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FOREX PRO WEEKLY, August 28 - 01, 2017

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Aug 26, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals


    (Reuters) - The euro soared to its highest level in more than two years against the dollar on Friday after European Central Bank President Mario Draghi did not express concern about a strong euro zone currency, as some analysts had expected.

    Some analysts had suggested that Draghi could use the Jackson Hole, Wyoming central bankers’ conference to talk the euro down. When he did not do so, traders took that as a green light to buy euros.

    The dollar index dropped to a more than one-year low following Draghi’s speech and after Federal Reserve Chair Janet Yellen made no reference to U.S. monetary policy in her speech.

    Europe’s single currency has climbed 13 percent so far this year against the dollar, as it benefited from political dysfunction in Washington and the Federal Reserve’s gradual monetary tightening pace. A strong euro is a headwind for the export-driven euro zone economy.

    Instead of the surging euro, Draghi, in his speech at the Jackson Hole, Wyoming central banker’s conference, instead focused on other aspects such as a solid global recovery.

    “Primarily the dynamic that traders are betting on now is that the European Central Bank is not concerned about the euro’s strength despite the impact that the euro is having on core inflation and growth metrics throughout the euro area,” said Karl Schamotta, director of global market strategy at Cambridge Global Payments in Toronto.

    He added that traders had expected Draghi to jawbone the currency downward, following up particularly on the minutes of the last meeting, “in which it was very clear that the governing council had become increasingly concerned about the euro’s strength.”

    The euro hit a high of $1.1940, its strongest level since January 2015. It was last at $1.1929, up 1 percent on the day, its best daily percentage gain in two months.

    Against the yen, the dollar fell 0.2 percent to 109.31, while the dollar index slid to 92.542, down 0.8 percent.

    “At this point, there isn’t too much for Yellen to add,” said currency strategist Sireen Harajli of Mizuho Corporate Bank in New York.

    "The FOMC (Federal Open Market Committee) has been very clear in terms of communicating their intention to continue tightening policy very gradually, and I don't think they see anything to change that view."

    Instead, Yellen focused on U.S. regulations, saying those put in place after the 2007-2009 crisis had strengthened the financial system without impeding economic growth, and any future changes should remain modest.



    Chart of the Week: The Folly of Data-dependent Monetary Policy
    by Fathom Consulting

    When it comes to hiring, UK businesses appear to have shrugged off Brexit related uncertainty, pushing the unemployment rate down to 4.4%, the lowest in over 40 years. But the impact of that tightening, which would normally feed through to pay settlements, remains elusive.

    [​IMG]

    As a consequence, although consumer price inflation surprised on the downside in both June and July, staying stable at 2.6%, the average worker was worse off as real earnings continued to contract. While numerous explanations for this divergence have surfaced, a common thread across the developed world is that of poor productivity growth. Ironically, that is unlikely to improve until interest rates are raised, an increasingly distant prospect on the back of last week’s inflation and wage data.

    COT Report

    CFTC data shows bullish sentiment on EUR - within last 4 weeks as open interest as net long position are increasing. Last number shows 88 K contracts on net long position. EUR right now stands very close to all time high that was fixed in 2011 - 99.5K. As EUR still has some room to grow further, this is the moment where moderate retracement could start. As a rule, when EUR stands at 10% range to absolute extreme levels of net position - chances on retracement increase dramatically. Although EUR provides positive mood, but we just need to keep in mind this moment and do not miss signs of starting retracement.
    upload_2017-8-26_11-49-53.

    Techical
    Monthly


    Today, guys, we will take a look at EUR, but with keeping in mind a bit overload speculative position and through the prism of other currencies - CHF and Dollar Index. It will help us a bit with medium-term perspective.

    So, what do we have at current moment? Draghi did show no concern of EUR's strength. This is good and bullish sign for EUR. Four months in a row EUR shows tail closing, which also suggests strength. The only limit factor that we see right now is too extended speculative long position. Market stands relatively close to a moment where will be nobody to buy to support this trend and market could need some moderate bounce.

    That's why on monthly chart, we mostly are interested - where nearest resistance is. Chart shows that bounce down could start around 1.22 area - this is EUR favorite 50% Fib level and monthly OB ~1.2225. This is also natural long-term support/resistance zone, but actually it is too wide to make any sense for us.
    eur_m_28_08_17.

    Here we also should recall recent news from US Treasury. They indend to issue 500 Bln Bonds in IIIQ. This is very large volume that has not been seen since 2008 crisis. Putting this bonds on market will draw liquidity and provide support to USD. This is some kind of hidden intervension. Impact hardly will be dramatic, but in cooperation with other factors, this could be important.

    Aproximately the same picture we see on Dollar Index. Here price stands even closer to OS level and we easily could recognize possible H&S pattern:
    $indx_m_28_08_17.

    Both these moments tell that EUR could continue upside action a bit more, but market definitely is coming to moderate retracement within perspectives of 1-2 months.

    Weekly

    This chart brings nothing special to overall picture. Price right now is entering in zone where a lot of extension targets stand. Thus, first one is 1.27 extension of recent swing down @1.1950. 1.20 is MPR1. After that we have another, greater 1.27 extension target around 1.2150. So, 1.20-1.22 is a stripe of different minor targets.
    Most important, I suppose, is weekly OB level. It stands at the same 1.22 area:
    eur_w_28_08_17.

    As EUR brings not too much on weekly chart, it could be interesting to take a look at CHF. Actually, here market has formed strong bullish engulfing pattern. Now price stands in retracement back inside the body of this pattern, but potentially it suggests upside action. For EUR it means that it could turn down. This is another sign that retracement, possibly, is coming here:
    chf_w_28_08_17.

    Also, guys, we need to understand that Yellen's term will expire in February. Before appointing of new Fed chairman or (chairwoman), investors could unwind positions to reduce risk. A lot of other stuff will come as well - as Germany elections in September, US Debt ceil voting in US Congress and others...

    Daily

    So, or daily trading plan has worked perfect last week, and, indeed, bullish dynamic pressure has worked as it should to. Intraday 1.1950 target has been completed.
    Meantime daily chart gives two other extensions. First one stands at 1.1975 and mostly coincides with daily Overbought. Next one is 1.2050 area. This probably will become a ceil for coming week. Be ready that price action will become more volatile as EUR enters turbulence zone around weekly, monthly and daily OB area.

    Besides, if, our suggestion is correct, and, indeed EUR will turn down around 1.22 - it needs to prepare this reversal. Thus, upside action probably will be not as streight as before, and market could start to form some bearish reversal pattern here:
    eur_d_28_08_17.

    As a result, on CHF we could get very attractive "222' Buy pattern:

    chf_d_28_08_17.

    Intraday

    Recent action has solid upside impulse, so rally has good chances to continue. At the same time EUR stands very close to daily OB level around 1.20. It means that on coming week we will have special tactics of buying deeps and out around previous tops.

    On 4-hour chart price is forming butterfly "sell". As soon as 1.618 target will be completed, some retracement is possible. Most probable it will be either 1.1890 or 1.1850 K-support area. If we will get chance to go long, our target will be around 1.20 - daily overbought and daily extensions...
    eur_4h_28_08_17.


    Conclusion:

    In very long term perspective EUR looks positive as monthly USD index is forming huge H&S pattern.


    In shorter-term within few weeks EUR could climb slightly higher, but as sentiment analysis as some fundamental reasons suggest coming moderate retracement. It means that upside action will not be as streight as previously and EUR could start forming some bearish reversal pattern on daily chart.

    On coming week, as EUR stands close to daily OB area, our tactic will be buying deeps and out at previous tops (somewhere around 1.20's)

    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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  2. Major_Tom

    Major_Tom Private, 1st Class

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    Great analysis...thank you Sive...you are the best!!
     
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  3. Lolly Tripathy

    Lolly Tripathy Master Sergeant

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    Thanks sive sir..
    Last week got sum good pips on eur/nzd/aud/
    I never afraid of any major news just becoz your vision..
    This week u r giving many hints...hope I will catch it all..
    Thank you so much again m again...
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar hit a four-month low against the yen on Tuesday after North Korea fired a missile that passed over northern Japan, the latest act of provocation by Pyongyang that has ramped up global tensions.

    The dollar was down 0.4 percent at 108.81 yen, having slid to as low as 108.33 yen in early Asian trade on Tuesday, its lowest level since mid-April.

    A risk-averse mood prevailed in the region following the missile launch, with Japan’s Nikkei stock index falling to its lowest level in nearly four months.

    The yen tends to benefit during times of geopolitical or financial stress as Japan is the world’s biggest creditor nation and has a current account surplus.

    There is also an assumption that Japanese investors might eventually repatriate funds if market turmoil persists and dampens their risk appetite.


    North Korea fired a missile early on Tuesday that flew over Japan and landed in waters off Hokkaido, in a sharp escalation of tensions on the Korean peninsula.

    “Based on past patterns in which the yen has gained on such incidences, speculators reacted immediately to the North Korean missile headlines, taking dollar/yen to the intraday lows,” said Mitsuo Imaizumi, chief FX strategist at Daiwa Securities.

    The United States, Japan and South Korea asked for a United Nations Security Council meeting to discuss the test, diplomats said. A meeting of the 15-member Security Council would be held later on Tuesday, they said.

    The risk of further falls in the dollar against the yen can’t be ruled out given the simmering geopolitical tensions, said Teppei Ino, analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore.

    “It doesn’t look like the situation is settling down, so I think you need to stay on guard,” Ino said. “It’s very hard to get a good read on what might happen after this,” he added.

    The Swiss franc touched a one-month high of 0.9498 franc per dollar at one point. The safe haven Swiss franc later pulled back to 0.9522.

    The dollar was already on the defensive, particularly against the euro, after Federal Reserve Chair Janet Yellen did not mention monetary policy at a central bankers’ summit in Jackson Hole last week, and as European Central Bank President Mario Draghi’s held back from talking down the euro at the same meeting.

    The dollar had also weakened after Tropical Storm Harvey paralyzed Houston, Texas, and many oil refineries in the U.S. Gulf Coast, spurring worries about the storm’s potential impact on the U.S. economy.


    The euro was down 0.1 percent at $1.1969. Earlier on Tuesday the euro rose to $1.1986, its highest since January 2015.

    The dollar index against a basket of six major currencies was little changed at 92.207 by late morning, recouping early losses.

    In early Asian trade, the dollar index had touched its weakest level since May 2016. A drop below the May 2016 trough of 91.919 would take the index to its lowest since January 2015.


    Today we will take a look at EUR and a bit on CHF as their patterns stand in relation. Well, we were right on direction in our weekly research, but EUR has not provided us any meaningful retracement for position taking.
    On daily chart we still watch for butterfly "Sell" with final destination point @1.2050 area, which also will be daily OB:
    eur_d_29_08_17.

    Now price is coming to resistance of WPR1, MPR1 and 4-hour 1.618 AB-CD target. May be we will get some minor bounce out from here. Probably it is better to not wait for deep retracement and most probable destiantion area is 1.1918 - nearest 3/8 Fib support and previous daily tops:
    eur_4h_29_08_17.

    As EUR will reach 1.2050, CHF, in turn, could complete "222" Daily Buy pattern:
    chf_d_29_08_17.

    Of course, a lot of risk stands around and new spiral of tensions around N. Korea could break technical background - "222" could shift to butterfly or , even fail totally. But right now this setup looks attractive. Mostly, because it's daily and it has very small risk as difference between 1.618 target and lows is very small.
     
  5. Lolly Tripathy

    Lolly Tripathy Master Sergeant

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    Dear Sive sir
    I would like to request you for gbp
    Confluence area and OB/OS on daily-weekly-monthly
    Thanks
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar pulled away from the previous session’s 4-1/2 month lows against the yen on Wednesday as investors’ concerns over North Korea’s latest missile test eased for now, while the Australian dollar surged on upbeat construction data.

    The dollar index, which tracks the greenback’s value against a basket of six major currencies, added 0.1 percent to 92.292, having recovered from Tuesday’s low of 91.621, its lowest level since January 2015.

    The dollar last traded at 109.77 yen, up from Tuesday's low of 108.265 yen, its lowest level since mid-April.

    “The dollar/yen reacted yesterday, moving lower, and that seems to be reversing today,” said Mitul Kotecha, head of Asia macro strategy for Barclays in Singapore.

    “Its become a typical reaction to what’s been happening in North Korea, where you initially see some risk aversion in markets and then reverse that move relatively quickly,” Kotecha said.

    North Korea’s launch on Tuesday of a ballistic missile over Japan’s northern island of Hokkaido initially spooked investors. It triggered a drop in U.S. bond yields and a slide in the dollar against the yen, which tends to benefit during times of crisis on the assumption that Japanese investors will repatriate funds.


    The greenback later recovered, with U.S. equities rising on Tuesday and the U.S. 10-year Treasury yield pulling up from 9-month lows.

    The U.S. 10-year Treasury yield last stood at 2.148 percent. On Tuesday, the U.S. 10-year bond yield fell as low as 2.086 percent, its lowest level since Nov. 10.

    North Korean leader Kim Jong Un guided a launch of an intermediate-range ballistic missile on Tuesday in a drill to counter the joint military exercises by South Korean and U.S. militaries, the North’s official KCNA news agency said on Wednesday.

    KCNA quoted Kim as saying it was necessary for the North Korean military to undertake more exercises focused on operations in the Pacific.

    While North Korea-related risks haven’t gone away, the fact that the dollar managed to bounce back sharply from Tuesday’s lows could lend support to the greenback in the near term, said Andrew Bresler, deputy head of sales trading in Asia-Pacific for Saxo Markets in Singapore.

    “We’ve certainly remained pretty cautious on the outlook for risk here, and definitely not buying fully into the discounting of the North Korean tensions,” he said.

    In the wake of the sharp swings seen in the dollar against major currencies on Tuesday, it is difficult to have a clear view on the dollar’s near-term outlook, Bresler said, adding that U.S. economic data would be a focus in coming days.

    Friday’s closely-watched U.S. employment report for August is expected to show employers added 182,000 jobs, according to the median estimate of 60 economists polled by Reuters.

    Investors are also gauging the potential economic fallout of Tropical Storm Harvey, which brought catastrophic flooding to Texas this week and shut down nearly a fifth of the U.S’s crude oil refining capacity.


    The euro edged up 0.1 percent to $1.1981, having retreated from Tuesday's high of $1.2070, its strongest level since January 2015.

    The Australian dollar was the standout mover of the Asian session, jumping 0.5 percent to a four-week high of $0.7995.

    Australian construction spending boasted its biggest rise on record last quarter as miners splashed out on major engineering projects, a surprise that could lift economic growth well above initial expectations.


    So, our EUR setup has been completed perfectly. Indeed, 1.2050 has worked as a ceil for current week as target coincides with daily OB area there. Now we should be ready for at least 3/8 retracement and, may be, re-testing of 1.19 top.

    Today we will take at AUD as we have clear pattern here and it could interesting for trading today. In the light of coming relief in USD weakness, AUD could show downside action. Initially, on daily chart we thought to get this butterfly with 0.8130 destination point. THis is reasonable pattern as we have the same untouched monthly target and sooner or later but it should be hit:
    aud_d_30_08_17.

    Now, in the light of coming retracement, it seems that market could make daily pattern wider and complete intraday "222" Sell first. It is not neccesary that aussie should collapse totally, but price could return closer to pervious lows. Upside action looks rather weak and overall sentiment on FX market mostly suggests some pullback. So AUD probably will not become an exception:
    aud_4h_30_08_17.

    As a result, our daily butterfly could change the shape a bit, become wider and start upside action after "222" completion:
    aud_d1_30_08_17.
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Lolly:
    Monthly OB/OS: 1.4061/1.0884
    Weekly OB/OS: 1.35/1.3266
    Daily OB/OS: 1.3117/1.2665

    On daily chart we now stand at K-support:
    gbp_d_30_08_17.
     
  8. DevTrader

    DevTrader Private, 1st Class

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    I am in more confident EURO shorting than buying .
    This trade was mixed of sentiment and technical picture.
    Now relaxed wait for NFP dat on friday. Tomorrow will be dull day compare to today
     

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  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The U.S. dollar rose broadly on Wednesday on speculation the European Central Bank could step in to weaken the euro and after strong U.S. economic data boosted expectations for a solid U.S. jobs report Friday.

    The euro was on track for its biggest daily percentage drop against the dollar in nearly four weeks, of about 0.6 percent, putting it back below $1.20 after touching a more than 2-1/2-year high of $1.2069 Tuesday. It last traded at $1.1906.

    Analysts said traders were starting to suspect that ECB President Mario Draghi could be growing more concerned about the euro’s rise, despite making no mention of the currency’s strength at a central bank gathering in Jackson Hole, Wyoming last Friday.

    Draghi’s omission of commentary on the euro that Friday had contributed to the currency breaking past the critical $1.20 level Tuesday. The euro is up more than 13 percent against the dollar this year.

    “The euro has gone way too fast, too quickly,” said Dean Popplewell, chief currency strategist at Oanda in Toronto. “People are starting to sit back and wonder: ’what is the ECB going to do about inflation still being below expectations in Europe?’”

    The ECB is set to hold a policy meeting next week.

    The dollar also gained after the Commerce Department said its second estimate of U.S. gross domestic product showed that it increased at a 3.0 percent annual rate in the second quarter, its quickest pace in more than two years.

    The ADP National Employment Report showed U.S. private-sector employers hired 237,000 workers in August for the biggest monthly increase in five months, also boosting the greenback and driving expectations for a solid U.S. August non-farm payrolls figure.

    The dollar touched a two-week high against the yen of 110.43 yen after the U.S. data, rising further off a 4-1/2-month low of 108.25 struck Tuesday following North Korea’s launch of a ballistic missile over Japan.


    The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.6 percent at 92.799 after temporarily hitting a more than 2-1/2-year low of 91.621 Tuesday.

    “Even if you have a small positive surprise (in non-farm payrolls), even around 200,000, that may extend the bid tone for the dollar,” said Mazen Issa, senior currency strategist at TD Securities in New York.

    The dollar index pared gains slightly after U.S. President Donald Trump dismissed any diplomatic negotiations with North Korea, saying “talking is not the answer.”


    Today, guys, we will take at GBP. On daily chart Cable keeps chances on higher upside bounce as we have bullish hidden divergence with MACD right at daily K-support area. Also market has completed bearish harmonic swing here. I'm not sure that action could start till the end of the week, it seems that it is more probable on next week only:
    gbp_d_31_08_17.

    On 4-hour chart GBP is forming reverse H&S pattern, but right shoulder is not completed yet. To finish it price should drop to 1.2850 area. Deep retracement is expected here due appearing of upside reversal swing as well. Usually price shows deeper retracements after reversal swing been formed:
    gbp_4h_31_08_17.

    This action on hourly chart could take a shape of AB=CD and butterfly "Buy" pattern. As currently sentiment for USD is mostly positive - GDP was revised up, ADP shows good numbers, it corresponds to technical picture. Still we need to keep an eye on lows (red circle). While price stands above it, GBP keeps chances to immediate upside action as upside butterfly could be formed. If price will hold above this low and NFP will be poor, it is very probable that upside action will start immediately:
    gbp_1h_31_08_17.
     
  10. Robban68

    Robban68 Private

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    Godmorning, looks like a DRPO buy can be form AUS/USD 1Hr. Be aware of NFP day tomorrow.
     

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