FOREX PRO WEEKLY, July 24 - 28, 2017

Sive Morten

Special Consultant to the FPA
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Fundamentals

(Reuters) - The U.S. dollar hit its lowest level in more than a year against a basket of major rivals on Friday a day after the European Central Bank's chief abstained from talking down the euro, while obstacles to U.S. President Donald Trump's policy agenda also weighed.

ECB President Mario Draghi said on Thursday that financing conditions remained broadly supportive, and noted that the euro's appreciation had "received some attention." However, he did not cite that strength as a problem nor did he directly try to talk the currency down.

Draghi's apparent lack of concern about the strengthening euro convinced traders that the central bank remained on track to potentially begin tapering its bond-buying stimulus later this year.

The dollar index touched 93.854 its lowest level since June of last year, and was last down about 0.5 percent at 93.885. The euro touched $1.1682 its highest level against the dollar in nearly two years, and was last up 0.4 percent on the day at $1.1674.

"The fact that Draghi didn’t necessarily argue too much against the strength of the euro ... certainly gave the greenlight for individuals to want to own the currency again or actually add to their positions," said Dean Popplewell, chief currency strategist at Oanda in Toronto.

The euro was last on track to gain 1.8 percent for the week, which would mark its second straight weekly rise against the dollar. The dollar index was set to fall 1.3 percent to mark its second straight weekly decline.

Against the yen, the dollar touched more than four-week low of 111.02 yen.

In addition to traders' expectations that the ECB was staying the course toward tightening monetary policy, investigations into alleged Russian meddling in the U.S. election and possible collusion with Trump's campaign were viewed as obstacles to the administration's pro-growth agenda and negative for the dollar.

"Compounding the (weaker dollar) move is this latest news on the political front in the U.S. about the Russia investigation expanding to Trump’s business affairs," said Alvise Marino, FX strategist at Credit Suisse in New York.

"This is on top of the fact that Senate has not been able to pass anything meaningful on the healthcare front," he said in reference to the collapse late on Monday of a Republican effort to overhaul the U.S. healthcare system.

The dollar touched its lowest against the Swiss franc in more than a year at 0.9440 franc.


Chart of the Week: Fathom’s US Economic Sentiment Indicator (USESI) points to robust economic growth in Q2
by Fathom Consulting
us-economic-ind-1.png

After incorporating survey data for June, the final 2017 Q2 USESI reading was 5.1%, suggesting that economic activity grew at a very strong pace last quarter. By contrast, official US GDP growth – scheduled for release on 28 July – looks likely to be closer to 2.5%, based on the hard economic data for Q2 released so far; we will publish a more detailed forecast later this week. In a note last quarter, we highlighted possible explanations for the very large divergence between survey (or soft) measures of economic activity and real (or hard) measures of economic activity in Q1. A large divergence appears to have continued into Q2; the most plausible explanation for this is that while US businesses and consumers are optimistic about the economic outlook, they are waiting for more clarity on tax reform before loosening the purse strings.

COT Report

Today, guys, we will take a look at AUD. Although we quite rare take a look at it and mostly we're focused on EUR, GBP, but... since this has happened - we have short-term setup on aussie, let's take a look, what we have on higher time frames as well.

CFTC data is very positive to AUD. Upside sentiment trend has started in June - now we see sequence of growing price, speculative longs and open interest. This indicates strong bullish sentiment on the market.
At the same time AUD is not at overbought. Currently net long positions stands around 50K, while maximum that we should worry about stands 2 times higher - around 100K contracts. Thus, aussie still has pretty much room to grow.
upload_2017-7-22_11-59-22.png


Technical
Monthly

In a stubborn counter standing on monthly/weekly charts of flat resistance around 0.77-0.78 area and higher lows - bulls has won. Higher lows that were started to form in September 2015 indicates bullish dynamic pressure, but only in July 2017 this breakout has happened.

Trend stands bullish (at least by letter) since 2015 here, price neither OB nor OS right now. So AUD has free space to continue upside action.

Last 2 month price strongly acts above YPP. As price moves above YPP, next destination should be YPR1 that stands around 0.81 area.

Upside action has started from a kind of "222" Buy" pattern (but not quite, as "D' point of inner AB-CD stands slightly higher than "B" point), and now we have wide AB-CD in progress that has the same target - 0.8165 and stands in a Agreement with major Fib resistance level. So, this is next target here:
aud_m_24_07_17.png


Weekly


On weekly chart trend is bullish as well, and here we have two important issues. First is big butterfly "Sell" pattern is forming. Its 1.618 target coincides with monthly AB-CD Agreement around 0.8160 area.

Second - right now market has reached 1.27 extension of the same butterfly. This level coincides with 3/8 major resistance @ 0.7946 and weekly overbought.

Taking in consideration these two issues we could make two conclusions. First - in nearest 1-2 weeks odds suggest retracement. We do not know how deep it could be, but even minor 3/8 respect of butterfly and daily overbought will be significant bounce for daily/intraday trading.

Second - after some time, upside action to 0.8165 area should continue. Despite all other moments that we already have discussed - take a look that price forms clear acceleration to 1.27 butterfly target. As a rule this leads price to 1.618 target after retracement will be over.
aud_w_24_07_17.png


Daily

Market is also overbought at daily chart. We've discussed already AB-CD pattern that has been formed here. In fact, we have strong resistance combination around 0.7950 area - daily AB-CD and OB, major 3/8 Fib resistance, weekly 1.27 butterfly and OB.

Most probable area that market could reach on retracement is 0.7730 K-support area, which is also accompanied by daily Oversold and former top. Now we need some pattern that could trigger this move down:
aud_d_24_07_17.png


4-hour

Here is the pattern that could trigger action down. At least we do not have nothing else here. This pattern is DRPO "Sell". Although thrust up was interrupted around 0.78 area (actually this was DRPO Failure), but this interruption was very shy - no 3/8 retracement was made. That's why we probably could treat upward action as whole thurst up.

DRPO has been confirmed and downward action already has started. We've started bearish trades on Thu, before DRPO even has been formed, by minor "222" Sell pattern.

So, here we do not have any other patterns... based on DRPO target - price should drop somewhere to 0.7780 area, which is rather close to daily 0.7730 support.
aud_4h_24_07_17.png

Houlry

Here we have shorter-term setup, that could become a part of downward action. This is 3-Drive "Buy" pattern that now stands near to start 3rd drive action. Overall action suggests that it could take a shape of butterfly. Trend stands bullish right now, but price action is mostly flat, which could become an indication of bearish dynamic pressure.

In, fact, on the slopes of each drive we've got "222" Sell patterns, that we've traded last week. Target of 3-Drive stands around 0.7860 area. As 3-Drive will be completed, price could show upward bounce, which could lead to appearing of some greater pattern and let us to take short position with final destination aorund 0.7730...
aud_1h_24_07_17.png


Conclusion:

AUD looks strong on long-term basis, but on coming week we're mostly interested in short-term downside
retracement that could reach 0.7730 area.

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 dollar languished near a 13-month low against a basket of currencies on Tuesday, with traders sceptical that this week's U.S. Federal Reserve meeting would do much to alter the greenback's recent weak trend.

The Fed is widely expected to keep interest rates unchanged at its two-day meeting that ends on Wednesday. The focus will be on any hints on whether it may raise rates again this year, and when it will begin paring its bond holdings.

Given the recent weakness in U.S. inflation data, the market is guessing that the Fed's tone will be dovish and this seems to be weighing on the dollar, said Stephen Innes, head of trading in Asia-Pacific for OANDA in Singapore.

"Without the Fed's support right now, I think the dollar is just going to wobble," Innes said, referring to the greenback's near-term outlook.

The dollar index, which measures the greenback against a basket of six major currencies, eased 0.1 percent to 93.916, trading within sight of Monday's 13-month low of 93.823.

The euro edged up 0.1 percent to $1.1655, not far from a high of $1.1684 set on Monday, its strongest level in about 23 months.

The dollar's outlook remains clouded by worries that persistent political disorder would present obstacles to U.S. President Donald Trump's stimulus and tax reform agenda.

Any dollar bounce is likely to be limited in the near term, given lingering concerns over U.S. political risks, said Shinichiro Kadota, senior FX strategist for Barclays in Tokyo.

"It's not as if the driver for the broad direction of dollar weakness has gone away. I don't think the dollar will keep rising persistently from here," Kadota said.

Jared Kushner, Trump's son-in-law and senior advisor, told Senate investigators on Monday he had met with Russian officials four times last year but said he did not collude with Moscow to influence the 2016 U.S. election.

The ongoing probes into the Russia matter by congressional panels and a Justice Department special counsel, as well as reduced inflation expectations, have weighed on the dollar for much of the month.

Market participants say the investigations have been one factor slowing progress on pushing through Trump's pro-growth agenda of tax cuts and infrastructure spending.

Against the yen, the dollar eased slightly to 111.07 yen. On Monday, the dollar slipped as low as 110.625 yen, its lowest level since mid-June.

Today, guys, we will skip gold analysis and talk on AUD and GBP. GBP will be in gold thread. Speaking on AUD - we still watch for moderate retracement on daily chart, because aussie stands at strong resistance cluster, as we've estimated in our weekly research.
aud_d_25_07_17.png


Yesterday market has vanised preliminarly steps on creation of 3-Drive sell pattern and turned up instead. It means that we have to watch for some other patterns. Now on 4-hour chart triangle is forming. But what is more important - this is bullish dynamic pressure. Take a look that trend has turned bearish but price aciton is not and it stands flat. Also AUD is forming higher lows here. It means that before any bearish patterns will be formed and retracement will start - market should take out previous top due to dynamic pressure. More probable that this will be some kind of W&R:
aud_4h_25_07_17.png


Hourly chart confirms this idea by butterfly and inner AB-CD pattern. As soon as it will be completed - previous top will be washed out. Probably this is what we're waiting for. If CD leg will be gradual, without acceleration, then we should get chance for scalp short trade at 1.27 butterfly target.
aud_1h_25_07_17.png


If market will drop below red circle - butterfly will be vanished and it will mean that retracement has started, but I suspect that it's low chances on this scenario.

If you will decide to trade AUD short - be careful as we're going against major daily tendency. This position should be strictly managed - move stop at b/e at first chance, as soon as minor bounce out from 1.27 target will happen. Avoid any acceleration to 1.27 target. In this case do not go short and wait.
 
Good morning,

(Reuters) - The dollar bobbed above a 13-month low against a basket of major currencies on Wednesday, as investors awaited the U.S. Federal Reserve's policy statement for clues on the course of its next monetary tightening.

Traders also kept an eye on the U.S. Senate, which narrowly agreed to open debate on a bill to end Obamacare. But the wafer-thin victory on a simple procedural matter raised questions about whether Republicans will be able to muster the votes necessary to pass any of the various approaches to repeal.

In a first of the many votes likely to come this week, the plan to repeal and replace Obamacare - passage of which is needed to fund fiscal stimulus - failed to get the 60 votes needed for approval.

"It seems like they started debate without clear view on where this will end. In a way they were able to agree to start debate precisely because neither moderates nor conservatives didn't know the final shape. Things still look very fluid," said a senior trader at a Japanese brokerage house.

The dollar was little moved on the latest news.

The dollar index, which measures the greenback against a basket of six major currencies, edged slightly higher to 94.109. On Tuesday, it fell as low as 93.638, its weakest level since June 2016.

Against the yen, the dollar was steady at 111.89 yen, holding gains after rising 0.7 percent on Tuesday.

"The dollar had endured relentless selling over the past month as market was forced to unwind the Trump reflation trade," said Heng Koon How, head of markets strategy for United Overseas Bank in Singapore.

Declining expectations that U.S. President Donald Trump could pull together stimulus have weakened expectations for U.S. growth and inflation.

The Fed is widely expected to keep interest rates unchanged at its two-day meeting that ends on Wednesday. Investors will be watching for any clues on whether it may raise rates again this year, and when it will begin paring its massive bond portfolio.

There is some focus on the possibility that the Fed could indicate September as the starting date for reducing its balance sheet, said Stephen Innes, head of trading in Asia-Pacific for OANDA in Singapore.

Such a hint from the Fed would not come as a big surprise, and may not provide much of a lift to the greenback, Innes wrote in a note, adding, "It will be the inflation language where a possible dovish skew will emerge."

Sluggish inflation has kept the dollar under pressure, and led to uncertainty on whether the Fed will raise interest rates again this year.

Still, the dollar regained some ground against major currencies in the previous session, as U.S. Treasury yields rose along with U.S. equities.

The yield on the benchmark 10-year note was at 2.322 percent on Wednesday, compared with its Tuesday close of 2.326 percent, and well above Friday's three-week low of 2.225 percent.

The euro held steady at $1.1647. On Tuesday, it rose as high as $1.17125, its highest since August 2015, and just a hair below a 2-1/2 year high, boosted by a stronger-than-expected German business survey.

The Ifo business sentiment index reached a record high, showing that Germans were "euphoric" about the country's business climate.

The Australian dollar fell after data showed the country's consumer inflation was surprisingly soft in the last quarter.

The Aussie shed 0.5 percent to $0.7900.


AUD finally has started downward action. Now we need to wait when bearish reversal swing will be formed and then watch for AB-CD upside retracement.

On GBP today we have a bit more clarity. On daily chart it seems that cable still feels some problems and can't continue upside action right now. Multiple bearish grabbers have been formed, overall action on intraday charts looks choppy, which could be a sign of deeper retracement.

Of course, major driving factor today is FOMC and it could bring drastic changes to technical picture. But, right now pure technical picture looks as we've just discussed:
gbp_d_26_07_17.png


On hourly chart market shows exist from yesterday's channel:
gbp_1h_26_07_17.png


And increase chances on appearing of "222" Buy on 4-hour chart:
gbp_4h_26_07_17.png


Still, until GBP stands above 1.2930 area - it keeps double-sided scenario. "222" pattern is one of them and another one is ButterflY "Sell" - if somehow cable will start upside action somewhere around. Definitely FOMC will be corner-stone of this situation and we think that it will be better to wait FOMC results to get clarity.
 
Good morning,

(Reuters) - The dollar licked its wounds at 13-month lows against a basket of major currencies on Thursday after the U.S. Federal Reserve's more cautious wording on the inflation outlook bolstered views it might not hike interest rates again this year.

While the Fed said it expected to start shrinking its massive holdings of bonds "relatively soon", a phrase taken by many to mean an announcement in September, the central bank also noted weakness in U.S. inflation more explicitly than before.

That recognition of soft inflation from the Fed, which had in the past judged the weakness as transitory, added to expectations that the Fed's plan to raise interest rates a third time this year might be delayed.

"Even though the U.S. economy is strong, inflation is weak. Markets want to see more signs of inflation before they are convinced about future rate hikes," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

"I also suspect people want to take stock of the impact of the likely reduction of the Fed's balance sheet," she added.

The dollar's index against a basket of six major currencies slumped to 93.26. It has fallen more than 10 percent from its 14-year high of 103.82 set on Jan 3.

The next support levels are seen at 93.019, its June 2016 low, and 91.919, a 16-month low touched in May 2016. A break of these could be seen as major bearish signals.

Although the dollar had been supported by the Fed's gradual policy tightening since late 2015, its perceived interest rate advantage is eroding as many other central banks have started to look to wind back their stimulus in recent months.

European Central Bank President Mario Draghi signaled in June that it could tweak its asset purchases, prompting investors to flock to the euro.

The euro rose to as high as $1.1777, hitting its highest level since January 2015. It last stood at $1.1755, up 0.2 percent from late U.S. levels.

The Canadian dollar, which has been helped by the Bank of Canada's rate hike earlier this month, hit a two-year high of C$1.2415 to the U.S. dollar on Wednesday and last stood at C$1.2436.

The British pound fetched $1.3146, reaching its highest level since September, while the Australian dollar reclaimed the $0.80 mark for the first time since 2015 and last stood at $0.8054 for a gain of 0.6 percent.

The dollar also slipped 0.2 percent to 110.90 yen , edging near 110.625, its 5 1/2-week low touched on Monday.

Although Fed policymakers have said another interest rate hike is likely by the end of year, Fed funds rate futures are pricing in slightly less than a 50 percent chance of a rate hike by December, compared to a little over 50 percent before the Fed's meeting.

But some players also said the market may have over-reacted to the Fed's latest statement.

"I think the Fed just fine-tuned its message to keep it in line with the reality, rather than trying to telegraph a message that it is going to delay its rate hike," said Kazushige Kaida, head of foreign exchange at State Street Bank and Trust's Tokyo Branch.


So, on EUR I would like to show you only one chart - this is our weekly picture. 1.3730 target has been reached - this is major 3/8 FIb level and weekly OB. This combination creates DiNapoli bearish "Stretch" pattern and it means that it's time to watch for bearish reversal patterns on daily and lower time frames, since chances on moderate retracement increases:
eur_w_27_07_17.png


On GBP our riddle about pattern has been resolved - "222" scenario is canceled, butterfly stands on the way...
On daily chart trend has turned bullish, and GBP is not at OB. It means that it could continue action to 1.3250 - our final destination point. Major retracement after 0.618 target is completed. It means that any intraday retracement should be small, as price should turn again to extension mode.
gbp_d_27_07_17.png


Here is the butterfly that we're watching right now. It is interesting, that 1.618 target stands at the same 1.3240-1.3250 area:
gbp_4h_27_07_17.png


For taking position, we probably could watch for either 1.3113 or 1.3090 K-area support. Any deeper retracement will look suspcious and not corresponding to market mechanics:
gbp_1h_27_07_17.png
 
Good morning,

(Reuters) - The dollar dipped against its major peers on Friday, its mild bounce earlier petering out ahead of the second quarter U.S. economic growth data due later in the session.

The dollar index against a basket of six major currencies was a shade lower at 93.826 after edging up 0.2 percent the previous day.

The greenback, which had sunk to a 13-month low midweek after the Federal Reserve's policy statement suggested it was in no hurry to raise interest rates again, received a lift on Thursday as Treasury yields rose on the back of upbeat U.S. durable goods and trade data.

Market focus was now on second quarter U.S. gross domestic product data due at 1230 GMT.

Economists expect the world's largest economy to have grown around 2.6 percent in the second quarter, from 1.4 percent in the first quarter. A solid outcome will no doubt give the beleaguered dollar some respite from the recent sell-off.

Dollar bulls have not had much to cheer about recently, hobbled by investigations into U.S. President Donald Trump administration's ties to Russia and the reduced likelihood of tax reform and infrastructure spending being enacted soon.

"The dollar's fall after the Fed meeting looked overdone, so it was natural for it to rebound," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

"And the dollar could find more bids if U.S. economic data turns out to be strong. That said, we are unlikely to see a return to the days when the dollar was the lone winner, because other countries are joining the Fed in trying to normalize monetary policies."

The euro is one of the currencies that has benefited from expectations the European Central Bank will begin phasing out its monetary easing sooner rather than later. It has gained roughly 11 percent against the dollar so far this year.

The common currency was last up 0.1 percent at $1.1686. It had fallen about 0.5 percent overnight, when it was knocked off a 2-1/2-year high of $1.1777. The euro was on track to rise 0.2 percent on the week.

The Swiss franc extended its slide against the buoyant euro, touching 1.1364 francs per euro. It was the franc's weakest since January 2015, when the Swiss National Bank (SNB) removed its cap on the currency.

"The traditionally close correlation between the euro and Swiss franc is changing, as expectations that the ECB would begin tapering its easy policy are becoming very strong," said Masashi Murata, senior strategist at Brown Brothers Harriman.

"The SNB, on the other hand, obviously does not want a strong franc. The policy divergence between the ECB and the SNB has been overlooked for a while but is now a theme being traded upon."

Investors expect the SNB to keep monetary policy loose while other central banks move towards tightening.

The dollar was down 0.2 percent at 111.070 yen to reverse the previous day's modest gains. It was poised to lose 1.2 percent this week, during which it fell to a six-week low of 110.625.


The Australian dollar was 0.1 percent higher at $0.7975.

The Aussie has advanced strongly as the dollar floundered through most of the week, soaring to a 26-month high of $0.8066 on Thursday. Higher prices of commodities such as copper and iron ore have also supported the currency.

The New Zealand dollar stood at $0.7487 after rising to $0.7557 on Thursday, its highest since May 2015.

So, guys - on EUR and AUD we still wait for bearish reversal swing. As it is not been formed yet - we have to be pantient. Positive GDP numbers could accelerate this process...

Today we need to make ajustment to our GBP analysis as yesterday price behavior has broken bullish market mechanics. Yesterday we have talked about nature of all swings - which one is expansion and which one is contraction. And normal bullish behavior has not suggested retracement to 1.3050 level. It seems too deep. Besides, the manner how it has happened also doesn't correspond to normal bulilsh behavior:
gbp_d_28_07_17.png


It means that right now we should forget about long entry. Market changes its shape and may be it will continue action to 1.3250 target by some larger pattern, but not now as deeper retracement of greater scale could happen first.
Plunge down has broken K-support area and price reached last major 1.3050 level. Here we see some bearish consolidation, a kind of flag or pennant:
gbp_1h_28_07_17.png


This could lead to appearing of 3-Drive "Sell" pattern on 4-hour chart or bearish wedge - they are the same now:
gbp_4h_28_07_17.png


Usually price tends to reach bottom of 2nd drive - 1.2930 lows....

That's being said, right now I'm not very fascinating with going long. Although negative GDP report could change picture but right now overall picture looks bearish...
 
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