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European Forex Pro Weekly 2010-03-17

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Mar 17, 2010.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUROPEAN FOREX PROFESSIONAL WEEKLY
    Analysis and Signals
    March 17, 2010

    Fundamentals

    During the current week main attention was attracted not by macro data but by different events, such as the FOMC meeting, rhetoric concerning the Greece austerity plan and healthcare reform voting in US Congress. Although there were not many data releases, in general it was positive. Empire Manufacturing Index shows 22.86, better than expected 22.0. Real estate sector has not showed solid expansion, but nevertheless has shown numbers, greater than expected. Building Permits 612K (exp.601K), Housing starts 575K (exp. 570), previous data was revised upward for 20K. Retail sales also have shown good numbers on the previous week. All these numbers confirm that the economic recovery is underway and trend is continuing.
    The most expected event – FOMC meeting, did not show any meaningful surprises. The Fed noted that the recovery remains intact but was still very cautious. The decision encouraged risk taking behavior as the statement suggested that the outlook for a rate hike was not pulled forward; therefore the carry trade may ensue.
    Risks, concerning US healthcare reform are a bit long-term, but the way of passing healthcare reform through Congress can make influence on political risks equilibrium and on Dollar trend. If Congress comes to their senses and waits to pass this bill using conventional constitutional measures, then the medium-term uptrend should not be challenged. But still, I think that the US is closer to tightening than other central banks (BOE, ECB and BOJ). The Fed already has started programs for draining liquidity (reverse REPO’s, hiking of the discount rate), and they will gradually adjust the language of FOMC meeting statements. For now, according Bloomberg there is a 58% probability that the first hike in the Fed fund rate will take place in Q3.
    The recent upward drift/short-covering rally in EUR/USD has also been triggered by the fact that nothing cataclysmic has happened in Greece since the country has started to propose/implement its austerity plans. Although we can see some short-term relief in the situation that was supported by EU officials, the problem still remains and it includes not only Greece but Spain, Italy and peripherals. I will not repeat here the detail numbers that I’ve written in previous research but for me the X-point of EU situation is April – June 2010 when EU countries should pay much in debt and interest. In the short-term period we can see some strength in the EUR.

    Résumé: Th US economy continues to show signs of improvement. For now the basic expectation is that Fed will tighten rates to 0.5% in Q3. It will happen with solid probability if the current trend in macro data will continue. For now all seems good. The situation in EU very complicated, and I think that it will not be fully resolved until summer. Investors want to see debt maturity from Greece, how the EU supportive program will work and maturing of debt obligations from Spain and Italy in 2010. For now all this stuff has too much uncertainty and reminds me of Pandora’s Box rather than a clear plan of stabilization. This situation allows me to assume that the EUR will stay under pressure and EUR/USD downtrend will hold. Possible long-term targets – is 1.28 and psychological 1.25 levels. But the moving may be a bit slower than before.
    In the near short-term we can see some strength in EUR due lack of surprises from Fed about tightening and short-term relief in Greece crisis.


    Technical

    Monthly (EURO FX all sessions CME futures)

    Prices continue to move higher from 1.3400-1.3480 0.618 support, but the trend is bearish. Although we can see some retracement higher in mid-term period, the long term monthly target is COP=1.2881 (there will be an oversold by the way), next is OP=1.1482.

    Monthly EUR/USD
    [​IMG]

    Weekly (EURO FX all sessions CME futures)

    The FOMC meeting did not have much influence on weekly market behavior, although the upward move continues. We have downtrend still, but market becomes closer to its changing. We know the main weekly support at 1.3400-1.3480, so I’ve decided to mark weekly resistance levels and one of them (1.3870) close enough already. We see strong resistance at 1.4087-1.4140 area. Although I’ve marked it as K (confluence resistance), it’s a bit wide for confluence, but this is strong resistance zone anyway.
    We can’t estimate the upward movement targets yet for weekly chart, because do not see any retracement. Nearest down move target is XOP at 1.3074 (look for weekly graph in previous research).
    Looks like that the next event that will be able to change the weekly picture is the next Non-farm payrolls release.

    Weekly EUR/USD
    [​IMG]

    Daily (EURO FX all sessions CME futures)

    Our daily expectations were confirmed (watch for previous research). The diamond formation was broken up, and the market has almost reached 1.38 level. The development of price movement is very choppy, but still is upward. Now the price movement reminds me of a round bottom reversal pattern. The daily trend is bullish. Also I see a solid resistance area at 1.3870-1.3950 levels. 1.3870 is a weekly resistance also by the way.
    It’s too difficult to predict something with solid certainty, but forming round bottom pattern, the fact that prices did not return back below 1.3650 level and didn’t show fake diamond break makes me think that we can see further up movement, possibly to the 1.3950-1.40 level.

    Daily EUR/USD
    [​IMG]

    Trade possibilities (1):

    Monthly

    Now we can say that monthly bearish trend has been confirmed. Although there can be some improvements in Greece’s situation in the mid-term (and a retracement higher as a result), I think that in the long-term the USD is more favorable. The nearest long-term target is COP=1.2880.

    Weekly

    We have a down trend, no oversold conditions. The market has shown some development in an upwards move. At the same time we’ve seen failing attempts to pass through 1.3400-1.3480 support. I think that we can see some retracement higher to 1.3970-1.40 level. Probably, mostly only the NFP release can change the picture drastically and trigger EUR/USD down move continuation.

    Daily

    The market has shown an upper break of a diamond formation and prices didn’t return back below 1.3650 level. Also prices show something that looks like a round bottom reversal pattern. This makes me think that we can see further gradual upwards movement to 1.3970-1.40 area in the near term. This area has many resistance levels and overbought condition, so I do not expect that market easily can pass through it. The intermediate target is OP=1.3840 and weekly resistance at 1.3870.

    Current European Forex Professional Weekly Signal - Forex Peace Army Forum


    (1) “Trade possibilities” are not detailed trade signals with specific entries and exits. They are expectations about possible moves of the market during the week based on market analysis.


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    General Notice: Information has been obtained from sources believed to be reliable, but the author does not warrant its completeness or accuracy. Opinions and estimates constitute author’s judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipients of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein.
     
  2. Lee Barker

    Lee Barker Recruit

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    Awesome

    This is gold... there is going to be a big shock when the EURUSD takes a dive to the 1.29 area. Europe is not out the woods and my mate lives there and he says its going down slow.

    Cheers for the info.

    Lee:)
     
  3. arrautxa

    arrautxa Recruit

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    Indicators on your daily chart.

    Hello, Sive. Could you tell me what indicators are you using on the daily chart? Also if it is not to much to ask.Could you explain how to get the oversold/ overbought levels that you always mention? Do you have the excel formulas?
    Thanks for your great contribution. I always read your analysis.
    Regards
    Bill
     
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi, Bill
    I use DiNapoli indicators Pack for CQG. The red line is a MACD Predictor. This is derrivative indicator from simple MACD. This is trend indicator.

    The blue lines on the graph is Oscillator predictor. This indicator is derrivative from simle oscillator=Close - n-period SMA. I use n=7.
    The point is that I use non-normalize indicator for overbought/oversold conditions, instead of normalized one, as RSI, for example. The low line shows the price for oversold level and upper one for overbought.

    But you can use simple oscillator. In this case overbought will be when oscillator will reach it maximum or 90% of maximum for about 130 periods.
    Oversold - if it reach minimum.

    Hope it helps,
    Sive
     
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Current situation

    Hello, Gentlemen,
    looks like down move restarts even sooner then I' expected. Now we are just above 1.3580 0.618 daily support level. The reestablishment of upmove is still possible, but if 1.3580 will not hold, then, probably we will move to previous lows first.

    There were rumors, that FED intends to rise discount rate again.
    But the important event will be during weekend. There will be voting on healthcare reform in Congress (that worth about 940B USD). If it will pass through - the EUR/USD uptrend can return.
     
    #5 Sive Morten, Mar 19, 2010
    Last edited: Mar 19, 2010
  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD current update

    Good day, Ladies and Gentlemen
    There is some udate of EUR/USD situation and 4-H chart.
    I'm long on EUR/USD now. There are some reasons for that
    1. Market has reached OP=1.3520 area
    2. 4-hour chart shows W&R of a previous low
    3. We have daily stop grabber situation which can lead to previous high around 1.3840-13870 area.
    4 Also possibly, there can be a Double Repo on 4-hour chart, but for now it is too early to talk about this. I just want that you track this possibility.
    5. For now is a good situation to stop orders.

    In general, I assume scenario as follows:
    First shallow up move, then 0.618 retracement when I'll try to add position and then stronger up move, may be due DRPO.

    Sive
     

    Attached Files:

  7. Selrach

    Selrach Recruit

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    Hi Sive

    Are you still long on EURUSD? I see that the downward move continued below 1.3400, where we are now.

    Thanks again for your insight!

    Charlie
     

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