russia and potentially Russia is a major opponent - would you strike some secondary objects but taking risk of strong response from major rival. Russia has warned that it will response. This looks really stupid.
Besides, planes from Syrian airport were evacuated to Iran and Russian airbase... So my conclusion and I'm sure for 90% that this strike was agreed with Russia for resolving some economical and political problems.
Of course we can't know everything that stands under political curtain but, for example, - Europe and China right now pays almost 80$ for Russian (and US) oil, and 2-3 times greater for Russian aluminium. Trump now could strongly accuse those who still investigate Russian probe in US. Now Trump could say - " this is your fault that our relations with Russia stands on dead way. You have accused me and push me to do this step to prove my loyalty". Now you're getting what you want. This will turn public opinion against them.
Also, version that this was a "preliminary strike", just to test defense systems is not reliable. As a result of this "preliminary strike", US coalition could get massive response attack, so that "testers" could loose all ships. Other words, starting military operation against Russia with just three ships in the Sea and few planes in Cyprus base - this is suicide. Personally I do not believe this.And results of this attack mostly confirms my suspicions. It mostly looks like strike on Shairat airbase last year - when 50+ Tomahawks flew in unknown direction and just disappeared somewhere.
First official information that is available right now confirms my doubts. At least by Russian Military defense department - no casualties, 71 missiles from 103 were put down. It has nothing common with Iraq and Libya strike results... Such performance looks suspicious.
Speaking on tariffs, guys, this story is also stands far from the end. Although it was a hope that conflict is fading, but recently D. Trump said that new tariffs on Chinese electronic will be initiated. When Syria noise will silent a bit, this topic again will come on first stage, I suppose.
COT Report
Large speculators still keep longs on EUR and here we do not have significant changes. This relatively supports our suggestion that upside jump is still possible on EUR.
At the same time, as we already said - positions are highly saturated here, thus, it is difficult to expect action to extended target. Most probable that we will see reaching of 1.26 area.
Technicals
Monthly
As EUR has spent the whole week in relatively tight area, not much we could add to monthly picture. Something new we probably could get only on intraday charts.
Here 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 say 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, 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 yet. "No" is not because of bearish sentiment, but because of technical limitations that EUR carries right now. This is temporal limitation and gradually should be resolved.
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 resistance 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, daily chart also has not changed significantly. In fact, EUR stands in triangle consolidation. We've got upside action through the last week, but still it has not broken narrowing shape of price action. As you can see both extreme points are still valid.
It means that as previously EUR keeps chances for both scenarios - as butterfly "Buy" as "Sell" one theoretically could be formed. But, with relation to higher time frames analysis, we think that bulls have more chances to succeed.
Trend has turned bullish here as well. At the same time, it seems that primary drama will be played on intraday charts. Now we need to see that EUR indeed has got strong support at intraday levels and is forming upside reversal. Last week price behavior was logical and all steps that we've discussed were done.
Let's see what we will get next week, especially on background of geopolitical escalation around Syria, which will be more dollar supportive.
Intraday
As we suggest that dollar probably could get supportive jump on Monday morning, the pattern that we could keep an eye on is butterfly "Buy".
In general, around 1.2285 solid support area will be formed. Not just butterfly, but also AB-CD COP target which creates an Agreement with Fib support.
Besides, by reaching of 1.2285 EUR will complete two important issues - keeps harmony on 4-hour chart. Recall that we've talked about it last week, second - complete AB-CD shape of retracement after reversal swing.
That's being said, if somehow, we will be wrong and EUR will break short-term bullish setup, it anyway should show respect of 1.2285 area. That's why, attempt to go long at first touch of this level should be relatively safe - just don't forget move stops to breakeven, when upside bounce will happen.
Finally - don't be long, if downside action will be furious and take shape of collapse.
May be this setup is not as attractive compares to those that we saw previously in our long-term journey. But, right now we do not have anything else here....
Conclusion:
So, EUR still looks tricky on short-term perspective. On Monday we will check scenario that we've just discussed here. Because if EUR will hold it, this could become a starting point for strong rally to 1.2615 area and daily triangle breakout.
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.
