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European Forex Professional Weekly 2010-03-10

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Mar 10, 2010.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUROPEAN FOREX PROFESSIONAL WEEKLY
    Analysis and Signals
    March 10, 2010

    Fundamentals

    There is not much to talk about on the week - it has very little macro data. First, February Non-Farm payrolls have shown a positive surprise (although I’ve expected worse numbers) - “-42K” including revision instead expected “-68K”. At the same time the EUR/USD didn’t show continuous downward movement and entered consolidation. There are rumors circulated on the market that March’s payrolls will be about +300 - +350 K but they do not influence on market much currently. At the same time retail activity in early March becomes stronger, air travel shows signs of improvement also. Boeing looks ready to lift 777 and 737 production by the summer. If Boeing follows through on lifting production, it will be a sign that the recovery goes beyond the inventory cycle.
    From the other side, rating agency rhetoric was cautious towards the health of the U.S. and U.K. banking system. Fed Evans indicated that rates need to be low for some time due to lingering unemployment.
    Concerning Greece and EU problems, the short-term situation calmed down a bit. French President Sarkozy has said that EU would stand behind Greece. Besides, discussing of European Monetary Fund creation has raised great interest from investors. In general this event is supportive for EUR. There is uncertainty as to whether or not this will be discussed at this week’s meeting of the European Commission but further discussion of its formation will help the euro at the margin. Nevertheless long-term problems still remain. At least two countries – Spain and Ireland have solid budget deficits that can compare to Greece’s one (-16.35% to GDP). Spain’s deficit in 2009 was - “-12.103%” and Ireland’s – “-12.269%” (according to IMF data).
    Given that the criterion of the Maastricht Treaty dictates that the budget deficit-to-GDP ratio need to remain under -3% of GDP, Greece has already pledged that they will be able to reduce their budget deficit-GDP ratio to the mandated -3% by 2012. Just last week, the Greek Parliament approved an E4.8B austerity package. The plan will freeze pensions, increase sin taxes, cut public sector worker wages and also levy taxes on a random assortment of other goods. The austerity measures have triggered chaos in Greece as rioters protested Parliament’s decision. The threat of social unrest will continue in Greece. But this is just the tip of the Iceberg. Greece has to fulfill debt obligation in 2010 just for 16B EUR. But other counties have awful numbers:
    Italy - 259.8B EUR + 34.01B in interest ; Spain – 88.9 B+10.95B in interest. In wealthy times they can gradually recapitalize them, but for now it’s much harder to accomplish. And the Greece is just the first splash.

    Résumé: The US economy continues to show signs of improvement. For now the basic expectations that Fed will tight rate to 0.5% in Q3. It will happen with solid probability if the current trend in macro data will continue. The situation in th EU is very complicated, and I think that it will not be fully resolved until summer. Investors want to see debt maturity from Greece, how 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 remains a Pandora’s Box rather than a clear plan of stabilization. This situation allows me to assume that 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 become a bit slower than before.

    Technical

    Monthly (EURO FX all sessions CME futures)

    Changes on the monthly time frame come slowly even if they come at all. Nothing special to add compared to previous research - the trend is bearish. 1.3400-1.3480 support has stopped the market for now. 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.
    If we look at DXY (Dollar index) it looks soft a bit. Index has reached weekly OP target at 80.784 and 0.618 resistance from monthly thrust bar at 80.783 (this results in agreement) and shows W&R of this 0.618 resistance level. We have confirmed bearish and unconfirmed bullish monthly trend in DXY. Although March has just started and it can go up further during March but current situation looks bearish for DXY and points on a possible retracement down.

    Monthly EUR/USD
    [​IMG]

    Weekly (EURO FX all sessions CME futures)

    Due to the absence any meaningful event, the market is still in a tight consolidation just above the 1.3480 level. Weekly situation is a bit tricky. Look, from the one side we have strong monthly and weekly support, something that looks like Wash & Rinse of this level – long candle shadows. The market has tried to break this support during the 3 weeks but was failed every time.
    From the other side – we see very tight consolidation; market hasn’t reached even 1.38 level (that I’ve expected) and only 1.3700. The trend is bearish, no oversold.
    So, the strong support and not deep retracement makes me think that somebody strong holds the 1.3480-1.3400 level. Otherwise, retracement should be deeper if the whole market decides that 1.34-1.3480 is a fair level. But the retracement is too shallow. At the same time, to break through we need a catalyst – news, macro events, etc., that can trigger market movement. I think that it will not happen during current week – the macro calendar is light, no political events (if will be no any force-major of cause). And I would like to see some signs of a possible move on a daily time frame (for example, Wash & Rinse of 1.3750-1.3800 level). I expect that the weekly market will stay in a range 1.3550-1.3700 until that.

    Weekly EUR/USD
    [​IMG]

    Daily (EURO FX all sessions CME futures)

    On the previous research I’ve pointed that I expect a retracement higher. This retracement has taken place, although not so far as I’ve expected – 1.3700 level instead of 1.3840. At the same time NFP was released better than expected but market didn’t show us strong down move (I’ve opened long EUR/USD precisely after reaction to release). So, for now we are in a butter churn. But there are some things that I want to talk about. First, the market has moved to higher range during recent days - 1.3530-1.3700 range. Two weeks before that market was in 1.3450-1.3650 range. Although it has tried – it couldn’t break 1.3650 daily Confluence resistance level.
    Second, the current formation looks like Diamond reversal pattern, although not perfect. In general this pattern is rarely enough, and is very tricky.
    As you see, signs are very contradictory and this is typical for such kind of price behavior. Trying to put parts of the puzzle together – weekly and daily, we can make an assumption that we can see an upper fake break of a diamond formation and reaching of 1.3800-1.3820 level for very short time. Then prices can show fast return and we can see daily and weekly bearish Wash & Rinse. But for this scenario we need that low bound of the diamond holds. Market shouldn’t break 1.3550 level and close below it.
    If market will close below of a diamond border, then, the probability for down move increases significantly.
    Anyway, I do not recommend to open long-term positions for now, since we do not yet see some signs of a possible direction. Better to make short term intraday trades. You can set up for diamond breakout, but try to take as low risk as possible, because the is tricky.

    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 mid-term (and a retracement higher as a result), I think that in long-term USD is more favorable. The nearest long-term target is COP=1.2880.

    Weekly

    We have down trend, no oversold conditions. Market won’t to go up - retracements are very shallow. At the same time we see failing attempts to pass through 1.3400-1.3480 support. So, it looks like confrontation between Big participants and other market. And this is usually leads to breaking after some retracement. So, very possible that we can see some pull back higher, and fast back down move and break. But it is unlikely that it should happen during the current week.

    Daily

    We have a tough situation as a weekly. Short positions are growing – they do not allow the market to show deeper up retracement, so stop orders are very attractive for those who hold 1.34-1.3480 level. The daily trend is still bullish, market has passed to new higher trading range 1.3550-1.3700, possible diamond formation (but I’m not sure). Before breaking down we can see some upward movement to 1.3800-1.3820 level and grabbing stops crusade. If it will not happen and market will move below 1.3530 again then the upper retracement to 1.3800 most likely will not hold. Anyway I recommend to set up on short-term intraday trades at near term.


    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. tom.finanz

    tom.finanz Private

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    terms

    I'd like to know if there is a glossary somewhere for the terms and abbreviations used.
    non-native english speakers like me cannot make out these so easily.
    like
    cop xop op
    or 'wash and rinse'
    for instance
     
  3. Sentinel

    Sentinel Sergeant

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    Gold

    Please look at the graph. (I carried the latest talk from last week's analysis, here)
     

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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Well, actually yes, I can argue about 1077 a bit (the reverse move was fast) - although market has reached 1044 Confluence support but return was fast above 1077.
    Nevertheless we see some price appreciation of previous levels, that influence on price moving.
    But formally you're right - they were taken out... From that point of view you should take into consideration only nearest 1044 Confluence level.
    Still COP exists and it coincides with 1077. I think that market will show some appreciation to it.
    BTW OP is almost at next Confluence support around 1025-1027.
     
  5. Sentinel

    Sentinel Sergeant

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    Well, what about this confluence level?
     

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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    This Confluence is OK, but I've talked about another weekly price swing.
    The swing that you've talken about is also valid.
    Remember from the book part 3, where DiNapoli expains how much swings should be, depending on Focus numbers and their places.
    So, in our case we have 3 swings - large (that I've talked about) Down swing that is a retracement and your small swing. Because your Focus lower than previous high.

    By the way, there is no agreement, because there is no retracement to calculate targets.
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Tom
    Well, unfortunately not. But, you can read the post and my trades expamles.
    There pretty much explanation to that. I just explained the same things in previous research topic:
    http://www.forexpeacearmy.com/forex...n-forex-professional-weekly-2010-03-04-a.html
    Post from An2 and my answer.
    Sive.
     
  8. Sentinel

    Sentinel Sergeant

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    Are we having a W&R, or what??
     
    #8 Sentinel, Mar 12, 2010
    Last edited: Mar 12, 2010
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Ufortunately, I do not see Gold right now, only FOREX.
    Please, post the chart, I'll watch at it, then we will discuss it.
    Or we can wait until Monday, when I'll be in an office.

    Sive.
     
  10. Sentinel

    Sentinel Sergeant

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    Latest about Gold

    1) Market reached daily confluence level Tuesday, retraced back to OP on Friday (probably a W&R of OP level) and then closed below daily confluence level.
    2) Daily, weekly Dema are bearish.
    3) No oversold.
    4) In long term, the context is in favor of Gold decline, since EUR zone is in trouble and USD is improving. China which is an important investor in gold; tightening economic policy measures. All negative, the only risk is inflation, which may create an appetite for gold investment but I think we are much more far from this scenario yet.
    5) Analysts seems to turn in favor of Gold bearish. (From %73 (19 of 26) to %36 (7 of 19) in one week)
    March 5 (Bloomberg)- Nineteen of 26 traders, investors and analysts surveyed by Bloomberg, or 73 percent, said bullion would rise next week. Six forecast lower prices and one was neutral.
    March 12 (Bloomberg) - Nine of 19 traders, investors and analysts surveyed by Bloomberg, or 47 percent, said bullion would fall next week. Seven forecast higher prices and three were neutral.

    Well a close below daily confluence level can be an important sign and it seems that everything is in favor of a major decline in Gold. However the case in EURUSD is tricky as Sive warned and we should take care of it. What is the meaning of the latest hike to 1.37956? Is this also a W&R of the 16.02.2010 highs where there are probably a lot of StopLosses? Weekly and Monthly Dema are bearish and daily bullish in EURUSD. No overbought level yet but close.

    Daily graph and 4H graph (much more closer look) below..
     

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    #10 Sentinel, Mar 13, 2010
    Last edited: Mar 13, 2010

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