FOREX PRO WEEKLY, January 02 - 06, 2017

[Sive Morten]

Fundamentals

(Reuters) - The U.S. dollar slipped on Friday but notched its fourth straight year of gains against a basket of major currencies.

The dollar index which measures the greenback against a basket of six major rivals, gained about 3.7 percent for the year.

The index rose about 7.1 percent during the fourth quarter, more than half that gain coming since the Nov. 8 U.S. presidential election on expectations that U.S. President-elect Donald Trump's plan to boost fiscal stimulus would benefit the currency. A faster projected pace of rate hikes from the Federal Reserve next year also contributed.

Several analysts have said the dollar's uptrend remains intact next year, but noted the risk of dollar weakness given doubts surrounding how much dollar appreciation a Trump White House will tolerate.

"Much depends on how the Trump presidency and the Chinese economy work out," said Marshall Gittler, chief market analyst for retail broker FX Primus.

For the day, the dollar index was last off 0.38 percent at 102.290, down from a 14-year high of 103.65 hit on Dec. 20, and was up 0.18 percent against the yen at 116.74 yen. The greenback was still set to post its first yearly loss in five against the Japanese currency, of about 2.9 percent.

Sterling, which fell roughly 16.2 percent against the dollar to mark its worst year since 2008 on worries over Britain's June 24 "Brexit" vote to leave the European Union, was last up 0.62 percent at $1.2340.

Sterling bore the brunt of concerns this year over Britain's trade policy with Europe which flared up following the Brexit vote, said Jason Leinwand, founder and chief executive of FirstLine FX in Randolph, New Jersey.

The euro was up 0.39 percent against the dollar at $1.0529, but was set to fall 3 percent for the year to notch its third straight yearly loss.

Chart of the Week: One cheer for Christmas
by Fathom Consulting

‘Twas the night before Christmas, when all through the house

Investors awaited the pre-Christmas bounce.

Theory aside, the literature was clear,

For those with investments ’tis the ‘most wonderful time of the year’.*

Investors are well aware that much money can be made on stock markets in the pre-Christmas bounce. Indeed, there is now a wealth of academic research on the matter, which offers a conclusion about as close to unanimous as economists are ever likely to reach: “Equity markets do better in the week before Christmas than in other weeks”. Probably.

But the occurrence of such a phenomenon year-in and year-out is a challenge to the economic orthodoxy, which insists that there are no dollar bills left lying on the sidewalk. In fact, some research suggests that pre-holiday returns may be as much as 10-20 times greater than they are during the rest of the year. Additionally, it turns out that this is not just about Christmas either. Something similar tends to occur around other major holidays too, although returns before religious holidays exceed those of non-religious ones, possibly because they tend to be associated with more time off work.

So what is going on? A long list of theories that attempt to answer the question have fallen by the wayside, but an enduring (if unconfirmed) hypothesis is that it is a result of a psychological increase in euphoria associated with festive periods; in other words, ‘Christmas cheer’. This would also explain why the effect is predominately seen in countries that actually celebrate Christmas.

However, the additional Christmas bonus appears to be in decline. The moving average of the difference between festive and non-festive returns has fallen sharply in recent years and is close to its lowest ever level. Without knowing why this phenomenon has occurred in the past, it is difficult to say with any degree of confidence why it may be fading now. But the dramatic increases in algorithmic trading may be playing the role of ‘Scrooge’ and spoiling the party.

My opinion, guys, is people just are loosing the spirit of Christmas, it's major idea, the role of Christ in a destiny of humanity and each person in particular. That's why it is becoming harder and harder treat this day as important event, as "Holy day" - yes, this is where our simple "Holiday" was coming from. This important day now is under hard and dramatic secularization. For many people this is just a legal possibility when you haven't go to job, for others is a reason to get drink and eat and no more...And when you do not feel "something really special" in your heart, you have no wish to share with it, since this has become "ordinary". And changing of attitude to Xmas, leads to changing in behavior of people, their habits and now in souls also...

*Based on ‘Christmas economics – a sleigh ride’, Birg & Goeddeke (2014).

COT Report
Right now, guys, we do not have any new data on EUR from CFTC, but today I will show you CHF chart. It might be interesting, since there is a not bad relation exists between EUR and CHF. The most interesting thing here is a closing of all long positions on franc. Or better to say, drastic shift of net position from long to short. (Some longs definitely exist though.)
If you will take a look at historical chart - previously this has happened 4-5 times and every time CHF has shown downward action. Here we mean CHF itself, not USD/CHF. Besides, downward action usually lasts for considerable period of time, for some months.

This event could shed some light on EUR perspective in the beginning of 2017. As we know franc is safe-haven currency. If investors start to abandon it, they're looking for bargain.

Taking in consideration coming carry trade on EUR, CHF and USD as it is anticipated six 0.25 rate hike in 2017-2018 - it could lead to cash flow in USD assets. Now yield spread between US and DE 10 year bonds stands at maximum area and reaches 2.23%. Anyway, this out flow from CHF hardly could be called as bullish sign for EUR...

Technical
Monthly

Right now 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.

So as New year is going to start, we will take a look at big picture and also bring new yearly pivots numbers.
Yearly Pivot (YPP) stands at 1.0828 area, YPR1 = 1.1305, YPS1 = 1.0040. Last one has major importancy for us. It is interesting that 2017 YPS1 coincides with parity.

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 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.

Last 2016 trading session has clarified question about possible bullish grabber on monthly chart - we do not have it.

Among other patterns that we have, we could mention bearish dynamic pressure. But mostly it has completed it's target as 1.05 lows has been taken out.

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 will be re-established only when 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.

Weekly

Trend is bearish on weekly chart, but market is not at oversold. Here, I would like to continue discussion of "big picture" that we've started above.

On weekly chart we have 2 major patterns - butterfly and inner AB-CD pattern. Here we can see how accurate market reacts on each AB-CD target. First reaction was on 0.618 extension, now is on 1.0 target...

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. Recall, that we have daily 1.0230 extension. Also, if 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 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

Now we come to chart that we're familiar with already. Trend is bullish here, also you can see "small" weekly butterfly here and daily AB-CD pattern. As butterfly as AB-CD target stands in the same area - 1.02-1.0220.

As we've said last week, upside action is limited by OB level and market indeed has turned down recently. Also price keeps harmonic upside swing very well. As a result we have 1.02-1.06 trading range on daily chart. So, in fact, this is the only target that we could use on coming week. All others stand beyond OS level.

Hourly

As we've discussed possible long-term perspectives, different patterns and other stuff, come to agreement that upside action is just a retracement, right now we need to get real signs that retracement is over. For that purpose we will watch for hourly chart.

First - if you have followed our Friday analysis and took short position around 1.0585 area - you can do nothing, just move stops to breakeven. For others task will be a bit more difficult. Market could act differently.
Price will open right around WPP and most simple scenario if pirce will drop below yellow rectangle, 1.0485 area. In this case EUR will drop back in H&S consolidation and it will become very bright sign that downward action should continue.

More difficult situation, will be, if EUR will try to test new MPP and may be even WPR1 that stand around 1.06-1.0650 area. But anyway, this will be good area for short entry, since we know that this is Fib resistance and this is daily OB. In this case we should watch for upside AB=CD pattern. The only strict condition though, that action should be gradual, not thrusting.

Market mechanics here is rather simple. From bearish market point of view - everything has been done already. Retracement has happened, as EUR has completed all major targets around 1.06. Thus, it should turn down right now, or could flirt a bit around 1.06 and then turn down.
If this will not happen and market will start shows signs of thrust, trying to climb above daily OB and WPR1 - it will mean that market is not bearish any more, at least in short-term. Thus - just look on market's behavior.

Conclusion:

In a big picture, we think that announced measures by ECB, Fed and D. Trump administration will be gradually priced-in and this should be enough to push EUR to parity. Further action will depend on fulfillment of their promises and new factors that will appear.

In short-term perspective, we need to get clear signs that upside retracement is over. If we will get it, then EUR should follow to next 1.02-1.0220 destination.


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.

 

[Sive Morten]

Good morning,

(Reuters) - The U.S. dollar held quietly firm on Tuesday as the prospect of rising U.S. interest rates this year kept sentiment bullish, while a surprisingly upbeat reading on Chinese manufacturing gave the Aussie dollar a lift.

A holiday in Japan made for thin trade, leaving the dollar steady around 117.35 yen but well up on Friday's trough of 116.05.

Against a basket of currencies, the dollar was 0.4 percent firmer at 102.600 .

The euro did creep higher from an early $1.0455 low to stand at $1.0485 but remained well short of the $1.0700 peak touched during Friday's brief spike.

A dearth of liquidity had been largely behind that wild swing, and the market is now so long dollars that it is vulnerable to sudden corrections.

Data on Friday showed speculators increasing their bets on the dollar in the week up to last Tuesday after cutting positions for the first time since October in the previous week.

The greenback had soared to 14-year highs in December on speculation the U.S. Federal Reserve will hike rates as many as three times this year, and that President-elect Donald Trump will stoke growth and inflation with debt-funded tax cuts.

Treasury yields have jumped in anticipation while central banks in the euro zone and Japan are still working to keep their short-term yields deep in negative territory.

As a result, U.S. two-year debt pays 200 basis points (bps) more than German debt and 138 bps more than Japanese bonds.

"Following a period of consolidation between now and late January, we believe the USD will put on another 10 percent of gains over the next eighteen months," said Richard Grace, chief currency strategist at CBA.

Grace argued Trump's proposed plans for a U.S. company tax cut could be particularly bullish for the dollar since it would likely encourage a wave of repatriation by domestic firms and demand for U.S. equities by foreign investors.

"We anticipate some twelve-to-eighteen months of USD strength, beginning when the Trump Administration gets its tax cuts through the Congress," he added, citing late March as likely timing for passage.

Dealers are also keeping a wary eye on the yuan as annual quotas covering how much foreign currency Chinese individuals can buy are reset this week.

China's foreign exchange regulator said on Saturday that the $50,000 annual individual quota will remain unchanged, but some banks have told customers that purchases of foreign currency for buying property, securities and life insurance were not allowed.

The new rules on overseas currency transfers are not capital controls, the official Xinhua news agency reported.

There has been talk investors could rush to sell the yuan fearing further depreciation in the currency, forcing the country's central bank to run down its reserves to head off a self-fulfilling spiral.

Some in the market have hedged the risk by shorting the Australian dollar, typically used as a liquid proxy for the yuan. Yet the Aussie got a lift to $0.7230 on Tuesday after a survey showed China's factory activity picked up in December, with output reaching a near six-year high.

The Caixin/Markit Manufacturing Purchasing Managers' index (PMI) rose to 51.9, from 50.9 in November.

So, let's take a look at EUR again. Yesterday market was rather thin, so it is interesting how action will change (or not change) as soon as investors will come back to trading. On daily chart nothing significant has changed. Due to technical picture EUR should retrun back to downward action. Upside potential is limited by OB level, downward floor stands around 1.02 for current week. Our next target stands around 1.02-1.0220, butterfly extension and 1.618 AB-CD target:

So, as you remember our major concern on short-term EUR picture stands around bearish signs that could confirm downward continuation. We've specified two conditions - market should not move above 1.06 area. It was done. Second - market should drop below 1.0485-1.05 area. This is also done, but, guys, the there is a trick that this was done on thin market. Still, EUR has dropped below WPP and now is flirting around our 1.05 area.
Right now we could adjust conditions. We do not need first condition any more and will make it more strict. Following market mechanics, current downward action is extension mode. It means that EUR should stand in daily bearish trend continuation to next target. That's why, now we need First fib level and K-resistance around WPP. EUR should not move above it, if it is really bearish.

This simultaneoulsy gives you an idea where you can take a short position.

 

[Sive Morten]

Good morning,

(Reuters) - The dollar moved back towards a 14-year peak on Wednesday as U.S. debt yields resumed climbing, giving a lift against the safe-haven yen amid strong investor appetite for riskier assets.

The dollar index against a basket of major currencies was up 0.1 percent at 103.30.

The index climbed to a 14-year high of 103.82 the previous day in reaction to the Institute for Supply Management (ISM) numbers, which showed U.S. factory activity accelerated to a two-year high in December.

Late on Tuesday, profit-taking on the dollar in the wake of a pullback in U.S. yields had taken the index towards 103.00.

The euro was down 0.1 percent at $1.0394 after briefly recovering to $1.0423. It hit a 14-year trough of $1.0340 overnight.

Against the Japanese yen, the greenback was up 0.2 percent at 111.970 after slipping to 117.540. The U.S. currency surged overnight to a near three-week peak of 118.605 yen.

The yen, which usually benefits in times of risk aversion, struggled for traction as the region's risk assets gained. The Nikkei added more than 2 percent in the first trading day of the year.

U.S. Treasury yields had tempered the dollar's overnight rally by making an about-turn following their initial spike in response to the upbeat ISM data. Then, amid the risk-on mood, yields rose again, shoring up the dollar.

"The dollar's moves show just how much the currency depends on Treasury yields for direction," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

"While I expect the dollar to be volatile given its close and sensitive link to Treasuries, from a longer-term perspective I see it tracking yields higher this quarter."

The 10-year Treasury note yield surged to its highest level since September 2014 in December on expectations that U.S. President-elect Donald Trump would introduce reflationary measures backed by large fiscal spending, prompting the Federal Reserve to follow through with a series of interest rate hikes.

The growing consistency of strong U.S. economic reports has also added to expectations of additional tightening by the Fed, which had just hiked rates last month.

Still, the greenback was seen facing potential turbulence ahead of Friday's highly anticipated U.S. non-farm payrolls report.

"The problem is that the run-up to the Fed's first rate hike in a year is now over and while policymakers have signalled plans to raise rates three more times this year, the dollar's sharp rally last quarter invited profit-taking," wrote Kathy Lien, managing director of FX Strategy for BK Asset Management.

"There are also concerns about how strong Friday's non-farm payrolls report will be."

The Australian dollar was up 0.3 percent at $0.7238. The Aussie was on a steady footing after being buoyed the previous day by a survey showing China's December factory activity picked up faster than expected.

The New Zealand dollar did not fare as well against the broadly higher dollar, slipping 0.2 percent to $0.6903 .

The pound was little changed at $1.2238 after stooping overnight to a two-month low of $1.2200.

So, currently we do not have any problems with EUR - it shows all features of bearish market and behaves rather well from this point of view. Yesterday price has dropped right back to 1.0350 area. This level brings some support, since this is long-term AB-CD weekly target, WPS1. But most important that this is low of high wave pattern on monthly chart. If EUR will break it down - it will mean that market has chosen direciton. After that action to parity should be smooth without any significant interruptions.
Overall price action shows some signs of bearish dynamic pressure, our targets are the same here - 1.02-1.0220:

On 4-hour chart as EUR has returned back in rectangle - it shows natural action, drops right to the opposite border of consolidation. Major level to watch for today is 1.0460 area. This should be enough to show respect to support, while our 1.0530 K-resistance around WPP still stands as "red line" for bearish sentiment.

Here, on hourly chart we see another reason for minor bounce up here - it's a 1.618 AB-CD target. As we suggest that EUR now stands in downward extension mode, and actually it doesn't have any significant supports here - it would be perfect if retracement will be over around 1.0460 area, as EUR should show minor 0.618 AB-CD action and may be will form butterfly or something of that sort. Stronger upside retracement is possible but not welcome...
That's being said, today we're watching for upside bounce to 1.0460. Yesterday drop has started as it was expected. Currently everything stands as it should be:

 

[Sive Morten]

Good morning,

(Reuters) - The dollar stepped further away from a 14-year peak against a basket of major currencies on Thursday as market players were spooked by sharp falls in the dollar against the Chinese yuan.

The yuan rose sharply for two days in a row to hit near two-month highs, wrong-footing speculators that had bet on the yuan weakening further due to capital outflows from China.

Unexpectedly big falls in the dollar against the yuan had knock-on effects on the dollar against major currencies, such as the yen and the euro, as traders rushed to cut back their bets on the dollar there as well.

"It's not clear exactly how the yuan's strength should help other major currencies against the dollar. Yet, considering that the renminbi had been a major piece of the puzzle in the dollar's strength, a reversal in the dollar/yuan tends to dampen momentum for overall buying in the dollar," said a senior currency trader at a major Japanese bank.

The dollar's index against a basket of six major currencies slipped to as low as 101.86, a three-week low, just two days after it had hit a 14-year high of 103.82 on Tuesday, when a strong reading from a U.S. manufacturing survey boosted the greenback.

The euro rose as much as 0.7 percent in Asia to $1.0563, extending its recovery from a 14-year low of $1.0340 touched on Tuesday.

The dollar slipped almost one percent at one point to 116.08 yen, though it has so far managed to stay above its Dec. 30 low of 116.05.

The dollar's retreat also came as investors locked in gains from its two-month-old rally after Donald Trump won the U.S. presidential election.

The dollar had soared on Trump's plans to cut taxes, boost fiscal spending and protectionist trade rhetoric, all seen as inflationary and lifting U.S. bond yields.

But uncertainty on exactly what his presidency will bring is prompting some players to close their bets on the dollar ahead of Trump's planned news conference on Jan. 11. He will be inaugurated on Jan. 20.

"Some people say the 'Trump rally' has come to an end already. Others say the real rally will begin after he takes office," said Kyosuke Suzuki, director of forex at Societe Generale. "It's not clear what the market's next theme will be."

"Recent economic data is pretty good so markets are on risk-on mode overall and the dollar is supported. But U.S. bond yields are being capped so the dollar is losing its drive for further gains," said Yukio Ishizuki, currency strategist at Daiwa Securities.

U.S. bond yields edged down on Wednesday, with the 30-year yield hitting a four-week low, even as the minutes from the Federal Reserve's December policy meeting showed almost all policymakers thought the economy could grow more quickly because of fiscal stimulus under the Trump administration.

The Chinese yuan rose more than one percent to a high of 6.7989 to the dollar in offshore trade a day after Chinese authorities tried to shore up the currency with higher a mid-point and intervention by state-owned banks.

Although Beijing set the mid-point for the daily trading range in line with market expectations on Thursday, short-covering in the yuan continued.

"There had been speculation that China plans to weaken the yuan against the dollar after the change in its currency basket at the end of last year. But the exact opposite has happened and I'd guess the Chinese policy-makers didn't want a one-sided market," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

Separately, a private survey on China's services sector showed growth in the industries accelerated to a 17-month high in December, underpinning risk sentiment.

So, it seems that massive stops triggering on yuan led to massive sell-off of USD across the board. As a result, our CAD B&B trade has not reached the target, price just was starting move higher for 50% and then collapsed.

On EUR, in turn, these new inputs have led to breaking 1-leg retracement scenario and now market mechanics suggests that EUR will show deeper upside retracement and should show some kind of 2-leg retracement. BTW, overall impact on EUR was less than on other markets, such as Gold and CAD.

On daily chart EUR has not broken 1.0350 level that is very important. Hardly EUR will climb higher than 1.0630 daily overbought level on current week. Anyway, to break short-term bearish tendency, EUR will have to take out 1.0870 top that hardly will happen any time soon. Besides, tomorrow we will get NFP release that could return all back in place:

On 4-hour chart we see another bullish signs that suggest some upside continuation. First - price was stopped by WPS1 and returned right back above WPP. This action breaks an idea of 1-leg retracement on daily chart and suggests some upside continuation. Also EUR has broken our K-reistance around 1.0535 area that should not been done, if market is bearish. Today-tomorrow we will watch for WPR1 and 1.0670 Fib level. Now is major question how long this effect of short covering against yuan will last on EUR:

So, as EUR has not followed to typical market mechanics of 1-leg upside retracement that suggested breakout of 1.0350 area. This tells that short-term setup has changed and market has turned to compounded upside retracement. Since tomorrow we will get NFP release, right now it is better to not take any shorts. Next level that EUR could reach till the end of the week is WPR1 and Fib level around 1.0670

 

[Sive Morten]

Good morning,

(Reuters) - The dollar crawled up on Friday as the dust settled from its tumble overnight to a three-week low, although gains were limited ahead of the U.S. non-farm payrolls due out later in the session.

The dollar index against a basket of major currencies was up 0.1 percent at 101.610 after dropping overnight to as low as 101.300, its lowest since Dec. 14. It was on track to lose about 0.8 percent on the week.

The index, which had set a 14-year high of 103.820 just three days ago on a seeming resumption of the dollar-bullish 'Trump trade', was weakened overnight by lacklustre U.S. employment data. The U.S. currency was also hit by a surge in the Chinese yuan, which some traders suspect was orchestrated by China to shake out large short positions against the currency.

As China works to stem capital flows and stabilise the currency ahead of the Lunar New Year and Donald Trump's inauguration as U.S. president, the offshore yuan rose the previous day to a two-month high against the dollar to mark the largest two-day rise since its inception in 2010.

"The yuan was a key catalyst that bears watching but it is not the only factor. There were large amounts of dollar long positions, particularly against the euro and yen, that found an opportunity to be unwound," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

Chinese authorities on Friday ramped up their defence of its currency, with the central bank raising the value of it official guidance rate by the most since the yuan was revalued in 2005.

The move was reminiscent of January 2016, when China's central bank reversed an earlier depreciation of the yuan -which sent global markets tumbling- and led the currency higher.

"The global economy looks to be in better shape compared to a year ago so the risk-off trend could be limited. But China-related headlines appear to have given participants a chance to adjust positions which had excessively favoured the dollar," said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.

China is expected to report December and full-year 2016 foreign exchange reserves on Saturday amid concern over the speed at which it is burning through its dollar cash pile in defence of the yuan.

The greenback was up 0.4 percent at 115.825 yen after falling 1.6 percent overnight. It ranged between a high of 118.605 and a low of 115.060 this week.

The euro was down 0.2 percent at $1.0584 after rallying 1.3 percent the previous day to pull away from a 14-year trough of $1.0340 set on Tuesday.

The dollar has lost support from U.S. Treasury yields, which has pulled back sharply over the past three days from their highest levels since September 2014 marked in December. Yields pulled back as investors grew risk-averse amid uncertainty about the incoming Trump administration.

Treasury yields declined further on Thursday as the ADP National Employment Report showed that U.S. private employers added 153,000 jobs last month, below economists' expectations for a gain of 170,000.

Investors are now focused on Friday's U.S. non-farm payrolls report. While economists expected jobs gains of 178,000 in December, wages were also in sharp focus as they were seen as a key factor determining the Fed's pace of rate hikes this year.

The Australian dollar nudged down 0.2 percent to $0.7327 after gaining 0.7 percent overnight, when it touched a three-week high of $0.7356. The Aussie received some support earlier on Friday after data showed Australia boasting its first trade surplus in almost three years in November.

The New Zealand dollar inched down 0.1 percent to $0.7017 after climbing to a three-week peak of $0.7040.

So, buy yesterday's action EUR has confirmed our suggestion on deeper retracement. Right now on daily chart EUR stands at overbought, that's why theoretically it could move higher, but major action probably will happen on next week, if NFP will be supportive for this. Speaking on NFP, now numbers are not as important as before, since US job market is strongly saturated and it just can't support the same pace of job creating.
Now wages growth come on frst stage, since they indicate inflation. Thus, be careful - a bit worse numbers but with nice wages growth will be treated as positive NFP...

Second moment on daily chart is untouched targets around 1.02-1.0220. This moment doesn't let us to treat any upside action as new trend. Any upside action with untouched targets on the back is not reliable and any reversal pattern that could be formed in a advance of reaching major targets will have more chances to fail:

I'm speaking about reversal pattern, since you could recognize reverse H&S on 4-hour chart:

So, market should start to form upside slope of the head, if this indeed will be H&S. It means that market today could reach our 1.0670 area and WPR1, and even continue action to 1.0870 next week, to reach neckline, but, when it will drop to bottom of right shoulder around 1.0550 area - it has great chances to fail due existing of untouched daily targets...

On hourly chart we have AB-CD extension. Minor one has been reached already, while AB=CD stands precisely at 1.0670 resistance and WPR1, while 1.618 AB-CD stands around neckline and 1.0870 Fib level, so, this is subject for future talks.

That's being said today we're watching for 2 moments. First - reaching our predefined target @ WPR1 and 1.0670 Fib level. Second - price action around WPR1. If EUR will break it up, this will put basis for upside continuation on next week.

 

[RahmanSL]

Sive, as usual, your analysis are most informative and insightful as ever.
I will most certainly be watching EUR/USD because, if all things come to pass as you have analyzed, it will be most worth to trade the pair.....not forgetting that we get positive daily swaps on shorting EUR/USD

Have a fantastic and profitable 2017

 

[Sive Morten]

Sive, as usual, your analysis are most informative and insightful as ever

Thanks Rahman, I try to do my best. Your warm support gives me inspiration and make me continue this work...

...not forgetting that we get positive daily swaps on shorting EUR/USD

You're probably carry trader, somewhere deep in soul.

Today we bring arguable view on CAD. I know you like it...
At least it should be interesting reading.

 

[chalo]

Sive, as usual, your analysis are most informative and insightful as ever.
I will most certainly be watching EUR/USD because, if all things come to pass as you have analyzed, it will be most worth to trade the pair.....not forgetting that we get positive daily swaps on shorting EUR/USD

Have a fantastic and profitable 2017

Sive, I would also like to express how grateful I am for your constant informative help. Learning a lot about analysis and insightful details and thinking. Wish you a wonderful 2017 to you and your family.

 

[ivans990]

Hi Sive,
What is your opinion about USD/JPY DREPO setup on Daily chart (of course if today candle finish below the 3x3 line)?

 

[Sive Morten]

Hi Sive,
What is your opinion about USD/JPY DREPO setup on Daily chart (of course if today candle finish below the 3x3 line)?

Yes, it could be ( I also have made a video on JPY today), but fundamental background for JPY makes setup a bit tricky. But technically, it looks nice.