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FOREX PRO WEEKLY, December 25-29, 2017

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Dec 23, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    (Reuters) - The euro fell against the dollar on Friday after Catalan separatists won a regional election, prompting worries about the possible break-up of the euro zone's fourth-largest economy.

    Spain's government had hoped that the Catalan election would strip pro-independence parties of their control of the regional parliament and end their campaign to force a split. But with 96 percent of ballots counted in a vote to elect Catalonia's regional parliament, separatist parties are seen winning 70 seats out of 135.

    "The euro dipped on the (Catalan) headline but it is not obvious that the vote advances the issue one way or the other and the euro found good support on dips," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

    The euro slid 0.3 percent to $1.1835. Europe's common currency though was still up nearly 13 percent so far this year, on track for its best yearly performance in 14 years. The dollar, meanwhile, was little moved by Friday's mixed batch of economic data.

    Reports showed U.S. consumer spending accelerated in November and shipments of key capital goods orders increased for the 10th straight month. However, household savings dropped last month to their lowest in more than nine years. Low savings suggest the strong pace of consumer spending is unlikely to be
    sustained unless there is a significant pickup in wage growth.

    Analysts said trading volumes were thin ahead of the Christmas holiday, which could cause some volatility.
    Friday's most eye-catching mover was once again bitcoin, although this time because of losses. It plunged as much as 25 percent on the day at one point to below $12,000, having lost a third of its value since Sunday.

    The dollar index, which measures the U.S. currency against a basket of six major rivals, was up 0.2 percent at 93.400. For the year, however, the index was down 8.5 percent. One immediate threat to dollar bulls was removed on Thursday, as the U.S. Senate approved a bill to fund the federal government through Jan. 19 and avert agency shutdowns ahead of a Friday midnight deadline. The bill now goes to President Donald
    Trump to sign into law.

    Congress also approved the most significant U.S. tax code overhaul in three decades that is expected to give a short-term lift to already solid economic growth, also supporting the dollar.

    The dollar was steady against the yen at 113.37. On Thursday, Bank of Japan Governor Haruhiko Kuroda
    reinforced expectations that the BOJ was in no hurry to move away from its ultra-loose monetary policy.


    Chart of the Week: Fathom’s ESIs Shrug off Euro Area Political Uncertainty
    by Fathom Consulting

    Fathom’s latest Economic Sentiment Indicator (ESI) for the euro area remained unchanged at 1.4% in November, with the country-level indices confirming that the upswing in economic sentiment remains elevated across the currency bloc.

    [​IMG]

    France’s ESI saw the largest monthly increase, rising from 0.8% to 0.9%, predominantly driven by strength in both the manufacturing and services PMIs. The headline consumer confidence survey also jumped by two index points to 102.4 in November, indicating that rising optimism about the French economy is broad-based. Surprisingly, ongoing political uncertainty in both Germany and Spain is yet to have a meaningful impact on either country’s ESI, with both remaining elevated. Italy’s ESI continues to outperform hard economic data and is hovering around all-time highs, but elections must be held before the end of May next year and they have the potential to spark fresh waves of volatility, with a reversal in economic sentiment a strong possibility. That being said, the fragility of Italy’s recent upswing in economic sentiment has financial-market implications. We maintain our call that Italy’s weak fundamentals will continue to constrain its long-term growth potential and so stand by our recommendation to hold French and German equities relative to Italian equities.

    COT Report

    Today, guys, we will take a look at Aussie Dollar. Last time when we've talked on it, its net long positions were extremely high, and market was needed solid retracement down to normalize it. As a result it has dropped for 3 points, approximately from 0.78 to 0.75 area.
    Now, we see massive closing of longs on recent report. Reasons could be different for that and it is not an exception that it also could be financial year end.

    At the same time our long-term view on AUD - is inner, domestic growth sources. RBA follows flat policy, and mostly currency performance will depend on major income source - export (mostly to China).
    [​IMG]

    Here is detailed Australian government report and it tells about good performance in 2017 . This mostly confirms our previous conclusion:

    The only driving factor for AUD could be inner ones, as commodity export and it's prices. If overall commodities bullish trend will continue - then AUD will keep chances to proceed to higher levels, but in short-term perspective, within 1-2 months its upside potential looks limited and stands around 0.8150-0.82 area. At the same time, hardly we will get strong sell-off as well, as situation around AUD mostly looks positive by far."
    upload_2017-12-23_12-18-23.

    Technical

    Monthly

    Actually, guys, I'm not occasionally has chosen AUD analysis today. In fact, we have major background for medium-term trading on monthly chart. This is not often happens. But when this happens - this give us real advantage, since we know long-term perspective in advance.

    Construction here stands rather simple and I like when this happens. We will not take a look at some long-term tools here, such as far Fib resistance levels, big AB-CD, but will focus only on 2-3 month perspective.

    After long-term drop market has reached Agreement at major all-time 5/8 Fib support of 0.7180 Fib level. Now market is forming a kind of flag action, and we're mostly interested in action inside flag. Here we have AB-CD pattern that has not quite reached OP target. Now, right at flag support line AUD is forming bullish grabber. Since there is just one week till December close, chances that it finally will be formed are significant, right?

    This grabber totally agrees with idea of uncompleted AB-CD target. Thus, monthly chart lets us estimate major points of trading plan - invalidation point @ 0.75 and potential target @ 0.8160
    aud_m_25_12_17.

    Weekly

    Monthly setup suggests that we should find some chance to take long position, somewhere inside grabber's candle.

    Here trend is still bearish, but we already have some reversal signs. First is, in December price has passed through MPR1 and this could be early hint on new bull trend. Upside reversal is started by "222" Buy pattern, while right in reversal point we have bullish engulfing and tweezers bottom.

    Meantime, market is coming to first major Fib resistance around 0.7740. Although AUD is not at overbought here, we have a kind of B&B "sell" setup. Market was dropping since summer's end and bearish momentum here is still strong. It means that as aussie will touch resistance - some deep retracement could happen. Very probable that it will happen right between Christmas and New Year's Day.
    aud_w_25_12_17.

    Still we should not fall in euphoria, because monthly grabber is not confirmed yet and surprises are still possible. Yes, we count on grabber, and chances are great, but this issue is not done yet. So, if we will get some surprise - I don't know, for example bearish grabber on weekly, - we should not upset and just keep mind open. May be opposite setup will be even more attractive.

    Daily

    On daily chart trend stands bullish, market is not at OB, but, we see that 0.7740 is not just a fib level but K-resistance area.

    Also take a look that on a whole way up since 0.75 - there was no deep retracement yet. So, AUD has formed bullish reversal swing but no deep retracement. It means that it should follow...

    The most recognizable pattern here is reverse H&S. It means that retracement should be somewhere to 0.7630 or even to 0.7585 Fib support:
    aud_d_25_12_17.


    4-hour

    On intraday chart we do not have clear Fib extension that could point on 0.7740 level. But we have butterfly "Sell" on top with potential reversal point at 0.7730.

    Also we have clear MACD divergence that should be formed right around daily K-resistance area.
    aud_4h_25_12_17.

    So, scalp traders could watch for chances to sell around 0.7740, while we will be watching for retracement down, somewhere to 0.7585-0.7730 area to go long. May be a bit later we will get precise level, if AUD will start to form some AB-CD pattern, and we potentially could get "222" Buy pattern.

    Conclusion:

    AUD has positive mood. As speculative positions where off-loaded, due recent CFTC report - nothing prevents upside action from sentiment analysis point of view.

    Fundamentally, Australia also shows good performance in 2017. RBA policy right now mostly stands flat and export income still stands as major driving factor.

    Technically such positive background should support upside action. In shorter-term perspective, we expect action to 0.8160 area that should start somewhere from 0.76.


    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. IanN

    IanN Private, 1st Class

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    Thank you Sive and happy holidays to you, too.
     
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  3. Major_Tom

    Major_Tom Private, 1st Class

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    Thanks Sive for all your great posts and videos.
    Happy end of 2017 and good preparation for your Christmas day on January 2018.
     
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  4. chalo

    chalo Private

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    Thank you Sive, Feliz Navidad and happy holidays
     
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  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar was steady in holiday-thinned trading on Tuesday, shrugging off upbeat Japanese economic data as most market participants have already closed their books for the year.

    Markets in Australia and Hong Kong remained closed after Monday’s Christmas holiday, and many financial centers in Europe will also be shut on Tuesday.

    The euro was steady at $1.1871. The single currency gave up some ground last week after Catalan separatists won a regional election, deepening Spain's political crisis in a sharp rebuke to Prime Minister Mariano Rajoy and European Union leaders who backed him.

    Against the yen, the dollar was almost flat on the day at 113.29 .

    “Yesterday and today, major markets are closed, so it’s difficult to see clear direction at the moment, and we need to think about what will happen in the beginning of next year,” said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo.

    “I still believe that the passage of the U.S. tax bill and the avoidance of the government shutdown are positive for the dollar,” he said. “In a relative sense, the dollar has an advantage.”

    Last week, the U.S. Congress approved a tax code overhaul that was expected to give at least a short-term lift to already solid economic growth. They also pushed through a measure to fund the federal government through Jan. 19, averting agency shutdowns.

    The market had a muted reaction to data released early on Tuesday which showed that Japan’s core consumer prices rose for the 11th straight month, up 0.9 percent year-on-year, and household spending jumped in November.

    While the inflation rate remains distant from the Bank of Japan’s 2 percent target, the rise offered some hope that a steady economic recovery will gradually drive up prices.

    Still, the BOJ kept monetary policy steady last week and its governor reassured markets the central bank will lag well behind overseas peers in ending its ultra-easy policies.

    Minutes of the BOJ’s October meeting, released on Tuesday, showed most members shared the view that the central bank should maintain its easy policy.

    The dollar index, which tracks the greenback against a basket of six major rivals, edged down 0.1 percent to 93.253 .

    Cryptocurrency bitcoin was last up 1.7 percent at $14,142.33 on the Bitstamp exchange.


    So, although today is still a holidays in EU, some progress on EUR has appeared. Mostly it supports our idea on possible upward continuation. Setups, that we've discussed for long entry have been completed.

    On daily chart our major concern was around minor direct H&S that is still visible here. But recent price action gives more and more signs that this pattern probably will fail. Market stands too long on right shoulder's top and above top of left shoulder. This is definitely not the sign of bearish control.
    Besides, on Catalan elections in Spain our anticipated drop has happened but EUR has returned back fast, which is not agreed with overall conception of H&S, right?

    That's being, said, here we should be ready for AB-CD action up. First - to COP target around 1.1970:
    eur_d_26_12_17.

    On 4-hour chart our reaction on "222" Sell pattern was sufficient but minimal - market has shown just 3/8 retracement and then turned up again. Taking in consideration inner AB-CD pattern, it suggests upward continuation to XOP that stands again around 1.1970...
    eur_4h_26_12_17.

    On hourly chart market has created two chances to go long. First one was based on Catalan election major drop to 1.1830 K-support and Agreement area. Second - was on deep retracement after. Here I even keep the marking - watch for "222' Buy pattern. As you can see - it was created perfectly.

    But, if you've missed both - don't be upset with that. Now we will watch for most recent swing up. As minor gap up was formed, here some retracement should follow as well. I suspect that it will be somewhere to 1.1850 - 50% of recent upside action. This could become 3rd chance to take long position. May be we will get another '222" Buy...
    eur_1h_26_12_17.
     
  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar held steady versus a basket of major currencies on Wednesday, while the Canadian currency traded near a three-week peak, drawing support after oil prices climbed to 2-1/2 year highs.

    The dollar index, which measures the greenback against a basket of six major rivals, was little changed at 93.300.

    The Canadian dollar last stood at C$1.2694 per U.S. dollar, near Tuesday’s peak of C$1.2684, which was the loonie’s highest level since Dec. 6.


    Oil prices surged to 2-1/2 year highs on Tuesday, boosted by news of an explosion on a Libyan crude pipeline as well as voluntary OPEC-led supply cuts.

    Commodity-linked currencies such as the Canadian dollar are likely to gain support on the crude rally, although it remains unclear whether there will be a sustained rise in oil prices, said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.

    “I think it’s going to lend support...to the oil-related currencies,” he said.

    With many market participants on holiday ahead of the year-end, currency moves could be exaggerated by thin trading conditions, Innes added.


    Moves among major currencies were modest with the U.S. dollar edging up 0.1 percent to 113.31 yen, while the euro was little changed at $1.1860.

    Bitcoin edged up 0.9 percent to about $15,900 on the Luxembourg-based Bitstamp exchange. That came after bitcoin bounced on Tuesday after sliding 25 percent last week, its biggest weekly drop since 2013.


    Today we will take a look at loonie. Besides, tube explosion in Libya brings volatility on crude oil prices that makes impact on CAD as well.

    In general, on Crude Oil we wait for 77 area. Market has strong technical stimulus - close wide gap around 77. So, we think that AB-CD pattern has good chances to reach target:
    oil_m_27_12_17.

    On daily CAD market stands in rectangle. Downward action has started from minor W&R of previous tops and put prices back to the lower border of consolidation. Despite oil prices appreciation, CAD has other reasons for downside continuation. In fact, CAD was dropping since April and this is first upward bounce and reversal swing. Technically some deep retracement should happen, that we haven't got yet.

    That's why we think that chances on downside breakout here rather strong. Using classical target estimation tool here - retracement should reach 5/8 Fib support around 1.24 area:
    cad_d_27_12_17.

    On intraday chart we do not have many tools. Action down is strong. AB-CD pattern shows existence of COP target around lower border and WPS1. But this is just first destination. As it will be hit - most interesting stuff should start...
    cad_4h_27_12_17.
    So, if you want to try go short - think about stop entry order tool slightly below 1.2620 lows.
     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar was on the defensive on Thursday, hampered by a recent dip in U.S. 10-year bond yields, while commodity-linked currencies were bolstered by this week’s rally in metals and oil prices.

    The dollar’s index against a basket of six major currencies slipped to 92.842 at one point, its lowest level since Dec. 1.

    The index has dropped 9.2 percent this year, putting it on track for its biggest annual slide since 2003.

    “Bond yields have pulled back from their peaks and the dollar is trading with a soft tone,” said Satoshi Okagawa, senior global markets analyst at Sumitomo Mitsui Banking Corporation in Singapore, referring to a pullback in U.S. 10-year Treasury yields.

    The U.S. 10-year Treasury yield stood at 2.425 percent on Thursday, having come off a nine-month high of 2.504 percent set last week.

    The euro scaled a 3-1/2 week high of $1.1920. The single currency has gained 13.3 percent so far this year, well on the way for its best annual performance since 2003.

    The dollar fell 0.3 percent to 113.02 yen, edging away from a four-week high of 113.75 yen touched on Dec. 12.

    This week’s drop in the dollar probably partly reflects a sell-the-fact type of reaction after U.S. President Donald Trump signed U.S. tax reforms into law last week, said Lee Jin Yang, macro research analyst for Aberdeen Standard Investments in Singapore.

    “I think people have been long dollars into the (Fed’s December) rate hike, into the passage of the tax bill, and right now people are just pulling back,” Lee said, referring to short-term market positioning.

    He cautioned against reading too much into this week’s activity, given that thin year-end trading conditions can exaggerate market moves.

    Currencies of commodities exporters remained firm, in the wake of this week’s rise in oil prices to 2-1/2 year highs and a surge in copper prices to four-year peaks.

    The Australian dollar touched a two-month high of $0.7791 on Thursday, and has gained nearly 1 percent so far this week.

    The Canadian dollar touched a high of C$1.2624 per U.S. dollar at one point, matching its early December peak, which was the highest since October.


    So, EUR indeed has started upward action. Now price is not at OB, trend stands bullish. On daily chart we have two major targets by far, and both of them are based on AB-CD pattern. Nearest one, COP @1.1970 could be hit even prior NY holidays. Next one @1.2125 probably will be interesting in 2018 already...

    Meantime market is coming to minor resistance - WPR1. So, some shy downside reaction could happen today:
    eur_d_28_12_17.

    On 4-hour chart our smaller ab-cd pattern is still valid. If you remember, once as OP target was hit - downside retracement has followed. We also traded it. Now, market again turns to extension mode and we look for next target - XOP. It stands at the same 1.1970 area:
    eur_4h_28_12_17.

    As we were looking on EUR pretty close in last few sessions, we've got 3 chances to go long. Still, if you've missed all of them - you could keep an eye on today's retracement. Price is coming to another XOP target around WPR1. So, shy reaction could follow. Mostly we should keep an eye on either 1.1915 or 1.1905 K-support area. Hardly deeper retracement will follow:
    eur_1h_28_12_17.

    That's being said, today our trading plan suggests minor drop for 15-30 pips out from 1.1935 area and then upside continuation again to 1.1970. If you already have long position - you need do nothing, just do not forget tight stops from time to time...
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar wallowed near a one-month low against a basket of currencies on Friday, while commodity currencies such as the Australian and Canadian dollars were at two-month highs thanks to firmer energy and metals prices.

    The dollar index against a basket of six major currencies was unchanged at 92.602 after slipping 0.4 percent overnight to 92.573, its lowest since Nov. 27.

    The index was on track to lose 0.5 percent this month.

    Shin Kadota, senior strategist at Barclays in Tokyo, said rebalancing of positions by market participants signalled broad selling of the dollar, particularly the yen, towards the year’s end.

    “Seasonal trends in the currency market have shown that the dollar tends to weaken after Christmas through the first few days of the following year before eventually being bought back again,” he said.

    Many institutional investors close their books at the year-end, a deadline for taxation and performance reporting, a time seen leading to dollar selling pressure.

    The dollar index will likely end the year down more than 9 percent, its worst showing since 2003, and a Reuters poll showed it is expected to lose a bit more ground against other major currencies next year.

    The dollar sagged in 2017 although the U.S. economy expanded, the Federal Reserve tightened monetary policy and the United States enacted a major overhaul of its tax code.

    Tensions stemming from the Korean Peninsula, the Russian scandal dogging U.S. President Donald Trump’s election campaign, and low U.S. inflation were some of the factors that shackled the dollar in 2017 and expected to continue weighing on the currency in 2018.

    “The Fed and European Central Bank are poised to normalise policies in 2018 but due to limited inflation concerns, volatility in currencies is likely to be curbed,” wrote strategists at Sumitomo Mitsui Asset Management.

    “But geopolitical risks linked to North Korea and the Middle East and political risks posed by Brexit negotiations and the U.S. midterm elections bear watching in 2018.”

    The dollar was 0.1 pct lower at 112.735 yen. It had slipped to a nine-day low of 112.660 overnight, having gone as high as 113.750 on Dec. 12. It was headed to lose 3.5 percent against its Japanese peer in 2017.

    The euro was steady at $1.1947 and in close reach of a one-month high of $1.1959 scaled the previous day. It has gained 0.3 percent in December.

    The common currency showed little immediate reaction to Italy’s announcement that it will hold an election on March 4, as such an outcome had been anticipated. The poll is expected to produce a hung parliament and possibly some market turbulence in the euro zone’s third-largest economy.

    In addition to political factors such as the Italian election in March, a key factor for the euro in 2018 is how the European Central Bank proceeds with curtailing its massive monetary stimulus.

    The euro has risen 13.5 percent this year, its strongest annual gain since 2003. It was lifted by factors including relief over the French elections and expectations for the ECB to normalise monetary policy while taking in stride political developments in Germany and Spain.

    The Australian dollar was effectively flat at $0.7795 having surged to a two-month peak of $0.7810 the previous day.

    The Aussie was headed for a 3 percent monthly gain, lifted by a rise in the prices of commodities like iron ore and copper.

    The Canadian dollar extended its overnight rally to touch C$1.2555 per dollar, its strongest since Oct. 20.


    The loonie was on track to gain 2.5 percent in December, boosted by a surge in crude oil prices.

    The New Zealand dollar edged up to $0.7099, its highest since Oct. 19. The kiwi retreated to a 17-month trough of $0.6781 in November, buffeted by a change of government, but has bounced back nearly 5 percent from that low.

    Bitcoin was last up 3.2 percent at $14,908.44 on the Bitstamp exchange having sunk 6 percent on Thursday. It was off the record highs near $20,000 touched 12 days ago but still headed for a gain of roughly 1,400 percent in 2017.


    As our EUR view doesn't need any update by far - let's take a look at JPY again. Yen is showing deeper retracement than we've expected initially. When rally on EUR has started - yen was tried to stand flat, but pressure has become too strong and it collapsed.

    Still, major details of our bullish setup still stand valid - as daily grabber as monthly one. But right now price is coming to red line:
    jpy_d_29_12_17.

    On 4-hour chart you can see our major short-term target, which is based on daily AB-CD pattern. This is 113.82 COP level. This target is treated as minor one, because it's just a 0.618 AB-CD extension. That's why too deep retracement prior reaching of this target should be treated as sign of weakness. Now JPY is coming to last "reasonable" level, although even this level stands rather deep. This is Agreement support and WPS1. Here we have two different indicators of validity of bullish setup. First one is WPS1, as we know that it should keep any retracement while bull trend valid. Second - Agreement support at major 5/8 level. Breaking it prior reaching of minimal target will be irrational issue for normal bullish action:
    jpy_4h_29_12_17.

    Finally, on hourly chart we see that Yen is making preparation to upside reversal - forming bullish butterfly right at the same area:
    jpy_1h_29_12_17.

    So, here we could make two conclusions. First - if market has done all preparations for upside reversal but will not reverse - what we should think? Right. In this case bullish setup probably will be destroyed and we should be ready for further drop below 112.
    Second - 112.50 area is relatively safe for long position. If even market later will turn down again - some upside respect of this area should happen first. This let's us move stops to b/e. This is our favorite tactics - taking positions around strong support/resistance levels...
     
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  9. stelore

    stelore Sergeant

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    HAPPY NEW YEAR TO ALL OF YOU!!!
     
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  10. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Thank you Stefano, and to you and all your family as well! And of course to everybody!
    Spend this time well!
     

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