FOREX PRO WEEKLY #2, July 02-06, 2018

Fundamentals

In 2nd report let's update our long-term view on CAD. Canada has its own problems and driving factors - domestic economy performance and anticipation of rate change, crude oil prices and NAFTA long-term negotiations with US.

Last week CAD has shown solid performance on growing oil prices and surprise expansion of the domestic
economy in April raised expectations for a Bank of Canada interest rate hike next month.

"Good enough data, the bank should hike," said Greg Anderson, global head of foreign exchange strategy in New York at BMO Capital Markets.

As Reuters reports, chances of an interest rate hike at the central bank's July 11 announcement jumped to about 80 percent from 67 percent before the data for gross domestic product, the overnight index swaps market indicated.

Still, the loonie fell 1.8 percent for the second quarter, pressured by a trade dispute between Canada and the United States and slow-moving talks to revamp the North American Free Trade Agreement.

Speculators have raised bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of June 26, net short positions jumped to 32,799 contracts from 14,014 a week earlier.

Now it is a big question whether recent strength in CAD temporal or it could last for considerable period of time.

On crude oil, guys, market has completed our long-term AB=CD target but no reaction has followed yet. Common sense suggests that it should follow sooner rather than later. Now there is some room till the higher level of K-resistance area @ 82$, but recently the leader of Saudi Arabia promised President Donald Trump that he can raise oil production if needed and the country has 2 million barrels per day of spare capacity, the White House said on Saturday, rowing back on an earlier Trump tweet that appeared to suggest the Saudis had agreed to boost output by that amount.

At the same time, Saudi Arabia stands in center of Yemen conflict and also has some obligations with OPEC+ agreements. This makes its position fragile. Yemen previously already made few missile attacks on S. Arabia. If they will play in its own game - Yemen forces could be used to strike world's largest refinery oil plant there to control crude oil output. This is not published in newspapers, but this is part of the dirty undercover political game...


Technicals
Monthly

Technically CAD shows reaction on strong support area that has been hit recently. This is monthly K-area and Agreement. Last time, in May when CAD starts to show irrational price action from bearish point of view, we've changed our expectations and focused on upside continuation, which has happened.

In general, this price action is not very strong, doesn't show signs of thrust and mostly reminds retracement, which means that CAD could turn back to downside action inside consolidation in short-term perspective. Monthly trend stands bullish right now.

In longer-term view, this consolidation reminds flag pattern, which as a rule is continuation pattern. As it was formed after upside action, chances on upside breakout of the flag looks more probable.

That's being said, monthly chart isn't really important for coming week, because price stands inside consolidation and it is needed to take a look at smaller scale action.


Weekly

Once our 1.33+ target has been completed, as our May analysis has suggested action above 1.31 tops because of bullish grabbers and butterfly "Sell", now market has formed multiple bearish signs. First is our butterfly is completed and last week has become reversal one, as price has reached new weekly top but closed below the low of previous week.

Second is, and more important - whole construction, including our butterfly "Sell" on the top, takes the shape of large 3-Drive "Sell" pattern, which keeps its ratios very good. Take a look that "2" Drive accurately stands at 1.27 of the 1st, while 3rd on crossing of 1.618 of the "1" and 1.27 of the "2". This combination is perfect for 3-Drive pattern.

Minimum target of this pattern is bottom between "2" and "3" drives - i.e. 1.2526 area. It doesn't look absolutely impossible, as oil price could rise a bit more, to 82$ and BoC could increase rate again...


Daily

Despite that situation looks strongly bearish on weekly chart and we should get downside continuation within few weeks, on daily market stands oversold and it means that upside bounce in the beginning of the week could happen.
In fact, we have DiNapoli bullish "Stretch" pattern as price stands at combination of Fib support and daily Oversold. Also price will open right at July MPP.
It means that current level is not very attractive for taking short position and we need to get some upside bounce to step in:


Intraday

Here we do not have background for long entry - no bullish patterns have been formed, so intraday traders will have to wait a bit. The only thing that we have is completion of Double Top target. Upside retracement should be deep, because market stand in upside action within few months. So, WPP definitely should be reached but I will not be surprised if CAD will reach 1.3250-1.3280 area.

For short entry we should look for "222" Sell pattern as it is most common one in such situations.

Conclusion:

Within few weeks CAD could get relief on a background of positive fundamental data and crude oil prices. Longer-term perspective still remains bearish for now.

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.

 

Good morning,

Today it will be useful to take a look at gold market finally (while CAD stands with retracement that we've discussed in weekly report). Gold is coming to tricky area, guys. On new daily trading plan suggests reaching of 1210-1215 Agreement support, but right now market comes close to 1230 lows and completed Double Top target:


Gold is a kind of market that quite rare leaves important lows without attention. It lets us to suggest that 1230 should be washed out very soon. Besides, on 4-hour chart we have AB=CD pattern that has target around it, but larger AB-CD (dot line) has OP target below 1230 lows. It means that we could count on dramatic action around.


If you think about taking short position - don't hurry, wait for meaningful upside retracement. Gold could show W&R of 1230 lows and moderate retracement could start after that.
Scalp traders could watch for W&R of 1230 and bullish patterns as this combination could provide good chance for fast bullish trade.

 

Good morning,

Gold market starts preparation to the trap that we've discussed recently. Despite that we've got bullish engulfing here - today we could get bearish grabber which potentially suggests taking out of previous lows. This, in turn should push price lower and wash out recent lows and stops around them. Also we have B&B "Sell" Setup here, on daily. It means that retracement down should reach at least 1245 area.


On 4H chart some pattern probably should be formed. Usually this is butterfly "Buy". In general 1.27-1.618 extension of recent upside action is enough to complete both AB-CD targets here.


Market has broken hourly channel and formed upside reversal swing. It also suggests at least deep downside retracement, which corresponds with idea of daily B&B "Sell". Here gold should re-test broken channel border. This action could be triggered by small H&S pattern. At least it appears quite often in similar situations.


That's being said, it is too early to go long, even without daily grabber. If this one indeed will be confirmed today - we could count on completion of our cunning scenario here and drop to 1225 before any meaningful retracement will start.
Scalp traders could think about fast short trade due daily B&B "Sell".

 

Greetings everybody,

Let's proceed with our gold analysis. It seems that our trading plan starts to take shape. On daily we've got confirmed bearish grabber which suggests taking out of 1230 lows and this pattern is important for the whole short-term trading plan here:


On 4H we have AB=CD pattern that also has not been completed yet and most common pattern for such situations is butterfly "Buy" of course. It should let gold market as to complete AB=CD as to hit daily grabber's target:


Finally, on 1H market is started H&S pattern that we've discussed yesterday. Its target creates an Agreement with major 1246 5/8 Fib level. This is first destination that we will watch for till the end of the week.

 

Greetings everybody,

Let's update our GBP view today. Last week we've made a decision on long entry by daily 3-Drive "Buy" pattern. Situation was developing positive since then, and price indeed is coming to its minor target of 1.33 - top between 2nd and 3rd drives.
Still, NFP stands ahead and now we see some short-term bearish signs on intraday charts. Although they do not cancel 3-Drive but suggest possible deep retracement. That's why we call to manage existing long positions - tight stops or may be even take 50% profit:


Because on 4H chart we have the same as on EUR "222" Sell and hidden bearish divergence. Also here you could recognize reverse H&S shape which makes possible deep retracement for right arm forming:


as "222" AB=CD pattern has been completed - on hourly chart we also have H&S top that has two targets. First is OP around K-area while second is XOP around major 5/8 FIb support, which stands in harmonic releation to left arm. It is possible that NFP could trigger the drop and we think it makes sense to prepare: