FOREX PRO WEEKLY, January 08-12, 2018

[Sive Morten]

Good morning,

(Reuters) - The dollar edged higher against the yen on Thursday after comments by China’s foreign exchange regulator eased concerns that China may reduce its buying of U.S. government bonds.

The dollar rose 0.2 percent to 111.70 yen, pulling away from a six-week low of 111.27 yen on Wednesday.

China’s foreign exchange regulator said a recent report that China was considering slowing down or halting its purchases of U.S. Treasury bonds could be based on erroneous information.

Bloomberg News had reported on Wednesday that Chinese officials reviewing the country’s foreign exchange holdings had recommended slowing or halting purchases of U.S. Treasury bonds.

U.S. 10-year Treasury yields rose to 10-month highs and the dollar fell after the report was published.

After the regulator’s comments on Thursday though, the dollar and U.S. Treasuries gained some buying support.

Against a basket of six major currencies, the dollar inched up 0.1 percent to 92.396 .DXY, having fallen as low as 91.922 on Wednesday.

Still, some analysts remained cautious about the dollar’s near-term outlook.

Market sentiment seems tilted toward the dollar’s downside, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

“Market reaction to dollar-buying factors has been subdued, while market reactions to dollar-selling, and yen-buying factors, have been more vivid,” Murata said.

The dollar is down more than 1.1 percent against the yen so far this week, having also come under pressure after the Bank of Japan trimmed its buying of long-dated Japanese government bonds in market operations on Tuesday.

The BOJ operation unleashed a wave of speculation that the BOJ could be poised to begin winding down its stimulus, giving the yen a boost.

The BOJ on Thursday soothed nerves by buying its usual amount of debt.

The euro was steady on Thursday at $1.1951, having retreated from Wednesday's intraday high of $1.20185.

The Canadian dollar was nursing losses after slipping on Wednesday as investor bet the Bank of Canada was less likely to raise interest rates next week if the United States withdraws from the North American Free Trade Agreement (NAFTA) trade agreement.


Canada is increasingly convinced that U.S. President Donald Trump will soon announce that the United States intends to pull out of the agreement, two government sources said.

The Canadian dollar was little changed at C$1.2549 per U.S. dollar. It fell on Wednesday as low as C$1.2583, the loonie's lowest level since late December.

The Australian dollar touched its highest levels in nearly three months at $0.7887 on Thursday after data showed that Australian retail sales recorded the biggest monthly rise in four years in November, a major boost for an economy that has been struggling with sluggish consumer spending.

The Aussie last traded at $0.7880, up 0.5 percent on the day.

So, yesterday it was dramatic action across the board, but mostly in our favor as DXY, EUR and Gold have shown anticipated behavior.
While those markets take the rest, today we will take a look at CAD, because it shows clear setup for 1-2days trading. This is B&B "Sell" on daily chart. All preparation to trade has been done. Thrust is perfect, price has hit major Fib resistance and trend line:

The minimum target of this trade should be an area around 1.2445-1.2450 - 5/8 Fib support of whole upside retracement.

On 30-min chart we have completed AB-CD XOP target which also creates an Agreement with daily Fib resistance. And price has formed bullish reversal swing. Usually this action leads to deep retracement.

The only problem here - we do not have clear bearish reversal pattern. Some hints on possible "222" Sell on top, but it looks a bit choppy and noisy, not too good. That's why here you will have to make a decision whether to take trade and place more extended stop or wait for clear bearish pattern. Or, right, skip this trade totally - this is decision also...

 

[Sive Morten]

Good morning,

(Reuters) - The dollar slumped against rivals on Friday on the back of weak factory inflation data, while the euro enjoyed solid support after the European Central Bank hinted that it could be gearing up to trim its massive monetary stimulus.

The dollar index, which tracks the greenback against a basket of six major rival currencies, edged down slightly to 91.814. A move below the Jan. 2 low of 91.751 would put it at its weakest since Sept. 20.

The index was on track to shed 0.2 percent for the week, pressured by data on Thursday that showed U.S. producer prices fell for the first time in nearly 1-1/2 years in December, which could temper expectations that inflation will accelerate in 2018.

Against the yen, the dollar was almost flat on the day at 111.27, after plumbing a six-week low of 111.05 yen on Thursday.

It was still down a steep 1.6 percent for the week in which the Japanese currency soared as a routine operational reduction in bond purchases by the Bank of Japan triggered speculation that the central bank would unwind its massive stimulus.

“Yen short positions had been building, and investors seem to be looking for opportunities to trim them,” said Yutaka Miura, a senior technical analyst at Mizuho Securities.

While the domestic economy is in its best shape in years, tame inflation meant that most market participants aren’t expecting Japan’s central bank to explicitly shift its easy policy stance anytime soon.

Japan’s economy minister on Friday suggested it is possible for the government to declare an end to deflation before consumer prices reach the BOJ’s 2 percent inflation target.

“The market is very cautious about the Bank of Japan’s policy changes, but it is not expected that they will change their policies any time soon, since CPI is still lower than 1 percent,” said Harumi Taguchi, principal economist at IHS Markit in Tokyo.

“It’s not only for Japan, but for the ECB and U.S., that markets are sensitive about anything that suggests tapering,” she said.

The euro was up 0.2 percent at $1.2050 , approaching its nearly four-month high of $1.2089 set last week. It was up 0.2 percent for the week.

The single currency rallied on Thursday, after ECB policymakers said in minutes of the bank’s December meeting that they could revisit their communication stance in early 2018, boosting expectations that they are preparing to reduce their vast monetary stimulus program.

Investors took the relatively hawkish statement as a further signal that the ECB will wind down its 2.55 trillion euro ($3.07 trillion) bond purchase scheme this year if Europe’s economy continues to hum along.

Bitcoin was up 2.8 percent at $13,618.78 on the Luxembourg-based Bitstamp exchange. It skidded over 11 percent in the previous session after the government of South Korea, a crucial source of global demand for cryptocurrency, said it is considering a plan to ban cryptocurrency trading.

Guys, in today video we take a look not on DXY but on CAD and AUD as well. Here we focus on major setup only, which is Dollar Index.

Daily DXY shows rather clear patterns. Our B&B "Sell" trade has worked perfectly. Now it is just one step till our major pattern - "222" Buy around 91.20 area.

Pattern could be triggered by 4-hour Butterfy "Buy", which has 1.27 target at the same 91.25 level. So, butterfly could finalize daily AB=CD and become a triggering pattern for "222" Buy setup:

Thus, today we're keep watching for downside continuation and may be butterfly completion, while trading of daily pattern will start next week probably. Don't forget that Monday is MLK Holiday in US.