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European Forex Pro weekly 10-14, May, 2010

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, May 8, 2010.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hello, everybody. There are many questions that have appeared about fundamentals and EUR/USD perspectives. So this is my view on situation.

    Fundamentals
    Today we will focus on the EU financial crisis, because there is not much to say about US economy, just a few words. As early as in the beginning of the year I’ve pointed out that if the US economy will continue to show numbers that will be in a row with expectations and understanding of “Economy Growth” term, all will be OK. In other words, US has only economical issues, not political ones and that gives the US extra points. Now it comes true. After Nonfarm Payrolls release we can point out that Employment growth momentum becomes faster and I even can say that to my mind, the employment sector is almost out of risk zone. Three main things that spread a shadow on the recovery in US are the Real estate market, banks debt provisions and reserves and anemic personal and industrial loans. But this is not critical and I expect that these issues will turn positive till the end of the year. All others things – Indexes of Confidence, Labor market, Industrial production, GDP, Inflation are in favor of positive development of situation. Furthermore, due to the European crisis, the US Dollar and US Treasuries are becoming a safe haven for the investment world, because there is a great uncertainty about EU currency and EU bonds. So, Mutual, Pension and hedge funds are turning to US market, because for now it is too risky to invest in Euro. This will lead to great inflow into US. For example, assume that a Fund can invest in Bonds with A+ rating or higher. So, Germany, France, Italy and Spain bonds are suitable for that purpose. But this is for now. What will be tomorrow? Even if Germany's rating will remain the same, what will be with Euro currency? This is the risk.
    Let’s talk now about the EU situation. First of all, President Trichet and the ECB hold a very passive position in the question of Greece's debt. This adds fears and uncertainty to the market. There is a real question in Europe about who will be a buyer of Spain, Portugal and Italy's debt. Portugal and Spain's debt auctions have had a low bid-to-cover ratio and the interest rate was higher. When, as I said, the ECB did not show any support to Greece crisis and European debt market, then the question has appeared – Is it a time for reassessing all types of assets? The bond market is skyrocketing and Greek bonds have reached 11.3% yield, S&P has lost almost all the 2010 gains, Crude Oil fall as a stone, US Treasuries yield around 3.55% level. So, looks like this process is already underway. But there can be some relief if a bailout will be passed on Monday. In fact, the question is simple. EUR is a European currency; it needs support from EU officials. If they do not want to provide it, then they do not believe in the EUR. If this is so, why we should? And the whole market thinks in this way. So EU officials and the IMF should come to an agreement, other way – I even do not want to predict EUR future.
    Conclusion: Fundamentals are on the backseat now. Increases/decreases risk factor is what that matters now. The X point for nearest future is an agreement EU officials and IMF. It has to happen for EUR having it’s chance.
    Technical
    This is a monthly chart
    There was a very tough week, our expectations were met – we’ve reached monthly COP=1.2881, and we’ve broken all Pivot supports for the current month. This is a very bearish sign, but I want to note something.
    First of all, (I think that you’ve got this also) this is not just a down move here. This is a flight to quality rally. Look at the AB move on the chart, the blue line is a lower bound of Oscillator Predictor that shows us an oversold condition. See, market was extremely oversold during almost four months in the end of 2008. Something like that we can see in a foreseeable future. It means that we should be extra careful with support and oversold analysis. What shall we do then? Let’s see…
    We have strong bearish trend. Pay attention to the circle that I’ve marked on the chart. It’s important. We have a very strong support here – combination on Oversold condition and Fib support=1.2577. This is “Stretch” Directional pattern. Besides, just one figure below the market is a quarterly pivot support2. It means that I definitely do not want to sell here. I will expect any buy signals on lower time frames (weekly or daily) and think that next week may have an upturn bias.
    After possible pull back I will look an opportunity to enter short. See the “stops” labels on the chart – I expect that market should hit them before possible solid reversal starts. The next target is OP=1.1482 and I think that it should be reached.
    Monthly chart conclusion: The market has reached strong support levels and shows Buy “Stretch” directional pattern. This tells me that I should not sell here. On next week, the market can trade with an upside bias. At the same time, the current down move is a Flight to quality rally that can drastically skew the technical picture and the market can be extremely oversold for some months in a row (like in 2008). I expect that after some retracement up, the down move will continue and market should hit stops and reach an OP=1.15 roughly before we can expect solid reversal. So, don’t be a seller, look for short-term buy signal on lower time frames. Take only reasonable risk.
     

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    #1 Sive Morten, May 8, 2010
    Last edited: May 9, 2010
  2. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Weekly

    This is a weekly chart. We have a strong bearish trend, no oversold still on weekly, but the market is close to it. Two things that I have to note here. First thing is the stop orders just below the minimum at 1.23 area. I will not be very surprised if market will hit them before retracement. The second thing is a possible target of a retracement. There are two strong areas. The first one is 1.2972-1.3019 confluence resistance, Monthly Pivot Support 1 just above it at 1.3052. And second area, also a Confluence resistance – 1.3309-1.3325. Monthly Pivot is also just above it at 1.3373.
    If I’ll take a Buy position, I will be looking for any Agreement with first confluence area. Because the monthly trend is bearish, weekly trend is bearish, this is just a pull back, and we also see a flight to quality rally. So, take chips from the table early, ok?
    By the way, if the market will hit stops before retracement, there will be a new low and Fib levels should be recalculated. Look for my daily updates.
     

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    #2 Sive Morten, May 8, 2010
    Last edited: May 9, 2010
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Daily

    This is a daily chart. The market is extremely oversold just above monthly Fib support at 1.2578. This is a daily “Stretch” pattern. So, I will look for a buy signal on Monday. The one thing that I want you to pay strong attention to - is a weekly Pivot point at 1.2867 level. I expect that the market will test it on Monday. If, on Monday, market will go above Weekly pivot and close below it – don’t be long anymore. This will be a bull trap. If you have some qualms about it – just look at what had happened around the weekly Pivot (blue short dashes on the chart) on Monday of the previous week.
    If up move will start, the possible target is a first confluence resistance at 1.3020-1.3026 level.
     

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    #3 Sive Morten, May 8, 2010
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    4-Hour

    Ok, let’s see how we can play entering a long trade. First of all, the 4-hour trend is bullish. There is a resistance around 1.2790-1.28 area, and, probably, market will show some retracement to 1.2740-1.2760 area. There are two possible targets – strong resistance at OP=1.2880. There is an Agreement with Fib resistance, Weekly Pivot point. And second – XOP=1.3062 that is Agreement with Fib resistance 1.3075 also. XOP is just above daily Confluence resistance, so, I think that if the market will reach this area the better way to take profit at Confluence resistance rather than wait for XOP reaching. But remember – if market will rise above the first but close below weekly Pivot point on Monday – don’t be long anymore.
     

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    #4 Sive Morten, May 8, 2010
    Last edited: May 9, 2010
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    GBP/USD and JPY/USD possibilities

    These are weekly charts of the GBP and JPY. There are trend changing failures on both of them. So, I expect that as GBP as JPY should hit stops during couple of weeks. I will try to trade it - Buy GBP/USD, Sell USD/JPY till stops will hit.
    Although it possibly will not happen, but usually does.

    I've attached JPY/USD and not USD/JPY chart. So you should turn it from top to bottom.

    Sive
     

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    #5 Sive Morten, May 9, 2010
    Last edited: May 9, 2010
  6. Lucas Gremista

    Lucas Gremista Private, 1st Class

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    I chickened out last week on EUR/USD and it went down like 1000 pips, like you said. I've been following your analysis for a few weeks now and yes, I think you are a great trader, thanks for sharing your knowledge with us.
     
  7. tom.finanz

    tom.finanz Private

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    signals

    hi Sive,
    your demo account is up ~ 90% in just 8 months.

    how can I get your signals realtime?

    tom
     
  8. andyhawes

    andyhawes Recruit

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    Hi Sive,
    Can you tell me, which are the major fib levels that you look for, for example do you include the 50% retracement level when looking for confluence zones?

    Also, do you feel that the indices will also follow this bearing trend along with the European currencies? I ask this as I notice that EUR/JPY in particular seems to reflect the index moves lately, at least on the shorter timeframes.

    Kind regards and thanks for your time and excellent market analysis.
     
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi, Tom
    First, do not follow all my trades, that I make on demo. Because this is just a demo, and sometimes I try some stuff there - strategies, signals etc.

    Second, concerning your question... It's a bit difficult, because, sometimes I've made very fast trades, for 1-4 hours. I live in Europe, so, there is a solid time difference. Even if I'll place a detail signal here on forum, you'll see it, possibly, when all has happened already.

    But, If I'll see any possibility for trading on a longer time frames - I'll post it in
    daily update. During every week, usually I've made a daily update in the morning. Just check for previous topic 1-5 of May, it become more clear for you.

    The problem is that even if I'll post precise open price, t/p and s/l price - this is just my expectations and the final decision I make based on the situation that will be on the moment of my entering.
    Possibly FPA can do something like e-mail notification when I'm entering the trade or something like that.

    Sive
     
  10. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi, Andy

    I use 3 Fib levels - 0.382, 0.618 and 0.786. I do not use 0.5 because if Fib levels make Confluence (when 0.382 and 0.618 levels from different reaction points coinside with each other) this is almost at 0.5 area.
    I use 0.786 level because FOREX very often makes deep retracement and this level very suitable for stop orders placement. Also this level is often fall in Agreement with XOP targets.

    Well, yes, in general. Although, the Stock market is beyond the scope of this forum, neveretheless, just look at the Yearly Pivot point for S&P500, for example. It somewhere around 1000 points. Pivots are touched by the market during the period with 70-80% probability. ;)
    This is a technical issue.
    If we talk about fundamentals then current bearish move is run to quality - market shakes risky assets that are equities and flows into defensive assets - US Treasuries, Gold, US dollar. Market always prefers make return OF investments first and return ON investments in second term.

    Sive
     

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