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Forex FOREX PRO WEEKLY #2, April 22 - 26, 2019

Discussion in 'Sive Morten- Currencies, Gold, Bitcoin Daily Video' started by Sive Morten, Apr 21, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    Yesterday we've discussed situation around GBP and come to conclusion that it is remains difficult and definitely it is hard to call it positive.

    At first glance, EUR stands at better situation, at least it will not be harmed by Brexit at the same degree as UK. But this is phantom visibility. In reality, EU financial situation also is tough, but it has its own problems. Even last year and through this year as well, week by week we talk about weak position of EUR in relation to USD by many reasons. Recent week and coming one suggest confirmation of this statement.

    Thus, the dollar hits a 2-1/2-week high on Thursday as data pointed to a sturdy U.S. economy, while the euro was dented by weak manufacturing activity in Europe.

    U.S. retail sales increased by the most in 1-1/2-years in March as households boosted purchases of motor vehicles and a range of other goods, the latest indication that economic growth picked up in the first quarter after a false start.

    The economy’s strength was reinforced by other data on Thursday showing the number of Americans filing applications for unemployment benefits dropped to the lowest in nearly 50 years last week.

    “In addition to the recent upticks in Chinese data, the latest U.S. retail sales numbers have helped to ease investor worries about the global economy. It’s pretty quiet trading due to the Easter holiday, though,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

    The picture was less bullish in the euro zone as data on Thursday showed that activity in Germany’s manufacturing sector shrank for a fourth straight month in April.

    The euro fell against the dollar to as low as 1.1226, its lowest level in 1-1/2 weeks, after the worse-than-expected data from the Europe’s largest economy.

    Activity in Germany’s manufacturing sector shrank for a fourth straight month in April, while a similar survey from France also painted a bleak picture.

    “Investors are worried about the health of the global economy and the eurozone and the fortunes of the euro are closely tied with that,” said Ricardo Evangelista, a senior analyst at ActivTrades in London.

    A week ago, European Central Bank President Mario Draghi raised the prospect of more support for the struggling euro zone economy if its slowdown persist.

    But the prospects of more stimulus has failed to lift the general gloom over the euro’s outlook.

    But this is just tactical news, guys. More interesting things stand ahead. Take a look what St. Louis Federal Reserve Bank President James Bullard said last week. Weak U.S. economic data that marred the start of the year should change for the better in coming months, and ease some of the concerns among investors about the health of the recovery, St. Louis Federal Reserve President James Bullard said on Wednesday.

    “My baseline case is that the temporary weakness we observed in January and February is going to dissipate and is dissipating,” Bullard said during a conference at the Levy Economics Institute at Bard College. “We will continue to get better news on the U.S. economy as we get into the second quarter and the third quarter and...the yield curve will steepen.”

    Indeed recent data looks positive. Two weeks ago it was seemed that everything is over and everything goes to recession. But we've said - don't be hasty, situation changes very fast and very soon it could be quite different. Bullards' expectation and recent US statistics turn back to life idea of rate change by the Fed in 2H of 2019.

    At the same time, recent data of Fed Fund futures quotes tells that market absolutely doesn't ready to this step. Quite the contrary - it shows that drop back to 2-2.25% rate has more chances to happen, as probability of this rate rage increasing into 2020:
    upload_2019-4-21_11-20-27.
    Source. cmegroup.com

    But situation is more complex. According to recent Fathom consulting view, Positive US GDP surprise expected amid pickup in economic sentiment.
    Here is what they tell:

    "We have revised higher our forecast for US Q1 GDP growth, from an annualised rate of 2.0% to 2.8% (the consensus estimate from the Thomson Reuters Poll is 1.8%) following the release of some positive hard economic data over the last few weeks. Those data include retail sales, which rebounded in March, solid US housing data and a quicker-than-expected increase in exports in the first two months of this year."

    Our revision coincides with an upturn in business and consumer confidence and is reflected by our US Economic Sentiment Indicator (US ESI), which climbed from 3.9% to 4.2% in the last month of Q1. The increase in the US ESI was led by the consumer sector, with 7 out of 9 consumer-based inputs rising, compared with just 8 out of 14 business-based inputs. The dovish-sounding Fed, a solid labour market and further gains in the stock market can help explain the move.

    [​IMG]

    Curiously, this is somewhat at odds with what we expect to see in next week’s advance estimate of US Q1 GDP, which is likely to show a soft consumer spending print, but with solid contributions to growth from business investment, trade and inventories. The decline in spending was mainly due to soggy auto sales, which may be transitory and linked to the government shutdown.

    The bigger picture is that while US GDP growth looks set to slow this year, we still think it will grow above potential, causing inflation to rise and prompting another increase in the fed funds rate in H2 this year. The NFIB survey of small businesses offers a window into the slower-growth-but-rising-inflationary-pressures dynamic: the number of firms expecting an improving economy has fallen significantly, while the number of firms that are finding it hard to fill one or more positions is close to its all-time high.

    COT Report

    Recent CFTC data shows that speculators hold bearish positions almost without big changes. Market waits something. Since the beginning of the year net short position is gradually rising.
    upload_2019-4-21_11-30-32.
    Source: cftc.gov
    Charting by Investing.com


    Technicals
    Monthly


    As April stands inside month we mostly keep our long-term view without changes. Trend stands bearish here.

    As we said previously we're watching either downside breakout and start action to 1.08 and later to 1.03 or ability of the EUR to hold above 1.12 and turning up. It seems that market goes up with the latter by far.

    Market stands at support area around major 5/8 Fib level. In case of upside action, YPP will be important target , because, as a rule, market tends to touch YPP through the year. But after recent events chances on rally stand phantom.

    As Fathom consulting expects first rate change by Fed in June, but market is not ready for this step (as wee see from Fed watch tool by CME) - this is the first moment when EUR could show big action. By our view this could happen somewhere in the summer. Of course, recent news and market sentiment hardly agree with this now, but situation changes rapidly and this scenario is not erased totally yet. Brexit saga also could add some fuel to the fire and we could get strong action. UK probably will try to finish Brexit as soon as possible to not take part in EU elections.

    As we said this many times previously - indirect technical factors point on market's weakness, at least in long-term perspectives, as EUR can't jump out from strong support within more than 5-6 months and just lays upon it. Trend stands bearish here.

    Monthly situation shortly could be described as indecision with light gravitation to the downside. In fact, long standing around Yearly Pivot last year confirms things that we've discussed above. MACD trend stands bearish here.
    Thus we keep valid our downside COP target around 1.03 by far.

    Just by using of common sense, guys, in nowadays it is difficult to expect something positive as in global economy as in politics. Hence, any bad new triggers demand for safe haven assets and US dollar. Following simple logic odds stand in favor of downside trend rather than sharp upside reversal.

    So, although on technical picture we see just light and indirect signs of EUR weakness, political background stands negative. This is the major reason why I do not believe in resurrection of bull trend on EUR in this year.
    eur_m_22_04_19.

    Weekly

    Here is again - nothing to comment yet. As last week, this time frame is least informative among the others as nothing happens here. Market stands in the same consolidation, providing just minimal changes. Since price stands long-term here already, the exit probably should be strong and fast.

    The only new issue that we've got is bearish grabber. But, market stands so choppy that it is difficult to use this pattern as context for the trade. Definitely it is not sufficient for position taking, despite that this week some downside action still has happened.
    eur_w_22_04_19.

    Daily

    On daily chart situation has changed drastically on Thursday. We've talked about it in our daily video. EUR picture stands in tight relation to Dollar index, where we've got DRPO "Failure" pattern. Sharp reversal has not become absolute surprise, because we talk on EUR weakness for 2nd year, but tactically we've expected reversal from a bit higher level on EUR.

    Anyway, Dollar Index DRPO "Failure" perfectly matches to weekly uncompleted COP target right above the recent top that we also discussed many times. On EUR it means that should keep an eye on some targets below recent lows. And most probable pattern that could be formed is Butterfly with first destination around 1.11. Next, 1.618 extension stands at 1.10. The only tricky moment here is Friday's bullish grabber that we've got on "thin" Good Friday's market. This type of grabbers appears very often after first drop action and very often they fail. But, to keep our setup pure, we could wait when EUR erase it, or at least will keep in mind this pattern to watch over it through the week.
    eur_d_22_04_19.

    Intraday

    On 4H chart we have smaller AB-CD pattern that is inner to daily butterfly pattern. Nearest COP target stands right around major daily lows of 1.1170. OP stands 100 pips lower around 1.1070:
    eur_4h_22_04_19.

    On 1H time frame there was no significant action on Friday, where we keep an eye on upside pullback. Right now we have just small ab=cd pattern here. Market hits OP but also shows the grabber. I don't know how reliable this grabber as well, but it suggests that EUR could hit XOP target around 1.1265 area that we've mentioned.
    If you plan to go short, guys, don't be reckless. Despite that we have doubts on daily Grabber perspective, keep an eye on price action. Slow and lazy upside climbing supports idea of reversal around inside 1.1265 area, while sharp rally has to hold us from any short position.
    eur_1h_22_04_19.

    Conclusion:
    We provide detail covering of EUR through the week, thus our technical analysis on the charts mostly stands the same. The most valuable part of this report is fundamental one and it is faced to the future, while on charts we see that already has happened.
    On coming week we will get very important US data that should be decisive and could lead to strong action on EUR. Now we think that it should be dollar supportive and gradually Fed rate hike idea starts return back to the table. As a result, long term downtrend on EUR should continue.


    The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
     
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  2. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. I expect bullish action against 1.1183 and 1.1175 lows to complete upside retracement and red wave B on daily chart. After that I expect downside action to resume and hit 1.08 target.

    Daily chart:

    EURUSDkDaily.

    4H chart:

    EURUSDkH4.

    1H chart:

    EURUSDkH1.

    How to trade this?

    Maybe wave 2 is not completed yet which 1H chart shows, but I will simply ignore that and just take long position right away against 1.1175 lows.

    Long entry in zone 1.12-1.1250, TP zone = 1.1450-1.1740, SL=1.1174
     
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  3. FreddyFX

    FreddyFX Sergeant

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    Master Sive.

    100% with you on this analysis !!!
    Lets hope Trump does not mess it up, lol.
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Since this is "#2" thread, I put here the gold analysis while today's EUR view stands in "#1" thread.

    Gold market is extremely interesting today due to the patterns and traps that are forming right now. The major thing that we have to keep in mind - target cluster right below the market - 1267-1269. This is daily 1.27 butterfly extension:
    gold_d_23_04_19.

    And 4H AB=CD target. It means that market should form something that should let price as to complete major target as to prepare background for common retracement. Most suitable pattern is butterfly "Buy":
    gold_4h_23_04_19.

    But take a look what we have right now on 1H chart. Gold is forming reverse H&S pattern - this is big trap and really cunning action. Now many traders who see it will go long and will be trapped in wrong direction.
    It is really great odds that this H&S will fail and it makes sense to keep an eye on possible "222" Sell pattern instead of right arm. For scalp traders this could be valuable setup for short entry with 1269-1270 target:

    gold_1h_23_04_19.
     
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  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Today we take a look at GBP. On gold market our target has been hit, and now gold takes the pause and preparing to some natural retracement.

    On GBP the action, that we've expected has happened. Price indeed has dropped below K-support area and previous lows. Next destination point on GBP is 1.28 area and really strong support cluster stands around. This is major 5/8 Fib level, and two targets on lower time frames that create an Agreement:
    gbp_d_24_04_19.

    On 4H chart this is AB=CD OP target:
    gbp_4h_24_04_19.
    On 1H chart this is XOP of the same pattern that we've traded last week and this week as well. Our OP target has been hit yesterday:
    gbp_1h_24_04_19.

    As market is coiling around OP, some retracement could start. Market gradually turns to US GDP report on Friday, thus, today-tomorrow action could be more quiet.
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Let's take a look at Gold market today. On daily chart price shows natural pullback as butterfly target has been hit. In fact, it is few that we could do here because market stands close to the point that our long-term scenario considers as possible long entry area. Until GDP release it would be better to not take any positions on daily/weekly charts as situation could change. Positive GDP will trigger demand on USD and put on the table possible rate hike again.
    gold_d_25_04_19.

    On 4H chart there are two setups that could interesting. First is, upside reaction takes the shape of reverse H&S pattern and it suggests that entry point stands around right arm's bottom - 1275 area. At the same time - keep in mind GDP release, it could drastically change the context. For example, H&S could fail...

    If, still, H&S will done well, then, around 1285 area there will be bearish setup. As we still watch for 1255-1260 daily target, this is the point where gold could re-establish downside action. But final clarity we will get only in weekend:
    gold_4h_25_04_19.
     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Gold stands in the same upside respect of our major target that has been hit in the beginning of the week. Today is major driving factor is GDP repease, where we should get the answer on direction. Positive surprise leads to appearing bearish grabber on daily chart and action to 1255-1260 target next week. While negative surprise triggers the rally, but it still a question whether it will be just deeper upside retracement or major trend continuation:
    gold_d_26_04_19.

    On 4H chart we were watching for reverse H&S pattern, but gold shows strength and could proceed higher directly. Right now price stands at first Fib level. Next target is 1295 K-resistance, WPR1:
    gold_4h_26_04_19.

    currently it is difficult to take any trade on gold. Personally I do not have any position right now as our major trade this week has been done at 1267 target. Although we expect positive GDP, IMO better to wait for the fact, and take position next week, based on daily grabber.
    Long position is also unsafe right now by the same reason. The only setup that we see, which is a more gambling rather than trading is an attempt to go short around 1295 K-resistance with tight stop above the same area. If GDP indeed will be positive, market should drop out there. But only if you get an itch to trade it.:D
     
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