Sive Morten
Special Consultant to the FPA
- Messages
- 18,571
Happy New Year everybody!
Fundamentals
(Reuters) - The dollar fell to its lowest in over three months against a basket of major currencies on Friday, marking its steepest annual drop since 2003, on doubts over durability of a pickup in U.S. economic growth in wake of last week’s tax overhaul.
One of the most dramatic market developments in 2017 was the breath-taking rise of bitcoin and other crypto currencies. While they have pulled back at year-end, many of these digital currencies have surged in value this year.
The greenback may lag further against its peers in 2018 as investors expected other major central banks to reduce their stimulus while the Federal Reserve has signaled it would raise interest rates further, analysts said.
“The dollar will face more headwinds in 2018,” said Chris Gaffney, President of World Markets at EverBank in St. Louis, Missouri. “The Fed won’t be going at it alone in terms of taking off more gas from the stimulus pedal.”
Bets the European Central Bank might consider raising interest rates by the end of 2018 due to evidence of higher inflation and business activity in the euro have lifted the euro, which was poised for its best yearly performance versus the greenback in 14 years.
The euro hit a three-month peak at $1.2028, bringing its annual gain to 14.2 percent. It was last up 0.56 percent at $1.2008.
The euro’s rally was a drag on the greenback in 2017. The index that tracks the dollar versus the euro and five other major currencies fell as low as 92.080, which the lowest since Sept. 22. It recorded a 9.8 percent annual decline, the biggest yearly loss since 2003.
The dollar also weakened against the yen, sterling, Canadian dollar, Swedish crown and Swiss franc , which are the other index components this year.
The dollar index was at a 14-year peak at the start of 2017 on hopes for U.S. President Donald Trump’s pro-growth economic agenda. Barring the most dramatic rewrite of the U.S. tax code in 30 years enacted last week, Trump and Republican lawmakers have struggled to pass legislation.
Furthermore, many institutional investors close their books at the year-end, a deadline for taxation and performance reporting, a time seen leading to dollar selling pressure, analysts said.
Outside of traditional currencies, bitcoin and other crypto currencies rebounded after two days of losses tied partly to more regulators toughening rules on digital currencies in a bid to curb excessive speculation.
Bitcoin was last up 1.18 percent at $14,564.76 on the Bitstamp exchange. It was off the record highs near $20,000 touched 12 days ago but still headed for a gain of roughly 1,400 percent in 2017.
Here is article on economy growth around the world - not only in developed countries. It means that business cycle is changing indeed:
News in Charts: Stronger Growth and Improved Resilience
by Fathom Consulting
The world is enjoying a synchronised economic upturn. GDP growth forecasts have been revised up in many countries, and emerging market (EM) economies are no different. Brazil and Russia’s emergence from recession has been faster than we — or the consensus — had expected. Meanwhile, economic activity in India is gaining momentum after a sustained slowdown. The 32% rally in EM equities in 2017 is testament to this bullish backdrop. We think the EM GDP growth spurt is likely to be supported by three factors: rising exports; strong investment; and low inflation.
EM economies benefit disproportionately from trade, and this year’s upturn has been a boon. As highlighted previously, the much-discussed ‘end of globalisation’ has been greatly exaggerated. 2017 has seen a pickup in economic activity in the three largest parts of the global economy — China, Europe and the US. That has boosted EM exports, which suffered for several years from sluggish global demand and falling commodity prices. With China continuing to double down on credit-fuelled investment, Europe enjoying a strong upswing, and the US economy set to receive a fiscal boost, we think the EM export growth story still has legs.
In a virtuous cycle, increased foreign demand has been accompanied by rising domestic investment. Annual growth in gross fixed capital formation has picked up in many EM economies. This revival reflects the delayed impact of easier monetary policy, improved business confidence, and the partial recovery in commodity prices. With a benign global macroeconomic backdrop and firm commodity prices, we expect this recovery to continue.
Finally, muted price pressures will keep interest rates low, supporting domestic demand. Inflation has dropped noticeably in recent years, aided by stable or strengthening currencies and spare slack. This impact has been particularly pronounced in Brazil and Russia. In our view, inflation in this year’s outliers, Mexico and Turkey, is likely to drop next year, as sharp currency-related spikes unwind. That should allow monetary policy to remain loose, helping to boost consumption and investment.
Aided by the three factors outlined above, we expect average EM GDP growth to pick up next year, and support asset prices in the emerging world.
COT Report
Last time, guys, we've talked on sudden drop of positions prior Christmas holidays. With two weeks positions are started to re-establish, as we see growth of positions themselves and also growth in open interest. It means that new longs are appearing on market.
Although EUR has some upside potential in therms of speculative position saturation, but this potential is not very significant, as absolute high stands around 114K contracts, while current level is around 92K.
This moment will put impact on our analysis. Sentiment is bullish on EUR, but ceil stands not too far. Whether this ceil will be temporal or long-lived we do not know currently...
Technicals
Monthly
Well, situation on markets is changing rather fast. Not just on EUR but across the board - other currencies, commodities etc.
I do not want to take too extended look EUR right now. Mostly because there are a lot interesting things stand on daily chart. We could spend time to speak on what will happen within a year hypothetically, but I think that it is more useful just take a look at real setups that we already have in place.
On monthly chart I've drawn new 2018 pivots. One of the long-term setups stands in relation to YPR1 @ 1.2617 area. It seems that right now we could talk on real upside breakout of wide rectangle consolidation that has started in 2014. In October market has tried to drop below 1.15 area but failed and EUR now is forming tight flag just above rectangle.
It means that we could apply classical target for rectangle breakout - it's height. If we count it up, then we will get approximately 1.27 area, which mostly agrees with YPR1 and 50% all-time Fib resistance!
So, this is relatively long-term setup.
But right now we're mostly interested with action inside this small flag. Actually we've missed one important detail last time, which is very important. In fact, November action was upside reversal month - it's low stands under October and close price is above October high. Usually reversal candles leads for 2-3 periods of action. So, we have December and it seems that 1-2 months more should follow. That's why upside breakout of previous tops looks very probable.
Besides, reversal candle confirms real rectangle breakout by the fact of upside reversal right from its upper border and price inability to return back below 1.15 area.
Weekly
So, on monthly we've discovered relatively long-term target - 1.2617. Now let's see what closer targets do we have. On weekly chart all targets stand in relation to last action. In fact, we should get extension of some degree.
Large AB-CD extension of monthly rectangle points on 1.2375 target. Butterfly also has 1.618 target at the same area - 1.2425.
Another extension stands around 1.2240 and this one is more interesting for us, because others stand above weekly OB area. Thus, in situation of upside breakout above recent tops - most probable target will be 1.2240
Daily
Here our idea with triangle has been confirmed. Last time we've said that if you have uncompleted DRPO
in most cases this leads to triangle with following upside breakout. So, this has happened...
On coming week we continue to work with our upside AB=CD pattern. Our COP target @ 1.1970 has been achieved relatively easy and even extended. This "extension" mostly is based on existence of butterfly pattern, and market just has completed its 1.27 extension.
At the same time, market is not at OB and has no Fib levels above. So, upside continuation should be relatively easy. Next target will be important by two reasons. This is completion of daily setup - AB=CD OP target. It coincides with butterfly 1.618 @ 1.2110 and stands slightly above previous tops.
It means that market could move slightly higher as stops probably will be triggered.
Second reason of importance here - Strong monthly Fib level at 1.2175. It means that EUR will spend some time around probably, some moderate retracement could happen as well:
Another reason why I'm watching for this level is situation on Dollar Index. AB-CD completion will give us strong bullish pattern for dollar - "222" Buy":
So, it is relatively safe to keep longs till 1.2125-1.2150 area, but I wouldn't be hurry with forecast of immediate upside continuation above it.
Intraday
So, here guys we could take a look at retracement levels that could be achieved next week. Based on overall situation and market's strength, it seems that market could reach either 1.1945, which is also former top here, or 1.19 K-support.
As retracement has not started yet, it is difficult to suggest which one will be reached. May be price will form some hint, AB-CD pattern or something of this sort. In general, daily butterfly also doesn't exclude 1.19, because this is just 3/8 retracement and this is normal respect to 1.27 target.
Conclusion:
EUR starts to show signs of changing in long-term market's sentiment. Mostly these changes shift advantage in favor of EUR as EU economy shows very good recovery pace while Fed shows not as hawkish assessment of US economy as investors suggest.
We have specified some extended targets. But now our primary object is trading tools on daily chart. It should relatively safe to keep longs till 1.2125 area, but immediate continuation above this area looks doubtful right now.
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.
Fundamentals
(Reuters) - The dollar fell to its lowest in over three months against a basket of major currencies on Friday, marking its steepest annual drop since 2003, on doubts over durability of a pickup in U.S. economic growth in wake of last week’s tax overhaul.
One of the most dramatic market developments in 2017 was the breath-taking rise of bitcoin and other crypto currencies. While they have pulled back at year-end, many of these digital currencies have surged in value this year.
The greenback may lag further against its peers in 2018 as investors expected other major central banks to reduce their stimulus while the Federal Reserve has signaled it would raise interest rates further, analysts said.
“The dollar will face more headwinds in 2018,” said Chris Gaffney, President of World Markets at EverBank in St. Louis, Missouri. “The Fed won’t be going at it alone in terms of taking off more gas from the stimulus pedal.”
Bets the European Central Bank might consider raising interest rates by the end of 2018 due to evidence of higher inflation and business activity in the euro have lifted the euro, which was poised for its best yearly performance versus the greenback in 14 years.
The euro hit a three-month peak at $1.2028, bringing its annual gain to 14.2 percent. It was last up 0.56 percent at $1.2008.
The euro’s rally was a drag on the greenback in 2017. The index that tracks the dollar versus the euro and five other major currencies fell as low as 92.080, which the lowest since Sept. 22. It recorded a 9.8 percent annual decline, the biggest yearly loss since 2003.
The dollar also weakened against the yen, sterling, Canadian dollar, Swedish crown and Swiss franc , which are the other index components this year.
The dollar index was at a 14-year peak at the start of 2017 on hopes for U.S. President Donald Trump’s pro-growth economic agenda. Barring the most dramatic rewrite of the U.S. tax code in 30 years enacted last week, Trump and Republican lawmakers have struggled to pass legislation.
Furthermore, many institutional investors close their books at the year-end, a deadline for taxation and performance reporting, a time seen leading to dollar selling pressure, analysts said.
Outside of traditional currencies, bitcoin and other crypto currencies rebounded after two days of losses tied partly to more regulators toughening rules on digital currencies in a bid to curb excessive speculation.
Bitcoin was last up 1.18 percent at $14,564.76 on the Bitstamp exchange. It was off the record highs near $20,000 touched 12 days ago but still headed for a gain of roughly 1,400 percent in 2017.
Here is article on economy growth around the world - not only in developed countries. It means that business cycle is changing indeed:
News in Charts: Stronger Growth and Improved Resilience
by Fathom Consulting
The world is enjoying a synchronised economic upturn. GDP growth forecasts have been revised up in many countries, and emerging market (EM) economies are no different. Brazil and Russia’s emergence from recession has been faster than we — or the consensus — had expected. Meanwhile, economic activity in India is gaining momentum after a sustained slowdown. The 32% rally in EM equities in 2017 is testament to this bullish backdrop. We think the EM GDP growth spurt is likely to be supported by three factors: rising exports; strong investment; and low inflation.
EM economies benefit disproportionately from trade, and this year’s upturn has been a boon. As highlighted previously, the much-discussed ‘end of globalisation’ has been greatly exaggerated. 2017 has seen a pickup in economic activity in the three largest parts of the global economy — China, Europe and the US. That has boosted EM exports, which suffered for several years from sluggish global demand and falling commodity prices. With China continuing to double down on credit-fuelled investment, Europe enjoying a strong upswing, and the US economy set to receive a fiscal boost, we think the EM export growth story still has legs.
In a virtuous cycle, increased foreign demand has been accompanied by rising domestic investment. Annual growth in gross fixed capital formation has picked up in many EM economies. This revival reflects the delayed impact of easier monetary policy, improved business confidence, and the partial recovery in commodity prices. With a benign global macroeconomic backdrop and firm commodity prices, we expect this recovery to continue.
Finally, muted price pressures will keep interest rates low, supporting domestic demand. Inflation has dropped noticeably in recent years, aided by stable or strengthening currencies and spare slack. This impact has been particularly pronounced in Brazil and Russia. In our view, inflation in this year’s outliers, Mexico and Turkey, is likely to drop next year, as sharp currency-related spikes unwind. That should allow monetary policy to remain loose, helping to boost consumption and investment.
Aided by the three factors outlined above, we expect average EM GDP growth to pick up next year, and support asset prices in the emerging world.
COT Report
Last time, guys, we've talked on sudden drop of positions prior Christmas holidays. With two weeks positions are started to re-establish, as we see growth of positions themselves and also growth in open interest. It means that new longs are appearing on market.
Although EUR has some upside potential in therms of speculative position saturation, but this potential is not very significant, as absolute high stands around 114K contracts, while current level is around 92K.
This moment will put impact on our analysis. Sentiment is bullish on EUR, but ceil stands not too far. Whether this ceil will be temporal or long-lived we do not know currently...
Technicals
Monthly
Well, situation on markets is changing rather fast. Not just on EUR but across the board - other currencies, commodities etc.
I do not want to take too extended look EUR right now. Mostly because there are a lot interesting things stand on daily chart. We could spend time to speak on what will happen within a year hypothetically, but I think that it is more useful just take a look at real setups that we already have in place.
On monthly chart I've drawn new 2018 pivots. One of the long-term setups stands in relation to YPR1 @ 1.2617 area. It seems that right now we could talk on real upside breakout of wide rectangle consolidation that has started in 2014. In October market has tried to drop below 1.15 area but failed and EUR now is forming tight flag just above rectangle.
It means that we could apply classical target for rectangle breakout - it's height. If we count it up, then we will get approximately 1.27 area, which mostly agrees with YPR1 and 50% all-time Fib resistance!
So, this is relatively long-term setup.
But right now we're mostly interested with action inside this small flag. Actually we've missed one important detail last time, which is very important. In fact, November action was upside reversal month - it's low stands under October and close price is above October high. Usually reversal candles leads for 2-3 periods of action. So, we have December and it seems that 1-2 months more should follow. That's why upside breakout of previous tops looks very probable.
Besides, reversal candle confirms real rectangle breakout by the fact of upside reversal right from its upper border and price inability to return back below 1.15 area.
Weekly
So, on monthly we've discovered relatively long-term target - 1.2617. Now let's see what closer targets do we have. On weekly chart all targets stand in relation to last action. In fact, we should get extension of some degree.
Large AB-CD extension of monthly rectangle points on 1.2375 target. Butterfly also has 1.618 target at the same area - 1.2425.
Another extension stands around 1.2240 and this one is more interesting for us, because others stand above weekly OB area. Thus, in situation of upside breakout above recent tops - most probable target will be 1.2240
Daily
Here our idea with triangle has been confirmed. Last time we've said that if you have uncompleted DRPO
in most cases this leads to triangle with following upside breakout. So, this has happened...
On coming week we continue to work with our upside AB=CD pattern. Our COP target @ 1.1970 has been achieved relatively easy and even extended. This "extension" mostly is based on existence of butterfly pattern, and market just has completed its 1.27 extension.
At the same time, market is not at OB and has no Fib levels above. So, upside continuation should be relatively easy. Next target will be important by two reasons. This is completion of daily setup - AB=CD OP target. It coincides with butterfly 1.618 @ 1.2110 and stands slightly above previous tops.
It means that market could move slightly higher as stops probably will be triggered.
Second reason of importance here - Strong monthly Fib level at 1.2175. It means that EUR will spend some time around probably, some moderate retracement could happen as well:
Another reason why I'm watching for this level is situation on Dollar Index. AB-CD completion will give us strong bullish pattern for dollar - "222" Buy":
So, it is relatively safe to keep longs till 1.2125-1.2150 area, but I wouldn't be hurry with forecast of immediate upside continuation above it.
Intraday
So, here guys we could take a look at retracement levels that could be achieved next week. Based on overall situation and market's strength, it seems that market could reach either 1.1945, which is also former top here, or 1.19 K-support.
As retracement has not started yet, it is difficult to suggest which one will be reached. May be price will form some hint, AB-CD pattern or something of this sort. In general, daily butterfly also doesn't exclude 1.19, because this is just 3/8 retracement and this is normal respect to 1.27 target.
Conclusion:
EUR starts to show signs of changing in long-term market's sentiment. Mostly these changes shift advantage in favor of EUR as EU economy shows very good recovery pace while Fed shows not as hawkish assessment of US economy as investors suggest.
We have specified some extended targets. But now our primary object is trading tools on daily chart. It should relatively safe to keep longs till 1.2125 area, but immediate continuation above this area looks doubtful right now.
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.