Sive Morten
Special Consultant to the FPA
- Messages
- 18,564
Fundamentals
(Reuters) - The U.S. dollar hovered near its highest level against a basket of major rivals in 11 days on Friday after comments from U.S. President Donald Trump did little to shake optimism that his administration would reform tax policy soon.
At a joint news conference with Japanese Prime Minister Shinzo Abe, Trump avoided repeating harsh campaign rhetoric that accused Japan of taking advantage of U.S. security aid and stealing American jobs.
Trump did not reiterate his recent accusation that Japan was one of several countries devaluing their currencies to the disadvantage of the United States, but said in reference to currency devaluations that countries would be at a level playing field soon.
Despite briefly turning negative during the news conference, the dollar index was last up about 0.2 percent at 100.800, roughly unchanged from where it was before the conference and near an 11-day high of 101.010 struck in morning U.S. trading. The index measures the greenback against a basket of six major currencies.
Analysts said Trump's promise on Thursday of a "phenomenal" tax reform plan over the next two or three weeks continued to support the dollar against most of its major rivals.
"The underlying bigger story in the last 24 hours is that Trump has put the reflation trade back on the front foot by talking about a tremendous tax program," said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.
The dollar briefly fell to a session low of 112.87 yen during the Trump-Abe news conference. The dollar index was still set to post its best weekly percentage gain since mid-December, of 0.9 percent.
Analysts said an announcement that Federal Reserve Governor Daniel Tarullo would resign from the U.S. central bank opened the door for Trump to choose a more hawkish replacement, and may have been positive for the dollar on the margin.
"The prospect of one less dove on the committee could strengthen the argument for the Fed to raise rates multiple times this year," said Joe Manimbo, senior market analyst with Western Union Business Solutions in Washington.
The euro was last down 0.2 percent against the dollar at $1.0631, near a more than three-week low of $1.0608 touched before the Trump-Abe news conference. The dollar was up about 0.2 percent against the yen at 113.40 yen, not far from a nine-day high of 113.85 yen touched earlier.
News in Charts: Survey data imply strong German Q1 GDP
by Fathom Consulting
Despite the recent improvement in short-term cyclical indicators, regular readers of our research will not be surprised to learn that we remain long-term EA bears. That is because the “E” in Economic and Monetary Union has been ignored. In the words of former Bank of England Governor, Mervyn King, “the basic problem with a monetary union among differing nation states is strikingly simple. Starting with differences in expected inflation rates — the result of a long history of differences in actual inflation — a single interest rate leads inexorably to divergences in competitiveness.”
Put simply, those countries with higher rates of price and wage inflation experienced a lower real rate of interest. By stimulating demand and driving price and wage inflation even higher, this resulted in a loss of competitiveness. As our chart highlights, in the early years, the main refinancing interest rate was too low for many of the southern member states, now it is too high. Rather than helping to achieve price stability, the monetary union has exacerbated economic divergences and fuelled support for populist parties as discontent with the status quo grows.
Unless competitiveness can be restored, then members of the common currency union must accept the need for indefinite fiscal transfers. However, creditor countries remain reluctant to enact transfers on the scale required and this is unlikely to change anytime soon. Because of that, the future does not bode well for the euro area.
Nevertheless, short-term cyclical indicators have been more positive across the euro area and have surprised to the upside. Unemployment, though still painfully high, is falling fast for the majority of the member states and consumers are as confident about their own financial situation as they have been in almost fifteen years. Over the past three months, we have revised up our central projection for euro area growth in 2017 from 0.9% to 1.3%. The move reflects a combination of stronger US growth, a weaker euro and possibly a growing public perception that the authorities have things under control. As aforementioned, the latter is not a view that we share.
With respect to Germany, our view is that its economy will be the best of a bad bunch and continue to outperform the euro area as a whole. That is because the fallout from the crisis has weighed less heavily on German productivity growth than elsewhere. Also, unlike the periphery, Germany did not build up excessive debt in the run up to the financial crisis. While we are forecasting a slowdown in annual GDP growth from 1.8% in 2016 to 1.6% both this year and next (brought about by increased uncertainty following the UK’s decision to leave the EU and higher inflation from stronger oil prices), we are still above consensus.
German Economic Sentiment Indicator
Our German Economic Sentiment Indicator (GESI), part of a suite of propriety indicators created by Fathom, aims to distill the message from the responses to 18 different questions from 5 closely watched surveys into one composite measure. We have used principal component analysis (PCA) and found that the first principal component by itself is able to account for close to 65% of the variation in the underlying data. We have transformed the first principal component so that it has the same mean and the same variance as quarterly German GDP growth. The resulting monthly series is shown alongside quarterly GDP growth in the following chart.
How should we interpret the GESI reading?
The GESI is more persistent than GDP growth. By construction, it has the same mean and variance, but it displays less short-term volatility. In that sense, we might interpret it as a measure of underlying economic activity, rather than a prediction of actual GDP growth. Actual GDP growth is likely to be more volatile in any given quarter than our survey-based GESI. While still early in the quarter, January’s survey data point toward a strong Q1 GDP reading. Survey responses from the manufacturing sector were particularly robust, with expectations of future manufacturing activity, a component of the Ifo survey, also picking up sharply.
COT Report
Speculators cut their net-long U.S. dollar bets for a fifth straight week, to the lowest level since mid-October, according to data from the Commodity Futures Trading Commission released on Friday and calculations by
Reuters.
The value of the dollar's net long position totaled $17.07 billion in the week ended Feb. 7, down from $18.47 billion the previous week.
The dollar had fallen for four straight weeks against its basket of six major currencies before this week, undermined by the Trump administration's weak dollar rhetoric and lack of specifics on plans for tax cuts and fiscal spending, driving its worst January performance in three decades.
"The market was pricing in a high degree of swift implementation of some sort of fiscal stimulus from the Trump administration and the first couple weeks did little to reassure nervous investors that this president was indeed going to be focused on growing the economy through aggressive fiscal stimulus," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc. "Rather what we saw was a flurry of executive actions that were more focused on the more divisive issues of this campaign."
This week the dollar rose, supported by rising political uncertainty in Europe and a statement by U.S. President Donald Trump on Thursday that he would unveil a "phenomenal" tax plan in the coming weeks.
However, much of that took place after Tuesday, which was the end of the CFTC's weekly tracking period.
The Reuters calculation for the aggregate U.S. dollar position is derived from net positions of International Monetary speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars.
Right now, guys, CFTC report on EUR shows weak bullish sentiment. Net speculative short position reduces since November for approx. 90K contracts, while open interest drops just for ~ 40K contracts. It means that current upside action mostly is driven by short covering. So, although CFTC data doesn't contradict to price rally on daily chart but at the same time, upward action is not accompanied by open interest growth.
Technical
Monthly
January and February action still stands mostly inside Decemer candle and makes no impact on overall long-term picture. We know that fundamental background mostly looks bearish for EUR - potentially more hawkish Fed policy, ECB QE prolongation, coming elections in many EU countries, bringing more uncertainty. After GB, separatistic sentiment start to appear in other countries of EU, as Italy, France, Netherlands, Spain that are not satisfied with Brussels domination in governing EU.
Speaking on big picture, On a way down, guys, EUR has passed through all major Fib levels. Last one was at 1.12 area and now we do not have any other below current market. Also price has dropped below 1.27 extension of this big butterfly. Thus, on monthly chart the only logical destination point stands at parity - 1.618 butterfly extension, chanell trend line support and YPS1.
Besides, right now EUR is testing YPP, but unsuccessfully yet.
Concerning bullish perspectives... they look really blur by far. The only issue that we could drag in here is a hint on possible 2-bar stop grabber as January action was really strong and minor W&R of 1.0460 lows...
But this is definitely insufficient for real new bullish tendency. Especially if we will take in consideration previous strong drop in 2014, CFTC data. So it seems maximum that we could expect here is some deeper upside retracement, but no more. Anyway this is just tactical issue.
Also take a look at different behavior near low border of channel. Previously when market has touched it - it shows immediate upside pullback, it was V-shape reversal. Right now behavior is absolutely different, price just hangs on the border and shows no upside action. Any tight consolidation near trendline could become a sign of coming breakout.
Thus, based on monthly chart we could make two major conclusions. First is - real bullish trend could be re-established only if EUR will erase reversal candle and overcome its top above 1.16. Our next target on Monthly chart is parity - 1.618 Butterfly extension, YPS1 and trendline support.
In general guys, we think that steps that already have been announced by ECB and Fed should be enough to push EUR right to parity during "price-in" process, when market will "anticipate" them. But further dynamic will depend on real action from Fed, Trump administration and ECB. How they will fulfill their promises and obligations. Any surprising hawkish measures could push EUR even below parity, while step out from pormises could lead to appearing of reverse H&S pattern on monthly/weekly charts.
In shorter-term perspectives, EUR has tested YPP. Thus, our short-term target has been completed. Now we start to look over daily and weekly reverse H&S pattern, what will happen with it:
Weekly
So, our minimal destination for retracement was completed - EUR has reached YPP and 1.0830 area. On weekly chart upside journey that was lasted for few weeks on daily - looks like minor bounce. Trend stands bullish here, but hardly we could treat this action as strong weekly trend.
Since we have here two major patterns - butterfly and inner AB-CD, current upside action mostly reminds reaction on reaching of 1.0 extension AB-CD target. Now it stands at 3/8 major resistance, while even reaching of 5/8 resistance of AB-CD swing is acceptable. It means that if our daily H&S pattern will work and EUR will reach 1.10-1.11 area - this will not erase yet long-term bearish picture.
Right now last candle is most interesting for us. If EUR would have formed new top - I would say that this is reversal week, but even without new top - recent drop mostly engulfs previous week. Now it seems that this is an answer on our question - when EUR will start to form right shoulder of daily pattern. Based on this action we probably could say that it is started to do it.
Returning back to long-term perspective, on a way down final destination 1.618 point coincides with 1.618 butterfly target. Although we have multiple targets inside 1.0-1.05 area, ther are all minor ones. Recall, that we have daily 1.0230 extension. Also, if you will take a careful look, you could recognize another smaller butterfly inside right wing here. It also has target at 1.02 and 1.013.
But, guys, if EUR will be on a road to parity, all these intermediate targets will be hit very fast one by one.
Also, it is not very probable that market will stuck around 1.27 butterfly and will not go to parity. By two reasons - first is, pshychological pressure, second - when price will hit 1.27, it will be between 1.0 and 1.618 extensions of AB-CD pattern and this position is very unstable, market gravitates to some target... That's why parity probably should be hit.
And after that most interesting thing will come. Take a look that butterfly could become part of large reverse H&S pattern. But whether it will be formed or not will depend on fundamental factors, D. Trump ficsal policy, US economy data and Fed reaction. Thus, we have more or less single road to parity, but later, around it we will get a crossroads...If there will be something bearish that wasn't priced in yet - EUR could drop even further. If not - H&S will start to form...
Daily
On daily chart trend has turned bearish. Price very accurately has tested YPP and 1.0830 major Fib resistance. Currently we can't just ignore some clear bearish moments - EUR has dropped below MPP but not tested MPR1, harmonic retracement swing is broken down, overall upside tendency also was broken as EUR has created lower low on Friday. All this stuff makes us think, that may be EUR indeed has started to form right shoulder of our reverse H&S pattern and nearest destination should be 1.05 area?
Most probable destination is combination of 5/8 Fib level, MPS1 and daily OS. So, if you have bullish view on EUR and search for long entry - think about this area, as it should provide solid support. Conversely, if you're bearish - watch for H&S failure, if market will drop below MPS1, otherwise wait for reaching of the target by H&S...
Intraday
Here we need to make some adjustments to our analysis. These adjustments will not change the core but some details. For example - on 4-hour chart, we need to adjust neckline of our H&S pattern due reason that stands on hourly chart (so you'll see it a bit lower). As you can see - it changes the shape of the pattern, but doesn't cancel it totally. It means that we will watch for H&S completion in the beginning of next week:
The reason why we need to do so stands in AB-CD action on hourly chart. Initially we thought that market will start upward action from AB=CD target and this indeed has happened, but later EUR has dropped to 1.618 extension and created new, larger butterfly:
Thus, if H&S pattern is still valid, EUR could start forming of right shoulder right from current level. Otherwise, price probably will drop directly to daily destination point around 1.05. Pay attention to nice crossing of WPR1 and former support line of channel - it stands precisely at the top of potential right shoulder.
Conclusion:
Right now EUR shows signs of weakness on short-term charts. Thus, it could mean that market starts to form right shoulder of our daily pattern, and major destination point right now stands around 1.05 area. Before dropping, EUR could show upside bounce to 1.0740 area, if hourly direct H&S pattern will be formed and work properly.
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) - The U.S. dollar hovered near its highest level against a basket of major rivals in 11 days on Friday after comments from U.S. President Donald Trump did little to shake optimism that his administration would reform tax policy soon.
At a joint news conference with Japanese Prime Minister Shinzo Abe, Trump avoided repeating harsh campaign rhetoric that accused Japan of taking advantage of U.S. security aid and stealing American jobs.
Trump did not reiterate his recent accusation that Japan was one of several countries devaluing their currencies to the disadvantage of the United States, but said in reference to currency devaluations that countries would be at a level playing field soon.
Despite briefly turning negative during the news conference, the dollar index was last up about 0.2 percent at 100.800, roughly unchanged from where it was before the conference and near an 11-day high of 101.010 struck in morning U.S. trading. The index measures the greenback against a basket of six major currencies.
Analysts said Trump's promise on Thursday of a "phenomenal" tax reform plan over the next two or three weeks continued to support the dollar against most of its major rivals.
"The underlying bigger story in the last 24 hours is that Trump has put the reflation trade back on the front foot by talking about a tremendous tax program," said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.
The dollar briefly fell to a session low of 112.87 yen during the Trump-Abe news conference. The dollar index was still set to post its best weekly percentage gain since mid-December, of 0.9 percent.
Analysts said an announcement that Federal Reserve Governor Daniel Tarullo would resign from the U.S. central bank opened the door for Trump to choose a more hawkish replacement, and may have been positive for the dollar on the margin.
"The prospect of one less dove on the committee could strengthen the argument for the Fed to raise rates multiple times this year," said Joe Manimbo, senior market analyst with Western Union Business Solutions in Washington.
The euro was last down 0.2 percent against the dollar at $1.0631, near a more than three-week low of $1.0608 touched before the Trump-Abe news conference. The dollar was up about 0.2 percent against the yen at 113.40 yen, not far from a nine-day high of 113.85 yen touched earlier.
News in Charts: Survey data imply strong German Q1 GDP
by Fathom Consulting
Despite the recent improvement in short-term cyclical indicators, regular readers of our research will not be surprised to learn that we remain long-term EA bears. That is because the “E” in Economic and Monetary Union has been ignored. In the words of former Bank of England Governor, Mervyn King, “the basic problem with a monetary union among differing nation states is strikingly simple. Starting with differences in expected inflation rates — the result of a long history of differences in actual inflation — a single interest rate leads inexorably to divergences in competitiveness.”
Put simply, those countries with higher rates of price and wage inflation experienced a lower real rate of interest. By stimulating demand and driving price and wage inflation even higher, this resulted in a loss of competitiveness. As our chart highlights, in the early years, the main refinancing interest rate was too low for many of the southern member states, now it is too high. Rather than helping to achieve price stability, the monetary union has exacerbated economic divergences and fuelled support for populist parties as discontent with the status quo grows.
Unless competitiveness can be restored, then members of the common currency union must accept the need for indefinite fiscal transfers. However, creditor countries remain reluctant to enact transfers on the scale required and this is unlikely to change anytime soon. Because of that, the future does not bode well for the euro area.
Nevertheless, short-term cyclical indicators have been more positive across the euro area and have surprised to the upside. Unemployment, though still painfully high, is falling fast for the majority of the member states and consumers are as confident about their own financial situation as they have been in almost fifteen years. Over the past three months, we have revised up our central projection for euro area growth in 2017 from 0.9% to 1.3%. The move reflects a combination of stronger US growth, a weaker euro and possibly a growing public perception that the authorities have things under control. As aforementioned, the latter is not a view that we share.
With respect to Germany, our view is that its economy will be the best of a bad bunch and continue to outperform the euro area as a whole. That is because the fallout from the crisis has weighed less heavily on German productivity growth than elsewhere. Also, unlike the periphery, Germany did not build up excessive debt in the run up to the financial crisis. While we are forecasting a slowdown in annual GDP growth from 1.8% in 2016 to 1.6% both this year and next (brought about by increased uncertainty following the UK’s decision to leave the EU and higher inflation from stronger oil prices), we are still above consensus.
German Economic Sentiment Indicator
Our German Economic Sentiment Indicator (GESI), part of a suite of propriety indicators created by Fathom, aims to distill the message from the responses to 18 different questions from 5 closely watched surveys into one composite measure. We have used principal component analysis (PCA) and found that the first principal component by itself is able to account for close to 65% of the variation in the underlying data. We have transformed the first principal component so that it has the same mean and the same variance as quarterly German GDP growth. The resulting monthly series is shown alongside quarterly GDP growth in the following chart.
How should we interpret the GESI reading?
The GESI is more persistent than GDP growth. By construction, it has the same mean and variance, but it displays less short-term volatility. In that sense, we might interpret it as a measure of underlying economic activity, rather than a prediction of actual GDP growth. Actual GDP growth is likely to be more volatile in any given quarter than our survey-based GESI. While still early in the quarter, January’s survey data point toward a strong Q1 GDP reading. Survey responses from the manufacturing sector were particularly robust, with expectations of future manufacturing activity, a component of the Ifo survey, also picking up sharply.
COT Report
Speculators cut their net-long U.S. dollar bets for a fifth straight week, to the lowest level since mid-October, according to data from the Commodity Futures Trading Commission released on Friday and calculations by
Reuters.
The value of the dollar's net long position totaled $17.07 billion in the week ended Feb. 7, down from $18.47 billion the previous week.
The dollar had fallen for four straight weeks against its basket of six major currencies before this week, undermined by the Trump administration's weak dollar rhetoric and lack of specifics on plans for tax cuts and fiscal spending, driving its worst January performance in three decades.
"The market was pricing in a high degree of swift implementation of some sort of fiscal stimulus from the Trump administration and the first couple weeks did little to reassure nervous investors that this president was indeed going to be focused on growing the economy through aggressive fiscal stimulus," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc. "Rather what we saw was a flurry of executive actions that were more focused on the more divisive issues of this campaign."
This week the dollar rose, supported by rising political uncertainty in Europe and a statement by U.S. President Donald Trump on Thursday that he would unveil a "phenomenal" tax plan in the coming weeks.
However, much of that took place after Tuesday, which was the end of the CFTC's weekly tracking period.
The Reuters calculation for the aggregate U.S. dollar position is derived from net positions of International Monetary speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars.
Right now, guys, CFTC report on EUR shows weak bullish sentiment. Net speculative short position reduces since November for approx. 90K contracts, while open interest drops just for ~ 40K contracts. It means that current upside action mostly is driven by short covering. So, although CFTC data doesn't contradict to price rally on daily chart but at the same time, upward action is not accompanied by open interest growth.
Technical
Monthly
January and February action still stands mostly inside Decemer candle and makes no impact on overall long-term picture. We know that fundamental background mostly looks bearish for EUR - potentially more hawkish Fed policy, ECB QE prolongation, coming elections in many EU countries, bringing more uncertainty. After GB, separatistic sentiment start to appear in other countries of EU, as Italy, France, Netherlands, Spain that are not satisfied with Brussels domination in governing EU.
Speaking on big picture, On a way down, guys, EUR has passed through all major Fib levels. Last one was at 1.12 area and now we do not have any other below current market. Also price has dropped below 1.27 extension of this big butterfly. Thus, on monthly chart the only logical destination point stands at parity - 1.618 butterfly extension, chanell trend line support and YPS1.
Besides, right now EUR is testing YPP, but unsuccessfully yet.
Concerning bullish perspectives... they look really blur by far. The only issue that we could drag in here is a hint on possible 2-bar stop grabber as January action was really strong and minor W&R of 1.0460 lows...
But this is definitely insufficient for real new bullish tendency. Especially if we will take in consideration previous strong drop in 2014, CFTC data. So it seems maximum that we could expect here is some deeper upside retracement, but no more. Anyway this is just tactical issue.
Also take a look at different behavior near low border of channel. Previously when market has touched it - it shows immediate upside pullback, it was V-shape reversal. Right now behavior is absolutely different, price just hangs on the border and shows no upside action. Any tight consolidation near trendline could become a sign of coming breakout.
Thus, based on monthly chart we could make two major conclusions. First is - real bullish trend could be re-established only if EUR will erase reversal candle and overcome its top above 1.16. Our next target on Monthly chart is parity - 1.618 Butterfly extension, YPS1 and trendline support.
In general guys, we think that steps that already have been announced by ECB and Fed should be enough to push EUR right to parity during "price-in" process, when market will "anticipate" them. But further dynamic will depend on real action from Fed, Trump administration and ECB. How they will fulfill their promises and obligations. Any surprising hawkish measures could push EUR even below parity, while step out from pormises could lead to appearing of reverse H&S pattern on monthly/weekly charts.
In shorter-term perspectives, EUR has tested YPP. Thus, our short-term target has been completed. Now we start to look over daily and weekly reverse H&S pattern, what will happen with it:
Weekly
So, our minimal destination for retracement was completed - EUR has reached YPP and 1.0830 area. On weekly chart upside journey that was lasted for few weeks on daily - looks like minor bounce. Trend stands bullish here, but hardly we could treat this action as strong weekly trend.
Since we have here two major patterns - butterfly and inner AB-CD, current upside action mostly reminds reaction on reaching of 1.0 extension AB-CD target. Now it stands at 3/8 major resistance, while even reaching of 5/8 resistance of AB-CD swing is acceptable. It means that if our daily H&S pattern will work and EUR will reach 1.10-1.11 area - this will not erase yet long-term bearish picture.
Right now last candle is most interesting for us. If EUR would have formed new top - I would say that this is reversal week, but even without new top - recent drop mostly engulfs previous week. Now it seems that this is an answer on our question - when EUR will start to form right shoulder of daily pattern. Based on this action we probably could say that it is started to do it.
Returning back to long-term perspective, on a way down final destination 1.618 point coincides with 1.618 butterfly target. Although we have multiple targets inside 1.0-1.05 area, ther are all minor ones. Recall, that we have daily 1.0230 extension. Also, if you will take a careful look, you could recognize another smaller butterfly inside right wing here. It also has target at 1.02 and 1.013.
But, guys, if EUR will be on a road to parity, all these intermediate targets will be hit very fast one by one.
Also, it is not very probable that market will stuck around 1.27 butterfly and will not go to parity. By two reasons - first is, pshychological pressure, second - when price will hit 1.27, it will be between 1.0 and 1.618 extensions of AB-CD pattern and this position is very unstable, market gravitates to some target... That's why parity probably should be hit.
And after that most interesting thing will come. Take a look that butterfly could become part of large reverse H&S pattern. But whether it will be formed or not will depend on fundamental factors, D. Trump ficsal policy, US economy data and Fed reaction. Thus, we have more or less single road to parity, but later, around it we will get a crossroads...If there will be something bearish that wasn't priced in yet - EUR could drop even further. If not - H&S will start to form...
Daily
On daily chart trend has turned bearish. Price very accurately has tested YPP and 1.0830 major Fib resistance. Currently we can't just ignore some clear bearish moments - EUR has dropped below MPP but not tested MPR1, harmonic retracement swing is broken down, overall upside tendency also was broken as EUR has created lower low on Friday. All this stuff makes us think, that may be EUR indeed has started to form right shoulder of our reverse H&S pattern and nearest destination should be 1.05 area?
Most probable destination is combination of 5/8 Fib level, MPS1 and daily OS. So, if you have bullish view on EUR and search for long entry - think about this area, as it should provide solid support. Conversely, if you're bearish - watch for H&S failure, if market will drop below MPS1, otherwise wait for reaching of the target by H&S...
Intraday
Here we need to make some adjustments to our analysis. These adjustments will not change the core but some details. For example - on 4-hour chart, we need to adjust neckline of our H&S pattern due reason that stands on hourly chart (so you'll see it a bit lower). As you can see - it changes the shape of the pattern, but doesn't cancel it totally. It means that we will watch for H&S completion in the beginning of next week:
The reason why we need to do so stands in AB-CD action on hourly chart. Initially we thought that market will start upward action from AB=CD target and this indeed has happened, but later EUR has dropped to 1.618 extension and created new, larger butterfly:
Thus, if H&S pattern is still valid, EUR could start forming of right shoulder right from current level. Otherwise, price probably will drop directly to daily destination point around 1.05. Pay attention to nice crossing of WPR1 and former support line of channel - it stands precisely at the top of potential right shoulder.
Conclusion:
Right now EUR shows signs of weakness on short-term charts. Thus, it could mean that market starts to form right shoulder of our daily pattern, and major destination point right now stands around 1.05 area. Before dropping, EUR could show upside bounce to 1.0740 area, if hourly direct H&S pattern will be formed and work properly.
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.