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FOREX PRO WEEKLY, November 13 -17, 2017

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Nov 11, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    (Reuters) - The dollar slipped against a basket of currencies on Friday and was set for its biggest weekly drop in a month as investor disappointment that implementation of part of a planned big U.S. tax overhaul may be delayed until 2019 put a brake on the currency’s recent rally.

    The dollar index, which tracks the greenback against six major currencies, was down 0.08 percent at 94.37. For the week, the index was down 0.6 percent, on pace for its worst performance since the week ending Oct. 13.

    The greenback has also lost 0.5 percent against the Japanese yen this week.

    U.S. Senate Republicans unveiled a tax plan on Thursday that differed from the House of Representatives’ version on several fronts, including deductions for state and local taxes, and the estate tax.

    Complicating a Republican push for the tax revamp, senators said that, like the House, they wanted to slash the corporate tax rate to 20 percent from 35 percent, but in 2019 rather than right away.

    “It just highlights the challenge in reconciling the two (plans),” said currency strategist Erik Nelson of Wells Fargo Securities in New York.

    The House was set to vote on its measure next week after its tax-writing Ways and Means Committee approved the legislation on Thursday along party lines, with Democrats united in opposition.

    The Senate’s timetable was less clear, with a formal bill yet to be drafted in that chamber, where Republicans have a much smaller majority and a narrower path to winning approval for any legislation, let alone one as contentious as a tax package.

    “I think the markets are becoming concerned that this is not a serious piece of legislation and that there really is no political support necessary to pass it,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

    The dollar index gained about 3 percent from mid-September through the end of last week, boosted by hopes of tax cuts.

    “This week was a bit of a reality check for currency markets,” Wells Fargo’s Nelson said.

    Sterling closed the week on firmer ground, climbing around half a percent against the dollar on Friday as better-than-expected data on British industry and rising confidence in the progress of Brexit talks supported the currency.

    The pound was up 0.37 percent at $1.3197.


    US Outlook Unchanged After Key Developments Last Week
    by Fathom Consulting

    Our forecasts for US GDP growth and monetary policy are unchanged following progress on tax reform, the nomination of Jerome Powell for Fed Chair, and the employment report for October.

    Nonfarm payrolls rebounded last month, as we expected, suggesting that most of the damage to the labour market from the recent hurricanes was short-lived. For more see ‘How Hurricanes Harvey and Irma affected the US economy’. The US economy added 261,000 net payrolls last month, which may have been a little less than our forecast of a gain of 300,000, but there were a combined 90,000 upward revisions to payrolls gains in the previous two months. The six-month moving average edged higher suggesting that the labour market remains in decent shape.

    [​IMG]

    The earnings figures for October were soft — annual growth in average hourly earnings dropped from 2.8% to 2.4% — but this appears to be due to the large reversal in payroll employment in the leisure and hospitality sector, where workers earn a lot less than the national average. The unemployment rate edged down to 4.1%, the lowest level since December 2000. We expect earnings growth to resume its upward trend before long and we think that it is only a matter of time before this is reflected in core inflation.

    [​IMG]

    [​IMG]

    [​IMG]

    Meanwhile, the tax bill presented by Republicans may not reduce federal revenues by as much as some had expected, but changes with the biggest economic impact, such as corporate tax cuts, are still included in last week’s bill — the inevitable horse-trading among members of Congress is likely to delay its passage into law until next year. In the absence of further progress this year, the US dollar and US equities are likely to drift sideways.

    Finally, assuming Jerome Powell’s nomination for Fed Chair is approved by the Senate, we see little change in the outlook for US monetary policy — Mr Powell has served on the Board for the last five years and has supported current Fed Chair Janet Yellen’s stance.

    COT Report

    Now we do not see new tendencies in EUR sentiment data. As EUR has reached extremely bullish position in summer at ~100K contracts net, it was limited in upside continuation. With announcement of different policies by Fed and ECB our expectations of meaningful retracement have increased. Last 4 weeks we see gradual decreasing of as open interest as net long position, which means slow long closing by market participants.
    But, at the same time, we do not see bearish reversal on EUR. It means that current long closing could be preparation for end of fiscal year in many funds, profit taking etc. But, major bets on USD strength has not been done yet. This is a signal for us as well - time for major reversal on EUR has not come yet, and we should be ready for any surprises, possible upside action EUR etc.
    Some signs we also see on technical picture right now...
    upload_2017-11-11_13-27-45.

    Technical
    Monthly


    Last week EUR has shown shy activity that mostly had no impact on monthly and weekly charts. As major breakout of 1.14-1.15 support has not been done, our analysis of long-term charts mostly stands the same.

    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 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. So, we're still waiting when this will happen
    eur_m_13_11_17.

    Weekly

    Although last week was mostly inside one, but it brings very important nuance that could put shadow on price action on coming week.

    Those of you who follows our weekly analysis should remember that previously we've discussed chances to see here DRPO "Sell" pattern here. In general it's appearing would be logical, because it corresponds by it's nature to H&S pattern that we have on daily.

    But the problem with this pattern stands around strong upside action which should happen as second top of DRPO needs to be formed here. Another important condition - price should not reach important Fib support of DRPO's thrust. Both of these moments hardly could be combined with H&S pattern that we have on daily chart. Because its target stands around 1.1450 and if it will be achieved we will not get DRPO...

    It means that either DRPO or H&S will be vanished. Two weeks ago it was seemed that DRPO will be cancelled as EUR has shown strong downside impulse on breakout of H&S neckline.

    But now we see a bit curious price action as on weekly chart as on daily, which a bit irrational in relation to patterns that have been formed. Take a look that price has not reached Fib level, reversed up in "free area" with no real support below it, except may be, previous tops @ 1.16.

    In beginning of the week EUR has tried to drop lower but couldn't do it by different reasons and turned up again. This situation smells like chance for DRPO. Currently it is very difficult to make far going conclusions, as market has formed very small candle and may be it will be just minor bounce up, but the way how this has happened and place where it has happened could really lead to serious changes and even upside action back to 1.21 tops...

    eur_w_13_11_17.

    Daily

    The same situation stands here. Trend has turned bullish and price action shows irrational behavior in relation to H&S pattern. After neckline has been broken with strong plunge we've anticipated minor upside bounce as EUR has appeared to be around OS. As re-testing of neckline has happened - everything has started well last week.
    Indeed, we've got "222" Sell pattern on intraday charts and within 1-3 sessions of last week EUR was dropping. But, as EUR has moved already through K-support area it suddenly has stopped and turned up.

    This is warning moment and it stands in contradiction to normal market mechanics of H&S pattern. When neckline is broken you expect downside continuation.

    All this stuff makes us think about DiNapoli "Ooops!" pattern. Briefly we've mentioned it last week, but now it really could work. This pattern describes bears' trap, when right under H&S neckline strong K-support area stands. This K-area prevents normal downside continuation and puts prices in opposite direction back above neckline again. That's what we're worrying about.

    Daily picture means that no shorts should be taken until situation with "Oops!" pattern will be clarified. Bulls could try to trade it and take position against recent lows.

    Also keep in mind daily OB level - 1.1830. It could be useful for upside target estimation.
    eur_d_13_11_17.

    4-hour

    Right now, guys, we will not look over horizon of 1.1830 area, because it is not very interesting for coming week. And currently we're mostly interested in nearest target that could be achieved within a week, rather than perspectives of weekly DRPO.

    That's why we limit our view by 1.1830 daily OB ceil.

    Here we have a kind of Double Bottom (or reverse H&S) pattern right at daily K-support and accompanied by MACD divergence. It means that bears should sit on the heads while this pattern is valid. Upside potential of this pattern equals distance between bottom and neckline - and, it coincides with the same 1.1830 level.

    Around 1.17-1.1725 area we also have strong resistance. This is not just K-area, this is also daily neckline and monthly PP. This area is very important and probably will become a target of market makers. Usually when H&S stands on market and neckline is broken, many traders move stops lower, just above neckline. Existing of K-area is very good place to hide stops. Thus, pushing price slightly above it could lead to upside chain reaction.
    eur_4h_13_11_17.

    Hourly

    At the same time it will be very good check point. As you can see on hourly chart - market has completed reverse H&S ultimate 1.618 AB-CD target. Right above it neckline stands (dot line), that has been tested already. Normally, bearish market in such circumstances should not go higher. This is quite enough retracement.

    Here is two moments to watch for. If it will be Double bottom, then retracement should not be too deep - not lower than K-support around WPP.

    If price will drop lower, then another pattern could be formed - reverse H&S. In this case EUR should get support around WPS1 and 1.1580 area. Keep this in mind if your trading plan will suggest entry around WPP.

    Breaking below 1.1550 will re-establish normal bearish behavior and should cancel any upside action.

    eur_1h_13_11_17.

    Conclusion:

    As market shows not quite rational behavior in relation to H&S pattern, we should be ready for upside action on next week and watch for some important patterns and levels.


    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. cosmos

    cosmos Sergeant

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    Thank you, Sive. Very helpful analysis.
     
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  3. RahmanSL

    RahmanSL Major

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    Sive, I have been trading exclusively on EUR/USD on my live accounts for some weeks now and, as usual, your insights are extremely valuable for me :) Thank you very much.

    As for the pair "unusual" bullish momentum at end of week market closing, well, as they say: "When nothing much is happening, the pair (EUR/USD) moves up".

    All the best!
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar got support from higher U.S. Treasury yields in early Asian trading on Tuesday, while sterling arrested a recent slide, which followed concerns about Theresa May’s ability to stay on as British prime minister.

    “The dollar is getting support from U.S. yields, but I am actually surprised that it did not go higher, so perhaps the correlation between yields and the dollar is breaking down,” said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

    “But with the Fed expected to hike rates in December, the dollar could go higher” in the coming weeks, he said.

    The yield on two-year U.S. Treasury notes scaled a nine-year peak on Monday, as the yield curve resumed its flattening and investors priced in a 25-basis-point interest rate hike by the Federal Reserve next month.

    The 10-year Treasury yield rose to 2.405 percent from its U.S. close on Monday of 2.400 percent. It was at 2.304 percent as early as Nov. 8.

    The euro was steady at $1.1670, holding well above last week's a 3-1/2-month low of $1.1553.

    Sterling edged up 0.1 percent to $1.3122 after coming under pressure from political turmoil ahead of this week’s debate by British lawmakers about the government’s plan to leave the European Union.

    The debate on the Brexit bill kicks off on Tuesday and Wednesday, and takes place against an unstable political backdrop. As many as 40 of May’s lawmakers would support a no-confidence motion against her, according to the Sunday Times newspaper.

    Also in focus this week, European Central Bank chief Mario Draghi, Federal Reserve Chair Janet Yellen, Bank of Japan Governor Haruhiko Kuroda and Bank of England head Mark Carney will form a panel on central bank communication at the ECB-hosted conference in Frankfurt later on Tuesday.


    So, on weekend we've put background of new scenario on EUR and now are watching for it's development. Yesterday price comes closer to neckline of H&S which really could mean coming breakout effort:
    eur_d_14_11_17.

    On weekend it was still unclear what pattern will be formed here - Double bottom or reverse H&S. Right now we've got multiple bullish grabbers right under daily neckline which significantly increase chances on upside breakout attempt, and mostly stands in a agreement with irrational price behavior in last 2 weeks. In such circumstances, chances on double bottom looks better:
    eur_4h_14_11_17.

    Still there is one issue to monitor. Minor retracement that we've anticipated did happen, and it has led to appearing of first grabber on 4-hour chart. But grabbers themselves has rather close minimal target - just previous tops.
    That's why, if market will break daily neckline and will hold above it (in this case stops probably will be triggered), then upside action will continue, but if EUR will just form another minor spike with W&R of 1.1677 and then drop below 1.1630 - then be ready for further dropping back to 1.1575.
    eur_1h_14_11_17.

    So, today is very important moment for EUR, and daily neckline breakout is a major detail.
     
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - A reduction in risk appetites lifted the yen on Wednesday and pressured the Australian dollar, as investors awaited U.S. consumer inflation data later in the global session.

    The Aussie was the big mover of the Asian session, skidding 0.6 percent against its U.S. counterpart to $0.7587, brushing its lowest levels since July.

    Against the yen, it tumbled 0.8 percent to 85.81 yen after falling as far as 85.67, its lowest since mid-August.


    Data showed Australian wages rose only 0.5 percent in the third quarter and 2.0 percent for the year, falling short of 0.7 percent and 2.2 percent respectively and challenging the Reserve Bank of Australia’s view that wages would pick up.

    Slumping equities also added to pressure. Asian stocks slipped on Wednesday after weaker crude oil prices took a toll on Wall Street.

    “Risk sentiment has soured somewhat in the last week or so, as the U.S. equity rally has run out of steam,” said Ray Attrill, Sydney-based global co-head of forex strategy at National Australia Bank.

    “So you’ve had a bit of a perfect storm, with specific factors that have been supporting the yen, that have also been driving down the Aussie, which is still a very risk-sensitive currency,” he said.

    The euro remained close to 2-1/2 week highs, getting a boost from Tuesday’s upbeat German economic data. The common currency edged down slightly to $1.1797 after jumping more than 1 percent in the previous session. It moved well away from a 3-1/2-month low of $1.1553 plumbed last week.

    The euro’s ascent pushed down the dollar index, which tracks the U.S. currency against a basket of six major rivals. It was steady on the day at 93.812, wallowing at its lowest levels since late October and well below its overnight high of 94.542.

    Germany’s seasonally adjusted gross domestic product rose by 0.8 percent on the quarter, beating a Reuters poll forecast of 0.6 percent.

    Investors awaited U.S. consumer inflation data for October, due later on Wednesday, that is expected to show a marginal increase in consumer prices.

    “If it is weaker, then that may push down the probability of a Fed rate hike in December,” said Jeff Kravetz, regional investment strategist at U.S. Bank Wealth Management.

    “Right now, Fed fund futures are pricing in around 80 percent, but it could go down to like 50-50,” he said. “And if we do get a weak number, then I would think the euro would continue to strengthen, versus the dollar.”

    Data on Tuesday showed U.S. producer prices rose a more-than-expected 0.4 percent last month, boosting the PPI 2.8 percent in the 12 months through October for the biggest annual increase in wholesale inflation in more than 5-1/2 years.

    But economists said the strong producer price readings probably did not translate into higher consumer prices in October as the correlation between the PPI and consumer price index has weakened.

    Against the yen, the greenback slipped 0.3 percent to 113.15, hitting its lowest levels since late October and moving away from its eight-month high of 114.735 hit last week.

    Data released earlier on Wednesday showed Japan’s economy posted its longest period of uninterrupted growth in more than a decade, expanding at a 1.4 percent annualised rate in the July-September quarter. That was slightly above the median estimate for annualised growth of 1.3 percent.


    So, on EUR our suggestion was correct. Indeed market has started to show irrational behavior for bearish market in common and for H&S pattern in particular. It has come against normal market mechanics. As a result DiNapoli "Oops!" pattern has worked very nice and our first leg up mostly completed. Still, we need keep in mind possibility for weekly DRPO "Sell". For this purpose price should reach 1.20-1.21 area. But today-tomorrow we mostly will be interested in retracement action:
    eur_d_15_11_17.

    On 4-hour chart market has completed classical Double bottom target, but, at the same time it has not quite reached daily 50% major Fib level and OB. It means that before retracement will start, EUR could try either to climb slightly higher or to form some pattern with upside spike, such as butterfly of H&S.
    Also pay attention to disrespected 1.1730 K-resistance area. It very often happens that market returns back to disrespected K-areas on a way of retracement.
    eur_4h_15_11_17.

    So, currently we mostly will deal with hourly chart. Scalp traders could watch for bearish patterns that could trigger retracement down - butterfly, H&S, DRPO "Sell" etc. Or, say, for B&B "Buy" pattern.

    If you would like to go long, then you need to wait when retracement will be over. It would be nice, if we will get some bullish continuation pattern, such as "222' Buy. Also don't forget about 1.1730 area... May be it will be destination of retracement.
    eur_1h_15_11_17.
     
  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar was on the defensive on Thursday as doubts for the prospects of U.S. tax reforms, a fall in U.S. stocks, and declining high-yield bond prices all soured the mood, offsetting an uptick in underlying U.S. inflation.

    The dollar index stood at 93.891, after having fallen to as low as 93.402 on Wednesday, its weakest in almost four weeks, a severe correction from the uptrend that began in early September on hopes of a tax cut deal.

    A U.S. Senate Republican tax plan drew fire from two Republican lawmakers on Wednesday in a possible sign of trouble for the sweeping measure, given the party can afford to lose no more than two votes to pass the legislation.


    “For the moment, the U.S. tax cuts will be the main theme of the markets. I would expect negotiation to drag on beyond the year-end but by the first quarter of next year, there will be a deal,” said Yukio Ishizuki, senior strategist at Daiwa Securities.

    U.S. stocks and junk bonds, which had also rallied on hopes of tax cuts and the prospects of a solid U.S. economic growth, extended their losses, further dampening dollar sentiment.

    U.S. S&P 500 fell to a three-week low while the yield on junk bonds rose to their highest in 7 1/2 months.

    “The markets that have benefited from buying by investors looking for yield enhancement are now crumbling while safe-haven assets are being bought. The sensitivity to risk seems to have been heightened,” said Kazushige Kaida, head of foreign exchange at State Street Bank.

    Any boost to the currency from positive U.S. consumer inflation and retail sales data was not strong enough to ease those concerns.

    Annual core inflation accelerated to 1.8 percent in October after having stayed at 1.7 percent in the preceding five months. Retail sales increased 0.2 percent.

    Both beat market expectations slightly and further firmed up the case for a December rate hike by the Federal Reserve. But beyond this year, U.S. interest rate futures were pricing in a slightly smaller chance of a rate hike early in 2018 than before Wednesday’s data.

    With the dollar facing headwinds, the euro traded at $1.1778, down slightly on the day but up almost 1 percent so far on the week, after having risen to as high as $1.1862 on Wednesday, its best level in over one month.

    The dollar dipped to 112.47 yen on Wednesday and fetched 113.04 yen in late Asian trade.

    The Australian dollar bounced from near five-month lows on Thursday as a mostly upbeat local employment report triggered a round of short-covering.


    The Aussie traded at $0.7594, almost flat on the day, after having plumbed a low of $0.7567, a trough last seen in late June.

    The New Zealand dollar edged down to $0.6857, near its 5 1/2-month low of $0.6818 touched last month.


    So, EUR indeed has climbed slightly higher and reached finally daily OB area, but positive US stats finally has triggered retracement. Now it is time to watch for trading setups:
    eur_d_16_11_17.

    On 4-hour chart we have clear "Evening star" pattern at top and it's classical target equals to its length, which means that here we again must recall disrespected 1.1730 K-resistance. Now it could become real destination point:
    eur_4h_16_11_17.

    Now we have 2-3 different setups. First one is too fast for our updates and it suggests upside action to 1.1825 Fib resistance. This is the level where we could get first trading setup, as there "222" Sell pattern could be formed.
    If we will be correct - next step is AB=CD action down precisely to 1.1730-1.1740 area. There our first setup will be finished and could start second one - "222" Buy".
    That's the trading plan that we will be watching here within few sessions...
    eur_1h_16_11_17.

    Today's JPY update stands in Gold thread...
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar slipped on Friday, weakened by a Wall Street Journal report that investigators into possible Russian interference in the 2016 U.S. presidential election had subpoenaed President Donald Trump’s election campaign for documents.

    Special Counsel Robert Mueller’s team issued the subpoena last month for documents containing specified Russian keywords from more than a dozen officials, according to the report.

    The dollar index against a basket of six major currencies was down 0.35 percent at 93.593.

    The index had edged up overnight to pull away from a four-week trough of 93.402 set on Wednesday. Wall Street shares rallied overnight after sagging through much of the week, causing a 4 basis points jump in the long-term Treasury yield to shore up the dollar.

    “Dollar selling picked up after the market became aware of the Wall Street Journal’s report,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.


    “Dollar demand from institutional investors appeared quite strong but selling by speculators seemed even stronger. We are likely to see choppy moves as participants try to adjust their positions before Thanksgiving Day (on Nov. 23).”

    The greenback dropped about 0.6 percent to 112.405 yen, lowest since Oct. 19.

    The dollar had bounced overnight from a one-month low of 112.470 yen midweek as an ebb in investor confidence halted a surge in global equities and lifted the Japanese currency.

    “While the comeback in equities has stopped the recent decline in Treasury yields, focus remains on U.S. tax reforms,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

    “Yields cannot rise much further when it is unclear whether tax reforms can go through this year. Dollar/yen can test the 114.00 handle but lacks momentum for a sustained surge under such conditions.”

    The U.S. House of Representatives on Thursday approved a broad package of tax cuts sought by Trump. The debate now moves to the Senate, where Republican majority is smaller and no decisive action is expected until after next week’s Thanksgiving holiday.

    The euro rose 0.35 percent to $1.1814 , paring overnight losses.

    The common currency was on track to gain 1.2 percent on the week. It had rallied to a one-month high of $1.1862 on Wednesday after data showed strong growth for Germany’s economy in the third quarter.

    Against the sagging dollar, sterling extended gains after drawing support overnight when an initiative by European Central Bank President Donald Tusk on Brexit negotiations was taken as mildly positive.

    The pound rose 0.35 percent to $1.3238 to put further distance between the week’s low of $1.3063 marked on Monday when perceived troubles for British Prime Minister Theresa May hurt the currency.

    The Australian dollar crawled up 0.15 percent to $0.7598. It was still poised to end 1 percent lower on the week, during which it sank to a near five-month low of $0.7567 on lower commodity prices and weak domestic data.


    So, on EUR everything goes well. Actually, today we do not need even daily chart, as our major interest is stuck to retracement action and it mostly stands on intraday.

    Thus, on 4-hour chart price indeed has shown deep retracement, precisely to 5/8 resistance of perfect engulfing pattern. Next step should be extention down to disrespected K-area around 1.1730:
    eur_4h_17_11_17.

    Today I use 15-min chart for more details. As you can see scalp traders indeed were able to take long position with butterfly "Buy" that has been formed right before upside action has started. Of course, we didn't know that it will hit precisely 5/8 Fib level, but, we just use classical B&B target.
    As upside action was rather fast, it is possible that minor upside leg still will happen before everything will be done. As a result we could get DRPO "Sell" as well here and been finalized by puny butterfly "Sell".
    So, if you thought about short position - this is a culmination point where you have to make a decision:
    eur_15m_17_11_17.
     
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