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FOREX PRO WEEKLY, November 06-10, 2017

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Nov 5, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    (Reuters) - The dollar rose broadly on Friday after the release of U.S. factory orders and services sector data that beat estimates, reversing an earlier slide after an underwhelming October jobs report.

    The euro turned negative against the dollar, falling to its lowest level since Monday after the U.S. factory orders and ISM non-manufacturing PMI data, while the dollar turned positive against the Japanese yen, erasing earlier losses and nearing its highest since mid-July.

    The Institute for Supply Management’s non-manufacturing purchasing managers’ index rose to its highest level since 2005. New orders for U.S.-made goods rose for the second straight month in September and orders for core capital goods surpassed expectations.

    The dollar index, which measures the greenback against six rival currencies, rose to its highest since Oct. 27, closing in on a nearly four-month peak.

    The strong data backed a slate of releases on U.S. growth and inflation from earlier in the week that pointed to a strong economy and further interest rate increases from the Federal Reserve.

    “When we look at the big picture, we’re looking at a Fed that’s likely to hike in December and could very well have three hikes up its sleeve for 2018 and that is certainly a more hawkish outlook than we’re expecting from most other major central banks,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

    The dollar had earlier fallen to its lows of the day after the release of October U.S. non-farm payrolls, which came in below expectations.

    The jobs report showed its largest gain since July 2016, but missed economists’ expectations for an increase of 310,000 jobs, following a particularly weak reading in September.

    The dollar index posted its third straight weekly increase, following its largest weekly percentage gain of the year last week. October was the dollar’s best monthly performance since February.


    Chart of the Week: Storm-affected GDP reading points to solid US economic momentum
    by Fathom Consulting

    Last Friday’s advance estimate of US GDP showed that the economy expanded at an annualised pace of 3.0% last quarter. While this is lower than our forecast of 3.5%, the difference between the outturn and our forecast was mainly due to inventories ̶ otherwise, the underlying pace of expansion was solid.

    [​IMG]

    Despite disruptions from the hurricanes, consumption rose 2.4%, while private non-residential fixed investment rose 3.7%. Inventories made a smaller positive contribution than we anticipated, as production by auto manufacturers failed to keep pace with a surge in demand for new vehicles – these inventories are likely to be replenished in Q4, boosting growth. Residential investment was negatively affected by the hurricanes, and fell 6.0% in Q3, but this component is likely to rebound in Q4. At this stage we expect GDP growth to exceed 3.0% in the final quarter of 2017.

    СOT Report

    Although we do not see many changes week by week, but in reality changes are coming, if we will take a look difference for month. Thus, for last 4 weeks net long position has dropped from record high and decreased for 26 K contracts, while open interest mostly stands that same around 438K contracts. It means that long position gradually have been replaced by shorts. This process now is going slow, but it just has started. Difference between ECB and Fed policy will continue to make impact on EUR/USD and probably will accelerate more closer to the end of the year:
    upload_2017-11-5_12-49-25.

    So last week we've put solid fundamental background under strength on US dollar. Downside reversal that we saw last week is just shy steps in this direction and should accelerate. Currently we have different setups on other currencies as well - GBP, NZD, just to call some, but we're also interested with progress on our major setup on EUR. Last week first step of our setup has been completed and second step just has started. We thought that it should be a bit faster, but it goes as it goes...

    Technical
    Monthly


    Last week market has continued downside action and November is becoming 3rd month of decreasing, although drop is not too fast by far. On monthly chart we do not see any reasons to change our analysis by far. Mostly it stands as we've suggested. Recent upside breakout to 1.21 area closer and closer comes to be treated as "failure" and "bullish trap" according to classical interpretation.

    Market has dropped below lows of both - September and August. They were "indecision" candles. It means that we probably is getting new direction right now.

    At the same time there are not many tools exist here, on monthly. Beyond of all-time support/resistance zone that cuts EUR/USD history by 1.20 edge, we have - rectangle consolidation and upside reversal swing. Making parallel to DXY chart, where we have downside reversal swing, here we also should suggest deep retracement down. This, in turn will push price back inside rectangle, which will be not good sign for bulls.

    In this case of rectangle space will be open for price fluctuation and now it is impossible to say whether it will be deep retracement or real return back to lows.

    Recent action, accompanied by fundamental background and parallel analysis of key financial markets mostly shows bearish picture and suggests downside action that could take large part of 2018 action.

    Now market still feels support of 1.16 area, but as it will dive deeper - downside action could accelerate
    eur_m_06_11_17.

    Weekly

    Last week we've discussed chances to see here DRPO "Sell" pattern. In general it's possible appearing would be logic, because it corresponds by it's nature to H&S pattern that we have on daily. But the problem with this pattern stands with strong upside action which it suggests as second top of DRPO needs to be formed here.
    Another important condition - price should not reach important Fib support of DRPO's thrust.

    Although theoretically it is still possible as price still stands above 1.1510 Fib support, but in reality, I suspect that DRPO chances looks phantom. Just because market already has got major impulse and it is mostly impossible to stop it, reverse up and return price back to 1.21 area.

    Yes, 1.14-1.15 is strong support area. It includes multiple Fib levels (and K-areas), trend line supports and OS, and upside retracement indeed could happen here. But DRPO time mostly is gone - it was much simpler to appear 2 weeks ago when market was indecision and just crossed 3x3 DMA.
    In such circumstances, it is more probable to get another bearish continuation pattern, that also suggests moderate upside retracement - this is "222" Sell. And it is very probable that it could start somewhere around 1.1450-1.15 area.

    Last week action takes the shape of "Gravestone" doji and most has bearish mood. Between 1.16 and 1.15 EUR has free space that's why action could go faster and retracement on daily and intraday charts should be smaller. 1.1450-1.15 area is final point of second step of our long-term EUR analysis. Third step is meaningful retracement up, somewhere to 1.17-1.18 area before major collapse on EUR will happen:
    eur_w_06_11_17.

    Daily

    Here guys, a few moments to consider. Last week when we've said that upside reaction should be mild to keep purity of bearish scenario, it was a bit unbelievable, just because price has reached daily K-support and OS. In such circumstances there was a great risk that EUR will jump above neckline again. But, everything has passed well, as we've suggested.

    NFP release was mixed. Although numbers have not achieved 310 K level, but last 2 month data was revised upward and real NFP was around 300K that is enough to treat is as good result. The major reason why Friday drop on EUR was slow, is drop in hourly earnings, which indicates short-term inflation.

    From technical point of view everything looks perfect by far. On Friday EUR has formed bearish reversal candle by creating weekly top and close below not even Thu but also Wed lows. In fact, our entry point has work perfectly as top was around 1.1689+. But, if you've missed this chance, you could watch for some minor retracement based on last downside candle. Market now is not at OS, and EUR has room to move lower.
    eur_d_06_11_17.

    Intraday

    On 4-hour chart we've got "222" Sell pattern, and market has dropped below "C" point of our AB=CD pattern. This gives new direction.
    Trend here also has turned bearish finally:
    eur_4h_06_11_17.

    Now let's estimate what levels we could watch for potential entry:
    Personally I like 1.1630-1.1633 area. Upside action should not be too deep. EUR has broken our flag pattern down and this area is combination of different resistances - WPP, Fib level and broken flag support:
    eur_1h_06_11_17.

    Those who already have position, could move stops to break-even on first entry (as I did) and think about scale-in around 1.1630 area. Now we start monitoring second stage of our long-term trading plan - action down to 1.1450...

    Conclusion:

    Bounce up to H&S neckline has been completed. Our next target is 1.1450.
    In longer perspective, before major collapse on EUR will happen - we should get deep retracement up. It is necessary to fade existed upside momentum, as EUR was standing in long term uptrend. So, this retracement has great chances to start somewhere around 1.1450 area. This is next, 3rd stage of our long-term trading plan.


    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.
     
  2. shahsavari

    shahsavari Private

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    Thanks a lot for your continuous and precise analysis.
    I appreciate your 7 day a week efforts to make them for us.
    Sincerely
     
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  3. mparama

    mparama Private, 1st Class

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    thank you !
     
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  4. AsstModerator

    AsstModerator FPA Forums and Reviews Admin

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    I'm posting this on behalf of Sive. The FPA is currently under a DDoS attack. A side effect of our DDoS defenses is some innocent IPs getting blocked, including the ones Sive uses.

    First, Sive on the Euro...

    Good morning,

    (Reuters) - The dollar sagged on Tuesday, knocked away from an eight-month highs versus the yen down as Treasury yields slipped on uncertainty over whether the Republicans can pass their tax bill in a timely manner.

    The Australian dollar held steady, showing little response to the Reserve Bank of Australia’s (RBA) well-anticipated decision to stand pat on monetary policy.

    The dollar index against a basket of six major currencies was a shade lower at 94.729, slipping slightly from a 10-daypeak of 95.077 reached on Monday.

    Against the yen, the dollar nudged up 0.15 percent to 113.870 yen, but still some distance from 114.735 struck the previous day, its highest since mid-March.

    The euro was steady at $1.1613 following its descent to a 10-day trough of $1.1580 overnight.

    The greenback had been solid after strong U.S. services and factory data issued before the weekend backed expectations for the Federal Reserve to raise interest rates next month and tighten further in 2018.

    But the currency sagged as such expectations failed to lift Treasury yields. The benchmark 10-year yield has slipped steadily toward 2.30 percent after peaking at a seven-month high of 2.47 percent in late October.

    “The dollar is lacking support from Treasury yields which have been declining on uncertainty over the U.S. tax bill and expectations that any rise in inflation would be slow,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

    "For the dollar to sustain its gains it will need the speedy passage of the tax bill before Thanksgiving Day (Nov. 23) to put a floor under Treasury yields."

    Doubts over whether U.S. Republicans could pass their tax plan have helped bring down long-term Treasury yields. The uncertainty dims hopes for faster economic growth, and there are worries about the scale of borrowing needed to finance the tax plan.

    “Factors that could provide positive surprises for the dollar have run out, and we could see the currency slip into range for the time being,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

    “North Korea is always a background concern and now Saudi woes could push dollar/yen lower. But the long-term picture has not changed of a steady U.S. economic recovery supporting the pair, which is likely to find support around 112.00 yen.”

    Australia’s central bank on Tuesday left its cash rate at a record low 1.5 percent, and signs indicated it would stay sidelined for months in the face of stubbornly low inflation and caution among debt-laden consumers.

    The RBA eased twice last year but has since held steady as it balances the risk of fuelling further borrowing in the country’s red-hot property market against tepid inflation.

    The Australian dollar was little changed at $0.7692 after gaining about 0.5 percent the previous day against the broadly weaker dollar.

    Other commodity currencies also performed well with oil prices climbing to 2-1/2- year highs this week amid political purges in Saudi Arabia.

    The Canadian dollar stood at C$1.2713 per dollar following an overnight rally to a two-week high of C$1.2701.

    The New Zealand dollar was nearly flat at $0.6938 after gaining nearly 0.6 percent overnight to pull further away from a five-month low of $0.6818 reached at the end of October on political uncertainty.


    So, on EUR currency we see shy activity by far. At least on daily chart situation mostly stands the same. Our next target here is 1.1450 area. Now market shows action that we’ve talked about in our weekly research – minor retracement up. As market has turned to “extension” mode after “contraction”, since retracement is over – retracement should not be too deep. Thus, today we mostly need just intraday charts.

    eur_d_07_11_17.

    On 4-hour chart price has formed clear bullish engulfing and it could be used for estimation of upside retracement target:

    eur_4h_07_11_17.

    This engulfing takes shape of clear reverse H&S pattern on hourly chart. This pattern usually reaches either AB=CD target or 1.618 AB-CD. In current circumstances first scenario is more probable. Besides, around 1.1634 area we also have EUR favorite 50% Fib level and WPP. H&S is accompanied by nice MACD divergence as well.

    eur_1h_07_11_17.

    So daily traders should wait when retracement will over and then search chances to go short. It should happen around 1.1635 area. If you’re intraday trader – you could try to use this H&S pattern for scalp long trade as well.

    Also guys, keep an eye on validity of this H&S pattern. If market will start dropping below 1.1590 and lower – it will mean that H&S probably will fail and EUR will continue downside action immediately.
     
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  5. Synchronicity

    Synchronicity Sergeant

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    Thanks for all your work keeping the site going in the face of these attacks.
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning, finally my access to site was restored ;) Thanks to our admin we were able to keep updates on FX markets...

    (Reuters) - The dollar slipped broadly on Wednesday, hurt by a media report that suggested the implementation of a centerpiece corporate tax cut under discussion in U.S. tax reforms plans could be delayed.

    The Washington Post, citing unidentified sources, reported on Tuesday that Senate Republican leaders are considering a one-year delay in the implementation of a major corporate tax cut to comply with Senate rules.

    The dollar had risen to a three-month high against a basket of currencies late in October, helped by expectations that reforms initiated by U.S. President Donald Trump’s administration would deliver tax cuts, boost the economy and lift interest rates.

    Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the U.S. currency.

    “The dollar is being sold against a wide variety of currencies like the euro, yen and Australian dollar on the Washington Post’s report,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.

    “We won’t be seeing big economic indicator releases for a while and the new Federal Reserve chair is already decided. So the U.S. tax plan has moved into the spotlight, and currencies are likely to move this way and that way on news headlines.”

    The common currency has slipped steadily over the past few weeks, pressured by the divergence in the monetary policies of the European Central Bank and the Federal Reserve.

    The dollar index against a basket of six currencies dipped 0.1 percent to 94.844 as U.S. Treasury yields continued to decline.

    The 10-year Treasury yield stood within close reach of a three-week low of 2.304 percent set the previous day. The yield has fallen steadily from a seven-month peak near 2.477 percent touched late in October.

    The Australian dollar gained 0.1 percent to $0.7654 to recoup some of the losses from the previous day, when it lost 0.6 percent on the back of a decline in the prices of commodities such as crude oil and iron ore.

    Other commodity currencies had also been pressured by the fall in crude oil. The Canadian dollar stood little changed at C$1.2767 per dollar after sliding 0.6 percent overnight.

    The New Zealand dollar added 0.1 percent to $0.6909 after losing 0.6 percent the previous day.

    Near-term focus was on the Reserve Bank of New Zealand’s policy decision due early on Thursday.

    Analysts say benign data of late would often prompt the central bank to express its confidence in the economy, although the recent change of government adds a significant degree of uncertainty.

    “Rate hike expectations cannot take root easily, capping the New Zealand dollar, as the process of redefining the central bank’s role has only started under the labor-led coalition government,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.


    So, yesterday's rumors on Tax reform delay have confused trading plans on EUR. Now it has turned to some consolidation. That's why today we will take a look at CAD action.

    Now we have interesting situation on crude, which suggests some downside retracement, approx. to 61.30$ area. This puts bearish background for CAD performance in few sessions, and mostly corresponds to our weekend analysis.

    Thus, on daily chart CAD has not quite reached AB=CD target and 1.27 extension, which stand in the same 1.2980-1.30 area. Right now this target is too far and we will focus on some closer ones, but, still we will keep in mind it:
    cad_d_08_11_17.

    On 4-hour chart market has completed harmonic swing and we're interesting what is going on in red circle:
    cad_4h_08_11_17.

    Here we could get reverse H&S pattern, if our suggestions are correct. Here I put most typical patterns that usually take place around H&S and upside reversal swing. First - we will wait for deep retracement, that also could take shape of "222" Buy pattern. Second - upside AB=CD, based on H&S with 1.2860 target. This is first plan of our trading plan here. If, of course, H&S will work...:rolleyes:
    cad_1h_08_11_17.
     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar slipped to a more than one-week low against the yen on Wednesday, pressured by worries over possible delays to President Donald Trump’s tax reform plans.

    U.S. House of Representatives Speaker Paul Ryan on Wednesday left the door open to a possible delay in implementing a huge corporate tax cut, following a Washington Post report that his fellow Republicans in the Senate are exploring the option.

    Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the U.S. currency, analysts said.

    “Anyone who has been long the dollar has been really vulnerable to headlines. We have seen a lot of traders leave the party on any sort of inkling of bad news,” said Lennon Sweeting, chief market strategist at XE in Toronto.

    “I think it is to do with uncertainty surrounding the path towards tax reform,” said Vassili Serebriakov, FX Strategist at Credit Agricole in New York.

    “In terms of data, it is very quiet this week. The December (interest rate) hike is fully priced in but there is a lot of uncertainty about next year, especially with the composition of the FOMC,” he said, referring to U.S. central bank’s policy-setting Federal Open Market Committee.

    On Monday, the Federal Reserve Bank of New York confirmed that William Dudley, among the most influential monetary policymakers throughout the financial crisis and its aftermath, expects to retire by mid-2018.

    That raised another question over leadership at the central bank, less than a week after Trump chose a new Fed chief.

    “It is difficult for markets to trade the Fed at the moment, so that kind of leaves most of the focus on tax reform,” Serebriakov said.

    The British pound weakened against the dollar, weighed down by a spiraling political drama in Westminster and growing doubts over Prime Minister Theresa May’s ability to deliver a good Brexit deal.

    The Canadian dollar strengthened against its U.S. counterpart, adding to its gains after comments by Bank of Canada Governor Stephen Poloz the day before that were less dovish than investors had expected.


    As we've said yesterday - Thursday is a time to go back to NZD analysis. Recent RBNZ statement was treated as light hint on possible inflation growth more hawkish policy in the future as Governor has expressed "some uncertainty around government spending".
    As a result, NZD has completed our target for upside retracement finally on intraday charts. But first - recall what we have. Our suggestion is that another leg down should happen as NZD has not completed yet major 1.618 AB-CD target. Current upside action stands due reaching of OS:
    nzd_d_09_11_17.

    On 4-hour chart kiwi has completed upside harmonic swing and has reached Fib level, MPP and WPR1 resistance area:
    nzd_4h_09_11_17.

    As a result of RBNZ statement, price has formed butterfly "Sell" on hourly chart:
    nzd_1h_09_11_17.

    Now about possible problems... upward action on Central Bank statement was rather fast. Thus, price still could break this area. If this will happen, then, harmonic swing on 4-hour chart will double probably and kiwi should reach next 0.7050 K-resistance area.
    Thus, you need to decide whether to take risk or to wait for more signs of reversal here, such as deeper downside action, signs of thrust down etc.
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar licked its wounds on Friday, on track for weekly losses after it dropped on disappointment with a tax bill put forth by U.S. Senate Republicans that would delay expected corporate tax cuts.

    The dollar index, which gauges the greenback against a basket of six major rivals, inched up 0.1 percent to 94.493 after skidding 0.36 percent in the previous session. It was down 0.5 percent for the week.


    The Senate Republicans’ bill to rewrite the tax code differed from their House counterparts’ plan. Like the House version, the Senate’s proposal would cut the corporate tax rate to 20 percent from 35 percent, but the Senate plan would delay implementation until 2019.

    “It really is U.S.-led, at the moment, for the dollar,” as investors focus on the details of the tax proposals, said Bart Wakabayashi, branch manager for State Street Bank and Trust in Tokyo.

    “The overnight move focussed on the tax situation in the U.S. and the seeming delay that is going to occur,” for the corporate tax cut, he said. “Tax reform is going to remain centre-stage.”

    Both plans call for a tax on $2.6 trillion in foreign profits held offshore by U.S. multinationals. The Senate wants that tax to be 12 percent for cash and liquid assets, and 5 percent for non-liquid assets. The House amended its bill on Thursday, going to 14 percent and 7 percent, respectively.

    Both bills would add $1.5 trillion over 10 years to the U.S. budget deficit and national debt, which in the past would likely have faced criticism from Republicans.

    The dollar inched 0.1 percent lower to 113.38 yen, down 0.6 percent for the week and well below its eight-month high of 114.737 logged on Monday. It has gained more than 5 percent over the past two months, which some say makes it vulnerable to profit-taking.

    “I’ve been warning that November is a dangerous month for the dollar,” said Mitsuo Imaizumi, Tokyo-based chief foreign-exchange strategist for Daiwa Securities.

    Funds that close their books this month could take profits on dollar-long positions, as well as their holdings of U.S. stocks, he said, adding that U.S. tax plan details could offer them excuses to sell.

    Higher U.S. yields underpinned the dollar, with the 10-year Treasury yield at 2.343 percent, compared with its U.S. close on Thursday of 2.331 percent. While yields initially fell amid uncertainty about tax reform, they rose again as prices were pressured by this week’s government and corporate debt supply.

    The euro was up slightly on the day at $1.1646, 0.3 percent higher for the week and holding well above a 3-1/2-month low of $1.1553 plumbed on Tuesday.

    Sterling inched down 0.1 percent to $1.3141. But was still on track to gain 0.5 percent for the week plagued by political scandals that raised doubts over the Conservative government’s ability to secure a strong deal in Brexit negotiations.


    So, today is a bit difficult choice for daily update as we mostly have discussed everything within this week. But, may be it makes sense to take a look at GBP again.
    On daily chart I still keep the shape of butterfly pattern (although it's a bit too choppy) and here we're mostly watching for 1.2950 target - 0.618 AB-CD and butterfly extension.
    As market has not erased recent drop on BoE meeting, it could mean that downside action should continue. Now is a question particularly how this could happen.
    Second important moment here is bearish grabbers that have been formed recently.
    gbp_d_10_11_17.

    Intraday charts mostly show just two possible scenarios. First one is "222" Sell pattern. To complete it market needs to show AB=CD upside retracement and break 1.3170 top of daily grabbers:
    gbp_4h_10_11_17.

    if this will not happen and market will fail to break them - in this case it could start dropping immediately and create butterfly "Buy". Its 1.618 extension will stand precisely around the same 1.2950 daily target.
    gbp_1h_10_11_17.

    But, whatever pattern will be formed, downside action should happen. Take a look on a contrast of recent drop and upside action. Drop is straight and fast, definitely thrusting action, while upside action is very choppy and sloppy. Hence, this is just a retracement and sooner or later it will finish.

    You could act differently - wait for "222" or breakout of 1.31 area to get more confidence concerning pattern. Or, you could try to anticipate butterfly with stops above1.3170, this is more agressive tactics. If you will be right - you'll get best entry point, if wrong - loss will be small, around 30-35 pips...
     

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