Forex FOREX PRO WEEKLY, October 01 - 05, 2018

[tun13]

Sir Sive, your students really put pressure on you to analyze the GPB/USD, LOL! Don't mind us Sir, we just love troubling our teacher ....... students! @Joh,@Lolly,@knot777 and others.

Morning guys,

as we've promised today we will take a look at GBP. The major thing that we have to recall is weekly B&B "Sell' and this pattern is still valid. It means that our major destination level on daily chart is 1.29 support.
Hence, any pullback that we could get now should be treated as a pause, just a retracement before downside continuation. This is important:
View attachment 39759

Meantime 4H chart shows completion of our AB=CD pattern that we've specified last week. here two points we need to mention. First one is - OP target has not been reached yet. It means that GBP should show another leg down. Second, CD leg is slower than AB, which suggests upside retracement as soon as OP target will be touched:
View attachment 39760

OP target could be reached by hourly butterfly "Buy". If you do not trust butterflies, then you could wait a bit more and see whether it will turn to reverse H&S, just to get more confidence.

Those, who trade B&B could watch for bearish continuation patterns when pullback will be over, i.e. use potential rally to sell into.
View attachment 39761

 

[Sive Morten]

Morning guys,

EUR behaves very logically, it mostly corresponds to our trading scenario. Thus, 1.15 support area has been reached and now on daily chart we even have got DiNapoli bullish "Stretch" pattern, because 1.15 was an oversold as well.

Now we turn our attention to upside action - how far it will be and what patterns stand behind it:

On 4H chart market has turned up precisely at the area that we've specified, and based on possible H&S pattern. Using the harmony of the pattern, the top of upside action should be somewhere around major 5/8 Fib level of 1.17.
Second issue here guys, is B&B "Sell, that could start from 3/8 level. Thus, depending on your priorities, you could sell with B&B or use B&B target for long entry:

On 1H chart our butterfly entry point was perfectly completed. If you have missed this chance, there could be another one. Since we have potential B&B on 4H chart - it's target could create right arm of H&S pattern here. And this will be another entry area that we could watch for.

H&S shows two targets - 1.1750 and 1.1680. I think we will look for second one.

 

[Sive Morten]

Morning guys,

Due strong fundamental background we've got neither B&B "Sell" nor reverse H&S pattern. Price action that we see today is very important, because it stands in relation to our long-term view. As we've mentioned many times in weekly reports, we treat this upward action as a retracement only. Initially we thought to see 1.19-1.20 area, and then downside continuation to 1.08. Right now as fundamental data has become more agressive and dollar supportive, the shape of retracement is changing and I suspect that 1.18 that we've got is a maximum.

It means that there is really high probability that reverse H&S pattern on daily will not be formed, if EUR will drop further. It will mean, in turn, that retracement is over and we return on a road of long-term bear trend to 1.08. Now I have big suspicions that this is indeed so. Yesterday EUR has shown strong bearish action - market has formed new top but closed below the lows of Wed. Now it stands at MPS1 and OS area, but it is already below major 5/8 Fib support. Theoretically market still stands close to it and keeps chances on reversal, but reality tells that chances are phantom.

On 4H chart price has dropped below our trendline and WPS1, we haven't got our B&B "Sell" pattern.

That's being said, market now behaves different compares to what it should to do, when it forms patterns that we have. It means that big picture could change. Right now it is definitely not good moment for long entry. I suppose, it is better to wait for NFP data release and wage inflation in particular, this will clarify everything and then we could make reasonable decision.

 

[Stag]

Hi Guys, a short update again. On the larger scale I think it's premature to conclude the Euro has established a final top. Unfortunately we have too many options right now. You can find three of them on the pics below.

The advance from 1.1526 has overlapping wave structure (can be counted either as a complete or still unfolding diagonal) and could not brake through the-mid line of the grey channel - a sign of weakness, at least temporarily.

Prices are flirting with lower borders of our KCT channels. For an immediate bullish follow through we need to see the Euro continue above 1.1815 against 1.168x.

A break below the grey channel followed by an impulsive dip below 1.1617 will signal that the Euro might have peaked but the outlook remains bullish and any drop should look corrective as long as prices are above 1.1526. On the other hand one of the counts suggests a blue (B) wave correction is still unfolding and we may see the early stages of an impulsive decline towards 1.15 to complete red wave B before the advance resumes again.

Not an easy situation.

View attachment 39701

View attachment 39702

Hi guys, the decline from 1.1815 may have found a bottom or is nearing its end. If the Euro breaks out of the yellow channel and rallies above 1.1594 toward 1.1625 would signal red wave B is complete. Any subsequent decline should look corrective with a higher low.

Note that only a break of the 1.130x low would negate this bullish view.

 

[Deltoid88]

Sive, Stag, others,

here is my long term view on EUR/USD. Would appreciate if you take a look and tell me your opinion about this.

From fundamental perspective how I imagine this to happen: I think that US economy is not so strong as majority think, and believe that problems will start to appear very soon. Because of that FED will start to cut interest rates and turn everything around. ECB would become more hawkish bank then FED. Furthermore, pricing in change of interest rates by markets has highest influence on the beginning of the cycle, either cutting or raising rates. It has not happen yet either for FED cut or ECB raise.

How to make huge profit in trading? Find event that majority bet on and are wrong and bet against it, but first be ready to be wrong in the beginning in order to be right in the end. It is almost impossible to have perfect timing.

I believe this could be that opportunity where majority is wrong and turnaround is very close. Patience and smart positioning is required.

Every reply is appreciated. Thank you.

 

[Sive Morten]

Hi Mate,

I think that US economy is not so strong as majority think, and believe that problems will start to appear very soon. Because of that FED will start to cut interest rates and turn everything around. ECB would become more hawkish bank then FED.

And why do you think so? Could specify the facts that support this point of view? This is the cornerstone for any long-term analysis.

 

[Sive Morten]

Morning guys,

On daily chart we still see nothing new. Minor upside bounce from major 5/8 support + MPS1 area. As we mentioned yesterday this are is vital for longer-term analysis. In particular, it will answer should we expect upside continuation or we turn back to long-term bear trend. Since price stands at the bottom of right arm of H&S pattern - this is very decisive moment. Statistics talks not in favor of the bulls, but miracle could happen, if wage growth of NFP release will be weak:

From technical point of view I see only one pattern that could become a background for upside reversal . This is hourly 3-Drive "Buy" pattern. First - we should get another leg to 1.1450 to complete the 3rd Drive, then, at least theoretically, upside action should start. So, if you want to take a bet on NFP and open long position - may be this 3-Drive will be interesting for you.

At the same time, we need reversal but not just minimal target of 3 Drive that will help nothing. In fact, if market will just hit the top between 2nd and 3rd drives and then collapse below 1.1450 - this still will be bearish. So, we're interested with this 3-Drive only as real reversal pattern that could become a starting point of new upside leg on daily chart.
Any drop below 1.1450 by today close will have a bearish sign.

 

[Deltoid88]

Hi Mate,



And why do you think so? Could specify the facts that support this point of view? This is the cornerstone for any long-term analysis.

Hey Sive,

Thanks for reply. First I want to say that my knowledge of economics is not perfect, but I am in process of quality learning. There is always something new to learn, right? I would be happy to accept any critics if you provide good arguments why my logic is not right.

Here are my reasons for that fundamental view:

1) US debt is enormous and with higher interest rates pain is going to be even greater. If you borrow to spend more in the present, that means there would be time in the future where you spend less to repay the debt. That future is near.

2) US economy is not sustainable like this. It needs period of less spending and less borrowing of the credit and higher productivity to naturally correct itself. Spending is higher because of credit, not because of productivity.

3) There are 2 type of information, information for masses and information for elite. Mainstream media is information for masses and it should be looked with extreme caution. What J. Powell says about US economy is what he wants markets to hear, it does not mean he really thinks that. If FED wants stronger dollar they make hawkish meeting, if they want weaker dollar they make dovish meeting. It is that simple and whatever they say has nothing to do what really happens in economy. Also I do not believe FED will be able to reduce its balance sheet. Charts are pure, they are the truth. On charts I see USD collapse.

4) Majority say US economy is booming. My question is, if it is booming why wages do not pick up on much stronger pace? My explanation is following: at the moment there is business optimism in US and more jobs are created which NFP reports tell, but those jobs are not quality, long term jobs. Those jobs are jobs with low wages and all of that optimism and jobs could disappear in blink of an eye. It is all fake, and it cant last.

5) I think that stock market crash is very near, 2019 I think and that could be game changer, start of USD collapse.

My conclusion, truth is hidden between lines, it is not written in the news. We need to make conclusions by our own thinking, not to be influenced by others.

I look at every deep in EUR/USD as buying opportunity lomg term and especially as buying opportunity in Gold long term! If this scenario come true I think gold would go to all time high above 2000$ in next few years, and this time I believe it could be rally which can be sustained on long term.

 

[Stag]

Sive, Stag, others,

here is my long term view on EUR/USD. Would appreciate if you take a look and tell me your opinion about this.

As you already know the framework I use for my analysis is powered by the Wave Principle and it is built on the idea that financial markets are a product of investors' psychology and the waves of optimism and pessimism drive them. Consequently, this method ignores the fundamentals.

I'm monitoring two longer term scenarios, let me share one of them. This one suggests what we see unfolding from 1.2555 is a correction of the prior impulsive advance from 1.0341. It should end after three waves and should last months or even a year until it reaches 1.1187 and it might continue to 1.081. This level marks where the (A)(B)(C) correction would retrace 78.6% of the advance from 1.0341 (filling the gap probably).

 

[Deltoid88]

Stag,

beautiful and deep wave count analysis as usual. This looks very probable. I will do my own wave count on daily chart so we can compare results.

Would you be so kind to share second long term idea too?

Do you watch fundamentals at all or you just use charts?

Thanks for reply!