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Forex FOREX PRO WEEKLY, August 19 - 23, 2019

Discussion in 'Sive Morten- Currencies, Gold, Bitcoin Daily Video' started by Sive Morten, Aug 18, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    As we now tracking two currencies - EUR and GBP, in fundamental part we take a look at news and rumors on both of them. Technical situation is a bit boring on both, but GBP is better match to our former analysis, which doesn't need much update. Thus, in technical part we take a look at EUR this week.

    As Reuters reports - the euro fell to a two-week low on Friday against the dollar, which extended the gains it made the day before after U.S. retail sales data came out better than expected .

    The dollar was on course to end the week up against the euro, the Japanese yen and the Swiss franc as investors returned to riskier assets. A stable offshore Chinese yuan helped improve risk appetite.

    Data showing U.S. consumers kept spending in July came as a relief after the U.S. Treasury yield curve inverted this week, which historically has preceded U.S. recessions.

    The inversion stoked worries about the impact of the Sino-U.S. trade war. The curve steepened a little on Friday .

    China on Thursday said it would retaliate for the latest U.S. tariffs on $300 billion of Chinese goods, but U.S. President Donald Trump said any pact would have to be on America’s terms, suggesting a resolution to the trade war remains elusive.

    China’s offshore yuan, whose plunge past 7 to the dollar last week sent shivers through financial markets, was weaker on Friday at 7.0530. The People’s Bank of China fixed the onshore yuan currency at 7.0312 on Friday, compared with market expectations at 7.0307, according to analysts at Commerzbank.

    “While it was roughly in line with expectations, it might be worth noting that since yesterday, the actual dollar/onshore yuan fixing rates have been slightly higher than the estimates,” the analysts said.

    The fragile calm is unlikely to last, traders said.

    “The most important point is there are more signs of a global economic slowdown,” said Tsutomu Soma, general manager of fixed income business solutions at SBI Securities in Tokyo.

    “Rates will continue to fall, and investors will pull back from risk, which means money will leave emerging markets and go to Treasuries, the Swiss franc, gold, and the yen.”


    Sterling was up 0.3% at $1.2118, close to a one-week high of $1.2150 and on course for its first weekly gain since mid-July. Encouraging data on British retail sales and consumer prices suggested the British economy was in better shape than some investors had feared.

    British retail sales unexpectedly expanded in July and signaled that consumers were taking the prospect of Brexit in their stride for now, helped by firm wage data and modest inflation pressures, according to data released earlier this week.

    “This suggests consumer spending is still holding up and still supporting the economy even though overall output contracted in the second quarter,” said Marshall Gittler, chief strategist at ACLS Global.

    “It ties in with the relatively high wage growth that we saw earlier in the week.”

    However, the risk remains that Prime Minister Boris Johnson will take Britain out of the European Union without a transition agreement, causing short-term economic turmoil.

    “I think sterling is likely to be more of a two-way market now as those opposed to Brexit rage, rage against the dying of the light. At the same time, we can’t expect the Brexit supporters, who have gotten this far, to just cry how bright their frail deeds might have danced in a green bay,” said Marshall Gittler, chief strategist at ACLS Global.

    Pound gained for a second consecutive day on Friday after a stream of resilient economic data this week calmed sentiment on the health of the UK economy and as opposition parties launched plans to block a no-deal Brexit.

    Further fueling demand for the British currency, especially against the euro this week, was growing momentum to try to stop Prime Minister Boris Johnson from taking Britain out of the European Union at the end of October without a deal.

    The opposition Labour party said it would call a vote of no-confidence in Johnson’s government as soon as it believes it can win it and seek to form a temporary government under leader Jeremy Corbyn to delay Brexit.

    Oliver Letwin, a lawmaker from Johnson’s ruling Conservatives, was asked to lend his support to Corbyn this week, but he told BBC Radio on Saturday: “I don’t think it’s at all likely that a majority would be formed for that and I wouldn’t be able to support that, no.”

    Asked to explain why, he said even an interim Corbyn-led government could do more damage than a disorderly exit from the world’s biggest trading bloc.


    Conservative opponents of a no-deal Brexit are deeply suspicious of Corbyn, whom they see as a dangerous Marxist intent on nationalising swathes of British industry and hiking state spending and taxes.

    It’s well worth having discussions with everybody across the House because there’s probably a majority of MPs (Members of Parliament) who don’t want to have a no-deal exit but the issue is can we get all of those MPs on some alternative proposition?

    “I’m not terribly optimistic about all this because I don’t see yet emerging an agreement on that,” he said
    .

    To form a new parliamentary majority with cross-party backing, Letwin said lawmakers would first have to agree a strategy for Brexit, revealing the divisions that have hampered pro-EU politicians since they lost the 2016 referendum.

    While some accept the result and want a negotiated withdrawal from the bloc to soften the economic impact, others are pushing for a second referendum in the hope of reversing the 2016 vote to leave the EU.

    “There is a high likelihood, alas, that this country is going to leave without a deal on the 31st of October,” Letwin said.

    While derivatives indicate market players may be trimming back some short sterling positions, the currency’s prospects remain clouded by the risk of Britain exiting the European Union without a divorce agreement.

    CFTC Report

    Speculators cut their bullish bets on the U.S. dollar in the latest week, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. The value of the dollar's net long position, derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars, was $16.70 billion in the week to Aug. 13, the lowest since July 23.

    The dollar on Friday was roughly flat after worries tied to trade tensions and a U.S. Federal Reserve interest rate cut weighed on consumer sentiment and after a report that Germany may run a deficit to boost growth lifted the euro.

    Still, we're mostly interested in positions on EUR and GBP. On EUR net short positions slightly have increased, which brings nothing new background but still, tells that all screams on TV on soon collapse of US dollar looks overestimated. At least market doesn't show real support of this direction as investors keep shorts on EUR at the same levels:

    upload_2019-8-17_14-23-54.

    Source: cftc.gov
    Charting by Investing.com


    On GBP positions also mostly stands the same, only minor contraction is fixed, but here, we're mostly focused on its absolute value as net short position hits all-time lows of 2017. Downside overextension sooner or later should trigger healthy upside retracement. As we talked about it in previous report - now it seems most suitable moment for that. UK Parliament comes back to work in September and a lot of stir will be around voting on no-confidence to BJ. That is, by our view, could become a trigger for GBP upside retracement:
    upload_2019-8-17_14-28-17.
    Source: cftc.gov
    Charting by Investing.com


    In recent report Fathom Consulting takes the view on UK economy sentiment. Here is two major extractions from Fathom's update:

    We see close to an evens chance of a second consecutive contraction in UK economic output in Q3, which would push the economy into technical recession .

    it is very likely that there will be a general election before the end of this year.


    [​IMG]

    That's being said, on GBP we do not see positive big shifts. Despite possible upside retracement due technical and political factors, UK currency probably will remain under pressure and any pullback will temporal by far.

    On EUR the most important observation that we see now - market ignores former bullish background which was based on new US tariffs, expectations of Fed rate cut, etc. Reaction on these events were short-term. It means that we should be careful to bearish signs that we could get next week on EUR.

    Technicals
    Monthly


    Last week we also mentioned that despite all talks about US problems and USD weakness - price doesn't lie and we see July performance showing USD appreciation. After breakout of major 5/8 Fib support, price still stands below it, without any attention to revanchist sentiments of dovish policy followers. This week trading makes no impact on August range as EUR has spent the time in the same area.

    We still have a kind of bearish engulfing pattern here. In longer-term view, take a look that EUR stands for a long time below upper border of rectangle, while normally, bullish market has to jump up after re-testing it. Dropping back inside rectangle and standing there, although near the border, is a sign of weakness. August performance as minor upside bounce and drop back to the lows also stands in favor of bearish sentiment.

    Nearest downside target stands around 1.0950 - YPS1.
    eur_m_19_08_19.

    Weekly

    On this time frame when this is all noise around on US weakness has happened, we've tried to stick with Morning star pattern that has been formed as reaction on weekly COP target. Now, the drop back inside the body of the pattern looks a bit too deep as it engulfs previous candle. Although theoretically "star" has not been cancelled yet as EUR still stands above the COP lows, but such a deep pullback doesn't add more optimism either.

    In fact, here we could talk about new "bearish engulfing" pattern. As it is formed in the middle of the downside channel - could it be early sign of bearish breakout? This is the second issue that we should keep in mind but it has longer-term perspective.
    eur_w_19_08_19.

    Daily

    Here we do not have any bright and clear patterns, but a lot of interesting details that are easy-to-miss. First, we should recall the butterfly that we have here. Upside action was logical enough as it was also COP on weekly and butterfly has become the pattern that triggered upside bounce. But, on a way up EUR has met solid sell offers, which became a reason of HW pattern and following consolidation. So, butterfly has not become a reversal pattern. It means that EUR could proceed to 1.618 target, at least due butterfly framework

    Second - on a way down right now EUR has broken 5/8 Fib support, which also was an Agreement with some intraday extensions and erased previous upside rally. This rally particular was due new screams on coming USD weakness.

    Finally, by pivot points frame work - EUR has moved above MPP but failed to reach MPR1 and dropped again below MPP. This is bearish performance.

    Just to take the edge off a bit, we could say EUR stands near daily oversold and the only potential bullish action that we could get is Double Bottom. And, else, we could recall "222" Sell pattern on Dollar Index. Still, the question on probability of upside reversal scenario stands open.
    eur_d_19_08_19.

    Intraday

    Well, our minor setup for Friday is done, as EUR indeed has formed butterfly and upside bounce. But its nothing to be happy with as butterfly was 1.618 but not 1.27 and upside reaction was too small.

    Here, on 4H chart we have the mirror picture of "222" pattern that stands on Dollar Index. While EUR stands above the 1.10 lows it keeps, at least theoretical, chances to reverse up. But, as we've mentioned earlier - too fast downside action with very short-term and flat stops and acceleration to XOP with another minor reaction doesn't match to idea of possible reversal. As well as other moments that we've discussed above.

    eur_4h_19_08_19.

    So, here is our butterfly on 1H and here is upside reaction. This picture is for those who intends to tempt fortune and try to take the bet on upside action. Theoretically we could get minor reverse H&S pattern, that should start by puny "222" Buy. This is 30-40 pips trade, but it provides chance to go long with relatively small risk. May be market could move slightly higher than OP - to test weekly Pivot around 1.1128 area and complete minimal 3/8 retracement of "222" pattern on 4H chart. But this setup is tactical and doesn't resolve issues that we've mentioned above.
    eur_1h_19_08_19.

    Conclusion:


    Our analysis shows that a lot of issues right now point on untimely happiness of the bulls as market slowly but stubbornly erases former bullish performance, which makes us think that EUR could drop more in medium-term.Currently we do not see real bullish signs and do not consider any long trades on daily time frame.

    Still, counter view followers could use 4H/1H setup for taking long position. It should be sufficient to let out with no loss or even with 30-40 pips profit, if even later EUR will continue dropping.


    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 folks,

    Market confirms our doubts on upside perspectives that we've discussed in weekly report and also talked on reasons why we think that recent drop breaks normal bullish price behavior.

    Now, from the technical point of view, EUR has simple task as it has no real support till 1.10 lows. Next target on daily chart is COP around 1.1010, but as it stands below recent lows, EUR probably will slip more by stops below the lows. Thus, MPS1 around 1.0965 could be reached. Deeper targets are not interesting for us by far as all of them stand below daily Osold area:
    eur_d_20_08_19.

    Although our puny H&S pattern on 1H chart has been completed - we see weak reaction on 4H chart. Market stands flat despite bullish MACD trend, which could be the sign of bearish dynamic pressure. Here we need to watch for the patterns - "222" Sell, if minor upside AB-CD will be formed, or something else. Also it is not forbidden to use Stop "Sell" orders near the 1.1067 low as market is not at support and any breakout will be real, probably.

    Anyway, currently we do not see any bullish context.
    eur_4h_20_08_19.
     
    #2 Sive Morten, Aug 20, 2019
    Last edited: Aug 20, 2019
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning everybody,

    As EUR gives us not too much information, today we take a look at DXY as well. On Daily chart EUR mostly stands in the same consolidation and keeps valid our former opinion - price behavior doesn't correspond to bullish market, which makes us think on downside breakout of 1.10 lows soon.

    On Friday annual Wyoming Central Banks meeting will start, and last through weekend. Markets expect to get some hints and rumors on future Fed policy, thus tomorrow and on Friday we probably will not get too much activity.
    eur_d_21_08_19.

    On 4H chart, despite recent spike down - bearish dynamic pressure still holds and market stands flat while trend has turned bullish:
    eur_4h_21_08_19.

    On 1H chart we turn to DXY as it provides the key to current situation. Recently we've mentioned "222" Sell on 4H chart there and now DXY is forming clear H&S pattern. Actually, you could recognize it inside triangle on EUR as well, but here, on Index it looks better.
    This pattern will give us the direction. If H&S will work - we will get greater upside pullback on EUR as well, once it will fail - EUR will turn down as well.
    dxy_1h_21_08_19.

    For trading you could chose what you like more - DXY or EUR. If you have bullish view (bearish on DXY) - market stands near the point where you could take position, top of right arm. For bears there are two solutions - either wait for H&S failure, or use stop "Sell" entry order just near the EUR lows (top head of H&S pattern on DXY). Everything depends on these lows. Once they will be broken - EUR will reach 1.10 area.
     
  4. ED SCHAFFER

    ED SCHAFFER Private, 1st Class

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    In this post, Sive not only tells us about his own market analysis, which is at the high professional level, but he goes even further by telling us what trades he advises taking as well & he does all this for us FOR FREE! That is why I gave this video a "like" & I advise you all to do the same as well to give approval & encouragement to Sive to continue doing the same. Cheerio.
     
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  5. ED SCHAFFER

    ED SCHAFFER Private, 1st Class

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    For some reason I am being blocked off from replying directly to Minimax, so this post is for him. Whilst Sive is still bearish EUR long term wise, I do agree with you that it looks good short term wise. I also think the January 2017 lows of 1.034 will hold as the DXY makes a right shoulder on the monthly chart & then drops thus the EUR will compare favorably to the USD over the coming months. No promises though. As always, time will tell.
     
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  6. DavidT

    DavidT Recruit

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    Sive is THE authority I go to when I am looking for the best technical setups. Please keep posting your high-quality analysis!
     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings guys,

    EUR still stands in the same flag/pennant consolidation on daily chart. Today we will get EU PMI report, ECB minutes and starting of Wyoming Central Banks meeting, although first official day will be only tomorrow.

    On daily chart we have the same situation, so let's take a look at 4H and 1H chart. On 4H chart we have only one new issue - this is possible bullish grabber pattern. It is not the fact that it will be formed, but we need to keep an eye on it. This pattern suggests upside action above recent tops, i.e. upside triangle breakout:
    eur_4h_22_08_19.

    But the problem is DXY shows opposite sentiment. Take a look at our H&S pattern. Price action around right arm mostly hints on upside continuation and H&S failure, rather than on bearish reversal:
    dxy_1h_22_08_19.

    Thus, we have contradicted patterns and, in current circumstances it would be better to wait for clarity or plan your trades when this clarity will come. For example, we again recall using of Stop entry orders, close to extreme points of consolidation as on EUR as on DXY, because patterns themselves do not provide us definite direction by far.
     
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  8. Robban68

    Robban68 Corporal

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    If the 1,106 low hold there is a good chance it reach 1.13x before it will resumé the downtrend. It doesn’t impact the overall structure it’s only a healthy bounce to load short with lower risk.
     
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  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    Yesterday it was a bit tricky action as on EUR as on DXY as market has completed as our 4H bullish grabber as bearish dynamic pressure, washing recent lows.

    Today it is all about JP speech in Wyoming. In EU/UK it will be around 15:00-16:00, I suppose, in US - early in the morning. Shortly speaking there are two camps - one suggests that JP should announce new long-term rate cut cycle, while others think that JP will use this meeting to fix conversation mistake that was done on last rate cut. Well, I tend more to second camp. We do not know everything, of course, but hindsight statistics shows good US economy performance with light signs of growing inflation. May be this is not time to rise the rate, but definitely not to cut it. So, I suggest that JP will calm down markets a bit and release too brave expectations of dovish policy. This should support USD and our COP target at 1.10 area should be reached today.
    eur_d_23_08_19.

    Technically, our triangle has turned to rectangle with the same features. The problem is to take position here, as we have no clear patterns. Again, the only tool, that could help is stop order either to buy or sell, depening on your view on situation. If you just want to trade volatility - you could use OCO feature, if your broker has it.
    eur_4h_23_08_19.

    Now why we think that situation is bearish by technical view. It is mostly seen on US Dollar index. If we start from the beginning, recall that market stands at the point of daily XOP and completion of "222" Sell pattern, but it shows no bearish reaction, even minor 3/8 retracement has not been formed. Our H&S pattern has lost its shape and feature. It is failed functionally, although it keeps validity graphically. The ping-pong swings between neckline and right arm doesn't correspond to idea of H&S, which means that it is failed. Hence, this situation also suggests upside continuation on DXY, i.e. downside on EUR.
    dxy_1h_23_08_19.
     
  10. soul rebel

    soul rebel Recruit

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    Good Morning All
    After Merckel's comments yesterday regarding assisting the UK to brexit, GBP/USD broke out of the consolidation. Do you guys think this could trigger the retrace up higher or are we more likely looking at further downward action to retest 12000 lows?
     

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