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Forex FOREX PRO WEEKLY #2, February 04 - 08, 2019

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Feb 3, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Today, guys, we will take a look at CAD instead of gold market mostly because of technical reasons. Gold doesn't need significant update by far as long-term as short-term picture stands mostly the same, while on CAD we have interesting technical setup due Crude Oil market and Venezuela turmoil.

    Fundamentals

    Global fundamentals that make impact on CAD as well we've discussed yesterday, in report dedicated to EUR.
    Here we add just few comments, special to CAD. Loonie dollar currently looks interesting because of strong relation to Crude oil and unrest in Venezuela could bring significant volatility to oil market. Besides, Bank of Canada still keeps hawkish sentiment and doesn't follow the Fed direction in question of rate policy. This combination creates the background that suggest appreciation of CAD value.

    As Reuters reports - The Canadian dollar strengthened on Friday to its highest in nearly three months against the greenback as oil prices rose and as the gap narrowed between Canadian and U.S. bond yields despite U.S. data showing employers hired the most workers in 11 months.

    The "big drivers" for the Canadian dollar have been narrower yield spreads and higher oil prices, said Amo Sahota, a director at Klarity FX in San Francisco. U.S. crude oil futures settled 2.7 percent higher on
    Friday, helped by upbeat U.S. jobs data and signs that U.S. sanctions on Venezuelan exports have helped tighten supply.

    The spread between Canada's 10-year yield and its U.S. equivalent narrowed on Friday by 2.6 basis points to a spread of 73 basis points in favor of the U.S. bond, its narrowest since Jan. 7.

    The narrower spread came as hopes rose of progress on trade talks between the United States and China.
    The U.S.-China trade talks this week had a "good vibe" with much work remaining, White House economic adviser Larry Kudlow said on Friday as China followed through on a pledge to increase soybean purchases with a 1 million tonne order.

    Canada is running a current account deficit as well as being a major commodities producer, so its economy could benefit from a pickup in the global flow of trade.

    "I think the deal is not closed but at least the tone has been positive and that has helped the commodity currencies for the most part," said Alfonso Esparza, a senior currency analyst at OANDA.

    Still, the Bank of Canada has said interest rates will need to rise further over time in order to achieve its inflation target.

    "I don't think the Bank of Canada needs to tweak its monetary policy or its tightening bias considerably as opposed to what we have seen with the Fed," Esparza said On Thursday, the Federal Reserve signaled a potential end to its interest rate hike cycle.

    Stubbornly low wage growth in Canada should start picking up later this year as the economy overcomes a slowdown caused by weak oil prices and housing market softness, Carolyn Wilkins, a senior deputy governor at the Bank of Canada, said on Thursday.

    Since our last discussion on CAD was before the moment when situation in Venezuela has become out of control, today we need to update this view.

    Technicals
    Monthly


    Here we've got the confirmation of strong bearish engulfing pattern by the close of January candle. Pattern stands at major 5/8 resistance. January black candle has closed below the lows of December, which could be treated as Reversal month as well. Price starts dropping and now stands below YPP.

    Strong support here stands at 1.2706 as YPS1 and 1.22-1.25 K-area.

    For the monthly chart, this is tactical setup, because it doesn't suggest too extended targets, as they should stand somewhere inside recent upside swing. But... this is for monthly time frame. For daily one this could be long-term direction which makes trading process easier.
    cad_m_04_02_19.

    Weekly

    Downside reversal point also was an XOP final upside target. Reversal has a shape of perfect Evening star pattern. As soon as downside action has started we've talked about possible B&B "Buy" and Bullish grabber that have been formed - but none of them were realized, market just has washed them out showing no respect at all. This just tells, how market strong is.

    But, right now we're coming to strong weekly K-support area where first stop could be done.
    cad_w_04_02_19.

    Daily

    Daily time frame also shows some reasons for upside pullback. Market has completed major COP target and finalized it by 1.618 Butterfly pattern. All this stuff stands near daily OS level.
    As butterfly extension strictly has not been hit yet - market could fluctuate around for some time before the pullback will start. Upside retracement has chances to reach 1.3255-1.3295 K-resistance, because we at weekly support which is strong enough to trigger this bounce. Harmonic swing also points on retracement to K-area.
    Our major direction is "down", so we're interested with this retracement only as a way to get better and safer entry opportunity, while scalp traders could think differently and use it as a background for intraday long trades.
    cad_d_04_02_19.

    Intraday

    Here, on 4H chart we do not have clear bullish reversal patterns yet, but could suggest that the most probable one that could be formed is reverse H&S. Shape of flat consolidation and sharp downside breakout is typical for left arm and shoulder shape.

    This chart also shows another K-resistance, where retracement up could stop. The advantage of this area compares to daily one stands due previous lows that stand inside of it. Besides, if we indeed will get H&S pattern, its AB-CD target also points on this area. But this is interesting only for those who intends to trade CAD on long side.

    cad_4h_04_02_19.

    Conclusion:

    Canadian dollar provides very interesting setup now on a background political events. Since setup is forming on monthly chart - it could provide weeks and weeks of clear direction for trading on daily time frame.
    Next week we expect starting of upside pullback on daily chart which should provide as better and safer area for taking short position.


    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. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greeting everybody,

    Let's take a look at gold market finally. On daily chart market turns to technical pullback after it has completed our 1320 target at OB level. But, at the same time, major XOP @1330 has not been completed. It means that current retracement should be very small. I do not exclude situation that it is already done. As maximum, gold could drop to 1300 and re-test broken rectangle consolidation that we've traded last week:
    gold_d_05_02_19.

    4H chart shows that current level is very strong support - K-area and XOP Agreement + MPP. So it could be enough to hold retracement of bullish market.
    Still, if downside breakout will happen - we could get a kind of H&S action with 1300 target:
    gold_4h_05_02_19.

    Although on 4H chart XOP looks untouched, 1H chart shows that it is mostly completed, as "A" point should stand slightly lower, right at the point where downside action has started. Once XOP has been completed, W&R of previous lows has been done. This action looks bullish.
    Here we need to take a look at former neckline. If it will be broken up - it could mean that gold is going to 1330 target.
    gold_1h_05_02_19.

    Here is two way to act. First is - apply DiNapoli "Minesweeper" entry tactic and try to go long at some Fib supports of upside action with stops below 4H strong support area. Second way is do nothing and wait drop to 1300.
     
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  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings, guys

    So, yesterday we've talked that sooner rather than later but gold has to complete our major daily target at 1330 level. The question only stands around the term, when upside action will continue. There are two major thoughts on this sub - either right now, from current level, or, market will show a bit deeper retracement, and re-test previous consolidation around 1300 area:
    gold_d_06_02_19.

    Depending on trading style, there are few options of position taking. First one is using of DiNapoli minesweeper tactics - buying at 1H fib support area. Yesterday this entry was successful. Market moves a bit higher, but right now still can't break resistance line:
    gold_1h_06_02_19.

    At the same time on 4H chart we've got two bearish grabbers, that suggest drop back to the lows:
    gold_4h_06_02_19.

    It means that if you've taken long position yesterday - move stops to breakeven. Gold action could be either W&R of recent lows, final completion of XOP here, on 4H and reaching of strong K-support and MPP. Or, second way, is, as we've said above - deeper retracement to major 5/8 Fib support around 1295-1300 area.

    Thus, for those who doesn't have long positions - do nothing, wait for drop back to 1307-1308 and watch for bullish signs there. If you've got long position yesterday by Minesweeper - move stops to breakeven.
    No bullish signs around 1307-1308 will mean that deeper retracement should happen.
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    here is, guys, fast update on gold. As market has broken 4H major support level - K-area and MPP, we automatically turn to second scenario, which suggests retracement to 1195-1300 area and re-testing of broken consolidation:
    gold_d_07_02_19.

    On 4H chart, as we've discussed this, it could take the shape of "222" Buy pattern, onces OP target will be completed:
    gold_4h_07_02_19.
     
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  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    so, we've started this week with CAD analysis and lets finish it also with CAD. If you forget what we've talked about it weekend - just re-read first post.

    So, mostly CAD has completed our scenario and indeed has shown upside action that we've talked about. But this action was stronger that we've expected. It means that we have to postpone short entry and move it on higher levels. Indeed, action on daily chart was fast and exceeded harmonic swing, which means that CAD should proceed upward action. Very probable destination point seems 5/8 Fib level, and stop mostly is technical, due OB at major 3/8 Fib resistance:
    cad_d_08_02_19.

    The pattern that could lead CAD higher is reverse H&S on 4H time frame:
    cad_4h_08_02_19.

    Finally, upside action is a good thrust and could become the foundation for short-term DiNapoli trades, such as B&B or DRPO.

    That's being said, our major scenario with short entry is not cancelled but postponed on higher levels. Second - CAD provides a lot of patterns for scalp trading.
     
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