Sive Morten
Special Consultant to the FPA
- Messages
- 18,673
Fundamentals
Looks like there is a lack of really new bad news on the market and that can give some respite to it. Equities shows solid rebound and VIX index is below 30% for the first time for the last three weeks. Technical factors also point to a possible bounce as you can see below. Although we can expect some relief while overpressure of crisis has reduced a bit, it is unlikely that it will become permanent. The LIBOR rate is still at highs, although the Fed swap balance is reduced a bit – this reduction is too low and has no tendency to think about reversing the situation. Moreover the current debt crisis can transform in a banking crisis. Deutsche Bank has disclosed their balance volumes of European debts – they indicated that they owned 500M in Greece and 200M in Ireland debt. Other large banks have to follow DB’s example to calm down investors. If their balances of Sovereign European debts are not revealed, it will make investors worry about fiscal stability of these banks. At the same time, I think that US macro data also will not take a backseat and may have influence on price action - the NFP release is soon.
Concerning EUR/USD, I just can tell my expectations with few words – Nothing is done yet. Although Governments of EU countries continue to push austerity plans through their congresses, so Spain has approved 15B help to Greece, this bailout program has a low popularity among the people. If we start to talk about consequences for the population in two words – this is greater taxes, which includes greater wealth taxes, VAT, and lower wages. As a result, now Italian workers come for strike. Also there are new limitations for banks – governments demand greater reserves that strongly contract the ability of banks for development loans and credit operations and surge non-working assets on balance sheets. But, from the other side, some bouncing can reduce of ECB intendance for currency interventions, because great concern was not about value of currency but about pace of reducing. So, I do not expect a major reverse and still keep my bearish midterm bias, technical target at 1.15 probably will be achieved.
Technical
Monthly
This is a monthly chart. It’s a bit heavy; so, let me make some notes about the different lines. The blue line is a lower bound of Oscillator Predictor that shows an oversold price. For May it’s at 1.2544 level. The green line shows monthly pivot points. I use it because the current month has not closed yet and I can’t calculate it precisely, so I use this line to calculate it from current close price of the month. I think that it should not change much due to last trading day of May on Monday.
Sometimes I like to look at candles, and now we see 6 months in a row when price shows a strong down move and close near the minimums of the months. Next Fib support is 1.2022 level, the trend is bearish. There are three important movements that I want to point here. First of all, look, how market just flies through the COP target at 1.2881 and emerges in oversold. I just want to remind you that 1.3030 was a major Fib support level and market absolutely disrespected this Confluence support 1.2880-1.3030. Sometimes, when the market disrespects such important levels it backs up to them later. At the same time I do not see a strong pullback after stops below 1.2330 were hit. For me it looks very bearish. Second – next target is OP=1.1482 that creates an Agreement with Fib support 1.1391. There will be a solid support. And the third – th June Pivot point will be around 1.2650. Despite my bearish thoughts, I think that we can see some pullback and market should touch this level during the month.
That’s being said, the downwad move should continue, the next target is 1.14-1.15 level, but market can touch 1.2650 area in June, and may be even reach 1.28-1.30 area of previous Confluence support and Agreement area, because it was absolutely disrespected during strong move down. That’s important.
Weekly
There is not much to add to previous week. Levels are the same –monthly Fib support 1.2197 that still holds the market. The main resistance is 1.3070-1.31 Fib Confluence resistance. I think that we should return higher, 1.2650 might to tell that retracement really has started, but now market does not show strong signs of pullback.
Daily
Daily trend is bullish. I do not see any particular signals right now, but one thing I do not like much. During the previous week, the trend has turned bullish, but prices continued to fall, and those people who buying on this trend change hide their stops below 1.2140. These stops are not hit yet and I think that they should to. Sometimes that does not happen but typically does.
1.2348 is a Weekly Pivot. If on Monday, prices rise above the Pivot and close below then we can see move to the down side. If prices will touch the Pivot and start to rise – there will be another tune. In this case we can expect move to 1.2650-1.2730 area. I’ve marked an ABC-bottom pattern that shows us additional resistance levels. First one is COP=1.2405, next is OP=1.2689. June Pivot also will be somewhere around 1.2650, 1.2731-1.2734 is a Fib Confluence resistance area. So, 1.2650-1.2730 is a very solid resistance and possibly market will bounce from it, can even reverse to downside, because of strong monthly and weekly bearish move.
That’s being said – if, on Monday, market will close below the Weekly Pivot=1.2348 the probability of the down move increases. If not – 1.2650-1.2730 area is a strong resistance.
1-Hour
On the hourly time frame, the market stands just above 0.618 Fib support at 1.2270. Hourly trend is bearish. Look at ABC-top pattern that I’ve marked there. OP=1.2240 just below Fib support and coincides with daily Pivot support 1at 1.2242. If market intends to move up in principle, possibly this move will start from that area – 1.2240. If not, then we should think about bearish bias. I will be watching for price action around this level on Monday before I’ll make any decision.
Looks like there is a lack of really new bad news on the market and that can give some respite to it. Equities shows solid rebound and VIX index is below 30% for the first time for the last three weeks. Technical factors also point to a possible bounce as you can see below. Although we can expect some relief while overpressure of crisis has reduced a bit, it is unlikely that it will become permanent. The LIBOR rate is still at highs, although the Fed swap balance is reduced a bit – this reduction is too low and has no tendency to think about reversing the situation. Moreover the current debt crisis can transform in a banking crisis. Deutsche Bank has disclosed their balance volumes of European debts – they indicated that they owned 500M in Greece and 200M in Ireland debt. Other large banks have to follow DB’s example to calm down investors. If their balances of Sovereign European debts are not revealed, it will make investors worry about fiscal stability of these banks. At the same time, I think that US macro data also will not take a backseat and may have influence on price action - the NFP release is soon.
Concerning EUR/USD, I just can tell my expectations with few words – Nothing is done yet. Although Governments of EU countries continue to push austerity plans through their congresses, so Spain has approved 15B help to Greece, this bailout program has a low popularity among the people. If we start to talk about consequences for the population in two words – this is greater taxes, which includes greater wealth taxes, VAT, and lower wages. As a result, now Italian workers come for strike. Also there are new limitations for banks – governments demand greater reserves that strongly contract the ability of banks for development loans and credit operations and surge non-working assets on balance sheets. But, from the other side, some bouncing can reduce of ECB intendance for currency interventions, because great concern was not about value of currency but about pace of reducing. So, I do not expect a major reverse and still keep my bearish midterm bias, technical target at 1.15 probably will be achieved.
Technical
Monthly
This is a monthly chart. It’s a bit heavy; so, let me make some notes about the different lines. The blue line is a lower bound of Oscillator Predictor that shows an oversold price. For May it’s at 1.2544 level. The green line shows monthly pivot points. I use it because the current month has not closed yet and I can’t calculate it precisely, so I use this line to calculate it from current close price of the month. I think that it should not change much due to last trading day of May on Monday.
Sometimes I like to look at candles, and now we see 6 months in a row when price shows a strong down move and close near the minimums of the months. Next Fib support is 1.2022 level, the trend is bearish. There are three important movements that I want to point here. First of all, look, how market just flies through the COP target at 1.2881 and emerges in oversold. I just want to remind you that 1.3030 was a major Fib support level and market absolutely disrespected this Confluence support 1.2880-1.3030. Sometimes, when the market disrespects such important levels it backs up to them later. At the same time I do not see a strong pullback after stops below 1.2330 were hit. For me it looks very bearish. Second – next target is OP=1.1482 that creates an Agreement with Fib support 1.1391. There will be a solid support. And the third – th June Pivot point will be around 1.2650. Despite my bearish thoughts, I think that we can see some pullback and market should touch this level during the month.
That’s being said, the downwad move should continue, the next target is 1.14-1.15 level, but market can touch 1.2650 area in June, and may be even reach 1.28-1.30 area of previous Confluence support and Agreement area, because it was absolutely disrespected during strong move down. That’s important.
Weekly
There is not much to add to previous week. Levels are the same –monthly Fib support 1.2197 that still holds the market. The main resistance is 1.3070-1.31 Fib Confluence resistance. I think that we should return higher, 1.2650 might to tell that retracement really has started, but now market does not show strong signs of pullback.
Daily
Daily trend is bullish. I do not see any particular signals right now, but one thing I do not like much. During the previous week, the trend has turned bullish, but prices continued to fall, and those people who buying on this trend change hide their stops below 1.2140. These stops are not hit yet and I think that they should to. Sometimes that does not happen but typically does.
1.2348 is a Weekly Pivot. If on Monday, prices rise above the Pivot and close below then we can see move to the down side. If prices will touch the Pivot and start to rise – there will be another tune. In this case we can expect move to 1.2650-1.2730 area. I’ve marked an ABC-bottom pattern that shows us additional resistance levels. First one is COP=1.2405, next is OP=1.2689. June Pivot also will be somewhere around 1.2650, 1.2731-1.2734 is a Fib Confluence resistance area. So, 1.2650-1.2730 is a very solid resistance and possibly market will bounce from it, can even reverse to downside, because of strong monthly and weekly bearish move.
That’s being said – if, on Monday, market will close below the Weekly Pivot=1.2348 the probability of the down move increases. If not – 1.2650-1.2730 area is a strong resistance.
1-Hour
On the hourly time frame, the market stands just above 0.618 Fib support at 1.2270. Hourly trend is bearish. Look at ABC-top pattern that I’ve marked there. OP=1.2240 just below Fib support and coincides with daily Pivot support 1at 1.2242. If market intends to move up in principle, possibly this move will start from that area – 1.2240. If not, then we should think about bearish bias. I will be watching for price action around this level on Monday before I’ll make any decision.
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. We watch what happens on Monday. One of our forumer wrote that china is going to buy 500 Bil euro bond and that will make another top before market reach bottom. But you never comment about it at your above fundamentals, so is that means that it is not that much important and wont affect the market?
