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European Forex Professional Weekly 2009-11-05

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Nov 5, 2009.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUROPEAN FOREX PROFESSIONAL WEEKLY
    Analysis and Signals
    November 5, 2009


    Fundamentals

    Risk aversion is continuing. On the previous week we’ve seen only the first signs of this process, but during this week the process has accelerated even more. The point 6 of our “Basic macroeconomic issues” is underway. So, what do we have now? First and the most important is to watch the labor market. Numbers do not show any grow in momentum. Yes, we see some improvement, but the jobs numbers and employment are showing stabilization rather than growth. The trend in PMI numbers, which originally adopted a v-shaped pattern, is losing momentum also. Although we’ve seen a solid GDP growth – this is still due to Government programs – Bonds buyback, cash for clunkers auto program, tax back and tax credit programs, etc. From the other side we see bankruptcy of CIT, the divesting of ING, the EU Commission’s forecast that European banks could see between E200B and E400B more in losses and the announcement that RBS and Lloyds will need more capital.
    As a result, I expect that Central Banks politics and macro data will be the most important till the next of the year. Investors are now trying to reassess the situation, because the first euphoria about world economy recovering and about the pace of this repair is not confirmed yet. So, it means that things are not as good as has been assumed. The additional headache is coming from the end of a fiscal year fact. This moment also can skew the real situation a bit.
    The release of October Non-Farm payrolls will be paramount to perpetuating current EUR/USD move. A further deterioration in payrolls will be detrimental to sentiment and cause another wave of risk aversion. However as the market settles after the release and no new concerns over the financial system arise, the risk trade may resume to the detriment of the dollar. This questioning of the fundamental recovery could leave the trade quite choppy before it resumes a steadier trend.
    My thought is in near-term this dollar’s strengthening can continue. For now it is a technical factor, it is just reassessment of expectations and economy condition. In the long-term, unfavorable fundamentals for the dollar didn’t disappear – the continued ambiguity and fiscal irresponsibility coming from Washington coupled with the poor interest rate differential and low LIBOR still make the dollar unattractive. Moreover, the global recovery is not over; it is just hitting a rough patch. Additionally, central banks are still diversifying reserves despite the setback in the economic repair. India just purchased 200 tons of gold from the IMF to facilitate this diversification. While 2010 may prove to be a better year for the dollar, it is possible this short term correction is just a hiccup in a bigger trend.

    Basic macroeconomic issues:

    1. Investors basically pay attention only to the nearest perspective. Since FED rate tightening is too blurring, we should not to expect meaningful USD strengthening until next year (or till first signs of a rate hike possibility);
    2. USD will become stronger when investors see these signs, so the expectations concerning EUR/USD rates parity will change;
    3. We can expect growth in the USD, if the possibility of second leg of recession will grow, and if investors will have large borrowing positions in USD;
    4. EU economic recovery will have a time lag about 1-2 quarters compared to the US recovering;
    5. When EU rate hike expectations will appear, the dollar will turn to weakeness;
    6. We can see temporary USD strengthening from time to time due some technical movements (risk aversion, stocks buying etc) until the first signs of a rate hike possibility appear.
    7. The primary US economic data that will be under scrutiny are personal credit, spending, wages and employment, inflation. This is a final segment in the chain, and it’s very important.

    Technical

    Monthly (EURO FX all sessions CME futures)

    I do not show the monthly chart for the current week, because there is nothing new to say. All important information was in previous research. The main thing that I would like to remember – is that monthly trends are bullish, so the current down move on EUR/USD is just a retracement from the monthly scale view.
    I place weekly chart lower. The most interesting movement – is a possibility of trends change to bearish in weekly term. It depends on EUR/USD movements till the end of the week. If it will happen, we can expect deeper down move from the peer.

    [​IMG]

    Daily (EURO FX all sessions CME futures)

    The daily trends are bearish; we have no oversold level, so technically nothing is blocking a possible down move. Look’s like up retracement is over (we take a close look at this movement on the hourly chart), and we have received our ABC points. So, what are the possible targets for Daily down move? COP=1.4637, OP=1.4470 that is most probable to reach. The most interesting thing is that both targets are very close to Fib support levels, that makes these levels stronger, although spread between targets and according them Fib levels a bit wide for daily chart.
    Also I want to point out that up retracement had stopped precisely at 0.618 Fib resistance. It tells us that daily down trend is still working.

    [​IMG]

    Hourly (EURO FX all sessions CME futures)

    The context on the Hourly chart is bearish for now. First, the strong uptrend has finished precisely at 0.618 Fib daily resistance level. XOP target at 1.4873 and OP at 1.4888 were in agreement with this daily resistance level. We have no oversold yet, so can expect the solid down move. The up move is still holding on hourly chart, now it’s near Fib resistance at 1.4875. So we can’t estimate C point for target calculation just yet. We have just A and B points.

    [​IMG]

    Trade EUR/USD possibilities (1):

    Hourly:
    Well, it still difficult to say will it be additional up move or not, but the context for trading is bearish. The most conservative stop is above of previous high – 1.4908. If market breaks it – a down move is under questions. We can’t estimate targets yet, an up move is still underway.

    Daily:

    The Daily trend is still bearish. It can break up, if the market goes higher than 1.4908 level. For now the situation is for short trading. The nearest target is 1.4637


    (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. tapesense

    tapesense Recruit

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    Thanks for the analysis, one question - I have 1.4895 as 61.8%, am i missing something :)?
     
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    tapesense,
    Yes, that's correct level (it obvious, we need just look at the graph), but market just spike it for a while. And the high was a bit above the 0.618. But it still works.
    If market will turn up, the main moment will be breakout through maximum. Market-makers definitely would like to grab stops, that just above it. This will exacerbated up move even more. That's why I've pointed 1.4908 instead of 0.618 Fib resistance.
    Sive
     
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    I've looked at the market in the morning, and decide, that I will be aside of the market till next week. Yesterday's upmove strong, besides market does not retrace lower. It can be an eve of a solid up move. Besides, today will be a Payrolls release. I expect, that it will be a bit worse than expected (somehing about "-175K" ) then downmove can take place still, but this kind of divination is not in my trading plan, especially with small account. It can be very volatile day.
    But, still, down context is in force - market does not break 0.618 level yet. If strong down move will begin, the better way is to enter at retracement.
    Sive
     
    #4 Sive Morten, Nov 6, 2009
    Last edited: Nov 6, 2009
  5. josgab

    josgab Recruit

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    Weekly signas

    I have been following your weekly signals, and must say that i am impressed.
     
  6. Darmendra

    Darmendra Recruit

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    Simply Superb Analysis

    Hi Sive ,
    I am Darmendra from India.
    eversince you have started posting your analysis , i have been following carefully and entering the trades at a much more matured and informed way.
    I sincerely thank you for all your researches and analysis .
    Maybe I ,ask or request your goodselves for more .
    Could you post all your depth of knowledge gor GBPUSD also .
    please , its just an humble request.
    warm regards,
    Darmendra
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hello, Darmendra
    Acctually, I plan to add gradually GBP/USD, USD/CHF and USD/JPY or AUD/USD (I do not decide yet) analysis, at least in technical part of research.
    Sive.
     
  8. LERITZ

    LERITZ Recruit

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    Hi Sive,

    Thanks for all the post. While I am among the believer that everything has a price, is your plan to get many to get use to your idea, then in couple of months to start charging for it? I just hate this and I am sure you wud do too if you were from my end!!! Hope to hear your comment on this plz. Thanks, LERITZ.
     
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi LERITZ,
    Well, I think this quest is to FPA executives rather than me, because I just fulfill our agreements and prepare researches.

    Sive
     
  10. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi, everybody
    As I said on Friday, I had some scruples concerning Payrolls (look at my posts) and possibility of downmove.
    Well, now we have a solid upmove. Although, daily trend is still bearish, I think that this move will continue, besides we do not have any important data on this week.
    At least until Thursday.
    So, My nearest target for upside move COP=1.4995, next OP=1.5104 and XOP=1.5284
    Now I investigate a possibility to enter long, but not from current levels. I think it will be a possibility to enter somewhere around 1.49-1.4920.
    Sive

    P.S. we definitely scrutiny this situation with payrolls and why we have upmove in weekly research.
     

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