FOREX PRO WEEKLY, February 13 - 17, 2017

Sive Morten

Special Consultant to the FPA
Messages
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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.”

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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.

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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.

20170208-GESI-German-GDP-estimates.jpg


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.
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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.

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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:
eur_m_13_02_17.png


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...
eur_w_13_02_17.png


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...

eur_d_13_02_17.png


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:
eur_4h_13_02_17.png


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:
eur_1h_13_02_17.png


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.
 
Hmm..Yes Concise report on Troubles for Euro thanks Sive! A seemingly inexorable progression to Parity! BUT..with the reverse H&S on the Daily chart..i am still not discounting 1.0950. I am also feeling 'Bullish' on Cable. I just don't feel that Stirling could reach parity with US$...not just yet anyway!?
Take a look: Double Bottom on weekly chart at 1.20 area with Bullish engulfing candle in January. Left shoulder is formed between 1.28 and bottom of Brexit Candle around 1,35..(which is also an 'Unfilled Gap'!) :cool:
If we take the neckline to be around 1.29 then we could see Retracment on Cable all the way back to 1.39 area!? :D
 
Hmm..Yes Concise report on Troubles for Euro thanks Sive! A seemingly inexorable progression to Parity! BUT..with the reverse H&S on the Daily chart..i am still not discounting 1.0950. I am also feeling 'Bullish' on Cable. I just don't feel that Stirling could reach parity with US$...not just yet anyway!?
Take a look: Double Bottom on weekly chart at 1.20 area with Bullish engulfing candle in January. Left shoulder is formed between 1.28 and bottom of Brexit Candle around 1,35..(which is also an 'Unfilled Gap'!) :cool:
If we take the neckline to be around 1.29 then we could see Retracment on Cable all the way back to 1.39 area!? :D

Well, On EUR - existing of reverse H&S doesn't mean yet that it definitely will work, it could fail. ;)
On GBP - yes, I also watch for this pattern, because it matches very well our idea of VOB on monthly chart. Thus, some solid pullback on weekly/monthly chart should happen before downward extension, but we haven't got it yet. Thus, may be now, with this H&S...
 
Good morning,

(Reuters) - The dollar extended losses on Tuesday after President Donald Trump's national security adviser Michael Flynn quit, with investors waiting to see whether Federal Reserve Chair Janet Yellen offers clues to the likely pace interest rate increases in her congressional testimony.

The dollar weakened 0.3 percent on the day to stand at 113.43 yen, off Monday's high of 114.17 but well above a 10-week low of 111.59 yen touched a week ago.

It touched its session low of 113.39 yen shortly after news that Flynn resigned late on Monday under scrutiny over whether he discussed the possibility of lifting U.S. sanctions on Russia before Trump took office.

"The news weighed on the dollar against the yen because it's a hard situation to understand, and also to understand what kind of broader fallout it will have," said Kumiko Ishikawa, FX market analyst at Sony Financial Holdings.

Slumping Japanese equities also put upward pressure on the yen. The Nikkei stock average was down 0.7 percent, extending losses in afternoon trading after Toshiba Corp unexpectedly delayed the release of its quarterly earnings and details of a multi-billion dollar writedown to its nuclear business.

The dollar index was down 0.1 percent on the day at 100.84, edging away from Monday's high of 101.11, its highest level since Jan. 20.

Yellen will present the U.S. central bank's semi-annual report on monetary policy and the economy in testimony to the Senate Banking Committee on Tuesday, followed by a the semi-annual monetary testimony before the House Financial Committee on Wednesday.

"People are just waiting for Yellen's testimony, and depending on what she says, the dollar could test the upside again," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

"But a few Japanese exporters are selling dollars at the moment, disappointed that it didn't go even higher after the weekend meeting" of U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe, who apparently did not discuss currency policy or trade protectionism, Ogino said.

Abe said on Tuesday he agreed with Trump that currency issues should be left for the finance leaders of each country to discuss.

Dallas Federal Reserve Bank President Robert Kaplan, a voter this year on the Fed's policy-setting panel, said on Monday in remarks prepared for posting to the Dallas Fed website that the U.S. central bank should act soon to raise rates or risk having to abandon its plan to do so slowly.

"Yellen does not need to say anything in detail. I think she'll be very cautious, so currencies might not move so much," said Masashi Murata, senior strategist at Brown Brothers Harriman.

"She might suggest some possibility of the Fed hiking rates in March, but I think that risk is very small," he added.

Interest rates futures showed investors pricing in only about a 1 in 5 chance the Fed will increase rates at its meeting next month, according to CME Group's FedWatch program.

The dollar also got a lift from Trump's promise last week of a "phenomenal" tax plan that the White House said would include tax cuts for businesses and individuals. The hopes raised by his comments helped lift U.S. stocks to record highs on Monday.

The euro, which has come under pressure in recent sessions as France's election campaign has heated up, was up 0.1 percent at $1.0611.


EUR right now shows a bit tricky action. Shortly speaking, it makes difficult to estimate the bottom of daily right shoulder, mostly because price shows irrational response on intraday targets and patterns. This could mean, in turn, that right shoulder is already started to form.
Since we almost have no extensions on intraday charts - it is diffiult precisely estimate the bottom of shoulder. Other words, it could happen that EUR could touch 50% support on daily chart and this will be the bottom of right shoulder. Right now is very important moment and we have to try to not miss this point of upside reversal:
eur_d_14_02_17.png


On 4-hour chart we have just one extension - lighting bolt AB-CD pattern, that points on 1.0525 Fib support:
eur_4h_14_02_17.png


The reason why we think, that normal price action could be changed - is irrational response of EUR to important levels. Recall, when we first start to talk on 4-hour H&S pattern - price has completed AB-CD pattern and formed butterfly. We said, that's it - EUR should start forming right shoulder. But only minor upside response has followed. Now again - price has completed 1.618 AB-CD and formed big butterfly. But again - just minor bounce. This is not normal. Something is pressing on EUR down and it could mean that EUR directly is moving down and already is started to form right shoulder on daily chart.

At the same time - we do not care too much - whether 4-hour H&S will be formed and we will get AB=CD down, or price will drop directly to 1.0525. Our primary task is bullish reversal patterns around MPS1 and major Fib support.

Right now EUR has last chance to form 4-hour H&S. WE have 3-Drive Buy pattern on hourly chart. Today we will monitor either EUR will break resistance trendline and 3-Drive will work, or, if EUR will drop below 3rd drive:
eur_1h_14_02_17.png
 
Good morning,

(Reuters) - The dollar held gains near a 3-1/2-week high on Wednesday after Federal Reserve Chair Janet Yellen signaled a faster pace of U.S. interest rate hikes.

Yellen told the U.S. Senate Banking Committee the central bank will likely need to raise interest rates at one of its upcoming meetings, although she expressed caution amid considerable uncertainty over economic policies under President Donald Trump's administration.

The dollar index, which measures the greenback against its six major peers, was last up 0.1 percent at 101.26. The index rose to 101.38 on Tuesday following Yellen's remarks, the highest since Jan. 20.

"Investors didn't expect Yellen to be that hawkish, so the dollar gained," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

"There are no big factors preventing the Fed from raising rates in March. Unless the emerging markets become volatile or the U.S. economic data shows weakness, the March rate hike is highly plausible," Sera added.

U.S. interest rates futures implied traders saw about a 20 percent chance of three rate increases in 2017, up from less than 10 percent on Monday.

Since the end of the 2007-09 recession, the Fed has raised rates once in December 2015 and again in December of last year.

President Trump has announced a rollback of financial regulation though details remain scarce, and markets are yet to get clarity on the size and scope of the tax cuts he has promised.

"Changes in fiscal policy or other economic policies could potentially affect the economic outlook," said Yellen, underscoring the uncertainty over economic policy.

Yellen is scheduled to appear before the House of Representatives Financial Services Committee later on Wednesday.

"Yellen doesn't seem to have changed her stance on rate hikes. Bids on a March rate hike still remains to be a minority," said Masashi Murata, senior currency strategist at Brown Brothers Harriman.

"The dollar/yen was weak last week, so investors bought back the dollar on Yellen's comments," Murata said.

The dollar was fetching 114.32 yen, not far from the two-week peak of 114.49 yen touched on Tuesday. The dollar recovered from a 10-week trough of 111.59 touched last week.

The euro was last down 0.1 percent at $1.0572, wallowing near a one-month low of $1.0559 plumbed on Tuesday amid political risk and disappointing regional economic data.

The euro has come under pressure from concerns about France's presidential election and Greek bailout talks. Polls showed National Front leader Marine Le Pen, who has promised to pull France out of the euro zone and hold a referendum on European Union membership, is leading in the first round of the French presidential runoff.

Greece was aiming to conclude the drawn-out review of the country's international bailout on Feb. 20 to coincide with a meeting of euro zone finance ministers.

However, Eurogroup President Jeroen Dijsselbloem said on Tuesday that Greece and its international lenders are not expected to reach agreement by next Monday, noting "the IMF must also be on board".

Talks between Athens, its European Union lenders and the International Monetary Fund over labor and energy reforms, fiscal targets and debt relief have dragged on for months, rekindling fears of a new crisis in the single-currency bloc.

Investors are eyeing a batch of U.S. economic data due out later on Wednesday, including consumer price index (CPI) and retail sales, for any fresh catalysts.

The CPI is expected to have risen 0.3 percent in January after a similar gain in December, while retail sales are likely to have risen 0.1 percent in January after advancing 0.6 percent the previous month.


So, the red line that we've specified yesterday has worked very nice as EUR was not able to completed 3-Drive hourly pattern. It has failed and any hopes on appearing of H&S pattern on 4-hour chart have been vanished as well.
On daily chart following to harmony as H&S pattern as harmonic retracement swing - price should reach 1.0530 area around major Fib level and MPS1:
eur_d_15_02_17.png


To be honest, guys, action that we see on 4-hour chart makes me think that EUR stands under strong pressure. And it seems that there are few chances that upward action could start from 50% daily Fib level.
First of all - take a look that EUR has not shown any retracement on a way down - straight downward action. Appearing of H&S pattern hardly could harm reaching of 1.0530 area. It just could change the shape of action, but it has the same destination. But pattern has not been formed and market continues dropping lower.
I ask you - if price has not formed any upside bounce from strong support levels, why it should do this around minor one? Besides, right now we see action that more typical for retracement rather than for reversal. Also we do not have any clear reversal patterns. That's why it seems that EUR should continue dropping to 1.05-1.0520 area.
eur_4h_15_02_17.png


On 4-hour chart, as we've said - our 3-Drive pattern has failed. Resistance trend line holds action very well. EUR has reached support of WPS1 and Fib level, but no patterns are forming right now and action looks unreliable:
eur_1h_15_02_17.png


All these moments and coming CPI and Retail Sales release, make us think that EUR probably will reach 1.05-1.0520 area today. Thus, we gradually are turning to daily pattern...
 
Good morning,

(Reuters) - The dollar pulled back on Thursday after rising to one-month highs in the wake of upbeat U.S. economic data, with demand for the greenback cooling as Treasury yields came off their peaks.

Better-than-expected U.S. inflation and retail sales data had backed expectations of an early rate hike by the Federal Reserve, sending the dollar index to 101.76 on Wednesday, a peak unseen since Jan. 12. It has since retreated to 100.92 in the Asia session on Thursday.

The dollar also came off from a 2-1/2-week high of 114.95 marked on Wednesday against the yen, touching a low of 113.73. It was last down 0.3 percent at 113.84 yen.

"The dollar is struggling as U.S. Treasury yields retreated from highs," said Junya Tanase, chief currency strategist at JPMorgan Chase Bank in Tokyo.

U.S. benchmark 10-year Treasury note yields slipped to 2.484 percent on Thursday, after climbing to a three-week high of 2.524 percent on Wednesday following the upbeat U.S. data.

Data on Wednesday showed U.S. consumer prices recorded their biggest gain in nearly four years, jumping 0.6 percent in January. Retail sales also outpaced expectations, increasing 0.4 percent last month compared to the analysts' poll of 0.1 percent.

But some analysts also noted that the data may not be as strong as it appears, while industrial output and a gauge on home builder sentiment took unexpected spills.

"Retail sales seemed to have been boosted by higher prices rather than an increase in the real consumption," said Shin Kadota, senior forex strategist at Barclays.

"Investors also took profit as the dollar was trading high this week," added Kadota.

Up until Tuesday, the dollar index had enjoyed a 10-session winning streak.

Fed Chair Janet Yellen offered no additional insight on the timing of the central bank's next rate hike in her second day of economic testimony before Congress on Wednesday.

On Tuesday, Yellen hinted more rate hikes were on the way as the jobs market has improved and inflation has shown signs of nearing the Fed's two percent goal.

Markets will get another chance to check the U.S. economic pulse from another batch of data, including housing starts, building permits and the Business Outlook Survey by Reserve Bank of Philadelphia.

The euro edged up 0.15 percent at $1.0614, recovering from a five-week trough of $1.052 touched on Wednesday.

Elsewhere, the Australian dollar hovered near a three-month high following a slightly better-than-expected reading in the country's January employment data.

The Australian dollar last traded at $0.7709 after touching $0.7732, its highest since Nov. 10.

Sterling last stood at $1.2460, edging up from a one-week trough of $1.2384 touched on Wednesday, knocked by slowing wage growth in the fourth quarter - bad news for British consumers facing a surge in inflation in the months ahead.


So our intraday work on estimation bottom of right shoulder has been done. Now we're turning to daily chart as right now EUR stands at "tension point" as I call such moments. Tension point has some features. First is - this is the point where you have to make a decision on trading and position taking. You have to do it right at tension point, because it has some features. Only in tension point you have minimal potential loss. Unfortunately it doesn't guarantee you success, but it does guarantee minimal loss if something will go wrong.
If even we have perfect setup - we rely on probabilities. And despite how perfect you pattern looks like - it still could fail. It doesn't mean that you did a mistake when you've taken a position, it only means that at every moment some small probability exists that pattern could fail...
Form that standpoint, tension points are very important because they let trader to minimize potential loss and get perfect entry if everything will go as it should...
Right now we stand right at this point in relation to daily H&S pattern:
eur_d_16_02_17.png


Thus, bullish traders today have to make a decision how to take position, while bears have to keep an eye on possible failure of daily H&S pattern (this also could happen, right?).

On 4-hour chart we see that our lightning bolt AB=CD has been perfectly completed and creates an Agreement with major daily Fib support. Trend has turned bullish:
eur_4h_16_02_17.png


On hourly chart EUR also has broken resistance trendline:
eur_1h_16_02_17.png


So, we have context for long entry on EUR. But ways, how to do it are differ. And what you will choose mostly depend on your mentality and trading style. this choice is rather personal. Conservative and most reliable approach is to wait for clear bullish reversal pattern around 1.05-1.0520 area. As it is few time passed since EUR has touched this area - no pattern has been formed yet. The minus of this way is obvious - sometimes, market starts upward action without any clear pattern, of forms very small and fast pattern as engulfing, "222" Buy etc... So, you could miss the entry.

Another way is to take a position at retracement. For example - in our case, 1.0580 area - crossing of trendline and Fib level looks not as bad. But this way also has its own minuses. You could get a whipsaw action, if EUR will spend some time, fluctuating around 1.05 support. So, this approach demands more activity from trader, and more active position managing, stop movement etc...

So, this choice is up to you... If you let me bring 2 cents - in current circumstances, first way looks prefferable. EUR was strongly depressed within 2 recent weeks. We see irrational response on strong support levels, they were just pressed down without any proper retracement. Yellen has given surprisingly hawkish comments and US statistics looks very strong. That's why, EUR has good chances to form reversal pattern here. At the same time, all these reasons could become the one of H&S failure...
 
hello master
can we treat this 30 min candle as a signal of retracement of eur/usd upto 1.0580
 

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Good morning,

(Reuters) - The dollar wallowed near a one-week low against a basket of currencies on Friday after upbeat economic data failed to lift Treasury yields, with underlying concerns about U.S. trade policy capping greenback attempts to bounce.

The dollar index against a group of major currencies stood flat at 100.470 after hitting 100.410 overnight, its lowest since Feb. 9.

The index had soared to a one-month high of 101.760 as recently as Wednesday, as U.S. Federal Reserve Chair Janet Yellen spoke in support of a near-term rate hike and the markets also saw robust U.S. inflation and retails sales data.

Indicators released on Thursday shed more positive light on the U.S. economy, with the Philadelphia manufacturing index on jumping to a 33-year high.

But the robust data was unable to sustain a rise in Treasury yields, which had already climbed to three-week highs mid-week, leaving the dollar to buckle.

"The dollar did rally in spurts this week but the surge lacked strong conviction. For example dollar/yen failed to take out the 115.00 threshold," said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

"This shows that the market is still trying to work out the implication of President Trump's policies, of which his approach to trade may not be supportive for the dollar."

Furthermore, the troubles facing U.S. President Donald Trump's administration, highlighted by the resignation of National Security Adviser Michael Flynn earlier this week, were also a source of investor concern.

The greenback was 0.1 percent higher at 113.340 yen JPY= after losing 0.8 percent overnight. It had briefly risen to a two-week peak of 114.955 on Wednesday.

"While Japan avoided being criticized for the yen at the recent summit, the fact that it remains vulnerable to scrutiny over currency levels has not changed," said Makoto Noji, senior strategist at SMBC Nikko Securities.

Currency issues were not high on the agenda during a two-day summit between President Trump and Japanese Prime Minister Shinzo Abe last weekend. The U.S. President had recently lambasted trading partners for weakening their currencies to the disadvantage of the United States.

"The yen is still weak relatively speaking and fears that Japan could come under fire any time over currencies is limiting the dollar's advances against it," Noji said.

The euro was steady at $1.0674 after climbing 0.7 percent the previous day. It was on track to eke out a 0.2 percent gain against the greenback this week, having been hit the previous week by perceived political risks to the euro zone.

Sterling extended modest overnight gains to rise 0.1 percent to $1.2502 .

The Australian dollar added 0.1 percent to $0.7699. The Aussie was not far from a three-month peak of $0.7732 set on Thursday on strong employment data.

The Aussie has gained steadily this year thanks to the draw of the country's relatively high yields and rise in the price of iron ore, the country's biggest export.

The New Zealand dollar was steady at $0.7207. The kiwi was poised to end the week little changed after slipping to a 3-1/2-week low on Tuesday after the Reserve Bank of New Zealand dashed expectations for a rate hike late in 2017.


Today guys, I think we need to recall our NZD B&B trade. We were so excited by EUR progress, that forgotten a bit on NZD setup...
Another reason - right now kiwi is moving to area that will determine the destiny of this trade. Another tension point but on lower time frame chart. Situtaion is very similar to those that we had yesterday on daily EUR.

On daily chart we see that B&B has started - first bounce up from major support has happened:
nzd_d_17_02_17.png


Now market stands in downside retracement. This is normal behavior as NZD has formed upside reversal swing on hourly chart. Usually price shows deep retracement after it. That's why we've chosen not AB=CD but 1.618 AB-CD target. This target creates an Agreement with Fib support and MPP. This is rather strong support area and it should be enough to hold any retracement, but only if NZD indeed has intention to go higher and complete B&B target @ 0.7280 area.
Another feature of this level is harmonic. Here you could probably recognize some reverse H&S shape.
nzd_1h_17_02_17.png


Thus, we will get clarity around 0.7175. If daily B&B will start - it will start here. If it will fail - it also will fail here and NZD will continue dropping on daily chart. So, bulls and bears will watch for this level but for different action. Bears for breakout, bulls - for taking long position.
 
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