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
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.
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:
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.
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:
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.
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...
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.
(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
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.
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:
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.
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:
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.
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...
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.