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Forex FOREX PRO WEEKLY, April 01 - 05, 2019

Discussion in 'Sive Morten- Currencies, Gold, Bitcoin Daily Video' started by Sive Morten, Mar 30, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    This week we do not have any surprises in market action as on Gold market as on EUR. Targets for the week were hit accurately. Next week market comes to some important events and data. Thus, ECB minutes will be published, multiple PMI and ISM indicators of EU and GB - they will be in focus, because they should express business attitude and post-Brexit expectations. Now GB is coming to hard Brexit next month.
    Finally, in US we also will get Retail Sale release. This is very important data, because it has significant correlation with GDP and widely used for regression analysis to predict GDP numbers. Since it stands for March - this is last number in the chain of numbers for three quarters which lets finalize GDP prediction. Volatility should increase in April.

    Now we see realization of our long-term view on EUR/USD. Even last year we'v prepared detailed analysis where we come to conclusion that EU and ECB has no real tools or ability to strengthen. As financially as politically EU stands depended on US. Besides, ECB has no tool to make impact on economy growth and gradually comes to Bank of Japan situation when rates stand at zero and recession lasts for decades, QE programme is over, economy shows poor growth and it is unclear what to do next. FED, at least has some room for rate maneuver and stronger impact on economy of other countries across the Globe due dollar domination and role of world's largest consumer. So, Washington could finance US economy problems by resources of other countries and this puts them in advantage position, compares to EU.

    As Reuters reports - The euro on Friday was headed for its worst month since October, weighed down by fears about economic growth and cautious signals from the European Central Bank.

    Policymakers cut growth forecasts for the euro zone economy earlier this month and launched a new round of cheap loans to its banks.

    Weaker-than-expected economic surveys from Germany and dovish signals from the ECB have pushed hedge funds to reduce their long euro positions.

    The single currency has also been weighed down by speculation the ECB will introduce a tiered deposit rate, providing a sign that policymakers plan to keep interest rates low for longer.

    “Eurozone growth forecasts for 2020 growth have fallen from 1.8 to 1.4 percent and that is consistent with a weaker euro and lower bond yields,” said Societe Generale strategist Kit Juckes.

    The dollar, meanwhile was poised on Friday for its strongest gain in five months as investors responded positively to a bounce in U.S. Treasury yields.

    With many currencies on the defensive, the dollar has weathered a decline in benchmark Treasury yields to a 15-month low. Against a basket of key rival currencies, the U.S. currency was a shade higher at 97.217.

    The dollar held strong even as data overnight showed the U.S. economy slowed more than initially thought in the fourth quarter of last year.

    U.S. consumer spending barely rose in January and income increased modestly in February. The report from the Commerce Department also showed price pressures muted in January, with a measure of overall inflation posting its smallest annual increase in nearly 2-1/2 years. Consumer spending accounts for more than two-thirds of American economic activity.

    With growth slower and inflation benign, Friday’s data bolstered the Fed’s case for ending its three-year monetary tightening campaign.

    “It was a soft number,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets, referring the PCE inflation measure. “It is a relief that there’s no reason for the Fed to have to raise rates.”

    Concerning Brexit, situation stands tricky. Pond sterling slides after parliament for the third time rejected Prime Minister Theresa May’s proposed deal to pull Britain out of the European Union.

    With May losing again - albeit by a smaller margin than the previous two votes - sterling is set to remain under pressure on fears no Brexit deal will be reached before the April 12 deadline.

    Moves in the pound were less dramatic on Friday than those following May’s previous parliamentary defeats. Trading of the pound has been scaled back because it has become so difficult to predict amid the constant and sometimes arcane political developments, traders said.

    The currency remained well above lows hit in December, in part because “markets have begun to price in a long delay and that’s risk and sterling positive,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

    Although it does not appear that May has the votes to pass her twice-defeated Brexit deal, markets have begun to price in a long delay in the proceedings, Anderson said, which is boosting both sterling and risk assets.

    So, it seems that Europe indeed comes to hard Brexit scenario and we suggest that coming next week multiple sentiment EU and UK data, as well as PMI numbers should play significant role in price action of next week. Taking in consideration the way where all this stuff follows, worse numbers have more chances to happen.

    COT Report

    Recent data shows minor increase of net short speculative positions on EUR and total position stands far from record lows. This keeps moderately bearish sentiment on EUR. Weaker-than-expected economic surveys from Germany and dovish signals from the ECB have pushed hedge funds to reduce their long euro positions. The euro was a tad higher at $1.123 but remained down about 1.2 percent for the month.

    upload_2019-3-30_12-41-22.
    Source: cftc.gov
    Charting by Inesting.com

    On US 10-year notes, price has formed butterfly "Buy" on weekly chart around major K-support area. Taking in consideration important data next week - rate could show upside bounce, may be due better numbers. At least technical picture suggests this. This could make additional pressure on EUR.
    upload_2019-3-30_12-51-26.

    Finally, as we've mentioned US interest rates, here is brief add-on from Fathom consulting, concerning liquidity:
    Our headline Fathom Liquidity measure (FLiq), has seen a significant rebound this year courtesy of sharp u-turns on rate hikes from both Fed Chairman Powell and ECB President Draghi. This has provided a much-needed boost to markets after the heavy 2018 Q4 sell-off. However, we note that market liquidity has recovered only to broadly neutral levels since the end of January 2019. More importantly, the fixed income sub-component to the FLiq continues to signal challenging levels of liquidity in this market segment. We believe market liquidity, particularly in fixed income, needs to improve from current levels if the euphoric market sentiment is to persist.
    [​IMG]

    Following the idea of Fathom consulting, to keep liquidity on necessary levels, Fed Reserve has to change its offloading balance schedule. Selling (previously bought from the market on QE programme) US Treasuries, Fed dries liquidity and, in fact, makes the same effect as rate hike but slower and smoother. Although recent yield drop makes situation tricky. Stopping bond selling supports demand and more rate drop, while keep selling dries liquidity.

    That's being said, taking it all together, guys, we suggest next week performance in favor of USD by indirect factors that we've just discussed.

    Technicals
    Monthly


    While market still stands above 1.1175 lows - it makes no impact on monthly picture. But, taking in consideration recent tendency, it seems that situation is coming closer to resolving.

    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. 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.

    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_01_04_19.

    Weekly

    This time frame provides minimum information to us and in fact is least informative as shows no significant patterns or performance. Trend has turned bearish again here and our suggestion last week, concerning some drop due shooting star pattern was correct.

    Following the tendency, market theoretically should create new lows here, as price stands in consolidation, and every time when downside action starts - it forms new lows. Closing near the lows this week also supports this idea.
    eur_w_01_04_19.

    Some assistance we also could get from dollar index weekly chart. Take a look that here we have clear sign of bullish dynamic pressure - MACD trend stands bearish, but price forms higher lows, forming hidden bullish divergence. Existence of COP just above the market also supports idea of upside breakout.
    #US$indx_M9Weekly.

    Daily

    Friday performance was shy and brings no clarity to our major question - whether EUR holds above 1.12 or not. Right now price still stands around the area of our targets for the week - 1.1210 area. It is actually nothing to talk about here. Trend stands bearish, but we do not have any patterns or trading setup here, price is not at oversold, it has chances to go lower.

    Recent price action since Dec 2018 reminds action on EUR monthly chart in 2008-2012 - the same whipsaw action with deep upside retracements and sharp sell-off. This is the war of attrition - once we will see weaker swing up or down and it shows who is lost. In 2012 we see very weak and slow upside swing on monthly chart before collapse. Here could be the same story.
    eur_d_01_04_19.

    Intraday

    On Friday market has shown lazy action. In fact here we do not see any upside reaction, just some sideways motion. It is obviously that XOP and 88% Fib level provides some support, but it seems that it is not too strong. In the light of our discussion this should not be surprise for us. In current circumstance it would be nice if upward bounce to 1.1280-1.13 area will happen...
    eur_4h_01_04_19.

    Here, on hourly chart market tries to form reversal H&S shape pattern. As major XOP and support area already have been tested, recent low should be good indicator. If market drops below it and reversal pattern fails, downside action should continue and EUR will challenge daily lows. To be honest guys, taking in consideration market sentiment it is difficult to expect rally this week.
    eur_1h_01_04_19.

    Conclusion:
    Coming week should bring significant volatility because it will be first month of publication data on EU and UK sentiment on a background of more clarity on Brexit issue. Overall sentiment and fundamental background stands negative and it seems that chances on downside continuation are better on coming week.

    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. FreddyFX

    FreddyFX Sergeant

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    To me it is not clear why they do not get it over with on this BREXIT soap opera. Nobody can develop any business and trading plans because of this uncertainty.
     
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  3. Joh

    Joh Sergeant Major

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    Thank you Sive as i have often said for your lovely clear reports. Have missed you, was unable to log on for over a week. Today they accepted me again?
     
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Joh, this was probably DDos protection software here, on the site. Sometimes I also can't login. Last year it happened often.
    If you can't log in, mail to support
     
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  5. Joh

    Joh Sergeant Major

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    Thank you, Tried, but could not even access that, also wrote an email it was returned.
    But cleaning my browser worked this far :)
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    Today will be not ordinary report on EUR, because we have lack of technical tools and have to use something else to make a suggestion on future action. Briefly we've mentioned these tools in weekly report.

    From the technical point of view, EUR looks bearish, because current price action is irrational for bullish market. After bullish reversal swing market shows too deep action, erasing all Fib support levels and dropping back to the lows. In fact, it erases upside action totally.

    Today-tomorrow we get multiple PMI data - on UK, EU, France, Germany and US ADP report and PMI as well. EU/UK data will be very important. As Hard Brexit comes closer to reality, PMI data could be really weak.
    Second two moments - recall US 10-year rate chart, it has formed bullish butterfly weekly at K-support. this weak rates turn north, providing support to US dollar. Indirectly this technical picture hints on good US data this week that we have a lot - Retail Sales Durable Orders, ADP and NFP release on Friday.
    Dollar Index shows bullish dynamic pressure on weekly chart.

    Taking it all together, plus abscence of any bullish patterns on EUR forms the picture of probable downside breakout. We change our view if we get real signs of bullish reversal and rally. But for now - we think it is not good moment for buying EUR.
    eur_d_02_04_19.

    On 4H chart we have anemic reaction on XOP. Market drops lower and stands below it. THis is not W&R. And XOP + 88% Fib support, potential Bat pattern reversal point is crucial area for the bulls on daily chart:
    eur_4h_02_04_19.

    On 1H chart, our H&S-kind setup surprisingly has worked well. But here we were right again - it has hit just minimal AB-CD target, tested WPP and dropped.
    eur_1h_02_04_19.

    How we could trade EUR right now? Well, the major driving factor this week will be stastistics. When market stands near important lows and shows signs of weakness - one way among the others is using of stop entry orders. For example, it is possible to place stop "sell" slightly above the daily lows, as yesterday we do on Bitcoin in opposite direction. Of course this is not unique way to act, just one of the possible.
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    EUR shows anemic action as Brexit journey turns to soap opera. Everybody already are tired from this long lasting action.

    So, while London and Brussels decide we take a look at some tactical setups that could be realized till the end of the week. At least, we have important data that will be released - multiple PMI's in UK and EU, ADP today and NFP on Friday. Chances that we get volatility are not bad.

    On daily market is coiling around the same area, not touching the levels around 1.1180 where we could place stop entry order for downside breakout. We still keep this potential setup on the table.

    Another one that we also could keep an eye on is based on recent thrust down. It has 8 bars, and suitable for DiNapoli patterns. Thus, if market will climb to 1.1284 we could get B&B "Sell" setup, or, DRPO pattern could provide setup to buy. Personally, I prefer B&B as is better suits to overall fundamental background.
    eur_d_03_04_19.

    On 4H chart market hints on possible reverse H&S pattern. It could start upside action on intraday chart. This is setup for those who wants to buy and scalptraders, but it stands beyond the scope of our daily setup. Potential H&S target coincides with daily 3/8 Fib level:
    eur_4h_03_04_19.

    On 1H chart we do not see something special, EUR has broken channel up, around 1.1280 stands solid resistance cluster...
    eur_1h_03_04_19.

    That's being said, we're watching for daily setup, based on the thrust, but also keep valid scenario with downside breakout, if 4H H&S pattern fails.
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    So we keep watching for two patterns - B&B "Sell" on daily (or DRPO "Buy" that is also possible) and 4H reverse H&S pattern that should trigger upside action.

    On daily chart there are no big changes since yesterday. EUR shows first close above 3x3 DMA and now stands above it. Overall sentiment and fundamental context suggests that appearing of B&B looks more logical but, we do not exclude DRPO as well as important statistics stands ahead:
    eur_d_04_04_19.

    On 4H chart market successfully completes the head part of H&S pattern. And now we're watching for final stage of it - forming of right arm around 1.1210 area. So, this is the decision moment for traders who indends trade this pattern. Target should be around 1.1280 - H&S AB=CD.
    eur_4h_04_04_19.
     
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  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    Everything stands according to our plan. Today probably we do not need daily chart, since we have minimal changes there. Once market will be close to B&B setup we take it in consideration again.

    Meantime, our H&S on 4H chart has started well. Now upside action stands a bit slow, but NFP is ahead and situation could change. If you have long position right now - it is time to think about breakeven stop loss order:
    eur_4h_05_04_19.

    There are two potential targets of H&S - OP at 1.1275 and XOP at 1.1318. OP is more realistic and we could think about XOP only if upside action to 1.1280 will be streight and furious. Any gradual action suggests strong resistance around 1.1275-1.1285 area and possible start of daily B&B.

    On 1H chart we see K-resistance area . 1.1284 is also a monthly Pivot:
    eur_1h_05_04_19.
     
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