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FOREX PRO WEEKLY, October 23-27,2017

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Oct 21, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    (Reuters) - The dollar made its biggest daily gain in a month on Friday and posted a weekly increase for the fifth time in six weeks as progress on U.S. tax reforms raised prospects of a fiscal lift to the economy, bolstering investor appetite for risk.

    The dollar hit a three-month high against the Japanese yen, to 113.56 yen, and a five-month high against the Swiss franc, touching 0.9858 franc. Traders seek the yen and Swiss franc in times of uncertainty and fear, and sell the currencies when they favor riskier assets.


    “This is clearly a picture of somewhat of a risk-on rotation today, and it’s ignited some of the animal spirits as we take another step closer to the potential for tax reform coming to fruition,” said Bill Northey, chief investment officer at the Private Client Group at U.S. Bank in Helena, Montana.


    “Because from the standpoint of what has the potential to impact economic trajectory and capital markets trajectory, it really is tax reform.”

    Senate approval of a budget blueprint on Thursday for the 2018 fiscal year cleared a critical hurdle for Republicans to pursue a tax-cut package without Democratic support.

    Investors also have viewed as bullish for the dollar remarks this week from Chair Janet Yellen and other officials of the Federal Reserve that suggest the central bank is moving forward with another rate hike this year.

    The dollar briefly fell on news that Trump was considering nominating John Taylor and Jerome Powell to the top two posts at the Fed, one as chair and one as vice-chair, and on news Yellen had lunched at the White House with Trump adviser Gary Cohn. It quickly retraced those losses.

    The dollar's strength dragged the euro down 0.6 percent to $1.1763 ahead of a European Central Bank meeting next week in which policymakers are seen cutting bond purchases but voting for an extension in stimulus.

    Enhanced risk appetite also helped boost the euro to its highest against the Swiss franc since January 2015, when the Swiss National Bank scrapped its peg with the euro.


    Ahead of national elections in Japan on Sunday, surveys suggest Prime Minister Shinzo Abe’s ruling coalition is on track roughly to match the two-thirds “super majority” it held in parliament’s lower house before the snap vote was called.

    The New Zealand dollar sank to a five-month low on concerns the new Labour coalition will take a harder stance on immigration and foreign investment than the outgoing center-right government.


    Chart of the Week: Euro Area Economic Sentiment Showing Little Signs of Abating Despite Taper Talk
    by Fathom Consulting

    Fathom’s latest Economic Sentiment Indicators (ESIs) for September show that confidence continues to strengthen across the euro area. On an aggregate level, our euro area ESI rose to an all-time high, surpassing its pre-crisis peak and buoyed by an unusually large jump in the European Commission’s consumer sentiment indicator in September. After consistently underperforming, Italy’s ESI has been volatile in recent months but rose sharply in September, up from 0.9% to 1.2% on the back of Istat’s (Italy’s National Institute of Statistics) economic climate index which climbed almost 15 points in September. This rise in economic sentiment across the currency bloc is set against the backdrop of anticipation of the ECB’s announcement on how it will taper its monthly asset purchases, expected to be made at its next meeting on 26 October.
    [​IMG]


    COT Report

    Recent CFTC data doesn't show any big changes yet on EUR. It stands at peak of bullish sentiment as net long position is coiling around absolute high. It means that our conclusion will be the same - upside potential of EUR is limited. May be it could move higher for 1-2 points, but currently it is difficult to count on new bull trend above 1.20-1.21 area.
    upload_2017-10-21_12-9-39.

    That's being said despite that sentiment stands extremely bullish - it stands in favor of downside retracement. This is paradox but this is just how markets work - when everybody already hold longs - there is nobody on other side, who could buy more and support existed tendency. As a result - market turns to retracement.

    Technical
    Monthly


    Recent action hardly impacts monthly chart. Mostly situation stands the same here. October price action takes doji indecision shape right above previous long-term consolidation border.

    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_23_10_17.

    That's being said, monthly chart mostly gives us just single important issue - don't count on upside continuation above 1.2150 area in perspective of few months. This is important for long positions that we could take on lower time frames. Profit should be taken as market comes closer to previous tops.

    Weekly

    Trend has turned bearish here, OS level stands rather far and doesn't prevent downside action. Last three weeks market mostly stands in the same range, thus, our weekly analysis also barely has changed. Last week even was inside one.

    In fact, here we have only one intrigue - whether we will get DRPO "Sell" pattern, or, market will continue downside action right now. Just to remind you - action since middle of the March, right after (or even before) the gap of French elections could be treated as "thrust". For DRPO we need some upside action, above 3x3 DMA and closer to previous tops. Recent pause on downside action on daily chart tells that theoretically this is still possible.

    As market shows rather slow downside action - we haven't got here any B&B "Buy". Price has spent 3 bars below 3x3 DMA but major fib level has not been touched - so, no B&B here.

    In general, 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 and potentially should lead to deeper retracement.

    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.

    eur_w_23_10_17.

    Daily

    Here, on daily picture we're coming to most important part of our analysis. Market now stands in narrowing price action, and usually when market does it, it keeps door open for opposite patterns. Partially we've discussed this topic on Friday. Indeed, on daily chart, we could get H&S and downside butterfly on the right shoulder. But at the same time, as stands above 1.1735 lows - it keeps door open for upside AB=CD and "222" Sell, that could be accompanied by smaller upside butterfly, right? So, what we gonna do?

    Let's try to find some additional details. First is, we have strong bearish divergence of H&S - right under strong monthly resistance area. Usually it leads to appearing of bearish reversal swing, which we haven't got yet.
    Second - it seems that we have bearish dynamic pressure here. Trend stands bullish, but price action mostly stands flat. Upside impulse was held by MPP - now it is the barrier between consolidation on the top of the head (H&S pattern) and shoulder. Market usually protects consolidations that price has abandoned already. If EUR will return back to consolidation above MPP - it probably will erase H&S and only potential weekly DRPO "Sell" will stay.

    Finally we have bearish engulfing pattern, that, at least in short-term, suggests another leg down. Putting all this stuff together, it seems that now it is not good point for any long positions. Only above 1.19 area we could suggest suitable situation for taking long trades.
    eur_d_23_10_17.
    Intraday


    Here you can see clear border between two consolidations mentioned above. It stands right at 50% major Fib level and MPP. By the shape of price action - EUR indeed keeps chances as for upside butterfly as for downside one. This is typical for any type of triangle narrowing price action. For us major point is low in red circle. Once it will be broken upside butterfly will be erased.
    eur_4h_23_10_17.

    But what chances that this indeed should happen? Well, if we will take a look at dollar index chart - it already has erased this butterfly (don't forget that DXY and EUR stands in opposite directions).
    dxy_4h_23_10_17.

    Also, let's not forget about daily engulfing. Usually it leads to some AB=CD action on hourly chart. Now we have AB leg in place. As price stands at 5/8 Fib support, on Monday we should get upside bounce and BC leg. But then EUR should continue move down to complete engulfing target:
    eur_1h_23_10_17.

    Conclusion:

    Despite multiple bearish signs, EUR still shows high degree on uncertainty of short-term perspective. Coming week will be also full of important fundamental data. Still it seems that minor advantage stands on the side of bears.
    Still, if you would like to take long position, it makes sense to think about using of stop type of entry order, on a breakout of 1.19 area. Here we have specific situation that gives us advantage as EUR clearly shows the border between consolidation zones. Once it will move above 1.19 again, road to previous tops around 1.21 will be open.
    But until price stands below 1.19 any long position will be accompanied with significant risk.


    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. Joh

    Joh Sergeant Major

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    Thank you Sive,
    This jolly euro bewilders me from time to time :( Am frustrated and not all that trusting this time, as the USA$ seem to be getting stronger INMO can easily see it go 117+. that may bring the E/U and GBP/U and A/U etc.down, aside for global/political issues/war etc.- Some BloomB. reports said the E/U would be a dollar by year end and Aussie fall to 0.50. What do you see at this uncertain time if the USA rises do you see the E/U drop again to the prev.expected 104/106 how far am i off the mark here?
     
    #2 Joh, Oct 22, 2017
    Last edited: Oct 22, 2017
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Well december rate hike is mostly priced in already. Next shake should happen on the comments on dec Fed meeting. Now EUR is a hostage of political unrest in Italy and Spain, because economical side in EUR now mosty stands positive. My opinion - there will be neither Catalonia independes nor independence of any lands in EU Core countries, such as Italy. This is just attempt to shake situation, to make EU weaker. This is a tool of pressure on EU politicians who take a course that is not coincide with previous vector. All terrorist attacks is the same tool of pressure, refugees etc. They are not "natural" processes. I think this is temporal.
    Currenty I'm not ready to talk on 1.04-1.06 on EUR. Now I'm ready for 1.15. If we will be around 1.15, then we could talk on other levels.
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar edged down on Tuesday, stepping back from recent highs as market attention turns to who will be the next head of the U.S. central bank.

    President Donald Trump told reporters on Monday he is “very, very close” to deciding who should chair the Federal Reserve after interviewing five candidates for the position.

    These include current Fed Chair Janet Yellen, whose term expires in February, as well as Fed Governor Jerome Powell, Stanford University economist John Taylor, Trump’s chief economic advisor Gary Cohn, and former Fed Governor Kevin Warsh.


    “It’s a big question for the markets. It’s one thing to speculate about it, but it’s another to take an FX position,” said Bart Wakabayashi, branch manager for State Street Bank in Tokyo.

    “Still, the rumors trigger some selling and buying, on perceptions of who might be more dovish or more hawkish,” he said.

    Investors are also following U.S. tax reform developments. The Senate’s approval of a budget resolution on Friday raised hopes that Trump’s tax plans would move forward this year.

    The dollar index, which tracks the greenback against a basket of six major rivals, was down 0.2 percent at 93.741, moving away from 94.017, which had been its highest since Oct. 6.

    The dollar inched 0.1 percent lower to 113.35 yen, pulling away from a three-month high of 114.10 yen hit in the wake of Sunday’s general election in Japan.

    Prime Minister Shinzo Abe’s coalition scored a decisive victory, reassuring investors that his “Abenomics” policies would continue, including the Bank of Japan’s easy monetary policy.

    “The risk-on sentiment has stalled for now,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

    “The Japanese election result was not so surprising, and was mostly priced in,” he said.

    The euro added 0.1 percent to $1.1762, though its gains were seen capped ahead of the European Central Bank’s policy meeting on Thursday, where the authority is expected to signal it will take small steps away from its ultra-easy monetary policy.

    Catalonia’s separatist crisis pressured the euro. Madrid has invoked special constitutional powers to dismiss the Catalonian regional government and force elections to counter the independence movement.


    A vote in the national Senate to implement direct rule on Catalonia is due on Friday.

    The New Zealand dollar, meanwhile, had the rug pulled out from under it after the country’s incoming Labour government laid out its left-leaning policies. It was last down 0.2 percent at $0.6949, within sight of a five-month low of $0.6932 plumbed on Monday.

    The policies were seen as unfriendly to foreign investment and immigration, and could weigh on the currency given the country runs a current account deficit.


    So, guys, although EUR has erased chances on upside butterfly and dropped on Monday, but new patterns and inputs that we've got on last session do not let us to relax. Although we thought that some drop will turn equilibrium in favor of bears, but this has not happened. Now, bears need to wait breakout of recent lows and H&S neckline to take relatively safe position. Any anticipation of this and attempt to go short right now could be very expensive.
    First is - we've got bullish grabber on daily EUR that suggests upside action above previous top. If this indeed will happen, then we will get action somewhere to 1.19-1.1930 area:
    eur_d_24_10_17.
    The same grabbers we have on Gold and Eurogold. It means that action should be up.

    Although butterfly has been erased, but another potentially bullish pattern is still valid and this pattern is "222" Buy:
    eur_4h_24_10_17.

    As you can see it is also accompanied by bullish divergence. The same pattern we have on DXY. But before upside action will start here, we probably should get minor leg down first, as AB=CD is not completed yet.

    This action is also suggested by DXY 4-hour chart. There we have bullish grabber that comfirms this idea:
    dxy_4h_24_10_17.

    That's being said, if you're bullish - on hourly chart today we you watch for minor leg down just to make AB-CD pattern completed and appearing of bullish reversal pattern. Here we also have divergence btw:
    eur_1h_24_10_17.
    While bears have nothing more but just wait when all this mess with bullish setups will be over either by its failure or by its completion.
     
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar held near a three-month high versus the yen on Wednesday, underpinned by reports of Republican senators’ favouring John Taylor to become the next head of the Federal Reserve, while the Aussie dollar weakened after soft inflation data.

    Taylor, a Stanford University economist, is seen as someone who may put the Fed on a path of faster interest rate increases compared to current Fed chair Janet Yellen, whose term expires next February.

    The dollar last traded at 113.77 yen, down 0.1 percent on the day, but still within sight of Monday’s peak of 114.10 yen, which was the dollar’s highest since July 11.


    “The market has started to price in a more hawkish Fed chair,” said Roy Teo, investment strategist for LGT Bank in Singapore.

    U.S. President Donald Trump used a luncheon with Senate Republicans on Tuesday to get their views on who he should pick to head the Federal Reserve, according to senators who attended.


    A source familiar with the matter said Trump polled the Republicans on whether they would prefer Taylor or current Fed Governor Jerome Powell for the job.

    More senators preferred Taylor over Powell, the source said. Trump also said he was considering reappointing Yellen, the source said.

    The reports of support for Taylor as the next Fed chief, helped offset news of Republican infighting, which might hamper the passage of a tax cut plan.

    Two Republican senators accused Trump of debasing U.S. politics and the country’s standing abroad, a rebellion that could portend trouble for his legislative agenda.

    The Australian dollar tumbled to three-month lows after Australia’s September-quarter consumer price index figures came in below market expectations, making investors see less chance of increases in Australian interest rates in coming months.

    The Australian dollar was last down 0.7 percent on the day at $0.7720, having touched a low of $0.7716 at one point, its weakest level since mid-July.

    Possible support for the Australian dollar lies at its 200-day moving average at $0.7694, and a breach of that level could open the way for a test of levels around $0.7600, said Teppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore.


    The euro held steady at $1.1763, with the near term focus on Thursday’s European Central Bank policy meeting.

    According to a Reuters poll of economists, the ECB is expected to announce on Oct. 26 that it will start trimming its monthly asset purchases to 40 billion euros from 60 billion euros in January.

    The economists were split on how long the ECB will prolong the programme beyond December when the current one expires and there was no clear view on whether or not it would leave the programme open-ended.


    As situation on EUR and DXY mostly stands the same, today we will update our analysis on GBP. Right now is rather sophisticated situation across the board as markets turn to narrowing action, and this kind of action usually a goldmine for contradictive patterns. In fact, this is what we see on EUR right now. Hardly we will get any activity today as tomorrow will be important ECB meeting.

    On GBP we mostly continue watching for daily bearish grabbers, that we've caught last week. But yesterday, we've got another one on a background of UK stats.

    Other toos also suggest downside action (at least right now) - cable has failed to break MPP for few times. Usually it makes market tending to MPS1 that stands right around our daily K-support area.

    Finally - here we have AB-CD pattern with minor 0.618 extension below recent lows and around the same 1.30 area.
    gbp_d_25_10_17.

    On 4-hour chart all this stuff could lead to appearing of butterfly "Buy" pattern:
    gbp_4h_25_10_17.

    Finally, on hourly chart we could see failed attempt of upside reversal. Here you can easily recognize failed reverse H&S pattern. Now market stands too deep for right shoulder and action down was too strong. Flag consolidation also points on possible downside continuation here:
    gbp_1h_25_10_17.

    So, it seems that our bearish scenario for cable is still valid.
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The euro stretched gains on Thursday ahead of a European Central Bank meeting that could result in a less accommodative monetary policy, while Asian stocks were subdued after Wall Street pulled back from record highs.

    The euro added to overnight gains to reach a six-day high of $1.1833, accompanying a rise by the German 10-year bund yield to a three-week top of 0.50 percent.


    The rise by the euro and German yields was prompted by expectations the ECB would cut back its bond-buying stimulus and take the biggest step yet toward unwinding years of loose monetary policy.

    However, the central bank is still concerned about low inflation and is expected to accompany the tapering with an extension of the stimulus in a “less-but-for-longer” move.

    The ECB’s policy decision is due at 1145 GMT and ECB President Mario Draghi’s post-meeting press conference is scheduled for 1230 GMT.

    “The focal point is how long the ECB decides to spend on tapering its bond buying,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

    “If the ECB opts to spend more than six months to taper, it will lead to thoughts that it won’t be able to move onto hiking interest rates until 2019,” he said.


    “The ECB could be seen as dovish in such a case and in turn weigh on the euro,” he said.

    The dollar was 0.2 percent lower at 113.515 yen.

    The greenback rose to a three-month high of 114.245 yen overnight as the benchmark 10-year Treasury yield spiked to a seven-month peak of 2.475 percent.

    But the dollar pared the gains as the Treasury yield retraced its rise amid the drop in Wall Street shares. The 10-year Treasury yield last stood at 2.426 percent.

    The dollar index against a basket of six currencies was down 0.15 percent at 93.567 and at its lowest in six days.

    The Canadian dollar was a big mover, having slid 1 percent overnight to a three-month low of C$1.2816 per dollar after the Bank of Canada left interest rates steady as expected, but sounded dovish in its policy statement.

    The loonie limped back slightly to C$1.2790 per dollar.

    The New Zealand dollar traded at $0.6890, having hit a five-month low of $0.6861 on Wednesday amid investor concerns over the new government's protectionist leanings.


    So, today we just can't ignore EUR as ECB meeting will start within few hours. There are two major issues that we need to keep an eye on. First is a degree of QE contraction - 20 Bln is consensus. Thus, if QE, will be contracted, say for 30 Bln, this will be EUR supportive issue.
    Second one is term of QE. Currently most traders think that it will be kept till Autumn 2018. So, if we will hear shorter term - this also will be in favor of EUR.

    On daily chart you can see that our suspicions were not in vain. Indeed, the price behavior that we've called initially as "irrational" now shows results. In addition to bullish grabber, now we have potential AB-CD to 1.1930 level:
    eur_d_26_10_17.

    In fact we have nothing more but "222" Buy pattern:
    eur_4h_26_10_17.

    On hourly chart market stands in wide flag consolidation. So, for bears - just sit on the hands and wait results of ECB meeting. Here is not good moment for taking position. It is better to wait completion of AB-CD action around 1.1930 or any level whatever it will be. Because we could get "222" Sell on the slope of daily H&S pattern.
    Besides, we also have potential DRPO "Sell" on weekly. That's why flirting around 1.21 or lower will keep it valid. So, even action to 1.21 will not necessary mean failure of bearish setup.

    For bulls - you could watch for some minor retracement on hourly chart - either to nearest 1.1805 or K-support area. Hardly retracement will be stronger. But you should be ready to take risk of ECB meeting mess. Who knows what will happen...
    eur_1h_26_10_17.
     
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  7. DevTrader

    DevTrader Private, 1st Class

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    Sive your attention also require on USD/CAD . Its been impressive setup and next level looking between monthly resistance 1.2840-1.2880.
    Its been good week trading other currencies than GBP and EUR.
    No doubt EUR will show volatility today and GBP next week.
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Thanks, buddy. Unfortunately I can't cover all currencies here... If you have some setup - put it in the thread. These threads are not only for my videos/posts. They are for discussion and sharing of your own analysis as well, especially when you see something interesting.
     
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar stood tall on Friday, on track for weekly gains, while the euro slumped to three-month lows after the European Central Bank extended its bond purchases and reduced the chances that it would hike interest rates in 2018.

    The ECB prolonged its bond buying programme by nine months to September 2018, and left the door open to keep buying after that. It said it would begin paring its monthly purchases by half to 30 billion euros ($34.90 billion) starting in January.


    ECB chief Mario Draghi said “an ample degree of monetary stimulus remains necessary”, as inflation has yet to show signs of a sustained upward trend.

    The euro was down 0.15 percent at $1.1633 after touching $1.1624, its lowest level since July 26. It was down 1.3 percent for the week.

    The common currency slumped against the greenback as the ECB’s cautious approach highlighted the difference between the Federal Reserve, which is poised to raise rates in December as it continues to normalise monetary policy.

    “The ECB’s decision appears like a limited deal, in which it restricted itself to curbing the amount of its bond purchases,” said Koji Fukaya, president at FPG Securities in Tokyo.

    “This is in sharp contrast to the Fed, which is moving steadily as scheduled towards the normalisation of policy. The euro looks headed for further losses under such conditions.”

    The dollar index, which tracks the greenback against a basket of six major rivals, added 0.2 percent to 94.800, trading at three-month highs and on track for a weekly gain of 1.1 percent.

    “The concept of tapering would be removal of accommodation, so it wasn’t exactly what the market was expecting - it was a dovish form of tapering, as there was both an extension and a reduction,” said Bill Northey, chief investment officer at the private client group of U.S. Bank in Helena, Montana.

    The ECB’s extension pushes “any potential rate hike to 2019”, he said.

    Also underpinning the dollar, the U.S. House of Representatives voted on Thursday to clear a procedural path for a Republican tax bill.

    “We did see some additional progress toward tax cuts,” Northey said. “As we move into 2018, the likelihood that something will pass increases.”

    Investor attention remains on candidates to head the U.S. Federal Reserve when current chief Janet Yellen’s term expires in February.

    Trump’s search for the next central bank chair has come down to Fed Governor Jerome Powell and Stanford University economist John Taylor, Politico on Thursday cited one source as saying, while another counselled caution. But a White House official told Reuters that no final decision has been made.

    Trump is expected to announce his candidate before his upcoming trip to Asia in early November.

    The dollar gained 0.15 percent to 114.155 yen, within sight of this week’s three-month high of 114.245 touched on Wednesday. It was up 0.5 percent for the week.

    The greenback’s rise against the yen was limited as the Japanese currency rallied against the euro.


    The euro fetched 132.840 yen after going as low at 132.590, its weakest in eight days. The common currency dropped 1.2 percent against the yen overnight.

    The yen showed little reaction to Friday’s data revealing Japan’s core consumer prices rose 0.7 percent in September from a year earlier to mark a ninth straight rising month.

    Sterling slipped 0.3 percent to $1.3124,with investors focussed on whether the Bank of England will proceed with its first interest rate increase in more than a decade after its next meeting on Nov. 2.


    So, yesterday it was really dramatic action. Although dovish ECB comments were in agreement with our long-term view, as we've talked a lot about CFTC EUR overextended bullish position and long-term patterns on dollar index, but, on daily/intraday charts all bullish patterns were vanished. This leads us to the same question - wether to trade Central Banks' meetings and decisions or not. But if you do, you should be ready for total collapse of all hopes.

    Today we will take a look at Dollar Index, but you could apply this analysis to EUR as it has the same picture but in mirror direction. Daily progress stands according to patterns that we've discussed - this is reverse H&S pattern and neckline has been broken recently. There are two targets that we could watch for on next week - 1.618 butterfly extension around 95.0 and AB-CD target @95.85.
    Still, right now market stands at daily OB and it is not very good moment to take position immediately, we need some pullback here:
    dxy_d_27_10_17.

    At the same time, this pullback should not be too deep. Definitely we do not want to see price return back below neckline. Hence, there are just two levels that we will be watching for - nearest 3/8 Fib support and K-support on 4-hour chart, that coincides with neckline:
    dxy_4h_27_10_17.

    Now guys, we're getting direction for long perspective - for year or so. Thus, don't upset if you haven't taken position yesterday. There will be a lot of chances ahead, but in safer environment.
     
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