FOREX PRO WEEKLY April 27-01, 2015

[Sive Morten]

Fundamentals
Data showing a seventh straight monthly decline in U.S. business spending plans knocked the dollar lower on Friday and gave Federal Reserve policymakers even less reason to raise near-zero interest rates any time soon.

The euro backed away from a two-week high against the dollar after euro zone finance ministers told Greece it will get no more aid until it strikes a full economic reform plan.

U.S. non-defense capital goods orders excluding aircraft, a proxy for business spending activity, declined 0.5 percent last month after a revised 2.2 percent drop in February, the U.S. Commerce Department said. Economists had forecast core capital goods orders gaining 0.3 percent in March, according to a Reuters poll.

Friday's durable goods report followed lukewarm data on U.S. retail sales, employment and housing starts, which suggest soggy growth that could cause Fed policymakers to delay raising rates for the first time in nearly a decade until later this year.

"This puts more concern on the performance of the U.S. economy and adds to the pressure the dollar has experienced over the last month," said Sireen Haraji, currency strategist at Mizuho in New York. "Markets are concerned that this might postpone the Fed normalizing policy."

Yields on U.S. Treasury debt rose after the durable goods report.

Against the yen, the dollar was off 0.60 percent at 118.87 yen .

Sterling was up 0.75 percent to $1.5172 after touching a five-week high against the dollar, despite assumptions that uncertainty ahead of next month's UK general election is a mounting risk for the pound.

The euro was last up 0.40 percent against the dollar at $1.0866, after touching a two-week high of $1.09, as lingering hopes that cash-strapped Greece was making progress toward securing fresh funding were dashed.

Jeroen Dijsselbloem, chairman of the euro zone finance ministers, said Greece still needs to deliver a list of reforms to receive funding, adding Athens needs to work faster and euro zone ministers will take stock of progress at the next meeting on May 11 in Brussels.

Similarly, EU Economics Commissioner Pierre Moscovici said that despite some progress in talks with Athens, a deal was still far off.

As we’ve talked a lot about EUR last week, today we will take a look at GBP again. On previous weekly research we’ve said that in short-term perspective GBP could show opposite action and move not in normal relation with other European currencies. Now we see this. First stage of our trading plan has been completed – GBP has reached solid weekly resistance area around 1.5150. Currently is really hot period in UK, since it is just couple of weeks till voting day.
CFTC recent data right now clearer and clearer shows the tendency. Open interest is contracting with simultaneous flat speculative long position and contracting short one. It gives us very important information. First is, it confirms that current upside action is just a retracement, but not new trend yet. And this upside action is driven mostly by closing of the shorts but not new inflows from investors. Here we could meet the same situation as on gold last month. Recall that jump from the moment of superb last NFP data was driven by closing of shorts. But right now – when no more shorts rest for closing – gold is returning back to downward action. Something of this sort we could see on GBP, if sentiment balance will not change.

Open interest:

Shorts:

Longs:

Technicals
Monthly
Since it is still valid – I would like to keep showing you monthly chart and analysis that we’ve made in December 2013 in our Forex Military School Course, where we were learning Elliot Waves technique.
https://www.forexpeacearmy.com/forex-forum/forex-military-school-complete-forex-education-pro-banker/30110-chapter-16-part-v-trading-elliot-waves-page-7-a.html

Our long term analysis suggests first appearing of new high on 4th wave at ~1.76 level and then starting of last 5th wave down. First condition was accomplished and we’ve got new high, but it was a bit lower – not 1.76 but 1.72. This was and is all time support/resistance area. Now we stand in final part of our journey. According to our 2013 analysis market should reach lows at 1.35 area. Let’s see what additional information we have right now.
Trend is bearish here, but GBP is not at oversold. Approximately month ago market has reached strong support area – Yearly Pivot support 1 and 5/8 major monthly Fib level. As we’ve mentioned on our previous research – “although market right now stands ~200 pips below this level, it seems that it has not been broken totally yet” and now market confirms this thought. Market gradually struggling through YPS1 but it seems that first attempt to pass through it has failed. It means that we could meet meaningful pullback in nearest future. Although in long term it will not mean the capitulation of the bears. This will be probably just temporal pullback, respect of support and correction after unsuccessful attempt to pass through support right on first challenge.
New information here is downward thrust. Occasionally I’ve counted the number of bars there, and guys, it has 8 black candles. Theoretically this thrust is suitable for B&B “Sell” pattern. We do not mention DRPO, since we come to conclusion that current upside action is retracement and it can’t lead to appearing of DRPO on monthly chart. I’m not sure about B&B, it looks a bit shy on overall picture, but this pattern is definitely the one that we should monitor.
In fact here we have just one major downward destination point. Monthly chart give us just single AB-CD pattern with nearest target at 0.618 extension – 1.3088. Still, here we have another one non-Fib orienteer – lower border of current consolidation. If we will treat it as sideways action then lower border will stand ~1.42-1.43 area. But first we need to get over current support level and see what market could give us here. Currently 1.30-1.31 area looks unbelievable, but if we would suggest parity on EUR/USD and starting rate hiking cycle in US – why not? Still, this is very long-term picture and right now we’re mostly interested in reaction of the market on current support level.

Weekly
Weekly chart is a centre of bullish sentiment. Last week we’ve said that action in recent two weeks we could treat as 2-period bullish grabber. DiNapoli does not have this name in his arsenal, but may experience tells that when market shifts trend and on the next period restores it back – it works as simple grabber in most cases. It means that theoretically market could exceed 1.5550 top. We will keep in mind this level.
It is interesting that if we apply here the thought about possible B&B “Sell” on monthly chart – this will the same area where it should be formed. In fact, as we can see 1.5550 is also weekly K-resistance area. I will not be surprised if there will be weekly overbought as well, if market will keep current upside pace. So, this level will be the next destination point, i.e. target in our trading plan.
Meantime we remind you on closer targets that were in focus last week. As 2-candles grabber action also is pretty bullish engulfing pattern and W&R of previous lows – our target has been completed. Market has reached first K-resistance and overbought. It means that although we still expect reaching of 1.5550 but on coming week chances on pullback increases.

Daily
Daily chart is very important right now. Trend is bullish here. Last week we’ve discussed failure breakout of long-ranged candle and suggested that market should move to opposite side and take an attempt of upward breakout. This has happened. But the problem here is that market stands also at K-resistance on weekly and daily overbought. In such circumstances it is very difficult to immediate breakout. This lets us to create another point in our trading plan on next week – expecting retracement.
Also we’ve mentioned reverse H&S pattern here. Take a look, this is really amazing – neckline stands right around 1.55-1.5550 area – right at weekly K-resistance where B&B “Sell” could start. Second thrilling agreement is the right shoulder. Will it become B&B “Sell” result? Because we know that minimum B&B target is 5/8 Fib support from upside action. Since we have 1.618 H&S pattern, 5/8 level will be precisely at the bottom of right shoulder.

4-Hour
This chart lets us to estimate most probable retracement target. I do not have Fib levels here, guys, but taking into consideration that cable is overbought as on weekly as on daily chart, retracement should be meaningful. Also, it is difficult to count on immediate breakout through the top of long-ranged candle. Odds suggest pullback down. On coming week MPP and WPS1 are coincide around 1.4950 area. This is also long-term consolidation and natural support. It seems that this is most probable retracement target.
Deeper retracement theoretically is possible and it will not break our analysis, but taking into consideration explosive upside action on daily chart, when GBP just moves up along with overbought line, hardly we could count on unnecessary “additional” depth of retracement. Here we also could recognize technical signs of tiredness of the market – wedge and MACD divergence. It makes sense since GBP at strong weekly resistance.

1-Hour
Hourly chart also shows that we have butterfly “Sell” in place and WPS1 coincides with 3/8 Fib support level. Retracement to 1.48 is possible, but seems not very probable due the pace of upside action on daily chart.

Conclusion:
Long term picture tells that also current upside action mostly is retracement, since it is driven by closing of short positions but not new inflows on GBP. Still, it seems that upside action still has chance to continue and next long-term destination point is 1.5550. Long term charts show potential for multiple patterns that could start to follow one after another – B&B “Sell”, reverse H&S, etc… From that standpoint Cable looks very interesting compares to other currencies.
Meantime, market is overbought on shorter-term scale and stands at strong weekly resistance. In beginning of the week we will monitor possible retracement to 1.4950 area first.



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.

 

[Sive Morten]

EUR/USD Daily Update Tue 28, April 2015

Good morning,


Reuters reports The euro hovered near a three-week peak on Tuesday, having pushed higher overnight as the dollar came under broad pressure and on renewed hopes that cash-strapped Greece was a step closer to securing fresh funding.

The dollar awaited U.S. data later in the day which could either hasten its fall against the euro or arrest its decline ahead of the closely-watched two-day Federal Reserve meeting that begins on Tuesday.

The S&P/Case Shiller housing index and consumer confidence data will provide a glimpse into the state of the U.S. economy, which is yet to gain full momentum and has doused market expectations for an interest rate hike by the Federal Reserve in June.

Greek Prime Minister Alexis Tsipras on Monday reshuffled his team handling talks with European and IMF lenders, a move widely seen as an effort to relegate embattled Finance Minister Yanis Varoufakis to a less active role in negotiations.

"Varoufakis' hard-ball tactics have been a source of huge frustration for the Brussels group of international creditors," said Ray Attrill, global co-head of FX strategy at NAB.

"The appointment of a more conventional negotiator, more familiar with the European bureaucracy, has stoked optimism that a deal will be reached before large payments are due in May."

Nevertheless, the situation still remained murky with Greek Prime Minister Tsipras also saying the government's top priority as it faces depleting cash coffers was to pay wages and pensions, subsequently adding that defaulting on debt was not an option either.

"The market has become used to potentially negative Greek headlines and less responsive to them. It will give more attention when payment deadlines loom closer or should Greece actually have a difficult time making payments," said Shinichiro Kadota, chief Japan FX strategist at Barclays in Tokyo.

Greece faces a Eurogroup meeting of euro zone finance ministers on May 11, a day before it must pay 700 million euros to the IMF.

The dollar was little changed at 119.095 yen briefly touching 119.44 overnight in a knee-jerk reaction to Fitch downgrading Japan's credit rating by one notch to A.

The impact was short-lived as the downgrade was well anticipated, the yen having taken past rating cuts in stride. The Bank of Japan's monetary policy meeting on Thursday loomed as a possible risk event.

Commodity currencies were among the best performers, further underpinned by gains in commodity prices.

With oil near its 2015 peak, the Canadian dollar touched a three-month high of C$1.2080 per USD . It was last at C$1.2101.

Its Australian peer scaled a near five-week peak of $0.7873 , before drifting off slightly to $0.7870.

There was nothing in a speech by Reserve Bank of Australia Governor Glenn Stevens that moved the Aussie. Stevens said he would not comment on monetary policy given the next rate meeting was only a week away.

Investors are in two minds whether or not the RBA will cut the 2.25 percent cash rate at the May 5 meeting.


So guys, we will follow to our tradition of last week - when we've prepared GBP weekly research but spoke on EUR along the week. Also we would like to say that our CAD DRPO weekly trade is still valid and works nice.
So, on EUR there are to major driving factor right now - Fed meeting that will start today and Greece debt. As many investors think that Fed will not haste with rate hike, Greek debt turmoil will act opositely, since situation there is far from solution. Thus, EUR moves very timidly.
From tehcnical point of view, last week we've said that although our short-term bearish setup was cancelled, it does not mean that market has become bullish. It still remains bearish on daily chart. Here we could get two possible patterns - butterfly "Sell" or "222" Sell. There is a big difference between them. Butterfly could be mostly treated as bullish here, because it will destroy big reversal butterfly that suggests 1.03 destination, while "222" will keep it and will be just deeper retracement in bearish trend:

On 4-hour chart picture mostly confirms scenario of "222" pattern. At least here we clearly see why market could turn down from 1.10 area but do not see yet any signs of possible upward continuation with daily butterfly "sell".
Here we have upside AB=CD and butterfly reversal pattern that confirms the same area. Market probably will continue to 1.618 target of butterfly, since we have accelerating candle right to 1.27 target. Also, guys this WPR1:

Finally, on hourly chart we have smaller butterfly, may be we will get 3-Drive sell also, I do not know yet. Anyway, if you're looking area for taking short position - 1.10 is not worst choice. Besides, this will be also very close to daily overbought. So, chances are solid that if market will continue move up later - it will react on 1.10 area by downward retracement. This will let you move stop to breakeven

 

[Sive Morten]

Good morning,


Reuters reports today dollar wallowed near a two-month low against a basket of major currencies on Wednesday as the market hedged the risk that the Federal Reserve might adopt a more dovish tone in statements following the two-day policy review.

The key risk for the dollar is the Fed's post-meeting policy statement due at 1800 GMT. The Fed is widely expected to keep policy unchanged and the focus will be on its economic assessment.

The central bank is considering monetary policy at a time when the U.S. economy has hit a soft patch, blamed largely on harsh winter weather, a strong dollar and disruptions at West Coast ports.

"Our expectation is the statement will acknowledge the Q1 data weakness but try and look through it, and that there will be no change to the characterisation of inflation prospects," said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.

"The acknowledgement of the weak data might be at the margin, dollar negative. But the bar for hawkish surprises is now much lower than it was two or three weeks ago," he added.

Just hours before the Fed releases its statement, the market will get an early read of how the U.S. economy fared in the first quarter. Economists expect the annualised pace of growth to have slowed to 1 percent, from 2.2 percent.

The euro last traded near $1.0968 , easing 0.1 percent on the day. On Tuesday, the euro had set a three-week high of around $1.0991, coming within a hair's breadth of $1.1000.

The dollar held steady versus the yen at 118.87 yen , hovering close to the bottom end of this month's 118.525-120.845 range.

The Australian dollar slipped 0.5 percent to $0.7988 , giving back some of the gains made on Tuesday when it soared more than 2.1 percent for its biggest one-day rise since November 2011.

The Australian dollar's sharp gains on Tuesday came on the back of growing expectations of easier policy in China and the recovery in iron ore prices over the last week, said Greg Moore, senior currency strategist at RBC Capital Markets.

Aussie bulls also found some comfort after the head of Australia's central bank refrained from talking down the currency at a speech on Tuesday.

"In the near term, sentiment in the U.S. dollar will be key for the direction in the Australian dollar," said Roy Teo, senior FX strategist for ABN AMRO Bank in Singapore, adding that the Aussie could face some profit-taking in the short term ahead of the Australian central bank's policy meeting on May 5.



So, today will be really difficult session, guys. Fed statement, GDP 1Q report really could push markets in doom&gloom action. Right now we see that our CAD weekly trade works nice. GBP shows action that we've anticipated and discussed in weekly research, but the pace how cable does it, is really surprising. Very fast upside action. Still our target at 1.5550 remains intact. Unfortunately GBP has not formed any retracement as we've suggested, but don't be upset too much. 1.5550 is just first destination. But as you can see from weekly research - market could continue action with bigger pattern and we still could get the chance to join it but at better level.
Still, today we return back to discussion of EUR. EU currency finally has reached very important point of 1.10. This is AB=CD target on daily, WPR1 and competion point of butterfly 4-hour chart. Daily overbought level today stands slightly higher, so market is not at overbought right now:

On 4-hour chart we see that market has reached an area that we've specified yesterday, and now we need to monitor will we get any reversal pattern around - may be here, or on 1-hour chart:

Since market just has reached it - it's too few time passed to any pattern could be formed.
Despite that market right now is trying to pass through this area - everything could happen, taking into consideration what a day will be. Also, guys, as we've said yesterday - we should not hurry here to take any position. As downside as upside - action probably will be significant and we will be in time to take position after Fed and GBP.
But if you trade Fed results or data, then, sure, this is your moment.

 

[Sive Morten]

EUR/USD Daily Update Thu 30, April 2015

Good morning,


Reuters reports euro rose for a third day against the dollar on Thursday, pushing above $1.12 for the first time in two months on growing concern over the U.S. economy's prospects.

With signs it will hold off on more monetary easing for the moment, the Bank of Japan also added to trend. The yen rose to its strongest in a month.

The euro, up more than 6 percent against the dollar since April 13, pushed to a two-month high of $1.12485 in morning trade in Europe.

A low reading of U.S. first quarter growth capped a poor run of economy numbers on Wednesday and the Federal Reserve's policy meeting was also seen confirming it will hold off again with any interest rate rise.

The scenario that has driven the dollar higher over the past year, that the United States is ready for a first rise in rates in almost a decade, is not yet dead. But with other major economies struggling, there are growing doubts.

"We still see this as a correction to the dollar's rise over the last year but near term it probably has further to run. A move up into the $1.15 area is definitely not out of the question," said Ian Stannard, head of European FX strategy at Morgan Stanley in London

"It will need some strong data surprises in favour of the dollar to turn this around."

The Bank of Japan, whose steady campaign of money printing has knocked more than a fifth off the value of the yen in two years, held off with another round of easing on Thursday and insisted it was confident inflation would begin to rise. That prodded the yen to as high as 118.50 in early trade in Europe.

"They have cut their inflation forecast but they still expect inflation to start rising in the second half of the year," said Manuel Oliveri, a strategist with Credit Agricole in London. "That says to me that monetary policy expectations remain stable and yen should hold in a range going forward."

The dollar last traded at 118.94 yen , down 0.1 percent on the day.

The New Zealand dollar was also a big loser, shedding nearly a full U.S. cent in response to dovish comments from its central bank. It last traded at $0.7614, down 0.9 percent on the day and retreating from a three-month high of $0.7744 set on Wednesday.


Well EUR has shown solid action and totally destroyed short-term setup for 1.03 target. Butterfly "Buy" pattern was vanished. In general we've expected upside action even 2-3 weeks ago, we've talked about in weekly research on EUR, but the way how market did it was a bit different. Anyway, in short-term perspective upside action probably will continue. The only risk factor for bulls right now is Greece.

Technically, EUR right now stands at strong resistance - butterfly, daily&weekly overobught, 1.618 AB-CD target and MPR1. It's a bit early to buy and we need some deep where we could take long position:

On 4-hour chart it is very probable that market could move to 1.0880-1.0940 K-support area. Also it approximately coincides with major 50% support that EUR likes most of all.
Besides, as market is overbought as on daily as on weekly - retracement probably will be meaningful and this level in general is suitable for this purpose.
Anyway, when we will get the shape of retracement, we will be able to estimate its target with more precision:

Also, guys, as butterfly on daily chart was not formed - it means that we could get some other, probably bigger reversal pattern that will become the basis for upward retracement on monthly chart. Right now it is not quite clear what it will be. So let's keep watching...

 

[Sive Morten]

GBP/USD Daily Update, Fri 01, May 2015

Good morning,


Reuters reports The dollar rose against the yen and bounced from a two-month low against a basket of currencies on Friday, drawing encouragement from signs that a recent patch of soft economic data may be coming to an end.

Signs that the labour market was recovering with initial jobless claims dropping, wages rising along with a jump in Midwest business activity all combined to draw investors back to the greenback.

Volumes, though, were on the lower side with most of Europe shut for May Day and the focus squarely on UK manufacturing PMI and ISM manufacturing data from the United States.

The greenback rose against the yen, supported by Treasury yields' rise in the wake of Thursday's upbeat U.S. data. The dollar was up 0.4 percent at 119.80 yen , pulling away from a one-month low of 118.50 plumbed on Thursday.

While it is true Thursday's data was good, we need a steady stream of good data for the dollar bull trend to be restored," said Petr Krpata, FX strategist at ING.

"Right now there is a fair bit of doubt about the dollar's bull run and whether the euro will drop further. We think the euro will resume its decline as the fundamentals have not changed and the last thing that the European Central Bank needs now is a stronger euro."

The euro traded near two-month highs against the dollar and yen holding recent gains on the back of a recent surge in German yields as fears of deflation in Europe eased just a little.

Data this week suggesting the euro zone might be pulling out of deflation sparked a rise in Bund yields, with the benchmark 10-year yield reaching 0.386 percent , up some 20 basis points in two days. That has pushed the EU/US 10-year yield differential higher in favour of the euro.

Still, analysts remain sceptical whether the rise in the euro especially against the dollar can last.

"Our analysis of the drivers behind euro/dollar suggests that it is front-end rates rather than long-end yields that are more important, implying that scope for the euro recovery is limited, in our view," Morgan Stanley analysts said in a note.

The euro last fetched $1.1260 , not far from a two-month peak of $1.1267 scaled on Thursday, having clawed its way back from a 12-year low of $1.0457 struck in March, when the ECB launched its quantitative easing scheme.

Against the Japanese currency, the euro climbed as high as 134.97 yen , its highest since early March.



So, guys, as EUR is continuing its climb, today we will take a look at GBP since market has reached our target at 1.5550. IT has happened much earlier than we've expected initially. But not time has come to discuss next step in our trading plan.
On weekly chart we see that GBP has reached K-resistance and overbought. In fact, we have weekly bearish Stretch pattern and it significantly increases probability that retracement will be deep. Also remember 1.4970 level - this is YPS1, we will need it below:

On daily chart market has reached neckline of our H&S pattern. And next major part of our plan will be waiting for retracement down that will let us to take long position. H&S pattern shows 1.4920 area. Taking in consideration that market is overbought as on weekly as on daily - retracement indeed should be deep. And - 1.4970 is also YPS1...

Now about risk factors for those who intends trade GBP down. On 4-hour chart we see that market has not quite reached 1.618 AB-CD target, probably because it stands deeply overbought. The target of this AB-CD coincides with weekly K-resistance area. To be honest market has not quite reached it for 50-60 pips, just couldn't overcome overbought probably. That's why we can't exclude that Cable could show another leg up before real retracement will start.
Finally, recent downswing has extension that coincides in turn with AB-CD target. This keeps door open for, say, butterfly "Sell" that could confirm reversal.
If this picture indeed will be confirmed - keep on daily chart, since it could lead to appearing of DRPO "Sell"...

If you would like to trade Stretch on weekly - you can do this, but currently risk/reward stands almost 1:1. Because you will have to place stop above weekly K-area. Still, you can use hourly chart as an indicator whether last upside leg will open or not.
If, on hourly chart market will return above 5/8 resistance in area of top consolidation, this will significantly increases the chances on upward leg to 1.5550-1.56 area. Thus, may be this will let you to place stop closer...

That's being said, we're coming to entry moment. Our next step in major plan - wait for retracement to 1.4920-1.4970 area.
At the same time you can trade any of additional patterns - stretch, may be DRPO "Sell" if it will appear and intraday patterns as soon as they will be confirmed.

 

[Brett Reynolds]

Would be interesting to see if 1.5550 coincides with Election Result!? OR..5/8 of Bread & Butter..whichever comes first as i don't exactly know when election is!? About 2 weeks time..or so...but whichever..i will be looking for 'a confluence, conincidence and serendipituous' rendezvous of Price Action'!
What ye say Sive?

 

[Sive Morten]

Would be interesting to see if 1.5550 coincides with Election Result!? OR..5/8 of Bread & Butter..whichever comes first as i don't exactly know when election is!? About 2 weeks time..or so...but whichever..i will be looking for 'a confluence, conincidence and serendipituous' rendezvous of Price Action'!
What ye say Sive?

Hi Brett,
Why not? It is possible. Elections on 7th of May