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FOREX PRO WEEKLY, January 01-05, 2018

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Dec 30, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Happy New Year everybody!

    Fundamentals
    (Reuters) - The dollar fell to its lowest in over three months against a basket of major currencies on Friday, marking its steepest annual drop since 2003, on doubts over durability of a pickup in U.S. economic growth in wake of last week’s tax overhaul.

    One of the most dramatic market developments in 2017 was the breath-taking rise of bitcoin and other crypto currencies. While they have pulled back at year-end, many of these digital currencies have surged in value this year.

    The greenback may lag further against its peers in 2018 as investors expected other major central banks to reduce their stimulus while the Federal Reserve has signaled it would raise interest rates further, analysts said.

    “The dollar will face more headwinds in 2018,” said Chris Gaffney, President of World Markets at EverBank in St. Louis, Missouri. “The Fed won’t be going at it alone in terms of taking off more gas from the stimulus pedal.”

    Bets the European Central Bank might consider raising interest rates by the end of 2018 due to evidence of higher inflation and business activity in the euro have lifted the euro, which was poised for its best yearly performance versus the greenback in 14 years.

    The euro hit a three-month peak at $1.2028, bringing its annual gain to 14.2 percent. It was last up 0.56 percent at $1.2008.

    The euro’s rally was a drag on the greenback in 2017. The index that tracks the dollar versus the euro and five other major currencies fell as low as 92.080, which the lowest since Sept. 22. It recorded a 9.8 percent annual decline, the biggest yearly loss since 2003.

    The dollar also weakened against the yen, sterling, Canadian dollar, Swedish crown and Swiss franc , which are the other index components this year.

    The dollar index was at a 14-year peak at the start of 2017 on hopes for U.S. President Donald Trump’s pro-growth economic agenda. Barring the most dramatic rewrite of the U.S. tax code in 30 years enacted last week, Trump and Republican lawmakers have struggled to pass legislation.

    Furthermore, 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, analysts said.

    Outside of traditional currencies, bitcoin and other crypto currencies rebounded after two days of losses tied partly to more regulators toughening rules on digital currencies in a bid to curb excessive speculation.

    Bitcoin was last up 1.18 percent at $14,564.76 on the Bitstamp exchange. 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.


    Here is article on economy growth around the world - not only in developed countries. It means that business cycle is changing indeed:

    News in Charts: Stronger Growth and Improved Resilience
    by Fathom Consulting

    The world is enjoying a synchronised economic upturn. GDP growth forecasts have been revised up in many countries, and emerging market (EM) economies are no different. Brazil and Russia’s emergence from recession has been faster than we — or the consensus — had expected. Meanwhile, economic activity in India is gaining momentum after a sustained slowdown. The 32% rally in EM equities in 2017 is testament to this bullish backdrop. We think the EM GDP growth spurt is likely to be supported by three factors: rising exports; strong investment; and low inflation.

    EM economies benefit disproportionately from trade, and this year’s upturn has been a boon. As highlighted previously, the much-discussed ‘end of globalisation’ has been greatly exaggerated. 2017 has seen a pickup in economic activity in the three largest parts of the global economy — China, Europe and the US. That has boosted EM exports, which suffered for several years from sluggish global demand and falling commodity prices. With China continuing to double down on credit-fuelled investment, Europe enjoying a strong upswing, and the US economy set to receive a fiscal boost, we think the EM export growth story still has legs.
    [​IMG]

    In a virtuous cycle, increased foreign demand has been accompanied by rising domestic investment. Annual growth in gross fixed capital formation has picked up in many EM economies. This revival reflects the delayed impact of easier monetary policy, improved business confidence, and the partial recovery in commodity prices. With a benign global macroeconomic backdrop and firm commodity prices, we expect this recovery to continue.

    [​IMG]

    Finally, muted price pressures will keep interest rates low, supporting domestic demand. Inflation has dropped noticeably in recent years, aided by stable or strengthening currencies and spare slack. This impact has been particularly pronounced in Brazil and Russia. In our view, inflation in this year’s outliers, Mexico and Turkey, is likely to drop next year, as sharp currency-related spikes unwind. That should allow monetary policy to remain loose, helping to boost consumption and investment.
    [​IMG]

    Aided by the three factors outlined above, we expect average EM GDP growth to pick up next year, and support asset prices in the emerging world.

    COT Report

    Last time, guys, we've talked on sudden drop of positions prior Christmas holidays. With two weeks positions are started to re-establish, as we see growth of positions themselves and also growth in open interest. It means that new longs are appearing on market.
    Although EUR has some upside potential in therms of speculative position saturation, but this potential is not very significant, as absolute high stands around 114K contracts, while current level is around 92K.
    This moment will put impact on our analysis. Sentiment is bullish on EUR, but ceil stands not too far. Whether this ceil will be temporal or long-lived we do not know currently...
    upload_2017-12-30_14-33-2.

    Technicals
    Monthly


    Well, situation on markets is changing rather fast. Not just on EUR but across the board - other currencies, commodities etc.

    I do not want to take too extended look EUR right now. Mostly because there are a lot interesting things stand on daily chart. We could spend time to speak on what will happen within a year hypothetically, but I think that it is more useful just take a look at real setups that we already have in place.

    On monthly chart I've drawn new 2018 pivots. One of the long-term setups stands in relation to YPR1 @ 1.2617 area. It seems that right now we could talk on real upside breakout of wide rectangle consolidation that has started in 2014. In October market has tried to drop below 1.15 area but failed and EUR now is forming tight flag just above rectangle.

    It means that we could apply classical target for rectangle breakout - it's height. If we count it up, then we will get approximately 1.27 area, which mostly agrees with YPR1 and 50% all-time Fib resistance!
    So, this is relatively long-term setup.

    But right now we're mostly interested with action inside this small flag. Actually we've missed one important detail last time, which is very important. In fact, November action was upside reversal month - it's low stands under October and close price is above October high. Usually reversal candles leads for 2-3 periods of action. So, we have December and it seems that 1-2 months more should follow. That's why upside breakout of previous tops looks very probable.

    Besides, reversal candle confirms real rectangle breakout by the fact of upside reversal right from its upper border and price inability to return back below 1.15 area.
    eur_m_01_01_18.

    Weekly

    So, on monthly we've discovered relatively long-term target - 1.2617. Now let's see what closer targets do we have. On weekly chart all targets stand in relation to last action. In fact, we should get extension of some degree.

    Large AB-CD extension of monthly rectangle points on 1.2375 target. Butterfly also has 1.618 target at the same area - 1.2425.

    Another extension stands around 1.2240 and this one is more interesting for us, because others stand above weekly OB area. Thus, in situation of upside breakout above recent tops - most probable target will be 1.2240
    eur_w_01_01_18.

    Daily

    Here our idea with triangle has been confirmed. Last time we've said that if you have uncompleted DRPO
    in most cases this leads to triangle with following upside breakout. So, this has happened...

    On coming week we continue to work with our upside AB=CD pattern. Our COP target @ 1.1970 has been achieved relatively easy and even extended. This "extension" mostly is based on existence of butterfly pattern, and market just has completed its 1.27 extension.

    At the same time, market is not at OB and has no Fib levels above. So, upside continuation should be relatively easy. Next target will be important by two reasons. This is completion of daily setup - AB=CD OP target. It coincides with butterfly 1.618 @ 1.2110 and stands slightly above previous tops.

    It means that market could move slightly higher as stops probably will be triggered.

    Second reason of importance here - Strong monthly Fib level at 1.2175. It means that EUR will spend some time around probably, some moderate retracement could happen as well:
    eur_d_01_01_18.

    Another reason why I'm watching for this level is situation on Dollar Index. AB-CD completion will give us strong bullish pattern for dollar - "222" Buy":
    dxy_d_01_01_18.

    So, it is relatively safe to keep longs till 1.2125-1.2150 area, but I wouldn't be hurry with forecast of immediate upside continuation above it.

    Intraday
    So, here guys we could take a look at retracement levels that could be achieved next week. Based on overall situation and market's strength, it seems that market could reach either 1.1945, which is also former top here, or 1.19 K-support.

    As retracement has not started yet, it is difficult to suggest which one will be reached. May be price will form some hint, AB-CD pattern or something of this sort. In general, daily butterfly also doesn't exclude 1.19, because this is just 3/8 retracement and this is normal respect to 1.27 target.
    eur_4h_01_01_18.

    Conclusion:

    EUR starts to show signs of changing in long-term market's sentiment. Mostly these changes shift advantage in favor of EUR as EU economy shows very good recovery pace while Fed shows not as hawkish assessment of US economy as investors suggest.

    We have specified some extended targets. But now our primary object is trading tools on daily chart. It should relatively safe to keep longs till 1.2125 area, but immediate continuation above this area looks doubtful right now.


    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.
     
    Kleinerbroker, Joh, Robban68 and 7 others like this.
  2. shahsavari

    shahsavari Private, 1st Class

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    Thanks Sive
     
    Sive Morten likes this.
  3. Joh

    Joh Sergeant Major

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    Thank you Sive, here is to another new beginning. Happy 2018
    Hope you and your family have a sensational 2018 and may the Forex Universe look kindly opon us all. . :)
     
    Sive Morten likes this.
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar dropped on Tuesday to its lowest in more than three months, weighed down on the first trading day of 2018 by expectations of a slower pace of interest rate increases by the Federal Reserve amid a tepid U.S. inflation picture.

    “Investors remain skeptical about the Fed’s outlook for three additional interest rate increases this year, especially given the extremely benign inflation backdrop in the U.S.,” said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.

    The dollar’s upside was also capped, as major central banks such as the Bank of England and European Central Bank are moving toward normalizing their own monetary policies.


    The dollar index hit a 3-1/2-month trough of 91.751 and was last down 0.3 percent at 91.887 . For 2017, the dollar index slid more than 9.8 percent, its weakest since 2003.

    “Any further drop below 91.00 would confirm a continuation of the dollar’s bearish trend from the beginning of 2017, with the next major downside target around the 90.00 psychological support level,” said James Chen, head of research at Forex.com in Bedminster, New Jersey.

    The euro, meanwhile, has been on a tear especially since the second half of last year on optimism over a brightening euro zone economic picture.

    In 2017, the euro had its strongest yearly showing against the dollar since 2003 as European economies strengthened and expectations grew the ECB will wind down monetary stimulus.

    The euro rose to start the new year, climbing to a nearly four-month high of $1.2082. It was last up 0.3 percent at $1.2049.

    Euro zone manufacturers ended 2017 by ramping up activity at the fastest pace in more than two decades, a survey showed on Tuesday, and rising demand suggests they will start the new year on a high.


    Also boosting the euro was a comment from an ECB official over the weekend. The ECB’s Benoit Coeure said he saw a “reasonable chance” the bank’s bond purchases would not be extended beyond September.

    Against the yen, the dollar fell 0.4 percent to 112.32. The yen continues to benefit from last week’s release of the Bank of Japan’s minutes of its meeting.

    The minutes showed some members are considering tightening monetary policy if the economy continues to improve next year, which would be a significant shift in strategy for a central bank thought to be the last to exit easier monetary policies.


    Today, guys, we will take a look at EUR again. Market has shown no reaction on daily 1.27 butterfly target and just continued upward action. So, our intention to use possible retracement for long entry was cancelled.

    Now, we have next target ahead - 1.2115-1.2125. But, I suspect that jump through previous top will be a bit stronger as stops should be triggered. EUR now is not at OB, so nothing prevent it from upside continuation here. This target is combination of 1.618 butterfly and major daily AB=CD objective points:
    eur_d_03_01_18.

    Approximately the same story is suggested by DXY. Dollar index also assumes minor downside continuation. In result we will get perfect "222" Buy pattern. So, if you keep longs on EUR - think about at least partial profit taking around 1.2120 area, because retracement could be significant:
    dxy_d_03_01_18.

    On intraday chart now we see two patterns - classic pennant continuation pattern and potential butterfly that could finalize daily targets.
    eur_1h_03_01_18.

    So, if you would like to go long on daily chart - you will have to wait for retracement. On intraday chart it is possible still to buy against 1.2025 butterfly lows with target around 1.2120 probably.
    That's being said - today we're watching for upside continuation and reaching of major daily targets. Then our primary focus will be on market's reaction around 1.2120 and "222" on DXY.
     
    cosmos and FreddyFX like this.
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar rallied on Wednesday on upbeat U.S. manufacturing and construction data and after minutes from the Federal Reserve’s last policy meeting showed the central bank remained on track to raise interest rates several times this year.

    Snapping a three-week losing streak, the dollar hit session highs against the euro and yen after the minutes from the Fed’s Dec. 12-13 meeting. The dollar index posted its largest daily gain in more than two weeks.

    The Fed’s minutes acknowledged the U.S. labor market’s solid gains and the expansion in economic activity, even as they affirmed policymakers’ worries about persistently low inflation. That suggested the central bank will continue to pursue a gradual approach in raising rates but could pick up the pace if inflation accelerates.

    Fed officials also discussed the possibility that the Trump administration’s tax cuts or easy financial conditions could cause inflation pressures to rise, leading to some dollar-buying, analysts said.

    “The debate is the same. You have strong growth and low unemployment on one side and surprisingly low inflation on the other side,” said Stephen Stanley, chief economist at Amherst Pierpont Securities in Stamford, Connecticut.

    “They have been taking a middle-of-the-road on their policy approach, gradually raising interest rates and unwinding the balance sheet. They will continue the same tack.”

    The dollar gained earlier in the session after data showed U.S. construction spending rose 0.8 percent in November to an all-time high of $1.257 trillion, driven by a surge in investment in private residential and nonresidential projects.

    At the same time, a U.S. manufacturing index as measured by the Institute for Supply Management rose to 59.7 last month, beating market expectations.

    Still, analysts remained skeptical about the dollar’s near-term prospects, noting the expected rate hikes have been priced in. Some also said modest U.S. inflation may encourage the Fed to go slower in raising rates.

    In late trading, the dollar bounced 0.3 percent to 92.18 after falling 2.5 percent over the last three weeks. The dollar’s 10 percent drop in 2017 was the largest annual decline in 14 years.

    The greenback also rose 0.2 percent versus the yen to 112.51 yen on Wednesday.


    Friday’s U.S. non-farm payrolls report should provide more clarity about the outlook for interest rates this year.

    The euro, meanwhile, slid 0.3 percent to $1.2016 after hitting a four-month high of $1.2081 on Tuesday, up roughly 3 percent from a mid-December trough.

    The single European currency has been supported by improving prospects for the euro zone economy and expectations the European Central Bank will wind down its bond-buying stimulus in 2018.


    Today, guys, we will take a look at GBP. In fact, we have the same setup on other currencies - EUR, DXY, but on GBP we have some additional details that make it more solid.
    Yesterday our suggestion of upward creeping right to major target was canceled by US data on Manufacturing and Fed minutes. Still, as major targets have not been hit - current downward action should be treated as retracement.

    On GBP market has reached rather strong resistance, although it doesn't have any Fib levels inside. Still it includes AB-CD COP target, WPR1 and MPR1. Besides, here we've got nicely looking bearish engulfing pattern:
    gbp_d_04_01_18.

    Following the typical price action of engulfing we could watch for two patterns here. First is B&B "Buy" on 4-hour chart that will be minor retracement back inside engulfing's body. Second - downside AB-CD action to engulfing target. This, in turn, could give us "222" Buy that should be good setup for long entry. Approximately the same story we should get on DXY and EUR:
    gbp_4h_04_01_18.

    B&B target will be 1.3565, then, theoretically downward action could start. Other secondary patterns could be formed as well. For example - "222" Sell around 1.3565. But they are for scalp traders. As our major context stands to the upside - we mostly are focused on long positions.
     
  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The euro hovered near a three-year high against the sagging dollar on Friday, while improving investor risk appetite weighed on the yen.

    The euro was 0.05 percent higher at $1.2074 after rising 0.45 percent overnight.

    The common currency received its latest boost overnight as data showed the euro zone economy closed out 2017 with the strongest growth in nearly seven years.

    The euro has been supported as U.S.-euro zone debt yield spreads have narrowed recently with the European Central Bank poised to curtail its massive stimulus programme and eventually join the Federal Reserve in normalising monetary policy.

    The euro has gained 0.6 percent so far this week and a rise above $1.2092 would take it to its highest level since January 2015.

    Weighed down by the greenback’s weakness against the euro, the dollar index against a basket of six major currencies was poised on a loss of 0.3 percent this week.

    It probed a three-month low of 91.751 on Tuesday and last stood at 91.838, headed for its third week of losses.

    The U.S. currency’s lack of traction was highlighted overnight as the dollar failed to draw support from stronger-than-expected jobs report. U.S. private employers added 250,000 jobs in December, data from ADP Research Institute showed, the biggest monthly increase since March.

    The markets are now focused on Friday’s U.S. non-farm payrolls report, which is expected to show job gains of 190,000 for December.

    Given the dollar’s recent poor showing, market participants reckon stronger-than-expected employment gains and growth in wages would be needed to turn fortunes around for the currency.

    “It is the same theme from 2017 that is hurting the dollar, which is low inflation concerns, which in turn has capped Treasury yields,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

    “The euro, on the other hand, is on a roll. We see the euro zone HICP figures out later today and if that proves to be strong, that could offset a decent U.S. jobs report from the dollar’s perspective,” Ishikawa said.

    The euro zone’s harmonised index of consumer prices (HICP) for December is due later on Friday.

    “The euro looks solid at these levels. But if it were to gain further, it may have to brace for comments by officials concerned about the negative economic effects of a strong euro,” said Shin Kadota, senior strategist at Barclays in Tokyo.

    The common currency was near a 26-month high of 136.370 yen scaled overnight and on track for to gain 0.7 percent this week.

    The Australian dollar extended gains from the previous day and rose to $0.7870, its highest since Oct. 20, before pulling back a little to $0.7854.

    The Aussie was on track for its fourth straight week of gains, with the recent surge in prices of commodities like copper and iron ore providing a lift.

    The Canadian dollar has also benefited from surging commodities, with crude oil prices at their highest since 2015.

    The loonie was headed for its third straight week of gains, touching a 2-1/2-month high of C$1.2483 per dollar on Friday.

    The yen was a laggard within the major currencies, having sunk this week against its peers like the dollar, euro and Aussie.

    The Japanese currency depreciated against the broadly weaker greenback due to increasing investor appetite for risk in the broader markets, which dimmed its allure as a perceived safe haven.

    The dollar was 0.1 percent higher at 112.830 yen , adding to modest gains from Thursday. It was little changed against the yen this week, during which it had momentarily slipped to a two-week low of 112.055.


    Today we continue our journey with GBP, as it has most clear patterns. It is no sense to talk on long-term perspective as today is NFP day and everything could change on US session as data will be released. But, meantime, technical picture mostly supports our idea of another leg down.

    On daily chart our bearish engulfing is still valid. Yesterday anticipated retracement back inside it's body has happened. Now is time for extension.
    gbp_d_05_01_18.

    Although ADP report was positive but reaction was muted due also positive data from EU. Now, investors could pay more attention to employment numbers today. Correlation between NFP and ADP stands around 95% and it gives not bad chances that NFP also will be good.

    Our B&B trade was perfect and completed where we've expected:
    gbp_4h_05_01_18.

    Now second step is ready to start. On hourly chart GBP has formed "222" Sell pattern as result of our B&B. Downside action has started right from Agreement resistance of 1.3566. So, we should get some AB-CD downside target. IT could be either COP around 1.35 area or OP at 1.3460.
    gbp_1h_05_01_18.

    But all this stuff makes sense only if NFP will be positive. Otherwise setup will be cancelled.
     
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