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FOREX PRO WEEKLY, October 02-06, 2017

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Sep 30, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    (Reuters) - The dollar was little changed against a basket of major currencies on Friday after conflicting U.S. economic data, leaving it on course for its largest weekly rise in 2017 amid a rise in expectations for inflation and U.S. interest rate hikes.

    The one-week rise of just under 1 percent helped the greenback post its first monthly gain against its peers since February.

    On Friday, the dollar fell to session lows after the release of a report showing U.S. consumer spending barely rose in August, but that was offset by an unexpected increase in the University of Chicago’s purchasing managers’ index and an in-line reading on consumer sentiment.

    Federal Reserve Chair Janet Yellen said earlier this week that the central bank planned to stay on its current rate hike path, which suggested to investors that it would raise rates in December, with further increases to follow in 2018.

    The Fed has raised rates twice in 2017.

    Analysts said the week’s rally was sparked by the German election last weekend in which the far-right Alternative for Germany won seats in parliament for the first time, leading to worries that anti-European political movements on the continent, including those in Spain and Italy, could be more worrisome than initially thought.

    “Economically, the situation in the U.S. merits the fact that the dollar has gained,” said Juan Perez, currency strategist at Tempus Inc in Washington.

    “The political dissolution in Europe continues and now with the situation in Spain it symbolizes that there are separatist movements across the continent that cannot be ignored. On a geopolitical perspective, Europe in a little bit tougher situation than we are.”


    Comments from Yellen and the release of a foundation for President Donald Trump’s proposed tax overhaul also pushed inflation expectations higher, with U.S. Treasury yields rising to months- and years-long highs on Wednesday.

    The dollar index, the trade-weighted basket of the greenback against its rivals, was flat at 93.02. It rose 0.9 percent for the week, its best weekly performance since September, and was up 0.35 percent for the month.

    The euro rose 0.35 percent to $1.1824, having earlier hit a three-day high against the dollar. The dollar was 0.1 percent higher against the Japanese yen at 112.43 yen.


    Chart of the Week: FOMC: When No Surprise is a Surprise
    by Fathom Consulting

    Last Wednesday evening the FOMC announced that it would begin the process of unwinding its QE programme in October, and that it would do so very gradually by reducing the amount of maturing securities on its balance sheet that it reinvests every month. Meanwhile, the ‘summary of economic projections’ implied that committee members expected to lift the fed funds rate by another 25 basis points this year, and by a further 75 basis points next year – the same as it did in July. Even though the balance sheet shrinking plan was telegraphed by the committee several months ago, and the ‘dot plot’ was little changed, Treasury yields and the US dollar rose following Wednesday’s meeting. Nevertheless, we believe that investors continue to underestimate the extent to which the fed funds rate will rise over the next year or so; they were right to call the FOMC’s bluff after learning the lessons from the taper tantrum in 2013, but they are wrong to do so now. Although Janet Yellen confessed that she did not fully understand why inflation had been so soft in recent months, FOMC members appear keen to continue moving interest rates away from the zero lower bound, even though core PCE inflation is not expected to hit 2% until 2019. Core PCE inflation is currently 1.4% and we think that it is a lot more likely to rise than fall over the next couple of years, particularly if the economy gets a boost from fiscal policy.
    [​IMG]

    COT Report

    Today CFTC chart shows very interesting situation that points on hidden bulls' stubborn on EUR. We're mostly interested in last 4 weeks here. After net long position has reached its peak, next week it has reduced a bit, while open interest has moved in opposite direction and increased. It means that although investors mostly were kept their longs, new shorts were opened. This was a sign of preparation to German elections. Two weeks ago pressure on EUR has increased as Fed confirmed their hawkish ambitions and voting day in Germany has become closer. As a result - some longs were closed, probably by shorter-term investors, because as net long position as OI have dropped.
    Last week, as election results have been announced we see that open interest almost stands the same while net long position have increased significantly and returned back to record levels. What does it mean? It means that short-term bears (speculators) stepped out and took profit probably while new bulls are stepped in. Concerning bulls - it is difficult to say right now whether they are long-term or short-term, may be they are those who out on week before elections and when Fed policy was announced. For short-term perspective this is more positive rather than negative sign for EUR. Status quo mostly has been re-established, except may be total value of positions. Right now it stands slightly lower compares to positions in July. It means that some investors since August still stand aside or in locking positions and wait for more clarity.

    upload_2017-9-30_12-22-32.

    So, as a bottom line - major limitations for EUR have not disappeared as total position still stands at record levels and upside potential is limited, but for short-term perspective of 1-2 weeks recent position dynamic is positive, because bearish investors have closed their positions which suggests that they are do not believe in fast depreciation of EUR. This is also confirms our idea of larger H&S pattern on daily chart.


    Technical
    Monthly

    As last week action was rather gradual, we do not have big chances in technical analysis of current situation on market, at least on monthly/weekly charts. Thus, major topic of our discussion as last week as this one and may even next week will be tactical downside retracement. Although it is "tactical" only for monthly chart. On daily one we have significant action.

    As we have estimated earlier, EUR has formed short-term bearish pattern here - wash'n'rinse of previous top. August was indecision candle and in September price has tried to move higher but failed. This is sign of weakness and it increases chances on deeper retracement on lower time frames, mostly on daily. And this retracement right now stands under way.

    Appearing of strong resistance on monthly chart, right at the moment of overloaded speculative bullish positions makes us to be careful with any bullish trades. We have two side-by-side Fib levels at 1.2160-1.2170 area on monthly chart and long-term support/resistance zone, where market stands right now. Monthly OB level stands higher and will not be a barrier. All yearly pivots have been broken up on EUR.

    As you can see August month shows mostly indecision action. May be shadows of this candle are not as big to call it "high wave" pattern, but by it's nature, it's probably the same. Appearing of "indecision" sign at this moment mostly stands in favor of retracement rather than upside breakout.

    It is a bit difficult to talk on depth of possible bounce, but monthly chart tells that it will be probably painless for bullish ambitions, if retracement will not be deeper than 1.14 area. Here we draw previous consolidation as rectangle, but in reality, if you draw upper border based on tops sharply, we will get sloped line and it stands around 1.14 area. That's why re-testing of this line is allowable and overall bullish sentiment will not be harmed:
    eur_m_02_10_17.

    The same situation we still have around US Dollar Index - it stands at strong monthly support and OS level, which gives monthly bullish "Stretch". Of course, hardly it will hold wide fluctuations of currencies on daily charts, but, action to new extremes hardly will be possible in nearest month or so. Besides, if you will drop time frame further, you'll see that some reversal patterns could be formed, such as DRPO "Buy", reverse H&S for higher upside bounce...
    idx_m_02_10_17.

    Weekly

    Trend has turned bearish here, OS level stands rather far and doesn't prevent downside action. In fact, what we've said above to Dollar Index might be true for EUR as well.

    Action since middle of the March, right after (or even before) the gap of French elections could be treated as "thrust". Currently price has not reached 1.16 area and we can't talk about B&B "Buy" here yet. Besides, DRPO "Sell" here is more logical to see, if we will take in consideration the scale of ongoing processes. I mean strong monthly dollar index support area and resistance on EUR. Also we should not forget about CFTC EUR positions they are also make mostly long-term effect.

    If DRPO "Sell" will be formed here, we probably will have to focus on deeper K-support area around 1.14, trend line and OS level.

    Here we could only talk on possible retracement levels that could be reached. I've drawn here sloped line that we've mentioned above and it stands in an area of K-support here.

    For shorter daily time perspective we will watch for 1.16 Fib support, this is "hidden" gap-based Fib level.
    eur_w_02_10_17.

    Daily

    So, taking all above talks together, it seems that our H&S pattern on daily has not bad chances to appear. As were tracking it day by day in our daily videos, it is not much to add right now.

    Market has reached daily K-support that is accompanied by September PS1 and daily OS level. This combination makes it suitable for starting point point for right shoulder creation. Our intraday 1.1620 target is too extended for this pattern and stands below K-area. It means that neckline probably stands as we've drawn it here and upside action has started.

    Taking in consideration of H&S harmony, it seems that destination point stands somewhere around 1.1880-1.19 area:
    eur_d_02_10_17.

    Intraday

    So, last week target of 1.1825 area has been met, so as ride down after German elections as ride up after completion of intraday targets were pretty nice.

    First, let's start from 4-hour chart. As butterfly 1.618 target has been met price has turned to upside retracement which we've traded in last 2 sessions. At the same time we have minor H&S pattern as well here and it's ultimate 1.618 target has not been completed yet.

    At the same time, as you can see, neckline of this minor "H&S" stands at the same area where the top of left shoulder of daily larger H&S. It means that most probable scenario here is upside continuation and re-testing of neckline, some kind of "kiss goodbye" probably. Then downward action could continue. Final target of minor H&S probably will be met on a road to major target of daily H&S pattern.

    Although market could reach 1.1620 first and start upside action (to form right shoulder on daily ) second, but this scenario we treat as significantly less probable:
    eur_4h_02_10_17.

    Upside action on hourly chart has started from our "222" Buy pattern, but later we also have recognized reverse H&S pattern, which target has not been met yet. Market just has reached 1.1825 resistance. Thus, completion of this AB-CD will lead EUR right to the point - K-resistance and neckline. That's what we will be watching for on Monday:
    eur_1h_02_10_17.

    Conclusion:

    In very long term perspective EUR looks positive as monthly USD index could form huge H&S pattern.

    In shorter-term perspective EUR has some factors that limit its upside potential - Germany election, technical resistance and overloaded speculative long positions by CFTC data It means that EUR mostly is ready for meaningful retracement down.
    On coming week we continue our work with daily H&S pattern and process of forming right shoulder in particular.



    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.
     
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  2. Lolly Tripathy

    Lolly Tripathy Master Sergeant

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    Great jib sive sir..
    Thanks for the clear vision on eur...
    God bless..
     
  3. LordBrandonCharles

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    compelling evidence
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar struck a 1-1/2-month high on Tuesday as Treasury yields rose after a strong reading for U.S. manufacturing activity hardened expectations for U.S. interest rates to rise by the year-end.

    The Australian dollar slipped to its lowest in more than two months after the Reserve Bank of Australia left interest rates unchanged and gave a somewhat cautious assessment of the local economy.

    The dollar index against a basket of six major currencies was up 0.3 percent at 93.848 after touching 93.891, its highest since Aug. 17.

    On track for its third straight day of rises, the benchmark 10-year Treasury yield edged up to 2.351 percent after briefly touching a three-month high of 2.371 percent overnight.

    Debt yields and equities rose - Wall Street shares reached record highs - after a measure of U.S. manufacturing activity for September released on Monday showed a surge to a 13-1/2-year high.

    “The dollar is drawing support from familiar themes. The Fed continues to sound hawkish, U.S. indicators are good and price indicators are rising,” said Bart Wakabayashi, Tokyo Branch Manager of State Street Bank.

    “All these factors are cementing the prospect of a December rate hike by the Fed.”


    The euro was down 0.2 percent at $1.1708 after brushing $1.1702, its weakest since Aug. 17.

    The common currency had already slid 0.7 percent overnight against a data-boosted dollar.

    The euro also took a knock on Monday as Spain faced its biggest constitutional crisis in decades after Sunday’s independence referendum in Catalonia.

    “The impact on the euro from the Catalonia vote is likely to fade. Other euro zone markets, like those in Germany, have taken the vote in their stride. Wanting independence and actually achieving it are also two different matters,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

    The dollar, which initially fell to 112.660 yen early in the session, was up 0.35 percent at 113.150 yen. A rise above 113.260 would take the greenback to its highest since mid-July.

    Still, some saw the dollar facing turbulence against the yen in the coming sessions as traders considered the implications of Japan’s snap general election later in the month.

    Ishizuki at Daiwa Securities pointed out that one-month dollar/yen risk reversals showed dollar puts are more popular.

    “What this means is that participants, particularly foreigners, are wary of the upcoming elections and its possible negative impact on Abenomics,” Ishizuki said.

    Market participants try to hedge against currency risk and volatility through the use of risk reversals, in which “puts” give them the option to sell.

    Japanese Prime Minister Shinzo Abe last week dissolved the parliament’s lower house and called a snap election for Oct. 22.


    Abe’s ruling Liberal Democratic Party (LDP) was initially expected to win the election with relative ease. An easy win, however, is looking less assured with popular Tokyo governor Yuriko Koike forging an alliance of opposition parties to challenge the LDP.

    The Australian dollar fell 0.4 percent to $0.7792, its lowest since July 18, after the RBA’s policy decision on Tuesday.

    The RBA kept interest rates on hold at a record low of 1.5 percent as widely expected while noting that a stronger local currency would slow the economy and restrain price pressures.

    The central bank said local economic growth was expected to pick up gradually in the coming years. But it also noted that slow wage growth and high household debt are likely to constrain spending and growth.


    On Monday EUR hasn't completed our suggestion on upside retracement to form right shoulder, but this scenario stands intact as price just returned to local lows. Actually this upward action should happen rather soon as B&B "Sell" pattern is growing on weekly USD index chart and markets across the board - EUR, AUD are ready to start forming last part of H&S pattern.

    Today we will take a look at GBP while we're waiting for our upside action on EUR and AUD. On GBP we recall our setup that we've discussed two weeks ago. Cable has completed AB-CD pattern and now we have market mechanics of B&B trade, although this is not typical B&B as it mismatches strict conditions - 6 closes below 3x3 DMA against 3 closes...
    Still, upside momentum is still hear and it should be sufficient to push GBP at least to 5/8 retracement. Besides, we have another pattern in place - bullish "Stretch" as price has reached OS+Fib support:
    gbp_d_03_10_17.

    On 4-hour chart market stands in downside channel. Although bullish butterfly already has been completed, but as price has dropped slightly lower - this is warning sign.
    gbp_4h_03_10_17.

    That's why, here is better to either wait for another clear bullish pattern somewhere round lower border of the channel on hourly chart, or - wait for upside breakout of the channel and take position on retracement. Here btw, market could formed reverse H&S pattern and left shoulder will be somewhere around broken channel.
    But, anyway, current setup on GBP is worthy to keep an eye on it...
     
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  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar stepped back from a 1-1/2-month high against a basket of currencies on Wednesday on speculation that U.S. President Donald Trump’s choice for the next Fed chair could be a less hawkish candidate than some had expected.

    U.S. Treasury Secretary Steven Mnuchin favours Fed Governor Jerome Powell over former governor Kevin Warsh, Politico reported. Both Warsh and Powell were interviewed at the White House last week.

    While both are seen as serious candidates to replace current Chair Janet Yellen when her term expires in February next year, Powell is seen as more dovish than Warsh, who has criticised the Fed’s bond-buying programme in the past.

    The dollar had rallied earlier this week on speculation that Warsh might be the leading candidate to replace Yellen, and got an extra boost from strong U.S. data.

    A more hawkish Fed candidate would likely prompt investors to bet on more aggressive normalization of monetary policy, to the dollar’s benefit.

    “The next head of the Fed is a longer-term focus for the forex markets,” said Keiko Ninomiya, senior FX market analyst at SMBC Trust Bank in Tokyo. “In the shorter term, investors are wary ahead of U.S. employment data later this week,” she said.


    The dollar index, which tracks the greenback against a basket of six major rivals, slipped 0.2 percent to 93.433 .DXY, off a six-week high of 93.92 touched on Tuesday following strong U.S. manufacturing figures.

    “The dollar has gained recently on expectations of a Fed rate hike in December and hopes of tax cuts, but the markets have finished pricing in all the positive news,” said Shinichiro Kadota, senior rates and FX strategist at Barclays.

    “A December rate hike is already factored in while we have to see whether any tax deal will come through,” he added.

    Dollar money market futures were pricing in about a 70 percent chance of a rate hike by December.

    The euro traded at $1.1764, up 0.2 percent on the day and off Tuesday's 1 1/2-month low of $1.16955.

    The common currency has been also dogged by concerns over political and social turmoil in Catalonia.

    Spain’s King Felipe VI on Tuesday accused Catalan secessionist leaders of shattering democratic principles and dividing Catalan society while Catalonia’s leader, Carles Puigdemont, said the region will declare independence in a matter of days.

    The dollar's rally against the yen has also stalled, with the U.S. currency unable to clear resistance around 113.25 yen in the past week. The dollar dipped 0.2 percent to 112.64 yen JPY=.

    Uncertainties ahead of Japan’s general election on Oct. 22, where Prime Minister Shinzo Abe faces a challenge from a new party formed by a popular Tokyo Governor Yuriko Koike, also clouded the outlook for the currency pair.

    The British pound edged 0.2 percent higher to $1.3259, but was still down 1.0 percent so far this week.


    It dropped to $1.3222 overnight, its lowest in almost three weeks, after data showing a surprise contraction in the construction sector stoked worries about economic uncertainty surrounding Britain's exit from the European Union.

    Adding to a sense of uncertainty, Brexit minister David Davis said on Tuesday that Britain is ready to walk away with no deal, and that officials were “contingency planning” to make sure all scenarios were covered.

    The Australian dollar bounced back slightly from Tuesday’s three-month low after the central bank cautioned that a higher currency would drag on the economy and inflation.

    The Aussie fetched $0.7856, up 0.2 percent on the day and off Tuesday's low of $0.7785.


    Today we return back to EUR discussion, but, actually, we have very similar expectations on other currencies - GBP and AUD.

    As we've said yesterday - don't worry of recent drop. It doesn't break our weekly trading plan and upside action is still possible to happen. It's just a question of the pattern - which one will be formed. On daily chart price still stands around strong support K-area and shape of H&S is easily recognizable:
    eur_d_04_10_17.

    Events in Spain, could probably make some pressure on EUR, but hardly this will be key driving factor. On 4-hour chart we have bullish divergence that was formed yesterday, as market has re-tested previous bottom:
    eur_4h_04_10_17.

    As a result we see two possible patterns here - either Double Bottom on hourly chart, with first destination around WPP that is neckline and K-resistance and then to WPR1 and 1.1940 Fib level, or a kind of falling wedge pattern on 4-hour chart, which could be broken up a bit later:
    eur_1h_04_10_17.

    That's being said, currently it is too early to talk on downside continuation as market keeps chances on upside bounce. Besides, we will get NFP later in the week and a lot of other important stats that could change situation rapidly.
     
  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar inched up against a basket of its peers on Thursday after data shed more positive light on the U.S. economy, although sagging Treasury yields tempered the greenback’s gains.

    The dollar index against a group of six major currencies was 0.05 percent higher at 93.500.

    It had declined 0.1 percent the previous day as speculation that the next head of the Federal Reserve could be a less hawkish candidate than expected knocked it off seven-week highs.


    The greenback managed to crawl back after Wednesday’s data showed U.S. service sector growth hit is fastest in 12 years in September and private employers added more jobs than forecast despite Hurricane Harvey and Irma.

    The gains, however, were kept in check with Treasury yields having pulled back from three-month peaks.

    “The dollar has not been able to take full advantage of the latest series of strong U.S. data as Treasury yields have come down from their peaks,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.


    The dollar index had scaled the seven-week peak of 93.920 on Tuesday, when the 10-year Treasury yield hit the three-month high of 2.371 percent after strong U.S. manufacturing data hardened expectations for the Fed to raise interest rates by year-end.

    The 10-year Treasury yield last stood at 2.328 percent.

    “It appears that the market has mostly priced in dollar-positive factors, like better indications for the U.S. economy, tax-related issues and the likelihood of policy tightening by the Fed,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

    Improving U.S. data along with the prospect of U.S. tax cuts and the likelihood that the Fed will raise interest rates in December have boosted the U.S. currency in recent weeks.

    “This leaves the dollar less responsive to positive factors, although it could show a relatively big reaction to negative surprises,” Murata at Brown Brothers Harriman said.

    The euro was a shade lower at $1.1757 after gaining about 0.1 percent overnight.

    The immediate focus was on the minutes of the European Central Bank’s (ECB) September policy meeting due later in the global day.

    The ECB signalled at the meeting that while it could announce a plan this month for a gradual exit from its very easy monetary policy, it was in no hurry to end it.

    The central bank also mentioned the potentially negative aspects of a strong euro at the September policy meeting so the markets will look closely at the minutes to gauge what was discussed about the currency.


    After touching 112.920 yen early in the day the dollar was effectively flat at 112.740 after slipping to as low as 112.320 on Wednesday.

    The Australian dollar was down 0.4 percent at $0.7832 after data showed the country’s retailers suffered their worst sales decline since early 2013 in August.

    The Aussie moved back towards $0.7785, a near three-month low plumbed on Tuesday after the Reserve Bank of Australia cautioned that a higher currency would be a drag on the economy and inflation.

    So, yesterday we've talked on EUR, today we will turn to AUD. Actually they have very similar setups on daily and intraday charts. As on EUR we do not have any big changes since yesterday, it makes sense to take a look at some other currency.

    Besides, now all eyes on Draghi speech later in the session, thus, EUR probably will be mute till it will happen.

    Currently many FX pairs are coiling around strong support areas - EUR, AUD, GBP etc., but upside reaction just can't get started. Recent hawkish Fed statements and coming NFP report, also good statistics keep market in sideways action.

    That's why, we should take position either by having clear bullish pattern on the back or, when we see first signs of upside breakout and starting upside action. Blind anticipation of this, just because market stands at strong support could be rather painful and expensive.
    So, AUD now stands at daily K-support area and it was OS recently. Here we could clear recognize shape of H&S pattern:
    aud_d_05_10_17.

    On 4-hour chart we see that AUD also has completed AB-CD target that makes daily support even stronger, as it is Agreement support as well. Also here is MACD bullish divergence (not shown).

    aud_4h_05_10_17.

    So, now we're coming to most interesting... on hourly chart we have only one pattern in place - 1.27 reverse H&S. And now price is forming last part of it - right shoulder. Here we need to keep an eye on 0.7810 area as this is 1.618 AB-CD target and there price should form some bullish reversal pattern on 15-min chart.
    aud_1h_05_10_17.

    In fact there are two major ways to trade this situation. If you trade on daily/hourly, you could use just this H&S and do not worry about some lower time frame analysis. Just keep an eye on possible downside breakout and dropping to the lows. This action will significantly diminish chances on any upside bounce.

    Second way - look for AB-CD completion around 0.7810, then drop time even more, to 15-min chart and watch for bullish reversal pattern. Position taking could be done based on this minor pattern with corresponding stop placement. This will significantly reduce potential loss, but, it demands more scrutiny and diligent work...


     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar hit seven-week highs versus a basket of currencies on Friday, supported by hopes for progress on U.S. tax reforms, while sterling was under the gun on worries over a possible leadership battle in the British government.

    Congressional Republicans moved to hasten an overhaul of the U.S. tax code on Thursday, with the Republican-controlled House of Representatives approving a fiscal 2018 spending blueprint to help advance an eventual tax bill.

    Solid U.S. economic data, along with the prospect of U.S. tax cuts and growing expectations for the Federal Reserve to raise interest rates in December have given a lift to the dollar in recent weeks.


    The dollar index, which measures the dollar’s value against a basket of six major currencies, edged up 0.1 percent to 94.097. It rose to 94.112 at one point on Friday, its strongest level since mid-August.

    The near-term focus is on U.S. job data for September, due later on Friday. The employment data is expected to show a slowdown in jobs growth, reflecting the effects from Hurricane Harvey and Irma.


    “After both hurricanes, expectations are now very low... So I think any number above 100,000 will be a positive surprise,” said Heng Koon How, head of markets strategy for United Overseas Bank in Singapore.

    According to a Reuters survey of economists, the jobs data will likely show that nonfarm payrolls increased by 90,000 jobs last month after rising by 156,000 in August.

    Against the yen, the dollar inched up 0.2 percent to 112.99 yen .

    The euro touched a seven-week low of $1.1686, and last stood at $1.1689, down 0.2 percent on the day.

    Sterling remained under pressure and slipped to fresh four-week lows on Friday, dented by worries over a possible leadership battle at the top of the British government.

    Divisions over the future of British Prime Minister Theresa May burst into the open on Friday, with allies saying she should carry on and a former Conservative Party chairman claiming the support of 30 lawmakers for a plot to topple her.

    That came after May reinforced markets’ doubts about her ability to govern effectively in a poorly-received keynote speech at the annual Conservative party conference on Wednesday.

    Now that markets see the likelihood of the Bank of England raising interest rates in coming months, the pound appears vulnerable to any factors, such as weak UK economic data, that prompt a reassessment of such views, said Tan Teck Leng, forex analyst for UBS Wealth Management in Singapore.

    “Markets are no longer net short (sterling), so there is a lot of room to take profit,” Tan said.

    U.S. Commodity Futures Trading Commission data released last week showed that currency speculators recently shifted to having a net long position in sterling for the first time since 2015.

    Sterling fell 0.3 percent to $1.3080. It slipped to $1.3073 at one point on Friday, its lowest level since Sept. 7. Sterling has shed nearly 2.4 percent this week, putting it on track for its worst weekly performance since October 2016.

    The Australian dollar skidded to its lowest level since mid-July at $0.7743 and was last trading at $0.7753, down 0.5 percent on the day.

    Today, guys we will take a look at dollar index (DXY). We very often mention it in our analysis but quite rare make a technical analysis of it. Meantime, DXY is a background for all FX currencies. Particular, it could explain why we're waiting for upside bounce on EUR and AUD...

    On weekly chart we see perfect B&B "Sell" setup, while market is coming to first 3/8 Fib resistance after solid thrust down. As a result, we expect at least 5/8 retracement of whole recent upside action and it has chances to start today:
    idx_w_06_10_17.

    Daily chart forms the same H&S pattern as on EUR and AUD. Starting of B&B "Sell" pattern should lead to appearing of right shoulder - that's why we expect the same action on EUR:
    idx_d_06_10_17.

    On intraday chart we see that all preparations are done for downside action. Price has completed 1.618 AB-CD target and formed perfect 3-Drive "Sell":
    idx_4h_06_10_17.

    Fundamental reason for that action could be poor NFP numbers due huge harm to infrastructure of southern US states - Florida, Hawaii etc. of hurricane attack.
     
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