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FOREX PRO WEEKLY, September 18-22, 2017

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Sep 16, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    (Reuters) - The dollar weakened against most major currencies on Friday, weighed down by an unexpected decline in U.S. retail sales last month that once again dimmed expectations for an interest rate increase in December.

    U.S. retail sales unexpectedly fell in August as Hurricane Harvey likely depressed motor vehicle purchases, dropping 0.2 percent last month. Economists polled by Reuters had forecast retail sales nudging up 0.1 percent.

    Looking ahead, the market is now focused on next week’s Federal Open Market Committee meeting, in which the Fed is expected to start reducing its balance sheet. There is, however, zero expectation for an interest rate hike.

    “The Fed’s tone and stance during next week’s FOMC statement and press conference will play a major role in setting expectations for interest rates, the Fed’s balance sheet reduction plans, and the U.S. dollar going forward,” said James Chen, head of research at Forex.com in Bedminster, New Jersey.


    Sterling, meanwhile, slammed the dollar as well, after a Bank of England policymaker opened the door for a possible rate increase in the coming months. That helped push the pound to its highest since the results of last June’s vote to leave the European Union, putting it on track for its best week against the dollar since October 2009.

    Currency traders also brushed off the latest missile fired by North Korea in a volatile day of trading on Friday.

    The dollar initially dipped against the safe-haven yen after North Korea fired a missile early on Friday that flew over Japan’s northern island of Hokkaido far over into the Pacific Ocean.

    However, the yen’s fall against the dollar on Friday raised questions about investors’ willingness to buy Japanese assets when Japan is in North Korea’s firing line.

    In late trading, the dollar rose 0.6 percent to 110.88 yen, posting its best weekly percentage gain since November.

    Britain’s pound, meanwhile surged above $1.36 on Friday.

    Sterling had already recorded its best day since April on Thursday, after investors brought forward their rate hike bets following the Bank of England’s signal that it would tighten soon.

    It built on those gains on Friday after BoE policymaker Gertjan Vlieghe said “the appropriate time for a rise in Bank Rate might be as early as in the coming months.”

    The euro was up 0.2 percent at $1.1940, staying below a 2-1/2-year high set last week. That pushed the dollar index to 91.868, down 0.3 percent on the day.

    Chart of the Week: Volatility, What Volatility?
    by Fathom Consulting


    Last month we passed the tenth anniversary of the financial crisis – an event that turned conventional wisdom about how economies operate on its head, and exposed widespread risks in the financial system that had previously gone unchecked. This led to a repricing of risk across the board. While policy uncertainty across major developed countries increased since the financial crisis and subsequent euro sovereign debt crisis, and remains historically high, the same is not true of the standard deviation of stock market returns, or other volatility measures such as the VIX.

    The VIX index is a measure of market-implied expectations of near-term volatility calculated using S&P 500 index option prices, and is a closely watched barometer of investor sentiment and market volatility. Not just far below its historical average, the VIX index is currently close to its lowest recorded level. Investors appear remarkably sanguine, despite stretched valuations across many asset classes and considerable political uncertainty in the US and elevated geopolitical tensions. One explanation could be the emergency level of monetary stimulus provided by central banks, or maybe investors simply think this time will be different.

    [​IMG]

    COT Report

    Recent CFTC data shows changes that we are expected to get and talked about it on last 2 weeks. This is just minor changes yet, but it could become just a first bell of coming retracement. Besides, on 24th of September Germany will take elections and some position closing looks logic before this moment. Anyway - last week chart shows that net long position has dropped while open interest has increased. It means that new shorts have come to market, not just long closing.
    Recall that overall EUR net long position stands near all time high and market just can't proceed upside action as nobody rest who could buy and support previous trend, because mostly all traders already keep longs... Thus, position needs to be off-loaded a bit. Usually it happens thanks to short-term traders and speculators. They more actively change direction of trading.
    Of course, it's a bit difficult to make conclusion just by result of single week, but this sign anyway not in favor of bulls.
    upload_2017-9-16_12-6-48.

    Technical
    Monthly

    Last week long-term EUR picture has not changed significantly. The only new important detail 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.

    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 in September 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_18_09_17.

    If we recall USD Index chart as we did last week, here we have bullish "Stretch" pattern, actually. Index is oversold right at 50% Fib support. This situation also mostly stands in favor of USD. Of course, monthly chart is rather big picture and we should not treat numbers as precise levels. Mostly they are some ranges around. But they work in the same manner as on lower time frames. It means that price could fluctuate around, but sooner rather than later it will respond to support and retracement will happen. Ultimately, here we could get even H&S pattern, thus, retracement could be much stronger, compares to our minimal estimations.
    #US$indx_U7Monthly.

    Weekly

    On weekly chart we have difficult situation because we do not have any tools to say whether market could climb slightly higher, or all visible targets have been achieved already and it could freely start move down. All that we have is just monthly resistance levels and, here - 1.27 major extension of big retracement plus new MPR1 in the same 1.21 area.

    Last week market has not formed something special, no reversal weeks either, no Overbought. 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.

    This is our ultimate level for retracement that is allowable by bullish sentiment. If EUR will break it then medium-term picture will change. But, retracement also could be smaller. Currently weekly chart doesn't provide any clear information. Based on Pivot point framework, we could suggest - as price has dropped below MPP, it could start moving to MPS1 and previous tops around 1.16-1.17 area...

    The new moments that we have here.. first is our suggestion to exit around previous tops as we've said that EUR hardly will be able to continue trend. Indeed, just minor W&R has happened. It's definitely EUR feels heavy to continue upside action. Second - price stands near MACDP line. This is always an issue to keep an eye on as bullish grabber might be formed here. That's being said, nearest downside target, if retracement still will start is 1.16-1.17.

    eur_w_18_09_17.

    Daily

    Daily EUR perfectly has completed our Friday trading plan. Support of daily OS+MPP+5/8 Fib level that market has reached - indeed has triggered significant intraday upside retracement. Thus, daily bullish Stretch was successful in general, but what's next?

    Well, usually trending market as it reaches support of this quality - uses it for upside continuation. But here we see a bit different story. Bounce us has happened but not too far. May be all fundamental moments that we've talked about above start make impact on market. Recall that new shorts have been opened last week.

    Second - here we have very strong bearish divergence with MACD which suggests drop below 1.1670 lows some time

    Putting its all together, right now it seems that deeper downward retracement looks more probable, some kind of AB-CD action on intraday charts, probably:
    eur_d_18_09_17.

    Intraday

    So, on 4-hour chart our Friday trading plan has been completed - EUR indeed has re-tested broken trend line around 5/8 Fib resistance. If our suggestion on deeper retracement will be correct - EUR should start action to 1.1730 area. Here we have the same small AB-CD that we've used on previous week and it's 1.618 target stands at the same area as new larger AB-CD pattern. Here is crucial moment to watch for is trend line. If price will jump up inside broken wedge - do not go short and wait. Here some other pattern could be formed - H&S pattern for example. In this case market should complete the top of right shoulder that stands significantly higher.
    eur_4h_18_09_17.

    That's why before taking any bearish position, we need to get pattern. On hourly chart EUR perfectly has completed our 1.618 AB-CD (and larger AB=CD as well) right at 5/8 Resistance. Actually we already have large "222" Sell pattern here, but right now it will be good scenario if we also will get minor one in a reversal point, as it will be very useful for position taking. Appearing of butterfly "sell" here is not very logical as market has no uncompleted targets above current level - all targets have been met:
    eur_1h_18_09_17.

    Why this situation is attractive? By two reasons. First is pattern - it shows clearly where to take position and where is invalidation point. Second is a risk - it stands approx. for 30 pips. If market will jump above 1.20 area and erased this "222" pattern - don't be short, sit on the hands and wait. It will mean that this reversal point has failed and market will form something else, definitely will proceed to higher levels. May be, as we've said above - it will be H&S later in the week...

    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, but still there are some scenarios exist how it could happen. In research we have discussed nearest scenario that could be formed on current price level. FOMC meeting on coming week also could support USD if Fed will announce sold-off of bonds from its balance sheet. This will dry some USD liquidity out from the market and support dollar.



    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. RahmanSL

    RahmanSL Captain

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    Sive, as always, thank you very much for your analysis which are very much appreciated.
    During such uncertain times a reliable crystal ball would greatly help us in our trades :)
     
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    "Not bad for little furball" (Han Solo) :D
     
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  4. scharf

    scharf Recruit

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    Thanks again Sive, you're the man!
    I came across this old gem when digging into the DiNapoli techniques
    If anyone's old enough to remember, it might bring back some fond memories... or if you're new like me, it'll give you some good insight into Sive's approach
     
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  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi buddy, yes this is really ancient archives :))
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar held steady at near 8-week highs versus the yen on Tuesday, with investors awaiting the Federal Reserve’s policy statement this week for fresh hints on the possible pace and timing of further U.S. monetary tightening.

    The dollar last changed hands at 111.52 yen, trading within sight of Monday’s peak of 111.665 yen, its highest level since July 27.

    The greenback has benefited from a recent surge in U.S. bond yields. The U.S. 10-year Treasury yield had reached a one-month high of 2.237 percent on Monday.

    That marked a rise of 22 basis points from 10-month lows set on Sept. 8, when U.S. bond yields fell on risk aversion, partly stemming from concerns about U.S.-North Korea tensions.

    In Asian trade on Tuesday, the U.S. 10-year Treasury yield slipped 1 basis point on the day to 2.218 percent.

    Investors are now preparing for potentially more hawkish statements from the Federal Reserve after its two-day policy meeting ends on Wednesday, especially after the Bank of England surprised investors last week with talk of a possible rate hike.

    The Fed is widely expected to announce this week that it will start paring its balance sheet, with the reductions seen likely to start this year.

    It is expected to keep rates on hold, but investors will be watching for fresh hints on the chances of another rate rise this year and how many could be expected in 2018.

    While the dollar might edge up towards 112 yen ahead of the Fed’s policy statement due on Wednesday, its recent rise against the yen looks a bit over-extended, said Peter Chia, FX strategist for United Overseas Bank in Singapore.

    “I would think that with the geopolitical risks always in the background, that will probably temper the upside potential,” he said, referring to the near term outlook for the dollar versus the yen.

    The yen showed little reaction to the possibility of Japanese Prime Minister Shinzo Abe calling a snap election for as early as October to take advantage of his improved approval ratings and disarray in the main opposition party.

    “Foreign investors usually react instinctively to such themes and there hasn’t been a visible response in currencies thus far,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

    “The ruling Liberal Democratic Party (LDP) is enjoying a recovery in support and it is hard to imagine a major change taking place. This is likely leading to the lack of reaction or interest from foreign participants.”

    The euro edged up 0.1 percent to $1.1968, on track for its fourth straight days of gains, albeit modest ones.

    Sterling rose 0.2 percent to $1.3520.

    The currency had soared to a 15-month high of $1.3618 on Monday on speculation that the BoE would raise interest rates soon for the first time in nearly a decade. But the pound’s rally was tempered after BoE Governor Mark Carney said any coming interest rate rises would be limited and gradual.


    Now we need to take a look at EUR again, because market has turned to second scenario that we've discussed in our weekly research. On daily chart picture has not changed significantly - market keeps upside bounce out from daily OS, MPP and Fib support:
    eur_d_19_09_17.
    At the same time fundamental background still stands the same and it stands in favor of retracement, at least how it is expected now by market sentiment - CFTC data shows too extended bullish positions on EUR, Fed should announce balance sheet off-load, elections in Germany also suggests investors to be more careful closer to weekend.

    On 4-hour chart market has exceeded the top that we've warned you about. Now price is challenging trend line and Fib level resistance:
    eur_4h_19_09_17.

    As we've said - don't be short if price will exceed this level. Now we need to wait for another bearish pattern - H&S. But first market has to complete right shoulder around 1.2065 area.

    On hourly chart we have approximately the same targets. Here, we have reverse H&S pattern that has AB-CD objective point right around 1.2065. As a result, we could get another bearish reversal pattern - large "222" Sell. That is what we will be watching for on this week:
    eur_1h_19_09_17.

    Invalidation point is the same - top around 1.21 and it is rather close to 1.2065. If somehow 1.21 will be broken then it will mean that butterfly pattern could be formed and this lead market to monthly 1.2170 major resistance. This will be answer on our question about whether market could show another leg up or not...
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar edged up against a basket of currencies on Wednesday as investors awaited the outcome of the Federal Reserve’s meeting at which it was expected to announce plans to trim its $4.2 trillion in bond holdings.

    The dollar index, which tracks the greenback against a basket of six major rivals, added 0.1 percent to 91.855, holding well above its more than 2-1/2 year low of 91.011 plumbed on Sept. 8.


    Analysts expect U.S. central bank policymakers to say at the end of their two-day meeting later on Wednesday that they will reduce monthly bond purchases starting in October, and also leave the door open for an interest rate hike at their Dec. 12-13 meeting.

    The U.S. currency was steady on the day against its Japanese counterpart at 111.56 yen, moving back toward an eight-week peak of 111.88 yen scaled overnight.

    Currency markets had a muted reaction to U.S. President Donald Trump’s speech to the U.N. General Assembly on Tuesday, in which he said the United States will be forced to “totally destroy” North Korea unless Pyongyang backs down from its nuclear challenge.

    “The market doesn’t seem to have any strong risk-off sentiment, even after Trump’s comments,” said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

    The yen tends to benefit during times of economic and political uncertainty due to Japan’s net creditor nation status, and the expectation that Japanese investors would repatriate assets during times of crisis.

    But this week, Murata said, the main factor for the yen is Japanese Prime Minister Shinzo Abe, who is considering calling an election for as early as next month.

    Sources have said that pledges to spend on education and child care, stay tough on North Korea and revise the pacifist constitution are likely to be pillars of Abe’s campaign.

    “Abe’s policy comments should support the dollar against the yen,” Murata said, adding that if the dollar can break above its 200-day moving average around 112.20 yen, 115 would be its next target.

    The euro was also steady on the day, at $1.1990.

    European Central Bank policymakers disagree on whether to set a definitive end-date for their money-printing programme when they meet in October, raising the chance that they will keep open at least the option of prolonging it again, six sources told Reuters.

    The strong euro, with its dampening effect on inflation, is driving a rift among ECB policymakers, according to sources on the ECB’s Governing Council with direct knowledge of its thinking.


    So, markets across the board just wait for Fed results and we have nothing really new on EUR - market creeps higher to our 1.2065 destination point. If Fed decision will not lead to collapse, we could get bullish weekly grabber on EUR. And this will be some kind of investors' anticipation of elections in Germany. In this case EUR should jump to 1.2170 major monthly resistance.

    That's why today we will take a look AUD. Recall that it has uncompleted 0.8165 major monthly target. And in our previous talks, we said that sooner or later price should continue upside action. As reaction on butterfly target and OB is completed, market could do it right from 0.7930 area, as price has formed nice bullish engulfing pattern:
    aud_d_20_09_17.

    On 4-hour chart reversal has started from butterfly pattern and MACD divergence. Now market is forming bullish reversal swing.
    aud_4h_20_09_17.

    So, may be right now it is too early to talk on direct action right to 0.8165 and first it is better to focus just on daily engulfing pattern. Now price is coming to resistance of Fib level and WPR1. This is an area where deep retracement could start from. Hence, 0.7980-0.80 area is the one where we could watch for entry opportunities, may be "222" Buy will be formed or something of this kind:
    aud_1h_20_09_17.
     
  8. Robban68

    Robban68 Private

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    Thanks for the update Sive,
    It looks some suspicious, A/U could form a bearish grabber on Daily since it is close to cross the line. E/U entering into a key area, who knows where we end up today after the Yellen speak later tonight. I believe I will be on the cheap seat today - on sideline...
     
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - The dollar rose to a two-month high against the yen and extended its gains against the euro on Thursday after a hawkish-sounding Federal Reserve heightened expectations for an interest rate hike in December.

    After concluding a closely watched two-day policy meeting on Wednesday, the Fed left interest rates unchanged as expected but signalled it still expects one more increase by the end of the year, despite a recent bout of low inflation.

    The U.S. central bank, as anticipated, also said it would begin in October to reduce its holdings of around $4.2 trillion in U.S. Treasury bonds and mortgage-backed securities it acquired after the 2008 financial crisis.

    Interest rate futures traders are now pricing in about a 70 percent chance of a December Fed rate hike, up from above 50 percent prior to the Fed meeting, according to CME’s FedWatch tool.

    The euro shed 0.1 percent to $1.1886 after dropping 0.8 percent the previous day, when it reversed a four-session winning run.

    The dollar was 0.2 percent higher at 112.430 yen after brushing 112.645, its highest since July 18. Still, the greenback’s gains against the yen were assessed as relatively limited.


    “The Fed will likely stick to its intent of hiking rates one more time in 2017 and three more times in 2018. But it also cut its long-term interest rate projection and this has somewhat slowed the dollar’s gains versus the yen by causing the U.S. yield curve to flatten,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

    While the Fed’s latest policy stance was viewed as hawkish for the most part, the central bank did lower again its estimated long-term “neutral” interest rate from 3.0 percent to 2.75 percent, reflecting concerns about overall economic vitality.

    Against this backdrop, the 30-year Treasury bond yield climbed 2 basis points overnight to a one-month high of 2.836 percent before dipping back to 2.814 percent on Thursday.

    The two-year Treasury yield rose more assertively, climbing roughly 5 basis points to touch a nine-year high of 1.451 percent and last stood firm at 1.446 percent.

    The Treasury yield curve flattened as a result with the 30-year/2-year yield spread at its tightest in almost two months and nearing its narrowest level in nearly a decade.

    “The Fed revising down its long-term interest rate forecast is positive for longer-dated Treasuries,” said Noji Makoto, senior strategist at SMBC Nikko Securities, implying that yields on these debt maturities stood to decline eventually.

    “The recent rise in yields longer-dated Treasuries could be peaking and we could witness the dollar’s rally against the yen peter out this week.”

    Currencies showed limited reaction to the Bank of Japan’s widely expected decision to stand pat on monetary policy.

    At a two-day rate review that ended on Thursday, the BOJ maintained the 0.1 percent interest it charges on a portion of excess reserves that financial institutions park at the central bank and also kept its yield target for 10-year Japanese government bonds around zero percent.

    The dollar index against a basket of six major currencies was steady at 92.524 and near a two-week high of 92.697 set overnight, when it added 0.8 percent.

    The New Zealand dollar was down 0.4 percent at $0.7331 , its rally the previous day losing steam against a broadly stronger dollar.

    The kiwi soared to a 1-1/2-month high of $0.7435 on Wednesday after a poll showed New Zealand’s ruling National Party pulled ahead of the rival Labour Party ahead of a general election this weekend.

    The Australian dollar fell 0.35 percent to $0.8004 .

    The euro was up 0.15 percent at 133.645 yen , recovering some of the losses suffered the previous day, when the common currency’s slide against the dollar nudged it away from a 21-month high of 134.160 set on Tuesday.


    So, as major even has happened, we now could return back to discussion of EUR. Recent Fed statement mostly should be treated as hawkish and supportive to USD. Thus, taking it together with elections in Germany and too large CFTC speculative positions - it is high probability on some downward continuation. Besides, potential weekly grabber that could be formed, no stands out of perspective and we now will focus on H&S pattern:
    eur_d_21_09_17.

    On 4-hour chart we will watch for downside AB-CD pattern as target of H&S. It stands at 1.1775 area:
    eur_4h_21_09_17.

    On hourly chart we've got our "222" Sell, although it was 100% perfect as CD leg was not totally equal to AB. But this is normal when CD leg is flat and you're waiting for Fed. It doesn't make "222" invalid.
    Right now market stands in short pause. Retracement probably will be small, may be to 1.1925 area. As overall background looks solid and drop was fast - EUR should continue move down soon:
    eur_1h_21_09_17.
     
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  10. Robban68

    Robban68 Private

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    AUD/USD A bulish Gartley on 4HR and a confrimed DRPO Buy on 1Hr as a trigger. Lets see how it will work out
     

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