Sive Morten
Special Consultant to the FPA
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- 18,564
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.
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.
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.
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.
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:
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:
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:
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:
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:
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:
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.
(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.
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.
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.
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.
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:
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:
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:
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:
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:
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:
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.
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