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Euro Forex Pro Weekly 16-20 August, 2010

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Aug 14, 2010.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals
    There were not many events on the fundamental front recently. The most important, as I suppose, was the results of the FOMC meeting and the Fed’s intending to return to QE program. What does it mean? Generally speaking, the Fed intends to add liquidity to the market by buying US Treasuries, partially for the money that they will receive from the maturing of mortgage bonds. There are two conclusions that can be made from this. First, the Fed has confirmed that the pace of recovery is slowing and it can stimulate returning to “Run into quality” scenario. This, in turn, can pump interest to US Treasuries and the dollar. In fact, this will be the second leg of he recession, although it may be not so destructive and can pass in softer manner.
    In Europe things are not done well also. Although the Q2 GDP data has shown better then expected numbers, Industrial production outside of France and Germany looks not very optimistic. Besides, the recent macro data suggests that Q3 GDP will be lower than for Q2. Moreover, during the previous week there was information that Spanish banks borrowed as much as 130.2 B EUR from the ECB in July. This is a record.
    So, there are many different pieces of information that have appeared in relatively small period of time. Sometimes, one data contradicts another one. Concerning optimistic EU GDP data, the main question of investors is: ” Is this really as good as it’s gets?” and “How long it will hold?”. The same questions are appearing in the US. This is even more important because the recovery has started in US and EU is tried to keep up the US. Now in US have appeared some problems but in EU - macro data shows improvement. Possibly, when US will start climb out from the second leg of recession, it will go up with EU, who knows. But for now, the situation from the fundamental point of view is very blurring. We see some improvement here and there, but during the next day all things turn back.
    My expectations generally link with results of future Fed action. We should wait for 2-4 months for reestablishing of Fed’s stimulating program and see what will happen. At the same time, macro data in the EU will come to a common denominator and will show some trend, I hope. However, I do not think that the US will come to Japan’s scenario and the main reason for this – population. In US growth of population is about 1% per year, but Japan has a negative number and, in general, has a more elderly population than the US. This is very important for consumption and as a result for economic growth. So, we can see a slow pace of recovery, but it should be positive to my mind.

    Monthly
    There is really not much to add on this time frame. The Trend is bearish, market has pierced 1.3123 area and pulled back. For now it looks like wash & rinse of this level, but the current month is not closed yet, so prices can easily return back.
    At the same time, I see this level of retracement as logical. If you remember, I’ve told that market should show 0.382 or 0.5 retracement up, because it not so oversold as in 2008, when it has shown 0.618 retracement to the upside. So, now the market has reached semi-position between 0.382 and 0.5. If the market will continue up move, then the next resistance is roughly 1.35area. Based on a monthly chart, I want to attract your attention to 1.2650 area (look at the chart – blue horizontal line). This is a support – 50% retracement of previous strong up bar and previous lows. If you will look further in the past then see, that this was an important level since 2004. Price action often found support or resistance at this level.
    [​IMG]

    Weekly
    During the previous weeks we’ve discussed when the momentum trade will start on EUR. The green line is 3-period simple moving average shifted forward for 3 periods. The previous thrust down was really strong, so, probability suggests that after first retracement up we can count on some continuation of the down move. I thought that it will start from 1.3120 area (this was a weekly Confluence resistance area, as you remember), but market has penetrated it a bit, reached monthly pivot resistance1 and then collapsed. We’ve received very solid bearish engulfing that engulfs 3 previous weeks of action. The target of this momentum trade is 1.2430 area, and I think that It should be reached.
    But this is only one part in the puzzle. Now look at previous up move. Market shows excellent separation from 3x3 SMA and thrust consists of 8 up bars. This is a good thrust and here we also can count on momentum trade, but smaller one. Market closed below 3x3 right after thrust up at weekly support around 1.2770 and monthly pivot. That is a context for momentum trade. So, the bullish momentum trade can start from here, I don’t know. But what I do know is that bullish momentum trade can be a part of greater bearish momentum trade. So, how to link them together? Well, I suppose that smaller bullish trade will be look like retracement after first thrust down in the greater bearish trade. So, it will be like a retracement of this strong move down.
    For now it’s difficult to say when it will start, but currently we at support that is suitable for this. That’s why I will be looking for some buy signals. If I will not see any – then we can see some move down to the next support. There I will be looking again, etc…
    That’s being said, the minimum target of starting move down is 1.2450 area, may be it will go down further, it’s impossible to say right now. Before market will go to 1.2450, very probable that we will see deep retracement up (0.618 at minimum) on the lower time frame.
    [​IMG]

    Daily
    I’ve placed two charts – one for supports and another one for resistances. Let’s pass through them. At the first chart we see how market just pass trough monthly pivot point and major 0.382 support at 1.2778.
    But for me the game around this support is not over yet, because at 1.2727 previous July’s lows are situated, and market can find some support there. If on Monday the market will break them, then possibly we will see another down move. The next support level is 1.2565-1.2606 – Fib support and weekly Pivot support 1. Also there is a level of oversold (for Monday it at 1.2683) that will add support there.
    Now on resistances… As you can see market is far below the weekly Pivot point (blue dash) at 1.2936. So, if retracement will start during the next week, the first area, where we can expect some sell signals is 1.2916-1.2936. This is weekly pivot point and Fib resistance. The second area – 1.30-1.3030, that I’ve told about the previous week – this is Fib. resistance at 1.3019, 50% retracement of strong down bar and previous highs. And the last gasp level – 1.3110-1.3120 that includes weekly Pivot resistance 1 and Fib resistance. I do not know how far retracement could be if it will be at all, but I do know levels, and I will watch for reversals there. For now I can say only one thing – watch for weekly Pivot point. If market will reach it and move above it – don’t be short. It will mean that we will see deeper retracement. IF not – if market will fail the break, then, probable retracement will finish at 1.2916-1.2936 area.

    Daily#1

    [​IMG]

    Daily#2

    [​IMG]

    4-Hour and 1-Hour
    The 4-hour chart adds some details to the whole picture. First of all, as you can see around weekly pivot not just a resistance, this is Confluence resistance that is stronger. Second, some of you, guys, like divergence/convergence pattern – we have one here. Personally, I never use this signal as sufficient to enter the market, it’s not very reliable for me. But I see it, and I show it to you.
    If somebody watched my Friday’s video, I’ve talk about possible double Repo. Here we did not receive confirmation and now there are too many bars between first penetration and second when it will come to pass. So, I just want to tell that I will not threat current price action as Double Repo no more.
    Now let’s take a look at 1-hour chart. Just couple of moments... The more recent AB-CD pattern finishes at 1.27 sharp. This area is also a 1.618 expansion of previous retracement. The blue line – is a previous lows on a daily chart that is at 1.2727 level. So, the very short term scenario (I suggest only for Monday) can be as follows - market will show some retracement up and then will move to 1.27. So, we will have 3-drive buy pattern. This is not a “must” as you understand. This is the thing that I would like to see. IF market will run through 1.27 as knife – probably we will not see retracement. If it will holds, I will expect the move to weekly pivot at minimum
    4-hour
    [​IMG]

    1-hour
    [​IMG]

    That’s being said, on Monday we will see does market intend to make a retracement to upside or not. My “point-x” area is around 1.27. If it will hold and we will see 3-drive buy pattern – I expect move to 1.2936 – area of weekly pivot at minimum. If not, well, probably we will see next leg to the down side.
    In longer term picture, I suspect that we in a long term momentum trade with the 1.2430 target and in general I would like to sell, but not right now – we are at oversold and strong support area. I need a pullback to enter short, that’s why I plan to try to catch this retracement. Also I do not see any problems with a scalp “Buy” trade if retracement will start indeed.


    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.
     
    #1 Sive Morten, Aug 14, 2010
    Last edited: Aug 16, 2010
  2. jamgreg

    jamgreg Recruit

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    Thanks Sive for your excellent and timely analysis. It sure looks to be a defining week ahead! Good fortune to all here on Sive’s forum.
     
  3. FreddyFX

    FreddyFX Sergeant

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    from Mexico

    Excellent observations.

    Keep them coming!
     
  4. bomi sanjana

    bomi sanjana Recruit

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    thanks

    thank you very much Sieve for your wonderful technical analysis. just so you know it helps me a lot in my daily trading decisions.
    Bomi sanjana
     
  5. grs1

    grs1 Recruit

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    Last Weels Analysis

    I believe many of those who followed the short buy sclap recommendation from last week did not do very well as we did not see 1.3030.
     
  6. steelhead151

    steelhead151 Recruit

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    Jeff

    thanks, had good trades last week. looking forword to this weeks trades.
     
  7. digital_soul

    digital_soul Private, 1st Class

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    guys,

    i dont understand this.. the US is going into 2nd recession but the EU shows small signs of improvement, yet, yet the EURO has FALLEN against the dollar.... shouldn't it be the other way around??? Shouldn't the Euro go up because of negative sentiment from the US?
     
  8. rockydewantara

    rockydewantara Recruit

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    thanks for your analysis for this week.
     
  9. moom

    moom Recruit

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    thanks

    thank you very much Sieve for wonderful technical analysis.
     
  10. jezzaper

    jezzaper Recruit

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    thank you Sir Sieve for great technical analysis.
     

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