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FOREX PRO WEEKLY #2, June 25-29, 2018

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Jun 24, 2018.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    Today we update our view of GBP. Speaking on gold market that we usually take a look at with our 2nd weekend report - it has hit our long-term 1262 target last week. Now we need to see reaction on major weekly support. Gold stands in downtrend now, SPDR fund storages drops as well and now stand for 824 tonnes. This 12 tonnes lower compares to beginning of the month. Investors have careful look at gold perspectives:

    "Gold has rebounded a little bit from the lower side due to the weakness in the dollar, said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. The trade war is affecting gold for the time-being. Unless the dollar weakens, do not expect gold to move too high, Leung added.

    In Great Britain situation also stands not too optimistic. Market has got a relief last week after a Bank of England meeting revived expectations of a rate hike this year, but fears of a breakdown in Brexit talks next week limited sterling’s gains.

    Major driving factors for GBP stands the same - weak national economy fundamentals and Brexit problems. We've talked about them in details in our previous reports. And they are still stand as major factors. That's why our long-term view on GBP remains bearish. But in short-term perspective, pound sterling could follow common tendency and show some relief.

    Sterling rallied on Thursday, though, when the Bank of England’s chief economist unexpectedly voted for an interest rate hike.

    The central bank kept interest rates on hold but the decision by Andy Haldane to join two other policymakers in calling for rates to rise to 0.75 percent lifted the pound off a seven-month low as expectations grew that the BoE could tighten policy in August.

    Reuters give following update on current situation in economy and Brexit negotiations:

    Markets now see a nearly 50 percent likelihood of the BoE raising interest rates in August by 25 basis points and a 90 percent chance of a rate hike happening by the end of 2018.

    “The BoE may prefer to act sooner rather than later given Brexit uncertainties may intensify later this year and make a November rate hike difficult,” analysts at MUFG said.

    Nine months before Britain’s exit from the EU, the country seems to be trapped in a period of relatively low growth. In the first quarter of 2018, the economy grew by just 0.1 percent, the slowest rate since 2012.

    Some market observers say the pound could rise in the coming weeks if economic data suggests any turnaround in the economy because it would help cement expectations of a rate hike.

    But an EU summit on June 28-29 at which Britain is hoping to make progress in securing a favourable Brexit deal with the EU could hurt sterling, strategists say.

    Prime Minister Theresa May is struggling to find a proposal on post-Brexit customs arrangements - the biggest stumbling block so far in exit talks - to take into negotiations with Brussels.


    “For now I would focus more on the EU summit than the Bank of England’s August meeting. I expect the summit to be harsh on Britain and for GBP to fall next week as a result,” said ACLS analyst Marshall Gittler.

    COT Report

    In general, Speculators turned bullish on the dollar for the first time since July last year, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday, as sentiment improved after the Federal Reserve forecast two more interest rate hikes this year.

    The value of the net long dollar position was $8.64 billion in the week ended June 19, shifting from a net short of $7.42 billion the previous week. This week’s net long dollar position was the largest since May 16 last year. Yesterday, by the way we've talk on big contraction of EUR long positions...

    “This is capitulation of the dollar shorts that were in position at the beginning of the year,” said Karl Schamotta, director of global product and market strategy, at Cambridge Global Payments in Toronto.
    “Monetary tightening is continuing at pace in the United States while there has been a moderation in terms of expectations around the ECB (European Central Bank) and other major central banks,” he added.


    On GBP we see the same tendency - position aggressively has turned net short last week with significant drop in long speculative positions:

    upload_2018-6-24_15-25-4.

    upload_2018-6-24_15-26-40.

    This data tells that GBP has clear bearish sentiment.

    Technicals
    Monthly


    Long term charts mostly stand in relation to fundamental processes rather some technical short-term issues. From this point of view GBP action on monthly chart absolutely corresponds to our view on UK economy and its perspectives. Right now we will focus only on nearest target of 1.30, but we remind you our long tong all-time AB=CD OP target around 0.95. Recent bottom of 1.22 is, actually, COP target.

    It is difficult to talk definitely guys, but in my opinion most undervalued factor for UK is flaw in its relation with EU as economical as political. EU is turning East right now to huge new markets and economical possibilities - Iran, Middle East, Asia and Russia, of course. This is alternative to UK market, especially when UK turns up its nose at EU. At the same time, UK is an island, it strongly depends on its closest neighbor - EU. Not only in terms of mutual trading, but also in terms of goods logistic. If this flaw will start to wide - 0.95 of GBP/USD could become a reality.

    Speaking on technical issues, our suggestion that GBP hardly will break through 1.40 area was correct. This was strong resistance, top of harmonic swing and at 1.40 long positions were highly saturated.

    Cable has failed to break through Yearly Pivot resistance 1. This fact tells, that current upside action is just a retracement within long-term bear trend.

    Picture that we see right now corresponds to EUR monthly chart. June month also stands as inside one and takes the shape of high wave pattern very close to YPP. As last week lows was at 1.31, we probably could say that our 1.28-1.30 target has been reached. Next month will be interesting because price will flirt with MACDP line.

    gbp_m_25_06_18.

    Weekly

    On weekly chart, after major K-support was broken, price has reached minor support area of 5/8 Fib level and MPS1. GBP has tested MPP in the beginning of the month but failed to pass through it. Here we mostly watch for the same pattern as on EUR - potential H&S.

    GBP has stopped here mostly due completion of our Double Top target but not due minor support. If upward bounce will happen - it could reach 1.36 area to keep harmonic the shape of H&S pattern.

    Whether this bounce up will happen or not we should understand by patterns on daily chart and how price will respect it. Since weekly support is not a kind of strong one, and price is not at Oversold, the background of possible rally doesn't look undoubtful.
    gbp_w_25_06_18.

    Daily

    On Friday we already have mentioned that cable pips to pips has completed our Double Top target. Above we've mentioned patterns on daily chart, that we should keep an eye on and which should clarify further price behavior. At first glance we could get small reverse H&S pattern right at weekly support and Double Top target. It looks obvious. But, to be honest, guys, I suspect another dive before upward action could start.

    There are two reasons for that. First is, upward action that we see right now is too slow. It doesn't look like reversal and sentiment shift. Besides, bearish grabber has been formed here - the same as on EUR.
    Second - major lows support stands slightly lower, around 1.30-1.3050 and there is YPP !!! which has not been tested yet this year. Market will gravitate to it. These reasons make me think that another drop is possible before upward action could happen.
    gbp_d_25_06_18.

    That's why I would suspect that another pattern has more chances to appear here...

    Intraday

    This is 3-Drive "Buy".
    gbp_4h_25_06_18.

    To get an early sign whether we correct or not with our 3-Drive suggestion - keep an eye on hourly chart. Shape of "2nd" drive is a H&S pattern. Once it will fail - this will confirm drop to 1.3050 area. If it will start to work and GBP will move above top of second drive - it will be the point in favor daily reverse H&S and tell that 3-Drive probably will not happen.

    Market should show retracement to 1.32 area to form right arm, but drop below this level will confirm our idea of 3-Drive pattern:
    gbp_1h_25_06_18.

    Conclusion:

    GB now is involving in multiple processes as political as economical. Financially, UK economy now stands in a difficult period. This gives a lot of uncertainty even in nearest future, including BoE policy. Currently we have bearish view on GBP and despite possible upside relief within few weeks - we suggest that cable will become weaker within longer period.

    In short-term perspective, our trading range stands between 1.30-1.36 area. This is the range of weekly H&S pattern. On coming week we mostly will deal with first stage of this process - initial moment of upward reversal.


    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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    Morning guys,

    Let's finally take a look at gold, it really needs adjusting of a trading plan. As you can see our XOP target of 1262 has been hit last week. Now the scale of AB-CD pattern has exhausted and we need to switch to larger scale to get next target.
    Now we will use this larger AB-CD and it shows that next objective point for gold stands at 1210-1215 Agreement area:
    gold_d_26_06_18.

    Overall fudamental and technical background for gold market stands bearish. We've explained it many times in our weekly reports. On 4H chart price action takes the shape of wide channel. To go short we need to wait for clear bearish pattern and most probable it will be "222" Sell" that should start somewhere around 1280-1283 area. Gold should turn up somewhere from 1250-1255, at least following the borders of this channel.
    gold_4h_26_06_18.

    This upward action could be triggered by butterfly pattern that is forming on hourly chart. Here we have to warn you that dealing with bullish patterns in current environment could be unsafe, and we think that it is better to wait for clear bearish patterns. But, if you have confidence and experience - nothing is forbidden, of course...
    gold_1h_26_06_18.
     
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  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Today we're back to GBP. As we've said in weekly resport, GBP shows similar price action to EUR, but not equal. There are some differences exist still. For instance, take a look at daily chart - while on EUR grabber has been erased, here, on GBP it is still valid. In weekend we've made a proposition that 3-Drive Buy pattern could be formed and upside reversal could start somewhere around 1.3040 area with destination to 1.37-1.38:
    gbp_d_27_06_18.

    To understand whether our suggestion is correct or not, we've agreed to keep an eye on hourly H&S pattern. If H&S will work as it should - it could mean that no 3-Drive will be formed, but if it will fail - 3-Drive scenario will get advantage.
    Now GBP has completed first stage of our trading plan - AB=CD retracement and forming of the right arm's bottom is completed precisely at the level that we've specified. Now we need to keep an eye on response:
    gbp_1h_27_06_18.

    If, indeed upside action will start, then daily reversal will be based not on a 3-Drive, but on larger 1.27 reverse H&S that you could recognize on 4H:
    gbp_4h_27_06_18.
    A the same time, taking in consideration EUR action, it seems that 3-Drive still has more chances to appear...
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    So, gold is still falling, let's finish our GBP topic. It seems that our suggestion was correct, and, indeed, 3-Drive "Buy" stands on the table. Price right now stands very close to its final point - 1.3040 area, where theoretically something should happen. If upside reversal will start - it should start from there. Otherwise collapse probably will be miserable. Daily grabber has been completed as price has dropped below recent lows:
    gbp_d_28_06_18.

    On 4-hour chart we could talk only on B&B "Sell" may be, if it will be formed at all. Because thrust down is good and it could become a background of DiNapoli directional pattern:
    gbp_4h_28_06_18.

    1H shows that drop has started precisely as GBP has failed to turn up due our "222" Buy and at the bottom of right arm. Here we also have another example - how it is important to have clear pattern and support, when you intend to make a trade. Despite that bullish scenario has failed- market still has shown minor response to pattern and support area, which was enough to tight stops to breakeven.

    gbp_1h_28_06_18.
     
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    GBP has reached mostly the point where, at least theoretically, upside reversal could start. On daily we have bullish reversal pattern as a background - 3-Drive "Buy"
    gbp_d_29_06_18.

    Today we could keep an eye on 4H chart, because here it seems either DRPO Buy or B&B "sell" pattern will be formed. DRPO is more logical since we're looking for bullish reversal and DRPO more corresponds to this task:
    gbp_4h_29_06_18.

    Today, as on EUR, we could focus only on some minor intraday patterns, until major direction on daily chart will chosen. For example, on hourly chart we have "222" Sell, which could form downside leg of 4H DRPO pattern...
    The same setups you can find on other majors, for example daily AUD or 4H NZD:
    gbp_1h_29_06_18.
     

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