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Forex FOREX PRO WEEKLY #2, May 20 - 24, 2019

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, May 19, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    As we've talked yesterday - today we decide to take a look at GBP. This is one of our major long-term setups. Situation on GBP has great importance to us, because it has long lasting driving factors and they mostly stand negative. Long-term factors provides long-term direction, which makes overall day by day trading more simple.

    Now there are two major concerns in EU - long-lasting Brexit saga and coming Parliament elections on next week. Yesterday turmoil is started already with a new scandal around Austrian vice-chancellor. I have a gut feeling that this is not occasional event, it was planned and launched right before elections and harm Austrian dominant role and political weight. I suspect that too warm relationship with Russia stands as one of the reasons of this scandal, which aimed on replacing of political elite in Austria.

    But somehow I'm sure that this is not the last surprise that get during this elections. Results are also could be surprising.

    Now we're more interested in second issue - Brexit and UK participation in EU elections.

    As Reuters reports - Britain’s tumultuous divorce from the European Union was again in disarray on Friday after the opposition Labour Party declared last-ditch talks dead due to Prime Minister Theresa May’s crumbling government.

    Nearly three years after the United Kingdom voted 52% to 48% in a referendum to leave the EU, it remains unclear how, when or even if it will leave the European club it joined in 1973. The current deadline to leave is Oct. 31.

    Brexit talks between May’s Conservative Party and Labour collapsed hours after May agreed on Thursday to set out in early June a timetable for her departure.

    Labour leader Jeremy Corbyn wrote to May on Friday informing her that the Brexit talks, which began on April 3, had “gone as far as they can” due to the instability of her government and its refusal to fundamentally shift its position.

    “We have been unable to bridge important policy gaps between us,” Corbyn, a socialist who voted against joining the predecessor of the EU in 1975, wrote to May.

    “Even more crucially, the increasing weakness and instability of your government means there cannot be confidence in securing whatever might be agreed between us,” Corbyn said.


    He said Labour would oppose May’s deal when it returns to parliament early next month. He later told reporters there was no chance of getting even part of a Brexit deal ratified by the end of July.

    The divorce deal, which May agreed last year with the EU, has been rejected three times by parliament. May will put the Withdrawal Agreement Bill, legislation required to enact the exit deal, to a vote in parliament in early June.

    A source in May’s office said the bill would contain new features to reflect some lawmakers’ concerns.

    Looking uncomfortable as she delivered a televised message to voters ahead of the European Parliament elections, May suggested Labour’s internal divisions over a second referendum were to blame for the failure of the talks.

    The pound sank to $1.275, its lowest level since mid-January.

    May’s hands have been tied, knowing that to make concessions to Labour would lead to fury in her divided party. Labour has feared any compromises on issues such as workers’ rights would be torn up by May’s successor.

    Britain’s labyrinthine crisis over Brexit has stunned allies and foes alike, and with deadlock in London, the world’s fifth largest economy faces an array of options including an exit with a deal to smooth the transition, a no-deal exit, an election or a second referendum.

    MAY ENDS IN JUNE
    The Brexit impasse is unlikely to be broken soon.

    After she puts her deal to a vote in the week of June 3, when U.S. President Donald Trump is due to make a state visit to Britain, May has said she will agree a timetable for the election of her successor.

    Before then, the government is considering holding a series of “indicative votes” to see what path, if any, lawmakers might be able to agree.

    “When we come to bring the legislation forward we will think carefully about ... the outcome of these talks, we will also consider whether we have some votes to see if the ideas that have come through command a majority in the House of Commons,” May said.

    Boris Johnson, the face of the campaign for Britain to leave the EU, said he would be standing as a candidate to replace May as Conservative leader and is the clear favourite among party members according to a poll published on Friday.

    “As we look to the future, we have to listen to the public,” Simon Clarke, a Conservative lawmaker, said on Twitter. “Boris Johnson is the only candidate who increases likelihood to vote Conservative among both our 2017 voters & people planning to vote (for the newly formed) Brexit Party.”

    The winner of a leadership contest will automatically become prime minister and will take control of the Brexit process, which has plunged Britain into its worst political crisis since World War Two.

    Johnson has been one of May’s most outspoken critics over Brexit and supports leaving the EU without a deal. Parliament has repeatedly said it does not want a no-deal Brexit.

    The Brexit crisis has left the United Kingdom divided and smaller parties - such as Nigel Farage’s Brexit Party and the pro-EU Liberal Democrats - are poaching support from both the Conservative and Labour parties at the fastest rate for decades.

    “Britain is divided down the middle over Brexit: it was in 2016 and it is in 2019 - and that is one of the reasons why this issue is so difficult to resolve,” John Curtice, Britain’s top polling expert, told Reuters.

    So, guys, the solution of this problem dawdles. And you don't need to be a prophet to understand that this makes strong negative impact on economy. Uncertainty now is worse than hard brexit. Because when Brexit is done, everybody understands the rule of new reality, while situation remains precarious - everybody waits, decrease activity and makes no steps. This makes slowdown effect on economy. This weak statistics confirms this.

    Fathom consulting also tells about weak economy sentiment in UK -

    Confidence about UK economic prospects remains subdued, with Fathom’s UK Economic Sentiment Indicator (ESI) unchanged at 0.2% in April. In common with many forecasters, Fathom correctly predicted a preliminary estimate of GDP growth in 2019 Q1 of 0.5%. It seems that preparations, by firms and households, for a potentially disorderly Brexit on 29 March boosted economic activity during the first quarter; with underlying economic growth at the start of this year close to 0.2%. In our judgement, the risk is that the actual data for Q2 will be correspondingly weak, as firms and households run down stocks built up in Q1.

    [​IMG]

    Low activity in UK finds the way into investors' position of GBP. Within last few weeks it stands mostly flat, and around zero area - neither bearish nor bullish:

    upload_2019-5-19_14-14-3.
    Source: cftc.gov
    Charting by Investing.com


    This deteriorating in economy we already see, while Brexit has not happened yet. Once it will happen, new reorganization of UK economy starts and hardly it becomes positive in a blink of an eye.

    On technical side we also have vital moments for GBP perspective.

    Technicals
    Monthly


    On monthly chart trend has turned bearish, price has dropped below YPP, confirming long-term bearish sentiment. Bearish grabber that has been formed in the beginning of the year is still valid and suggests drop below 1.24 area.

    On monthly chart we need to follow the sequence of the swing to understand where we're now. Action down to 1.21 was the CD leg of our major all-time pattern. Once COP extension has been hit, market turned to reasonable retracement and completed harmonic swing. We see that upside harmonic swing to 1.46 area is slower than downside drop.

    Now market is going down again. It could mean that CD leg continues and in long-term perspective, OP target could be completed. But this is too long-term perspective for us. We need something closer to use it as real target in day-by-day trading.

    Also I wouldn't talk on AB=CD upside action after major COP. COP is minor target and it is quite rare leads to deep retracement in shape of 2 legs.

    Overall price action shape lets us to suggest appearing of butterfly pattern, with first target around 1.1335. Another target is YPS1 that stands at 1.2440.
    gbp_m_20_05_19.
    Weekly

    Weekly trend stands bearish as well, oversold level is around 1.24 area, which agrees with YPS1 on monthly chart.

    Here we also have our major weekly target - COP around 1.2170 area, but, definitely this point is not of nearest perspective.

    Most valuable moment for us here, guys, is a failure of reverse H&S pattern. You probably do not remember this, but we've talked on this subject in our previous report, dedicated to GBP in the beginning of the May. Here is what we've said:
    "overall price action reminds reverse H&S pattern and what has happened with it? Right, it has failed to break the neckline. Besides, last upside effort mostly was erased by the drop. Weekly trend stands bearish. As we mentioned last week, to get official confirmation of H&S failure - we need price drop below shoulders - 1.2650-1.2750 area."

    Now - bingo, this has happened, it means that H&S is on the way of failure right to collapse, as price should drop below the head, which agrees with all our target.

    gbp_w_20_05_19.

    Daily

    On daily chart we have clear AB-CD pattern with signs of downside acceleration. This week market has broken major 5/8 support and important low - the right arm bottom of reverse H&S pattern. Nearest target stands at OP - 1.2660. Price is also near daily oversold. Next target is XOP at 1.2340.

    This combination suggests that it is no big sense with position taking until OP target will be hit, as it is too small distance and chances on following pullback is significant. Thus, here our trading plan suggests waiting when OP will be hit, and then watch for pullback.

    Combination of OP target, daily oversold and perfect downside thrust creates good background for B&B "Sell" pattern that we could use for taking short position. XOP target here probably should be treated in the link with 1.2440 YPS1 area as 100 pips difference is not big distance for monthly chart.
    gbp_d_20_05_19.

    Intraday

    On 4H chart we have nothing to add to our daily setup, as downside action stands strong and straightforward. The H&S pattern here is almost completed as price stands few pips from XOP target. Here we have another, minor thrust down, which is actually, the part of daily thrust. But it could be used for the DiNapoli patterns of smaller scale by intraday traders, as B&B or DRPO could be formed here as well.

    Speaking on our major daily setup, once daily OP will be hit - we will keep an eye on K-resistance. Now it stands around 1.29, but if OP will be hit, it should slide a bit lower to 1.2840 area. This is the point where potentially B&B "Sell" could start if our plan is correct.

    gbp_4h_20_05_19.

    Conclusion:
    Analysis of fundamental factors this week confirms existing of bearish sentiment and we keep our long-term bearish view on GBP.

    In short-term perspective, our trading plan suggests reaching of 1.2660 daily target then upside bounce to 1.2840 area which potentially should be suitable for short entry as daily B&B "Sell" could start from there.


    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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    Greetings everybody,

    Let's take a look at gold market today. On daily chart we do not have any drastic changes - our primary target is 1255 support area, where 3-Drive Buy pattern should start to work. Thus, we do not have any intention to trade gold long until this level.
    gold_d_21_05_19.

    On 4H chart we have some smaller AB-CD's and OP targets around the same level. It is possible that gold will form butterfly as final effort of downside action:
    gold_4h_21_05_19.

    On 1H chart we could keep an eye on possible upside bounce, as minor reverse H&S pattern is forming although I have real doubts that it will be completed. Anyway, if miracle still will happen - we have two Agreements of 1279 and 1283 levels. Potentially they are suitable for short entry with 1256 target.
    gold_1h_21_05_19.

    Thus, our trading plan suggests short trading on retracements until market is above 1256 target. Taking long position at major 1255 support area.
     
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  3. Stag

    Stag Sergeant

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    Greetings guys, a short update again. We have the early signs of a potential reversal from current levels.

    Keep in mind that ending diagonals are terminal movements, a C wave in this case, and they are often abruptly reversed and quickly retraced (see the expanding wedge shaped decline in five waves). This scenario suggests the Euro will stage a rally attempt starting from not much below current levels.

    Looking for evidence a bottom has been established we need to see prices up in five waves from the 1.1144 low. Printing above 1.1174 will offer an indication that a pink (b) wave low has been registered and the early stages of pink wave (c) rally may be under way.

    Note that this call is still considerd to be part of a still unfolding bearish case as long as prices remain under our critical key level at 1.1324. For any bullish reversal prices need to break above that key level.

    Good luck for all.

    EU_190521.
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Today we take a look at GBP, as on gold market situation mostly is the same as yesterday.

    GBP now completes the first stage of our trading plan, reaching daily OP. This is not too strong level and we still keep long-term bearish view on cable, but, some upside reaction on target is possible.
    Taking in consideration nice thrust down - we keep an eye on possible B&B "Sell" pattern, which we intend to use for longer-term trading, but not just till B&B target:
    gbp_d_22_05_19.

    On 4H chart GBP hits another target - XOP of initial AB-CD pattern:
    gbp_4h_22_05_19.

    Targets are finalized by butterfly "Buy" pattern. We do not call for taking any long positions in current situation, as it is rather risky as our major context is bearish. But this is not forbidden and choice is up to you.

    According to our trading plan - we treat possible retracement just as good chance to go short, but not trade upside action itself:
    gbp_1h_22_05_19.
     
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  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,
    Today again - fast update on GBP. Gold market stands flat, so our scenario is the same. On GBP is a bit confusing situation as we do not have meaningful reaction on daily OP, and it seems unclear what to do - either to wait for reaction, or maybe its time to go short...

    First is today we should get information on T. May retirement, so she should leave the PM chair. This is most important driving factor of this week.

    On daily chart indeed, we do not see yet the reaction on OP:
    gbp_d_23_05_19.

    But, we have 3-Drive "Buy" on 1H chart, and this is the key to situation. Breaking through 1.26 and downside continuation means that no upside reaction will be, and we're going to XOP @ 1.2340. If 3-Drive will work - we should get upside retracement, but now it is difficult to suggest, its target. So, keep your eyes wide opened, do not hurry with position taking... We should get an anwer soon.
    gbp_1h_23_05_19.
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Today we take a look at gold market. On GBP - our 3-Drive setup has worked perfect, although initially it looked doubt. So, some reaction probably will happen, on our daily OP target.

    On Gold - it has shown sharp upside reversal as well as other markets. But, it is not sufficient yet to break bearish tendency that we have on daily chart. Actually price has to move above recent top to do it. Thus, although overall upside momentum was strong and we should stay aside from any short position by far - it doesn't mean that market stands in bullish trend again:
    gold_d_24_05_19.

    On 4H chart our context with AB-CD pattern and 1255 OP target is still valid, as well, as butterfly that should finalize this action. As you can see, it is a lot of freedom in a shape of right wing of the pattern. It could start right from here, or, even from 1300 area - and this still will be the butterfly. That's why, bearish scenario has some margin of safety.
    gold_4h_24_05_19.

    Still, as reversal was sharp indeed, upside action could continue after retracement. Here gold has completed XOP target and creates Agreement resistance with Fib level. Also we have "222" Sell pattern, which suggests retracement, at least to 1280 area. As soon as it will be done - upside action has good chances to continue. It means that bulls could watch for "222" Buy or any other upside continuation patterns, while bears should sit on the hands by far. Current upside action could become an AB leg of larger AB=CD pattern. In this case, the top of butterfly's wing will be arond 1299-1300 area.
    gold_1h_24_05_19.
     
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