FOREX PRO WEEKLY, April 24 - 28, 2017

Sive Morten

Special Consultant to the FPA
Messages
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Fundamentals

(Reuters FX news) The euro weakened against the U.S. dollar on Friday as investors braced for Sunday's first round of a tight French presidential election.

The euro was down 0.14 percent against the dollar at $1.0699, off the session low of $1.0683. The common currency was 0.33 percent lower against the yen and down 0.27 percent against the Swiss franc.

"We have got overall de-risking happening. You have people keeping the powder dry ahead of Sunday," said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.

"Traders are looking liquidity and countries with a strong net international position."

Opinion polls suggest that France's election will likely come down to a second-round duel between independent centrist Emmanuel Macron and Marine Le Pen, head of the anti-European Union and anti-immigrant National Front.

Polls showing Macron in pole position ahead of the vote and an upbeat Purchasing Managers' Index survey from France helped steady investors' nerves somewhat and the euro was still on pace for its best week in 11 against the dollar.

Still, the options markets suggests investors are concerned about the chances of strong results for far-right candidate Le Pen and far-left rival Jean-Luc Melenchon.

The dollar, which has been pressured lately by weaker-than-expected economic data and worries about the Trump administration's ability to pass tax and fiscal stimulus legislation, rose on Friday as traders squared up positions ahead of the weekend.

The dollar index, which tracks the U.S. currency against a basket of six major rivals, was up 0.14 percent at 99.913. The greenback added to gains after President Donald Trump's told the Associated Press that he will unveil a tax plan next week that includes "massive" tax cuts for individuals and businesses.

The Canadian dollar weakened against its U.S. counterpart to a six-week low as cooler-than-expected domestic inflation reduced pressure on the Bank of Canada to consider interest-rate hikes.

The upcoming election also weighed on the Canadian dollar and the currency could come under further pressure if global risk sentiment took a hit on the results on Sunday, Schamotta said.

Other major currency pairs were trading in tight ranges, with Britain's weakest quarterly retail sales number in five years doing minimal damage to sterling after a 4-cent surge earlier this week. Sterling was down 0.11 percent at $1.2794.


Alors on vote
by Fathom Consulting

With the first round of the French presidential election becoming a four-horse race, markets are right to worry about a Marine Le Pen — Jean-Luc Mélenchon runoff on 7 May. Indeed, momentum behind Mr Mélenchon has seen him become the most credible candidate on the left, triggering heightened uncertainty in financial markets. In our view, French and peripheral yield spreads remain too low, underpricing the risk of the next president of France being a eurosceptic.

20170421-France-French-election-first-round-polls.jpg

IN HOUSE

This Sunday, voters will decide on which two candidates for the French presidency will make it through to the second and definitive round of voting on 7 May. Currently, four candidates are vying for the position; Mr Macron, Mr Fillon, Mme Le Pen and Mr Mélenchon. In light of the tragic events in Paris last night, the majority of candidates have agreed to suspend their campaign ahead of Sunday’s vote.

While the central scenario in our latest Global Economic and Markets Outlook assumes that either Mr Macron or Mr Fillon will become the next president of France, the narrowing of polls in recent weeks suggests that a showdown between the far-left (Mr Mélenchon) and far-right (Mme Le Pen) is a real possibility.

As our first chart highlights, eccentric left-wing candidate Mr Mélenchon has eaten into Benoît Hamon’s voting base. This “Mélenchon momentum” has turned the contest for the next occupant of the Élysée Palace into a four-horse race, with the spread between candidates surprisingly close at four percentage points. Now within the margin of error, this narrowing in polls makes it increasingly difficult to say with any confidence which two of the four candidates will win the first round.

Heightened uncertainty in the run up to May 7th

In a Newsletter sent to clients last month, we argued that in the run up to the French presidential election financial market uncertainty would rise. Since then, as we predicted, both the VSTOXX Volatility Index and the CAC 40 Volatility Index, which measure volatility in the EURO STOXX 50 equity index and the French CAC 40 Index respectively, have spiked. This has coincided with the rise of the tele-debate favourite Jean-Luc Mélenchon in the polls. Euro volatility against the yen, the US dollar and sterling, as measured by the three-month implied volatility, has also spiked.
VSTOXX-and-euro-volatility.jpg


Sovereign spreads are currently too narrow

In the dark world of our risk scenario, described in detail in our Global Economic and Markets Outlook for 2017 Q1, Marine Le Pen or Jean-Luc Mélenchon win the French presidential election, Five-Star become the largest single party in Italy, and AfD do well in Germany (not necessarily in that order). Those political events persuade markets to reconsider the value of the ECB ‘put’ option, the promise implied by Draghi’s “whatever it takes” speech that the ECB will step in and buy peripheral sovereign debt if yields on that debt threaten to rise to unsustainable levels.

That promise has held spreads down since 2012, and the value of the ‘put’ option it delivers to holders of peripheral sovereign debt in Europe has been colossal. But if the very existence of the ECB is under threat due to the election of eurosceptic leaders, then there is a risk that the ‘put’ option will be removed. Markets will reprice peripheral sovereign debt, and all the peripheral economies will spiral towards sovereign default. That will prompt a flare-up of the latent euro area banking crisis, and the process of unravelling of the Economic and Monetary Union (EMU) and, by extension, the EU, will have begun.

We assign a not insignificant 30% probability to our risk scenario materialising. If in that world sovereign bond spreads spike to levels last seen during the height of the 2011 euro area crisis or higher, as our forecast assumes, then at present French and peripheral bonds are overvalued. Indeed, with a weight of 30%, spreads should be roughly one third of the way between where they are in our latest central and risk scenarios. They remain some way below that.

In the dark world of our risk scenario, described in detail in our Global Economic and Markets Outlook for 2017 Q1, Marine Le Pen or Jean-Luc Mélenchon win the French presidential election, Five-Star become the largest single party in Italy, and AfD do well in Germany (not necessarily in that order). Those political events persuade markets to reconsider the value of the ECB ‘put’ option, the promise implied by Draghi’s “whatever it takes” speech that the ECB will step in and buy peripheral sovereign debt if yields on that debt threaten to rise to unsustainable levels.

That promise has held spreads down since 2012, and the value of the ‘put’ option it delivers to holders of peripheral sovereign debt in Europe has been colossal. But if the very existence of the ECB is under threat due to the election of eurosceptic leaders, then there is a risk that the ‘put’ option will be removed. Markets will reprice peripheral sovereign debt, and all the peripheral economies will spiral towards sovereign default. That will prompt a flare-up of the latent euro area banking crisis, and the process of unravelling of the Economic and Monetary Union (EMU) and, by extension, the EU, will have begun.

We assign a not insignificant 30% probability to our risk scenario materialising. If in that world sovereign bond spreads spike to levels last seen during the height of the 2011 euro area crisis or higher, as our forecast assumes, then at present French and peripheral bonds are overvalued. Indeed, with a weight of 30%, spreads should be roughly one third of the way between where they are in our latest central and risk scenarios. They remain some way below that.

Ten-year-peripheral-sovereign-spreads.jpg


Alternatively, in the event of a non-populist French president winning the election, spreads between peripheral and German bonds will narrow and equities will rally. Under this scenario, despite a short-term appreciation of the euro, we believe that the monetary policy divergence between the ECB and the US Federal Reserve will see the euro depreciate throughout the second half of this year, driving the common currency to parity against the US dollar by 2018 Q1. In the event of a Mme Le Pen or Mr Mélenchon win, we believe that the euro would depreciate sharply.

20170421-France-EURUSD-exchange-rate.jpg


COT Report

COT Report shows some tendency on EUR weakness. At least net short position has increased, and open interest also shows increasing. This combination creates moderate bearish sentiment on EUR:

upload_2017-4-23_12-44-45.png


Our 2 cents on France elections:

Last week we have prepared extended material on this subject. We would like to add just brief update here. Mostly it concerns E. Macron. Last time we've estimated that E. Macron is Rothchild's candidate on presidency. Rothchilds stand behind all wars on planet in last decade. In fact they are the head of neocons and H. Clinton was their candidate in US presidentcy. E. Macron has got his popularity on two factors. First is scandal around Fi. Filon and outstanding mass media support. Mass Media in Europe mostly stand under control of Rothchilds family and no doubts that they stand behind scandal with Fiion. Information was put on the table in right moment and this has let E. Macron to take the lead.

What will happen if E. Macron will win? In this case Rothchild will get control over the country, army and voice in UN Security Council and will use it to satisfy his own interests. For example, very popular topic right now is ISIL and Middle East war. Thus, Russia, Iran, Syria and other countries destroy Rothchild's ISIL army in Middle East and French should know, that if E. Macron will win then French army will be used to support anti-Russian operations. It will be done under cover of fighting against ISIL. Other words - France and it's military forces will be put to service not France but Rothchild. So this will be tradegy, but they will recognize it too late.

At the same time, we think that those forces who were stand against H. Clinton should prevent E. Macron victory. We do not know how this will be done and at what moment, but we think most probably it will happen right before 2nd round of elections. Right now we're living during 3rd World War. This is modern hybrid war, it goes differently, so that people do not understand anything. And now stand big compagne against Rothchilds and neocon control. We think that F. Filon should become a president. Because if E. Macron will be compromised - his voices will pass to F. Fillon but not to M. Le Pen.

Technical
Monthly


As we've said in videos last week, our technical view could be harmed by elections result, but mostly in short-term. Whoever will become a president, existed financial background will stand the same, thus, major long-term trends should be the same. April month still stands inside of March and barely impacts on long-term picture right now.

From technical point of view we have untouched long-term targets around parity and some time it should be met, but somehow I think that it should happen on a background of surprising tightening policy from the Fed, which has more chances to happen only in 2018. So, in perspectives of 1-2 years EUR looks weaker than USD. In coming years EU will meet hard restructural political process that could change the structure of the Union, role of different members and financial relations. Also it is a question what will be with newbie members in Eastern Europe.

In short-term perspective EUR mostly has completed AB-CD retracement on weekly chart when it has reached 1.0930 area two weeks ago. On monthly chart it looks like third unsuccessful challenge of YPP. In fact, the third failure to pass through YPP looks as sign fo weakness and could lead to downward action at least to previous lows around 1.03 or even lower. It is too difficult make any long-term forecasts with precise numbers, as there too much imputs that stand out of control, mostly political ones...

Right now on monthly chart there are more chances on reaching parity but it is difficult to judge on timing of this process. As usual, dealing with step-by-step action on daily/weekly chart, based on some patterns should help us:
eur_m_28_04_17.png


Bullish perspectives are also exist, but we could speak on them only when downward action to parity will end. Right now it seems that some bullish reversal pattern could be formed around it:
eur_m1_28_04_17.png
Picture shows classical action. Take a look that since 1999 - EUR was forming upside reversal swing that lasts till Dec 2007. Now market stands in deep retracement - this is typical action as new upside reversal swing has been formed. Based on this picture EUR is approaching to area where this retracement should over and it could get chance to starts extension leg of bull trend that could lead EUR as far as to 1.76-1.82 area. Also you could recognize here some signs of reverse H&S pattern. That's why on big weekly picture we also have made a suggestion on big H&S pattern with head around parity....But it seems upside trend by this picture could start not earlier than in 2018-2019.

Weekly

Theoretically trend by MACD is still bullish, market is not at oversold. But overall situation has changed drastically. As we've briefly mentioned previously - EUR has formed bearish reversal candle. This is strong signal, that upside action is over, at least in short-term perspective. As we've seen above - this mostly has happened due changing in financial background and global politics shifts.

At the same time, weekly chart mostly has completed normal upside reaction on reaching 100% extension of our large bearish AB=CD pattern. This reaction has taken the shape of upside AB=CD pattern and stopped at weekly K-resistance and YPP. As a result, here we could talk on some "222" Sell pattern.

This action could mean two things. First is upside retracement is over. Second - EUR is turning to extension mode of action with existed long-term bear trend. Next major target here is parity, but it is too extended and we will focus on closer ones - previous 1.03 lows first of all. We choose this target because it stands in logical relation with patterns that are failed on daily chart.

Here, on weekly, situation could change only if EUR will move above 1.0950 top again. Until this will happen - overall picture will remain bearish:
eur_w_28_04_17.png



Daily

Here we're mostly watching whether EUR will turn down and confirm our bearish view as AB-CD retracement up is completed or not. On Friday we've discussed two major bearish patterns here. Big shooting star pattern and bearish "222" pattern.

On Friday market has shown first pullback as we've suggested, and re-tested MPP. But as previously, our major signal will be formed when EUR will break trendline support and drop below 1.0550 area. Based on "222" that we've got, first AB-CD target down stands precisely around this area. Thus we need keep an eye on intraday charts to get signs of bearish reversal and then turn attention to daily picture:
eur_d_28_04_17.png


4-hour

As we've discussed on Friday - market has completed our upside target around 1.0777 Fib level and created an Agreement resistance. Theoretically, if upside action was just a retracement but not a new trend - price has no reasons right now to continue move up, as major target has been hit.
Thus, we need to watch for bearish reversal patterns here. Minor pattern on hourly chart, H&S has triggered downside drop. As a result EUR has reached K-support and now shows upside reaction on this.
At the same time price has formed bearish reversal swing as last drop is greater than previous swing up. 1.0740 is 5/8 Fib resistance of recent drop. Here we could get different patterns - Double Top, larger H&S...
With Monday open this will be clearer, as we will know election results and how market responds on it:
eur_4h_28_04_17.png


Conclusion:

Strong bearish reversal 2 weeks ago could mean that EUR steps back on a way of long-term bearish trend, as situation in global politics, domestic US finances has changed. Still, a lot of political events brings uncertainty and volatility on the market.

On daily chart we will watch for breakout of 1.0550 area and trendline support. This is major signal of downward contination. Right now situation mostly depends on France and Monday morning we hope that picture will be more transparent. Right now we prepare to watch for bearish reversal patterns around 1.0750-1.08 area.


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.
 
Last edited:
Good morning,

(Reuters) - The euro steadied on Tuesday, pausing after a rally sparked by the first-round results of the French presidential election, while the Canadian dollar fell after the U.S. slapped duties on Canadian softwood lumber.

The euro last traded at $1.0866, off Monday's peak of around $1.0940, its highest level since Nov. 10, after centrist Emmanuel Macron won the first round of the French presidential elections.

Polls show Macron defeating anti-EU, anti-euro nationalist Marine Le Pen in a runoff vote due to take place next month.

The euro's sharp bounce on Monday was partly due to the triggering of stop-loss buying at $1.09, said Tan Teck Leng, forex analyst for UBS Wealth Management in Singapore.

After that rally, lingering caution over the risk of a surprise win by Le Pen in the runoff vote will probably limit the euro's gains for now, he said.

"Our view on the euro/dollar is that between now and May 7, you'll probably be trading between $1.08 and $1.10," Tan said.

Opinion polls indicate that the business-friendly Macron, who has never held elected office, will take at least 61 percent of the vote against Le Pen after two defeated rivals pledged to back him to thwart her eurosceptic, anti-immigrant platform.

The Canadian dollar fell 0.4 percent after U.S. Commerce Secretary Wilbur Ross said his agency will impose new anti-subsidy duties averaging 20 percent on Canadian softwood lumber imports.

The loonie slipped to C$1.3560 per U.S. dollar at one point, its lowest level since late December when it sank to C$1.3598.

YEN SLIPS

The U.S. dollar rose 0.3 percent to 110.08 yen, as the safe haven yen edged lower.

There was little market reaction after media reports said North Korea put on a massive live-fire drill on Tuesday.

Market participants have been worried that North Korea could conduct its sixth nuclear test, or another long-range missile launch, to coincide with the 85th anniversary of the foundation of its army on Tuesday.

Analysts said there was some relief for now, over the lack of such action by North Korea.

They added, however, that concerns over geopolitical risks were likely to persist, limiting the yen's declines and tempering the dollar's gains against the Japanese currency.

"For the dollar to make a try for 112 yen, you'd like to see some type of positive news out of the United States and an easing in North Korea related tensions," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

One potential negative against the dollar is the risk of a U.S. government shutdown, Okagawa said.

President Donald Trump indicated an openness on Monday to delaying his push to secure funds for his promised border wall with Mexico, potentially eliminating a sticking point as lawmakers worked to avoid a looming shutdown of the federal government.

Trump is facing a Friday deadline for Congress to pass a spending bill funding the government through September or risk marking his 100th day in office on Saturday with a government shutdown.


Today guys, we will take a look at NZD. Currently it makes no sense to update EUR, since it is not clear yet what will happen with the gap. If it will be filled - this is one story and bearish tendency will be kept, while upside continuation will change short-term picture.

Also we have to refuse our idea that E. Macron will not win elections, because we see mismatch of our political view on ongoing processes and abscence any compromising evidence and infrmation campaigne against E. Macron. It just mean that we do not know everything and E. Macron could be acceptable for major geopolitcal forces. May be some great geopolitical deal was achieved. Now we can just keep watching...

So on NZD. Here we have great setup. Initially we have trhee steps in this scenario. First one has been achieved when market has completed B&B "Sell" target around 0.69 area. Second step is completion of 1.618 AB-CD daily extension and butterfly 1.27 target. Why we think that this should happen? Because drop down was rather fast and market has not reached major target. Such combinations usually lead to completion of AB-CD extensions.

Downward action could have a geopolitical background right now. Asia Pacific region is coming to become place of uncertainty as tensions around N. Korea are growing. If mess will start around it will involve all major players in regions - US, both Koreas, Japan, China and will make impact on whole region. Thus, Asia Pacific currencies could be under pressure for some time. NZD definitely is not strongest currency in the region, that's why it could feel pressure earlier than others...

Third step on daily chart - completion of large AB=CD and 1.618 butterfly target around 0.6750 area:
nzd_d_25_04_17.png


Recent action on intraday charts brings us confidence with our analysis. On 4-hour chart you can see our butterfly and 5/8 resistance area that market was not able to break. And this was our initial condition of bearish scenario - price should stay below 0.7075 area. Now kiwi is turning down:
nzd_4h_25_04_17.png


On hourly chart price has dropped below WPS1 that suggests starting of new bear trend and it stands at the eve of downside breakout of support line:
nzd_1h_25_04_17.png


That's being said, price action mostly corresponds to our scenario. It could mean that specified targets should be reached.
 
Good morning,

(Reuters) - The U.S. dollar surged against its Canadian counterpart on Tuesday after the United States imposed duties on Canadian softwood, while the euro hit a multi-month high on relief over the French election and the possibility of more hawkish European Central Bank policy in June.

The greenback hit C$1.3626 , its highest level against the loonie since late Feb. 2016. U.S. Commerce Secretary Wilbur Ross said Monday the United States will impose preliminary anti-subsidy duties averaging 20 percent on imports of softwood lumber.

The move, which affects some $5.66 billion worth of imports of the construction material, set a tense tone as the two countries and Mexico prepare to renegotiate the 23-year-old North American Free Trade Agreement.

"It reflects what is going to happen with the trade relationships for the U.S. and its neighbour," said Sireen Harajli, FX strategist at Mizuho in New York. "This is a negative reflection on that trade relationship."

The euro hit $1.0950, its highest level against the dollar in five and a half months, as traders digested centrist candidate Emmanuel Macron's victory in the first round of France's presidential election on Sunday.

"What we’re seeing is the beginning of a longer march" higher in the euro in response to Macron's first-round victory, said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York.

In addition, three sources on and close to the ECB's Governing Council told Reuters that with the fading of the threat of a run-off between two eurosceptic candidates in France, and with the economy on its best run in years, many rate setters see scope for sending a small signal in June towards reducing monetary stimulus.

Harajli of Mizuho said more hawkish ECB policy would drive interest rates higher in Europe, which would likely boost the euro.

The dollar surged about 1.3 percent against the safe-haven yen to a 15-day high of 111.18 yen. The reduced French election concerns, combined with strong new U.S. home sales data and optimism surrounding an expected tax reform announcement from U.S. President Donald Trump's administration on Wednesday boosted the dollar against the yen.

"If tomorrow’s tax plan is seen as credible by the market, then dollar/yen could go higher," Jalinoos of Credit Suisse said.

The dollar index, which measures the greenback against a basket of six major rivals, was last down 0.3 percent at 98.844 after touching its lowest level in five and a half months, of 98.695.


As many people are frustrating about this gap on EUR, let's discuss what we could get in nearest time. On daily chart, EUR stands at Overbought and inside K-resistance area. That's why in short-term upside potential is limited and this is not good time for taking long position.

Here we have rather rare pattern guys that calls "last engulfing". This is bullish engulfing but formed on the top. It works a bit differently and should not be treated neither as bullish nor as bearish. Direction will depend on breakout of it's range.

Finally, we have uncompleted large AB=CD pattern with target around 1.0975 area. As you can see this creates rather strong resistance cluster and potential bearish Stretch pattern by DiNapoli - combination of OB with Fib level. That's why we think that as AB=CD will be completed, market could turn to moderate retracement and make an attempt to close the gap. This could happen precisely between 1st and 2nd elections rounds in France:
eur_d_26_04_17.png


Approximately the same scenario we see on hourly chart as bearish butterfly is forming here and its 1.618 extension coincides with daily AB-CD target:
eur_1h_26_04_17.png


That's being said overall technical picture suggests first - action to 1.0975 -1.0980 area and second - starting of moderate retracement.
 
Good morning,

(Reuters) -

The dollar held gains against the yen on Thursday after U.S. President Donald Trump's tax plan offered no fresh surprises, slowing the greenback's rally, while the market awaited the European Central Bank's upcoming monetary policy decision.

The Canadian dollar and Mexican peso, which had slumped earlier on reports the United States is considering withdrawing from the North American Free Trade Agreement (NAFTA), bounced sharply after Trump said he would not scrap the pact but renegotiate instead.

Against the Japanese yen, the dollar had surged to a four-week high of 111.780 overnight before the unveiling of Trump's tax reform plan, but it lost traction as it failed to excite investors. The dollar was last up 0.15 percent at 111.220 yen.

The yen showed little reaction to the Bank of Japan's decision on Thursday to keep monetary policy steady as the outcome was well anticipated.

Trump's plan would cut the income tax rate paid by public corporations to 15 percent from 35 percent and reduce the top tax rate assessed on pass-through businesses, including small partnerships and sole proprietorships, to 15 percent from 39.6 percent.

"The Trump tax plan did not go beyond what the media had been reporting all week. And while the plan appears ambitious, its foundations are shaky from a revenue perspective," said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

"Participants have become wary of pushing the dollar further under such conditions."

The euro was up 0.1 percent at $1.0913.

The euro has had a buoyant week, climbing to a 5-1/2 month high of $1.0951 on Wednesday, as the first round of the French presidential elections held over the weekend reduced perceived risk towards the common currency.

The single currency has also soared against the safe-haven yen, which has broadly retreated this week as risk aversion has ebbed on the back of the French election results. The euro was at 121.445 yen after climbing overnight to a five-week peak of 121.980.

Another factor spurring gains for the euro this week has been expectations of a change in the direction of ECB policy in coming months, that it would soon scale back monetary stimulus.

The central bank is due to announce its policy decision later on Thursday and the focus is on whether the recent French election results, which favour a pro-euro centrist, had any impact in the ECB's stance.

"The euro has been gaining against the dollar and yen amid expectations of the ECB signalling policy tapering. So it could go temporarily on the defensive if the central bank does not deliver any tapering signals," said Shusuke Yamada, a senior strategist at Bank of America Merrill Lynch in Tokyo.

Sweden's central bank also makes a rates decision on Thursday, and while the Riksbank is widely expected to stand pat, investors will be looking for any hawkish signals after recent signs of strength in the domestic economy.

The Canadian dollar bounced 0.6 percent to C$1.3542 per dollar. The loonie had initially weakened to a 14-month low of C$1.3636 after a senior administration official said on Wednesday that Trump is considering issuing an executive order to pull the United States from NAFTA.

The Mexican currency strengthened 1.2 percent to 18.95 pesos per dollar after sinking to a more than one-month low of 19.29 overnight.

Antipodean currencies also rose as Trump's latest stance on NAFTA eased concerns towards U.S. trade protectionism for now.

The Australian dollar was a shade higher at $0.7489 after retreating to a three-month low of $0.7455 the previous day on lacklustre local inflation data. The New Zealand dollar added 0.4 percent to $0.6920, pulling back from a four-month low of $0.6873 plumbed overnight.

The dollar index against a basket of major currencies slipped 0.2 percent to 98.844 after rising to 99.332 the previous day.


So, guys, on NZD - situation develops perfect, kiwi almost has reached our first target around 0.6850. Today intraday traders could get cool chance of 4-hour chart as B&B sell pattern could be formed there.

Now let's turn to EUR. Yesterday we have pointed 2 important moments. First is - real reversal hardly will start before completion of daily AB=CD pattern @ 1.0775 area. Second is - reaching of this target will take some time as market stands at OB. This is what we see right now:
eur_d_27_04_17.png


On intraday charts we have more clear picture today. Due daily OB market can't immdiately continue move up and this has led to minor retracement yesterday. Our first butterfly is still valid here. But right now we could get another cool pattern - 3-Drive "sell".
Here EUR shows perfect example and it takes the shape of side-by-side butterflies:
eur_1h_27_04_17.png


That's being said, major conclusion here is mostly the same - waiting of completion daily and intraday patterns and then some relief will be possible. As market will have no new political inputs till 7th of May - this will be supportive factor for possible retracement and attempt to close the gap.
 
Good morning,

(Reuters) - The euro dipped against the U.S. dollar on Thursday after European Central Bank chief Mario Draghi said policymakers did not discuss removing the bank's easing bias on monetary policy, while the dollar jumped against the Swedish crown after the Riksbank extended its bond-buying.

The euro initially rose to a session high of $1.0932 on language in the ECB's statement, read by Draghi, which said the euro zone's recovery was increasingly solid and downside risks had diminished.

But other parts of the statement and Draghi's replies to questions stressed the barriers the ECB still faces before beginning to tighten the ultra-loose financing conditions it has maintained for nine years.

"Draghi wasn’t as hawkish as people had hoped," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

"Upside event risk for the euro is gone," he added, noting that there was a tendency to bet against the euro in part given the likelihood of centrist Emmanuel Macron defeating anti-EU candidate Marine Le Pen in the final round of France's presidential election.

The euro was last down 0.3 percent against the dollar at $1.0875, near a session low of $1.0852.

Sweden's Riksbank extended its bond-buying and predicted its first interest rate hike in mid-2018, later than previously projected. That sent the dollar as much as 1.3 percent higher against the Swedish crown to a session peak of 8.8730 crowns per dollar

The Bank of Japan also signaled it would maintain its massive stimulus effort, despite offering its most optimistic assessment of the Japanese economy in nine years.

Governor Haruhiko Kuroda conceded that public perceptions of future price increases remained subdued, which disappointed some traders hoping for a more hawkish inflation outlook and pushed the dollar higher against the yen.

"That lower inflation forecast would suggest continued accommodative monetary policy," said Eric Viloria, currency strategist at Wells Fargo in New York.

The dollar was last 0.2 percent higher against the yen at 111.22 yen after rising as much as 0.5 percent to a session high of 111.59.

The dollar index, which measures the greenback against a basket of six major rivals, was last up 0.1 percent at 99.104.

The dollar was down 0.8 percent against the Mexican peso at 19.0300 pesos after U.S. President Donald Trump said he would not scrap the North American Free Trade Agreement (NAFTA).


Initially we thought to take a look at GBP but due recent ECB comments, situation on EUR has changed slightly, so let's talk on EUR again...

On daily chart we have two points. First is - AB=CD target has not been met while EUR has started downward retracement. It makes foundation of this retracement very fragile and it could finish at any time. It is very probable that market still will return back and hit 1.0980 target. Here actually we have 2 different AB-CD, but with the same target.
Second - our "last engulfing" pattern. Right now price is stil coiling inside of it's range. As we've said in short-term period price will follow in the same direction as breakout will happen:
eur_d_28_04_17.png


On 4-hour chart we have two major levels to watch for. First on is nearest 1.0850 and Agreement with AB-CD target. Second - K-support around 1.08 and also Agreement but with 1.618 AB-CD target. As daily AB=CD has not been reached - it is possible that EUR could stop even at 1.0850... So, retracement down will be very unstable.
eur_4h_28_04_17.png


As a result of recent dovish ECB statement, our 3-Drive shape has been adjusted. Thus, last butterfly has been cancelled and we've got some kind of H&S pattern instead, although it's shape is not really perfect:
eur_1h_28_04_17.png


As you can see, for long entry it is too early as market still stands very close ot OB area and deeper retracement is possible, while short entry has too fragile background. Uncompleted dail AB-CD brings additional risk for bears.
That's why our thought is to wait a bit more... Market has whole week till 2nd round of elections, and retracement could continue. It could bring better chances for long entry. Until market will not complete daily AB-CD pattern or break our trend line around 1.07, it will be rather risky to go short.
 
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