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European Forex Professional Weekly 2009-08-27

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Aug 28, 2009.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUROPEAN FOREX PROFESSIONAL WEEKLY
    August, 28,2009

    Fundamentals:
    The basic thought that is spread widely enough is that dollar must become weaker in the long term. The reasons are quite simple – The Federal Reserve and US Treasury have built a large quantitative program, which increase inflation risks in long-term. Europe has a more sustainable economic support program, so inflation expectations there are lower than in the US. When the economic recovery starts, investors will think what price they paid and will pay for the supporting programs that made huge inflows of cash in the economy for stimulating consumer spending, bank loans and support of the real estate market. Besides, policymakers will not be too hasty to become restrictive enough. So, the Federal Rate will be low for too long. That is obvious statement, and in general it is correct, but there are some additional points that we should pay attention to.

    1. Economy recovering starts in the USA earlier than in Europe. Usually the time lag is about 1 or 2 Q. The main perspective of such a situation is a growing demand for US assets (stocks, bonds, mutual fund inflows etc.). If demand for assets will grow – demand for US currency will grow also.
    2. When the US economy recovery starts – USD/EUR rate parity expectations must change. A well-known fact is that current exchange rate reflects currency rate parity. During the recovery phase of the economy, inflation (and it’s expectations) will grow. As a result, expectations of rising FFR rate also grow. The Federal Reserve will rise rates earlier than the ECB because of an earlier economic recovery than in Europe.
    3. If we take into consideration the previous 2 points, then we can assume that US Dollar become stronger first – rising economy, growing demand for US assets, expectations for rates rising and earlier start of recovery will change the rate parity expectations. Moreover, the USD can become stronger as early as macroeconomic statistics (Nonfarm payrolls, Housing starts, ISM Index, Consumer confidence index) will show stable improvement trends.
    4. I expect that USD will start to lose strength only after first rise of rates in Europe (or near to this point). So, I agree with weak dollar in long-term, but I believe that it will become a bit stronger first.

    For the nearest week (31Aug – 4Sept):
    The main triggers that definitely will influence on EUR/USD pair are:
    Aug 31 – Chicago PMI, Consumer Confidence;
    Sep1 – ISM Index;
    Sep4 – Nonfarm payrolls.

    Technical
    Monthly (EURO FX all sessions CME futures)
    Let’s look at the recent monthly movements. First, point “D” is a perfect 0.618 Fibonacci extension form “ABC” movements:

    A=0.8245;
    B=1.3687; D=1.5024 (the real “D” is 1.5088).
    C=1.1661.

    Second, we see, that market has a record overbought level, according to the oscillator, since 1999. This overbought is just under 0.618 Fibonacci retracement that creates meaningful resistance to the market. The great overbought level near strong resistance is a potential bearish signal. Besides, if we look at MACD we’ll see, that it shows that the down trend is still holds. So, we can expect that this growth to near 1.45 level is just a correction from a down move. The main nearest target of potential bear movement is:

    D=1.5988;
    E=1.2326; =1.2126
    F=1.4449.

    Besides, some resistance to Fib 0.618 level adds 25-period MA that is 1.4183 currently (black line on chart).
    As a result, it seems that monthly EUR/USD is more bearish than bullish.
    But we have to find some more proof of that assumption in lower time scales charts.

    [​IMG]




    [​IMG]

    The main facts on weekly chart are growing volatility near 0.618 resistance level, MACD near crossing and bearish divergence with Oscillator and Stochastic. I do not believe in divergence too much and rare use this signal, but taking in the accounts all facts, it looks like it should working in this situation.
    Besides, the target of XYZ movements (1.4159) is a bit lower than “F” point, and almost in confluence with 0.618 resistance level. This make this level - 1.4573 (CME FX Euro futures contract quote, but is almost the same as a FOREX quote) stronger. Also we have to pay our attention, that previous upside move has finished on that level – maximum was near 1.47, and the closing 1.3853.


    [​IMG]

    Daily graph does not adds much additional information. We can see the same rising volatility near resistance. I just added some important support levels. Also, it is possible, that downturn will be in the form of circle – round top.

    [​IMG]

    4-hours chart shows a downtrend with middle oversold level. It is possible, that market will not go higher than 1.44. But, the possibility to go short near 1.43 is real enough.

    Trade EUR/USD possibilities:

    Monthly - Bearish;
    Weekly - Bearish;

    Signal only on weekly basis. Sell EUR/USD near 1.43-43.50, stop 1.4720, nearest profit 1.3750. There is not much probability that the pair will go higher than 1.4550, but 1.4720 is a level that has technical basis.
    Probably we can see 28 Aug, or during the next week more obvious signals to enter market on daily basis, but there are no valuable signals for now.


    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 recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein.
     
    #1 Sive Morten, Aug 28, 2009
    Last edited: Aug 28, 2009
  2. FXTrader

    FXTrader GainScope Representative

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    Thank you for the Analysis
    hope it is usefull


    James
    GainScope.com/forex/
     
  3. BamaGuy

    BamaGuy Recruit

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    Your Weekly Post

    Sive:

    Thanks, as being new to forex, I need all the help that I can get.

    Tom
     
  4. jd0616

    jd0616 Recruit

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    thanks a ton been struggling as of late..getting chopped to pieces..other problem i always seem to sell first..new to forex 2 mos. having trouble being patient..trying to find a style
     
  5. Dollar-Reaper

    Dollar-Reaper Private, 1st Class

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    Dollar outlook

    I must admit I can’t recall hearing of Sive Morten before, but I am really happy I have heard of him now. It is reassuring to hear that there is a bank broker with whom I share a similar outlook for the greenback in both the short and the long term. One tends to doubt your own perception of trends, especially long-term trends. So I do feel more comfortable with my own views having read his views on fundamentals.

    I would even go further regarding the long term weakening of the greenback, looking outside the square, and consider the impact in the longer term of the global tendency to not accept oil based on USD pricing, which is gaining support. Many oil producing and non-oil producing countries want to price oil in Euro or even Yen. While OPEC maintains that oil will continue to be priced in USD, it is common knowledge that it is now already being priced and sold in Euro. I do not believe that oil will ever not be sold in USD, but the writing is on the wall that it will be priced and sold in at least one other if not several currencies.

    Why a development of this nature would have a soft outlook for the greenback is fundamentally that in the past everyone had to buy USD to pay for their oil, and if this changes there would be less demand for USD as other currencies could be purchased to pay for the commodity.

    Congratulations to the FPA's Administrator for securing Sive Morten’s market analysis, it something really worthwhile to look forward to each week.
     
    #5 Dollar-Reaper, Aug 28, 2009
    Last edited: Aug 28, 2009
  6. pipfull

    pipfull Recruit

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    Tnx for the analyses and signals.
    I hope you will continue giving more analyses and signals on more pairs.
     
  7. arabianhawk

    arabianhawk Recruit

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    thanks
    and ithink 1.4400
    is the laste hi will tutch
    and finish
    now all down
    frome next week
    to hill
    hhhhh
    bay
     
  8. hnsx99

    hnsx99 Recruit

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    good analysis

    I think,this is a good analysis, let me see to compare with pipsalot, keep going...:)
     
  9. Darmendra

    Darmendra Recruit

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    very knowledgable piece of information

    I like to thank from my sincere heart to the forex peace army team for their constant thrive to educate the traders all over the world and to make them as succesful as they can .
    this analysis is , to be straight , is SOLID .
    keep up the good work.
    THANK YOU ONCE AGAIN.
     
  10. Akintunde

    Akintunde Recruit

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    a guru in the house

    it nice to have you share your professional knowledge with us.i cant wait for the next one..:)
     

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