FOREX PRO WEEKLY, July 11 - 15, 2016

Sive Morten

Special Consultant to the FPA
Messages
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Fundamentals

(Reuters) The dollar slid against the yen and some currencies on Friday in choppy trading on the view that the much stronger-than-expected U.S. employment payrolls report will not persuade the Federal Reserve just yet to raise interest rates again this year.

The greenback did rise after the U.S. jobs data, reversing losses against the yen and climbing to two-week highs against the euro and a five-week peak versus the Swiss franc. But gains against the yen evaporated and the dollar traded mostly lower on the day.

The dollar, however, remained higher against the euro and Swiss franc, but fell versus the Australian, Canadian, and New Zealand currencies.

Data showed that non-farm payrolls increased by 287,000 jobs last month, the largest gain since last October. May's payroll count was revised down to only 11,000 from the previously reported 38,000.

"It will likely require continued evidence of positive economic data in the months to come, including solid NFP (non-farm payroll) numbers, in order to convince the Fed that a rate hike would be appropriate," said James Chen, currency strategist, at Forex.com in New Jersey.

Fed funds futures, based on the CME Group's FedWatch, have not priced in a rate increase this year and for much of 2017. The futures data has priced in just a 28.2 percent chance that the Fed will increase rates at the June 2017 meeting.

In late trading, the dollar fell 0.4 percent against the yen to 100.46 yen, not far from the post-Brexit low of 99 yen.

"The psychological 100.00 yen mark has long been seen by traders as the key 'line-in-the-sand' in terms of the potential risk of Japanese intervention," said Forex.com's Chen.

The euro, meanwhile, was slightly lower at $1.1050. It earlier fell to $1.1003, a two-week low, after the jobs data.

The dollar gained 0.4 percent against the Swiss franc to 0.9826 franc. The greenback earlier rose to a five-week high of 0.9867 franc following the jobs data.

Sterling rose 0.3 percent against the dollar to $1.2951, surprisingly resilient after an upbeat U.S. jobs number.

There should be significant downside risk for sterling next week, however, with the Bank of England's monetary policy announcement.

Kathy Lien, managing director of FX strategy at BK Asset Management in New York said BoE Governor Mark Carney could use the meeting next week to prepare for further easing.

"So even though sterling/dollar appears to be forming a base, this is far from a bottom," she added.


Strong UK second quarter no more than a statistical curiosity
by Fathom Consulting

Owing to exceptionally strong data in April, we estimate that the UK economy grew by 0.6% in Q2 of this year. But the turmoil since last month’s EU referendum means that Q2 GDP data are likely to be little more than a statistical curiosity. This morning’s consumer confidence survey made for bleak reading, which is likely to feed through to consumer behaviour, and falling investment from firms. Our central view remains that the UK will narrowly escape a recession, but only if sterling continues to fall, cushioning the blow.
Consumer-conf-1.jpg

We estimate that the UK economy grew by 0.6% in the second quarter of this year. This is somewhat better-than-expected, with forecasts from the beginning of the quarter pointing to near economic stagnation. Robust data for both services and production output in April look to have driven growth, with signs of a slowdown through May and June.

A very different tone for Q3

In our view, the turmoil since last month’s EU referendum means that Q2 GDP data are likely to be little more than a statistical curiosity. Indeed, survey based evidence points to a sharp drop in consumer confidence, with results from market researcher GfK suggesting that the UK has suffered the largest drop in consumer confidence since December 1994. As the first chart highlights, its headline index has fallen sharply between the survey conducted before the referendum (when a vote to ‘Remain’ seemed the most likely outcome), and the survey conducted on 29 June — the results of which were published today.

Within this, expectations about the general economic situation, personal finances, and purchases of big ticket items over the next twelve months all fell. Interestingly, confidence of UK households in their own financial situation, though still elevated, has fallen by more than at any time since the 2008-2009 recession.

Consumer-conf-2.jpg


Some uncertainty to subside

Some of the uncertainty reflected in the results of this survey, which was conducted on 29 June, is likely to be associated with the UK’s fragile political situation. Prime Minister David Cameron had resigned the previous morning and the Labour Party had begun efforts to oust its leader, Jeremy Corbyn. Since then, candidates for the new Conservative Prime Minister have been whittled down to Home Secretary Theresa May and Energy Minister Andrea Leadsom, with a final decision to be made by early September. Accordingly, uncertainty surrounding the political situation may begin to dissipate within a few weeks. However, uncertainty about the terms on which the UK exits the EU – or even if it exits at all – will remain for months, if not years.

Looking ahead

Under our central scenario, we assume that the UK narrowly avoids recession, with a weaker currency cushioning the blow from reduced consumer expenditure. Survey based evidence also points to a drastic reduction in the number of job adverts since the UK’s referendum, reflecting defensive behaviour by corporates. With the future of the UK economy highly uncertain, investment is likely to be severely reduced until businesses have a clearer picture of what lies ahead.

08-07-16-UK-investment-scenarios.jpg


COT Report

Today guys, I think we can change our habit to talk mostly on european currencies and take a look at something else, for example on CAD. Mostly because we've talked about EUR and GBP too much recently and almost didn't talk on other currencies. Besides, CAD shows not bad short-term setup.
COT data does not show anything really special. Speculative position slightly bearish, open interest stands at average levels, nothing really important. So, from CFTC data we do not see any barriers as for upside action as for downside one:

upload_2016-7-9_12-0-14.png


Technical
Monthly
Here we're returning back to our old discussion of large picture. Market still stands in retracement after reaching all time AB=CD target. On a way down market has reached strong support area, consists of K-support, former top and YPP. On a first touch CAD has formed nicely looking bullish engulifng pattern.

So, this pattern in particular is our background for possible trade. But first - take a look at Crude oil chart. Price has completed harmonic upside swing, weekly trend has turned bearish and here we could count at least on minor retracement to ~43$ level. This will be enough to complete our CAD setup.
oil_m_11_07_16.png


Usually when market forms engulfing pattern - it's target equals to its bar length, and action by itself take shape of some AB=CD pattern. Engulfing could become starting point of some greater action, but now we're mostly interested in minimal target:
cad_m_11_07_16.png


Weekly

Here we see how situation with monthly engulfing pattern develops. Price has moved above MPP. Also, if you remember our last research - we've spoken on possible DRPO "Buy" pattern here. Well, actually we've got formal execution of DRPO conditions - thrust down, close above 3x3, below and then above again - this shape doesn't perfectly match to DRPO. Usually DRPO has equal bottoms, or even second bottome slightly lower, while here we have second bottom too high. It means that this action down was not an attempt to continue move lower, but mostly just a retracement after started upside action.

Thus, we probably could treat it as DRPO look-alike pattern, but may be it will work... Anyway DRPO has more extended target (around 1.36) but we will trade the closer one. First resistance here stands at 1.3311 area, trend is bullish on weekly chart by MACD:

cad_w_11_07_16.png


Daily

Here we have definite patterns that point on target. As we've said - engulfing pattern very often takes the shape of AB=CD on lower time frames. So, we see it on daily chart. AB=CD target stands @ 1.3378, slightly higher than weekly Fib level.

At the same time, CD leg could take a shape of butterfly, 1.27 extension also stands in the same area. Here we also have minor grabbers that suggest upward contination.

Finally, butterly inner AB=CD has target around 1.33 area. Thus, all three patterns' targets stand very close to each other and create some kind of agreement with weekly Fib level:
cad_d_11_07_16.png


Hourly

This picture shows that if market will show minor retracement down - 1.30 area is level where we could search for buy signals. This is a combination of WPP and Fib level. As market is not at overbought on daily chart - retracement should not be too deep.

Besides, current action up is already CD leg continuation, because loonie already has made a retracement after daily 0.618 AB-CD target been hit. Thus, too deep retracement here will be a bit irrational:

cad_1h_11_07_16.png


Conclusion:
Our analysis mostly is based on monthly retracement and dedicated to using it for tactical trading. Currently we expect that CAD could reach 1.33-1.3350 area. Long term perspectives is a bit blur right now, since to make a decision we need to see breakout of major levels on Crude oil, that we do not have by far.



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.
 
Good morning,

(Reuters) The yen hit a one-week low versus the dollar on Tuesday, after a weekend election victory by Japan's ruling coalition fanned expectations of more economic stimulus and bolstered risk sentiment.

Gains in equity markets helped spur selling of the yen, which had risen recently on safe haven demand after Britain's vote to leave the European Union added to worries over global growth.

The dollar rose 0.3 percent to 103.05 yen and touched a high of 103.29 yen at one point, its strongest level since July 1.

As the yen slipped broadly, the euro gained 0.5 percent to 114.17 yen EURJPY=R. Against the dollar, the euro rose 0.2 percent to $1.1083.

Japanese Prime Minister Shinzo Abe said on Monday that he will instruct Economy Minister Nobuteru Ishihara on Tuesday to start work on compiling a fiscal stimulus package, but did not mention how much the size of spending will be.

Ruling party sources had told Reuters before the election that the government was ready to spend more than 10 trillion yen.

Another focus in coming weeks is whether the Bank of Japan will expand monetary stimulus at its policy meeting in late July.

Market participants said the dollar's bounce against the yen since the start of the week has been exacerbated by position squaring.

"In dollar/yen, there had been an excessive build up of yen-buying positions and such bets are getting squeezed," said Shinsuke Sato, head of FX trading group for Sumitomo Mitsui Banking Corporation.

Some market players will now probably be looking to sell into the dollar's rally against the yen, Sato said.

He added, however, that the dollar could add to its gains if upcoming U.S. economic data and comments from Federal Reserve officials appear to favor a Fed interest rate rise in September, a view that has lately lost support.

While U.S. jobs data on Friday was much stronger than expected, U.S. interest rate futures suggest that many market participants doubt that the Fed will raise interest rates this year, in the wake of Britain's shock vote last month to leave the European Union.

Sterling rose 0.6 percent to $1.3078, pulling away from a 31-year low of $1.2798 struck last week.

The gains in the pound came as Interior Minister Theresa May was set to become Britain's prime minister on Wednesday with the task of steering its withdrawal from the European Union, after her rival withdrew from the contest.

While Andrea Leadsom's exit removes the need for a drawn-out leadership contest, investors remain uncertain about May's approach to negotiating Britain's exit from the European Union.

As long as Britain keeps moving forward with procedures to leave the European Union, sterling is likely to remain under pressure, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

"While the pound might rise on a daily basis, I think it makes more sense to expect that its downtrend will continue over the medium to longer term," Murata said.


So, today guys we make brief update on GBP. Last time, in weekly research we've waited for completion of all long-term targets, especially 1.30 area. Now this target has been hit and GBP could take some short-term relief.
So, in fact we have 2 setups on GBP. First one on daily chart, and it is based on Brexit plunge. We treat it as volatility breakout on weekly chart and could get 0.618 AB-CD pattern. Second - upside retracement per-se that will be BC leg in daily pattern.
On daily chart first retracement destination could stand around MPP and unfilled gap around 1.3780-1.38 area:
gbp_d_12_07_16.png


On 4 hour chart we see particular pattern by which market has completed important target - butterfly Buy. And again, guys, here we could get H&S pattern that will become a foundation of upside bounce. Targets of this H&S coincides with daily 1.38 area:
gbp_4h_12_07_16.png


If you would like to trade this H&S - you could either wait for bottom of right shoulder, or, I know that some traders trade it on a way up to neckline. So if latter is your choice, then take a look at hourly chart and 1.30 area that could be suitable for taking long position - this is WPP and K-support area:
gbp_1h_12_07_16.png
 
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Good morning,

(Reuters) The dollar eased slightly against the yen on Wednesday, but remained close to 2-1/2-week highs reached this week as the prospects for more economic stimulus in Japan helped bolster risk sentiment.

The dollar was off 0.2 percent to 104.46 yen. On Tuesday, the greenback touched 104.98 yen, its highest level since June 24. For the week, the dollar is up about 3.8 percent against the yen.

The euro fell 0.3 percent against the yen to 115.46 yen but was still up about 3.9 percent so far this week. Against the dollar, the euro held steady at $1.1057.

A rebound in equity markets has led investors to reduce their holdings of safe-haven assets like the yen, which had surged in the aftermath of Britain's shock vote last month to leave the European Union.

Some market participants caution against reading too much into this week's moves.

While the yen may ease further in the near term, a sustained drop against the dollar seems unlikely, said Daisuke Karakama, chief market economist at Mizuho Bank.

"I think these moves are nothing more than position squaring and will prove temporary," Karakama said, referring to the yen's broad retreat this week.

Expectations of more economic stimulus in Japan have contributed to the recovery in risk sentiment.

Japanese Prime Minister Shinzo Abe on Tuesday told his economy minister to compile an economic stimulus package by the end of this month to revive a flagging economy.

Besides fiscal spending, there is also focus on whether the Bank of Japan will expand its monetary stimulus at its policy meeting later this month, especially after former U.S. Federal Reserve Chairman Ben Bernanke told Abe that the BOJ has steps left available to support the economy.

Sterling eased 0.1 percent to $1.3233, after climbing 1.9 percent on Tuesday.

The battered sterling has enjoyed some relief this week as the anointing of interior minister Theresa May as British prime minister helped calm investors unnerved by Brexit and political turmoil.

For sterling, this week's main economic event is a Bank of England policy meeting on Thursday which markets expect will bring about a cut in interest rates to shield the economy from the immediate shock of the Brexit vote.


Today guys, we again will take a look at EUR. On daily chart we continue to trade our bearish grabber that was formed 2 weeks ago. Price action as you can see rather slow. On Friday market has formed high wave pattern and price stands in its range since then.
Yesterday EUR has failed attempt to move higher and another bearish grabber was formed. As today we will get Fed US economy view announcement this could lead to more activity and may be our patterns will reach the target.
Currently we expect that market should reach next support around 1.0850-1.09 area:
eur_d_13_07_16.png


On 4-hour chart we see the pattern that could lead market there. If some stop orders stand below the low of huge candle - then they could add more fuel to downward action. As a result we could get nice Butterfly "buy" pattern:
eur_4h_13_07_16.png


Finally, guys, be careful with reverse H&S pattern that is forming right now on hourly chart. Probably it will be better to not rely on it, as we have opposite daily patterns. Better is to use it as indicator. As soon as it will fail - we will get confirmation of downward action on EUR and it will be relativey safe to take short position. While it will hold and work properly it will be better to not take new short positions. We should get solution soon, as EUR stands at the bottom of right shoulder, so, here is a moment of truth:
eur_1h_13_07_16.png
 
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Good morning,

(Reuters) The yen slipped to a three-week low on Thursday on speculation of more stimulus from Tokyo, while sterling ticked up ahead of a Bank of England meeting that is expected to deliver a rate cut to blunt the economic fallout of Britain's vote to exit the European Union.

The dollar extended this week's gain to 105.54 yen, up 1.0 percent on the day and hitting its highest level since late June, as the yen was dogged by speculation that Japanese policy makers could take aggressive monetary easing.

Possibly helping to trigger the yen's latest was a story by Bloomberg that former U.S. Federal Reserve Chairman Ben Bernanke had floated the idea of perpetual bonds with one of Prime Minister Shinzo Abe's key advisers in April.

The idea under discussion was to make the government issue perpetual bonds directly to the BOJ. With Abenomics widely considered to have failed so far, traders are wondering if the government and BOJ will come up with more radical monetary and fiscal stimulus measures soon.

The dollar's rise accelerated after it broke above a major resistance at 105.00 yen, sparking short covering by those who had bet that heavy selling from Japanese exporters would block the currency's advance.

Sterling added 0.8 percent to $1.3244, rising off a session low of $1.3105.

The BoE is expected to announce a cut to its benchmark interest rate to a record low of 0.25 percent from 0.5 percent when its makes its monthly policy statement at 1100 GMT.

Another key focus is how soon the BoE's Monetary Policy Committee could sanction a new round of quantitative easing, said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong.

"We're expecting August to be the delivery date, so any kind of guidance on that front will be keenly watched," she said.

Wednesday's appointment of Theresa May as Britain's new prime minister alleviated market participants' fears about political chaos in the wake of last month's Brexit vote, and helped sterling climb off its 31-year low of $1.2798 plumbed earlier this month. But many economists say the UK could still slip back into recession.

"Even if the BoE passes on a move Thursday, they'll prepare everyone for easing later this year," Kathy Lien, managing director of FX strategy at BK Asset Management in New York, said in a note.

"If sterling rises because the Bank of England left interest rates unchanged and some part of the market was disappointed, the rally should be sold," she said.

The Canadian dollar, meanwhile, gained against the greenback, which slipped 0.3 percent to C$1.2944. The Bank of Canada held interest rates steady on Wednesday, saying it believed exports and business investment would pick up even as it cut its growth forecast for 2016.

The euro rose 0.3 percent to 116.20 yen. Against the dollar, the European currency added 0.2 percent to $1.1106.

Waning expectations of the Federal Reserve delivering further interest rate hikes have weighed on the dollar this year, and investors' wariness increased after the Brexit vote roiled markets.

Philadelphia Fed President Patrick Marker said late on Wednesday that the central bank will likely opt for a "fairly shallow" series of U.S. interest rate hikes, and that he wants to "let it play out a bit" before backing a policy tightening.


So, GBP is still forming H&S pattern on 4-hour chart and upside retracement stands in progress, situation probably doesn't need any update by far.

On daily EUR we see that downward action has slowed a bit, but all major patterns that have been formed still valid. I mean bearish grabbers. Market still stands below MPP, although trend has turned bullish on daily chart:
eur_d_14_07_16.png


On 4-hour chart our butterfly is valid as well, although right wing has changed the shape a bit, but butterfly has become even more harmonic:
eur_4h_14_07_16.png


Most interesting situation for us stands on hourly chart. Yesterday we've made a decision if market will hold H&S pattern - do not take short position. So, it has happened. EUR indeed was able to keep right shoulder and now even has reached the neckline. But, personally, guys, I do not have sufficient trust to this pattern that could call me to take long position. Price action looks heavy and tested already this area 4 times. As it was choppy in the beginning of H&S pattern as it stands right now. Besides, here we see multiple small bearish grabber have been formed. Thats, why, It seems that taking long position here is accompanied with solid risk.
At the same time it is a question how better to go short. As usual we have 2 major ways. First is agressive one. You could go short right now, and your entry level will be better, but as a payment for that you will take higher probability of loss, although loss itself will be also small.
Second - conservative. Wait when market will drop below the shoulder and only after that think about short position. Entry point will be worse, but greater confidence of downward continuation. Also it is possible to combine both of these ways in some ratio.
eur_1h_14_07_16.png
 
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Good morning,

(Reuters) The yen eased versus the dollar on Friday and was on track for steep losses for the week, under pressure from improving risk sentiment and speculation that Japanese policymakers could adopt more radical monetary stimulus.

The dollar edged up 0.1 percent to 105.46 yen, after having set a three-week high of 105.935 yen on Thursday. The dollar has gained about 4.8 percent versus the yen so far this week.

The yen has been dogged this week by speculation that Japan might resort to providing "helicopter money", which would involve the central bank taking steps to directly finance government spending.

While the yen has managed to regain some footing after government and central bank officials directly involved in policymaking said there is no chance that Japan will resort to "helicopter money", traders will be keeping close eyes on any fresh news on this topic.

"Any headlines related to Japanese policies will need to be watched closely," said Shinichiro Kadota, FX strategist for Barclays, adding that moves in dollar/yen will likely remain sensitive to any such headlines.

The risk-sensitive Australian dollar eased against the yen, following reports that an attacker killed at least 73 people and injured scores when he drove a truck at high speed into a crowd watching Bastille Day fireworks in the French Riviera city of Nice late on Thursday.

The Australian dollar last traded at 80.27 yen, down 0.1 percent on the day, and slipped to as low as 79.91 yen earlier on Friday.

Against the dollar, the Aussie slipped 0.2 percent to $0.7617.

A near-term focus for the Aussie, which is regarded as a liquid proxy for bets on China's economy, is China's second-quarter gross domestic product data and economic activity indicators for June, due at 0200 GMT.

Sterling rose 0.5 percent to $1.3415, after having risen 1.5 percent on Thursday as the Bank of England (BoE) kept interest rates on hold, wrong-footing many investors who had expected a rate cut following Britain's shock vote on June 23 to leave the European Union.

Expectations that the BOE will ease policy soon, however have helped temper gains in sterling, which remains below a two-week high of $1.3480 touched on Thursday.

Today guys, we will take at GBP. Although EUR currency still has led hourly H&S pattern to target, but this has happened on Nice tragedy and overall market still stands choppy, that's why, on EUR we still keep our opinion on possible further drop as our butterfly patterns suggests.

On GBP market stands on a retracement up. Major pattern that we're watching here is AB-CD down based on Brexit candle. Depending on upside retracement depth it will have a target around 1.26 area, so, approx. 10 points.
As first stage - AB leg in place, we're watching for second one, which is BC retracement up. Today market has reached daily overbought and hardly we will get sollid upside continuation today, but on next week GBP could reach and area around 1.36-1.3650 level around MPP that has not been tested yet. Keeping rate unchanged by BoE wil provide some support to cable as well:
gbp_d_15_07_16.png


Overall situation is developing as we've suggested. GBP indeed is forming reverse H&S pattern and most part of it already in place. Currently we have minor AB-CD that should lead market to the neckline and close the gap. Then second shoulder should start forming. At least theoretically it looks so.
At the same time, actually we do not much care how particularly price will reach 1.36-1.3640 area. All that we need is some reversal pattern that will help us to take short position with our major daily AB-CD pattern:
gbp_4h_15_07_16.png
 
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Sir any updates on Eur/usd
here is my plan ,


market is chop chop bullish currently , eur/usd looks good for short , if we take a took on Weekly chart's candle , continuously market Threats for break out on 4 Hour chart , and rejected by bears ' if we take a look on the fibo retracemnt we will find 50% of fibo which is on ( 1.1093 ) missed by a couple of pips and rejected by trendline ... market may touch this fibo Resistance
Point 1 : 4 Hour candle close above 61.8% ( so its no longer resitance )
Point 2 : take a look on trendline .. surely its good , but market needs more resitance to go down , than a simple trendline resistance.
Conclusion : so the plan is Pending Sell Eur/Usd on 1.1092 with a stoploss as per trading strategy target 1.1014 area for intraday !!
 

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Any analysis about NZD USD

Hi, metaphor,
Situation on NZD has changed. As we haven't got any reversal pattern price already has broken through K-resistance on weekly!! chart, we probably will have to change our opinion and watch mostly for long position, rather than short. But currently we haven't got yet some clear setup. We are watching for it and bring update as soon as we will get something valuable.
 
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