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Forex FOREX PRO WEEKLY, February 25 - 01, 2019

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Feb 23, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    This week was relatively quiet as no big shifts have happen neither in politics nor economy. This is also confirmed by price action as EUR stands in the range around 1.1360 the whole week. As Reuters reports
    The greenback so far this week has fallen 0.3 percent, after gaining more than 1 percent the previous week, in an uneven performance amid mixed U.S. economic data.

    "We continue to believe that longer run headwinds for the U.S. dollar are rising – in the form of structural (deficits) and secular (trend) pressures," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
    "We also believe that the U.S. dollar is increasingly vulnerable in the shorter run to negative seasonal pressures – which typically see the dollar peak in March and generally trade lower through until Q3," he added.


    Investors continue to watch high-level talks between U.S. and Chinese trade negotiators in Washington. Just over a week is left before higher tariffs would be triggered by the expiration of a U.S.-imposed deadline for an agreement. With the economic outlook foggy and major central banks much more accommodative than a few months ago, U.S.-China trade talks and Brexit are the primary concerns for traders.

    The euro dipped on Friday. Weak data since January has undermined support for the single currency, which edged lower against the dollar to $1.1331 It hit a two-week high on Wednesday, helped by hopes for an easing of the U.S.-China trade conflict. Analysts assessing the euro's prospects are focused on whether a slowdown in European growth is likely to be protracted. A survey on Friday showed business morale fell in
    February for a sixth straight month in Germany, the mainspring of the European economy.

    On Friday, Mario Draghi talked about EUR on a background of coming Brexit procedure. "Leaving the European Union or the euro currency does not equate to greater sovereignty for the country involved, which would then become hostage to decisions made elsewhere", the head of the European Central Bank Mario Draghi said on Friday.

    With Brexit looming at the of next month and scepticism towards the euro still simmering among the backbenchers of Italy’s ruling coalition, Draghi warned about the risks of going it alone.

    He said a country leaving the EU would be faced with the choice of either accepting rules made in Brussels to secure access to the single market or severing ties with its largest trading partners.

    “Being outside the EU might lead to more policy independence, but not necessarily to greater sovereignty,” Draghi said in a lecture in Bologna, Italy. “The same is true of the single currency.”


    Our opinion guys, that right at this moment markets are driven not by seasonal factors as it was mentioned above and even not by economy statistics, but politics. When it is a question on the table "to be or not to be", nobody will look at performance and return yield but on safety. And it is not needed to be as wise as Solomon to say that when situation becomes really tough, people are running to safe haven assets. In current background of Brexit, unrest in EU and global political uncertainty - people will prefer US dollar to EUR. This is mostly why I do not expect bullish reversal on EUR/USD any time soon. US just will not let EU to follow its own business interests while US bears the brunt of trade war with China, economy sanctions against many countries etc. Besides, political dialog between US and EU is becoming less friendly. EU starts to stand on hind legs from time to time and not follow to US pliantly as it was before. But US of course, has tools to reign in those who begins to charge. This contradiction between EU national interests and long-lasted habit to follow US as to senior brother will exacerbate more over time.

    In US is also not everything stand good. Now the whole world could see how 5th column, turncoats are strong in US. They put spoke in D. Trump's wheel and just do not let him to make his job. People now could see how many enemies of US nation sit in government and how tight they hold country and spin a web of deceit. And they will not stop. They are hoovering blood of US people, latch onto the federal teat, but also behaves as they are once and future kings. I'm really feel for D. Trump, because this is a nightmare challenge to rough all this stuff.

    Here is another reason why USD looks better than EUR, which is confirms our view. Here is recent Fathom consulting report on US sentiment.

    Our US Economic Sentiment Indicator (US ESI) declined for the fourth month in a row in January, falling from 4.4% to 4.0%, as the government shutdown, market volatility and concerns about the global economy weighed on confidence. Nevertheless, 20 of the 23 components of the US ESI were above their long-term averages, suggesting that the near-term outlook for the US economy remains strong. The impasse in Washington has delayed many data releases, including the advance estimate of GDP for 2018 Q4 — now expected at end of this month. This means that assessment of the US economy is more complicated than usual. With signs of a slowdown in Europe, the fact that the US economy added more than 300,000 net new jobs in January was encouraging, and suggests the world’s largest economy is some way from recession.


    [​IMG]


    COT Report

    Recent CFTC data shows that speculators have increased net short position for additional 10K contracts. This is important data for us, because we still consider recent pullback - is it reasonable to count on greater upside action or not. Sentiment analysis doesn't support idea of greater upside action.

    upload_2019-2-23_13-31-3.

    Source: cftc.gov
    Charting by Investing.com

    Technicals
    Monthly


    Monthly time frame usually is driven by long-term economic or political process, but not short-term technical fluctuations. Our long-term view we've put above, so here, on monthly chart we tilt toward idea of re-establishing downside trend, still.

    In general our analysis here still stands the same. We mostly wait for clarity - 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.

    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.

    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 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. Just by this 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_25_02_19.

    Weekly

    Bingo. Last week gives us a bullish grabber pattern. The same pattern we have on dollar index weekly chart. Something tells me guys, that this will be last bullish effort. Market either should start solid upside retracement or 1.12 lows will be broken with acceleration down.

    Take a look at price action right from top. EUR has formed bearish reversal swing, but no deep upside retracement has happened, although price was at strong support areas multiple times. It means that EUR stands under pressure. Maybe it is not very strong but it is constant. There is no big support below 1.12, relatively free space right to 1.03 lows.
    If grabber still will work, price could reach 1.15-1.16 area. Thus, weekly chart provides more or less clear setup. Risk zone is recent 1.12 lows - until they hold, EUR keeps chances on upside action. Breaking of 1.12 leads to collapse.
    eur_w_25_02_19.

    Daily

    This chart is really tricky. Our major focus on flag pattern that is formed by three side by side doji candles. It shows indecision situation, but at the same time works as direction indicator as soon as it will be broken. As we've discussed this on Friday - as bulls as bears could treat this consolidation in its favor. But downside flag breakout will be strong damage of bullish scenario.
    Nearest upside target stands at OP around 1.1450, but weekly grabber suggest higher action, at least above 1.15 top.
    eur_d_25_02_19.

    Intraday

    Unfortunately, intraday charts are real mess. Very choppy action, no real patterns exist by far. Next week we will get J Powell speech on Wed and Employment report, started with ADP earlier in the week. Market could spend time in flat till this data.

    The only thing that we could discuss here - parameters of long position. Those who want to go long should try to do it as closer to the 1.1320 lows as possible to minimize potential loss on the trade. Stops should be placed under 1.1270, if you trade on weekly grabber, or, at least below 1.13 K-support area. This combination creates more or less attractive balance of entry price and potential risk.

    Currently we have nothing to offer on opposite side, just because we do not have clear bearish patterns inside the flag. But, if it appears, we could repeat the same trade as on Friday's "222" pattern and try to go short. Situation stands really tricky and everything could turn opposite on data release or Powell's talks, despite that technical signs stand in favor of bulls.
    eur_4h_25_02_19.

    Conclusion:

    On coming week we do not expect activity till Wednesday. Short-term technical picture stands in bulls' favor but with coming J. Powell speech, ADP and NFP reports - everything could change fast.


    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. Major_Tom

    Major_Tom Private, 1st Class

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    Great! Thanks Sive :D
     
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  3. Stag

    Stag Sergeant

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    Greetings guys, the drop in the quoted post just speeded up, went lower and turned into an impulse wave, I adjusted my counts accordingly. Let me show you my updated interpretation of the scenarios I track during the year.

    My working assumption here is that the larger decline ended temporarily at the November 2018 low and a larger upward correction is unfolding off that low.

    The first part was complete at 1.1572. Then, we had an ABC zigzag decline which established its bottom at 1.1234, where the length of wave C equals the length of wave A (textbook quality example).

    The advance off that low seems to be a motive wave, though its subdivisions overlap - a warning sign of a possible corrective price action instead, we just don't know yet. Nevertheless, its character suggests we see an unfolding leading diagonal.

    With more indecisive sideways action seen during the last two sessions, it remains an open question as to whether a wave iv correction (or a wave B correction as an option) has already ended at 1.1316, or whether the correction is still developing. We have a choppy price action with overlaps, prices went nowhere during the last two sessions and we can see supportive signs of a still-unfolding advance - these make me think it is NOT the start of a major decline.

    An impulsive poke above 1.1371 will provide the needed evidence that a wave v advance is in progress against the end of a wave iv correction and the advance should head impulsively higher toward 1.1380 and possibly higher to finish off the wave (i) advance. So we should see a new high before the advance ends and a wave (ii) decline can get started then.

    However, any bullish view will be negated if prices drop under 1.1234. In this case, we cannot rule out a test of 1.1215 and a switch to my 3rd scenario.

    EU_190222_eod.
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Cool stuff. Thanks buddy.
     
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  5. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. Picture above was correct prognosis for wave 4. My view is similar to Stag's, with one difference. My primary count is that this unfolding diagonal is ending diagonal as part of C wave, of wave 4. That diagonal should be over very soon, since wave 1 is larger then wave 3, which makes wave 5 capped by length of wave 3 to 1.1411, for rule that wave 3 can not be shortest to be respected. I see zone 1.1374-1.140 as potential reversal zone for taking short position and move lower to break 1.1233 lows. Even if this is not correct wave count, if Stag is right, then at least corrective wave 2 to downside would start, so I see this as excellent short opportunity.

    4H chart:

    EURUSDkH4.

    1H chart:

    EURUSDkH1.
    How to trade this?

    Short entry in zone 1.1374-1.140, SL=1.1412, TP1 zone = 1.1260-1.130, TP2=1.1185
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    Situation on EUR stands tricky. Although technical picture shows weak bullish setup, there are a lot of things that I do not like and it makes long position taking not attractive.

    First, is real madness on intraday charts - very choppy price action under resistance. This is not good sign for market before upside breakout. Market is flirting with daily flag pattern resistance. Usually breakout is streight forward. Two recent session on daily chart could become a tweezers top, and this is also not good.
    eur_d_26_02_19.

    On 4H chart our suggestion of minor upward action was correct, so "222" Buy has worked, but it reminds me exhausting action, it seems that EUR is moving higher by last standing power. Too slow, too choppy.
    eur_4h_26_02_19.

    In current situation, we think that this is not bad idea to keep an eye on Dollar index. Here situation is much better:
    dxy_4h_26_02_19.

    We see clear H&S pattern that has hit OP at Agreement support. Breaking of OP lows could lead market to XOP and another Agreement support. Dollar index picture gives us two major points.

    First is, any upside action EUR is a retracement still. As soon as higher upside target will be hit, downside action probably will be re-established.

    Second - dollar index helps a lot with analysis. Thus, here we could keep at top and low of butterfy. Drop below OP lets us take long position on EUR, while move above neckline means that EUR is going to 1.12 lows.
    So, EUR-DXY parallel analysis provides at least some clarity on situation.
     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    So Stag and Deltoid have provided valuable insight as EUR indeed continues upward action. Our Dollar Index parallel analysis was really helpful as index compares to EUR shows clear patterns and it makes more simple to control situation.

    Since there are more upside targets exist on the market, we still treat this action as retracement, but not as new bullish trend. Yesterday flag finally has been broken and now EUR hits Agreement resistance (COP is completed). It means that today minor pullback is very probable:
    eur_d_27_02_19.

    And here is our 4H Dollar Index picture - as we've said drop below OP means that DXY goes to XOP and EUR moves higher. This target has been hit:
    dxy_4h_27_02_19.

    Here market also stands at Agreement support, which also suggets upside pullback. At the same time, here we have greater AB=CD pattern with OP target at 95.55 -20 points lower. It is not the fact, of course, that DXY will hit it, but, if this will happen we will get perfect "222" Buy pattern here. Still, for truth sake, we already have "222", but CD leg is not equal AB...

    on daily EUR OP target also stands in agreement with major 5/8 resistance.

    Now, on 4H EUR chart our story repeats. We're watching for harmonic drop down to K-support area. Again - to keep bullish trend valid, EUR should hold above it. Breaking down K-support and harmonic swing retracement could trigger south acceleartion.
    eur_4h_27_02_19.
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    As we've suggested yesterday, EUR should show some pullback as it has hit daily Agreement resistance. Now retracement stands underway. Currently we do not have any reasons to suggest break of short-term bullish tendency by far, as EUR holds above major intraday support levels and retracement is very small.
    eur_d_28_02_19.

    Major concern right is whether EUR will continue upside action right now, or retracement will be a bit deeper, as it is suggested by harmonic swing and K-support on 4H chart.
    eur_4h_28_02_19.

    And again we turn to Dollar index picture. Here, on 4H chart we have clear morning star pattern, which is analogue of bullish engulfing. This pattern suggests AB=CD shape of retracement on hourly chart, and it means that retracement should last a bit longer. If you drop time frame more, to 1H chart, you'll see a kind of H&S price action...
    dxy_4h_28_02_19.

    Putting it all together, we expect AB=CD retracement on 1H EUR as well. Its target coincides with harmonic swing and K-support on 4H chart:
    eur_1h_28_02_19.
     
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  9. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. I believe downside action in wave 5 just started, or at least correction from recent move to upside from 1.1233 lows. I labeled wave 1 bit shorter, which allows wave 3 to be longer, which allows wave 5 to be longer then wave 3. Wave 5 moved up a bit longer then I expected, but overall picture has not changed in my view. I expect bearish action in next weeks to at least 1.130-1.1350 zone, and I believe it will go down even more to break 1.1233 lows, to 1.1185.

    4H chart:

    EURUSDkH4.

    1H chart:

    EURUSDkH1.

    How to trade this?

    Sell entry in zone 1.1370-1.140, SL=1.1421, TP1 zone = 1.130-1.1345, TP2=1.1185
     
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  10. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. Here is closer look. I believe wave 1 of red wave 5 has ended and now we see upside retracement which could be last chance to get best possible short entry. I expect push higher to 1.1390-1.140 zone and then aggressive downside action in wave 3, shallow wave 4 to upside as retracement to wave 3 and then also strong wave 5 to downside to complete whole wave 5.

    15 min chart:

    EURUSDkM15.

    How to trade this?

    1st scalp position, long entry in zone 1.1365-1.1380, SL=1.1358, TP zone = 1.1396-1.14
    2nd main position short entry in zone 1.1390-1.140, SL=1.1421, TP1=1.13, TP2 zone = 1.1185-1.12
     
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