FOREX PRO WEEKLY, August 21 - 25, 2017

[Sive Morten]

Good morning,

(Reuters) - The dollar edged higher against the yen on Thursday, paring some of the losses it suffered after U.S. President Donald Trump suggested a shutdown of the government was possible and threatened to terminate the North American Free Trade Agreement.

Trump warned late on Tuesday he might end the NAFTA trade treaty with Mexico and Canada after three-way talks failed to bridge deep differences. He also said he may shut the government if he does not get funding to build a wall on the U.S.-Mexico border.

His remarks, made ahead of a debate in Congress over a spending package and raising the debt ceiling, knocked the dollar lower on Wednesday.

The U.S. Congress will have about 12 working days, when it returns on Sept. 5 from summer break, to approve spending measures to keep the government from shutting. Also, a deadline is nearing for raising the cap on how much the federal government may borrow.

In June, the Congressional Budget Office said Congress needs to raise the debt limit by early to mid-October to avoid a default.


The dollar edged up 0.1 percent to 109.16 yen, regaining some ground in the wake of its 0.5 percent drop on Wednesday.

Sim Moh Siong, FX strategist for Bank of Singapore, said it's unclear whether Trump's comments are a negotiation tactic or constitute a real threat that could lead to a government shutdown.

"We have to think a bit harder about the downside risks of the dollar, especially against the safe havens," Sim said.

The dollar might dip against safe haven currencies and assets such as the yen, Swiss franc and gold from time to time, until agreements on the budget and raising the debt ceiling are reached, he added.

Analysts said the dollar may lack clear directional bias ahead of a gathering of central bankers in Jackson Hole, Wyoming, that starts later on Thursday.

The dollar index, which tracks the greenback against a basket of six currencies, edged up 0.1 percent to 93.259.

The focus will be on speeches from Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi on Friday.

Yellen may try to prepare markets for the possibility of another Fed rate hike later this year, said Tan Teck Leng, forex analyst at UBS Wealth Management in Singapore.

"If anything I would suppose Yellen would want to recalibrate market expectations, at least to a 50 percent chance," Tan said.


U.S. interest rate futures are now implying about a 40 percent chance of a Fed rate hike in December.

On Thursday, the euro held steady at $1.1803, after having risen about 0.4 percent the previous day.

German and French PMI data released on Wednesday showed both countries registering strong private-sector growth in August, helping to support the euro.

Today guys, we update our EUR view. OUr AUD setup stands nice and price is coming to potential entry point, so we could turn to EUR again...

On daily EUR everything stands the same. As we said, it seems that here we have signs of bullish dynamic pressure that suggests upside breakout of the top:

On 4-hour chart price moved out from triangle again and completed our expectation. Here we also could estimate nearest target - 1.1950:

Hourly chart shows that EUR has turned up precisely in area that we've estimated - K-support and WPP. Here is just a suggestion that market could form another butterfly pattern with 1.1850 target. It probably could be achieved before meetin in Jackson Hole. Anyway if you've taken long around WPP - move stop to breakeven as situtation becomes more nervous and volatility is increasing...

 

[Sive Morten]

Good morning,

(Reuters) - The dollar was buoyant against the yen on Friday as some participants bought back the currency to square positions ahead of a meeting of central bankers in Jackson Hole, Wyoming.

While Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi are expected to stay on script in speeches later in the day, investors are hungry for any clues on further U.S. rate rises, the timing of its balance sheet tapering and whether Europe is still looking to rein in stimulus.

Yellen is due to give a speech at 1400 GMT and Draghi will speak at 1900 GMT.

The U.S. currency was a shade firmer at 109.640 yen JPY= after gaining 0.5 percent overnight.

The greenback was poised to end 0.3 percent stronger against the yen on the week, during which it had slipped to as low as 108.635 yen on geopolitical tensions stemming from the Korean Peninsula.

Investors’ focus for the time being has shifted from geopolitics and political turmoil in Washington to monetary policy.


“The theme at Jackson Hole this year is ’fostering a dynamic global economy’ and as such a general title suggests, the market may not get the immediate hints on interest rates it is eager to hear,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

But as a precaution some speculators appeared to have bought back the dollar before Jackson Hole, resulting in the dollar/yen’s rise, Ishizuki said.

Price data from Japan highlighted what could be a major topic of discussion at the central bankers’ gathering: why are inflationary pressures remaining so stubbornly weak despite a seemingly synchronized global economic recovery?

Japan’s core consumer prices inched up for a seventh straight month in July from a year earlier, but the gain was a tepid 0.5 percent and driven largely by higher fuel bills. The yen showed little reaction.

The euro was 0.05 percent lower at $1.1796 EUR= following a subdued overnight session, during which it was bound to a tight $1.1818-1.1784 range. It was on track to end the week with a 0.3 percent gain.

The common currency awaited ECB Draghi’s speech, though most market watchers expect he will drop few hints before the central bank’s next policy review on Sept. 7, when some expect he will announce plans to start reducing stimulus.

The euro has gained nearly 14 percent against the dollar this year and some observers were focusing on whether Draghi would choose to talk down the currency’s strength.

“Surprises from Jackson Hole, if any, would probably come from Yellen rather than Draghi, and any impact on the euro would come from moves in the dollar,” said Shin Kadota, senior strategist at Barclays in Tokyo.

“Market expectations for a December Fed rate hike have sunk quite low and there is room for improvement.”


Fed funds futures implied that traders saw a 42 percent probability of the Fed raising interest rates at its December meeting, down from around 50 percent early in July.

The dollar index against a basket of six major currencies stood little changed at 93.299 after nudging up 0.15 percent overnight on the back of a rise in U.S. Treasury yields.

The Australian and New Zealand dollars were both steady at $0.7900 and $0.7210, respectively.

The kiwi took a hit this week after the New Zealand government downgraded the country's growth outlook for this fiscal year and next. It fell to a two-month low of $0.7192 on Thursday.

As on EUR price mostly stands in the same area as yesterday - we will take a look at AUD. On daily chart big butterfly "Sell" starts to form and it has the same 0.8130 destination point as incompleted monthly patterns. That's why it's appearing looks absolutely logical. Our stop grabber has completed minimal target:

On 4-hour chart our "222" pattern has been formed, but I've missed entry for few pips as price has not completed totally AB-CD target, but just wash out previous lows right at 5/8 Fib support. If you've got the fill - this is good. Right now you could just move your stop to b/e and watch the movie.

Now it is difficult solution has to be made, if you want to go long. In fact, on hourly chart market is forming reverse H&S pattern that probably will finalize upside reversal. Unfortunately right shoulder already has been formed. And although I've drawn here another minor "222' Buy, but here is phantom chances that it will be formed. Thus, you have to make a decision - skip the trade, jump in here, wait for this "222" Buy or... may be drop trading volume 2 times and stick directly to daily Butterfly (this was my choice). May be you see something else here that could help you to make a decision:

Finally, take a look at USD Index. It gives clear signs of bearish dynamic pressure. As a result, today it could drop to monthly OS around 91.70-91.90 area and form butterfly pattern:

So, let's wait just few hours till 14:00 GMT when Yellen will start to speak...