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FOREX PRO WEEKLY, February 26-02, 2018

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Feb 24, 2018.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    Last week market's attention mostly was hooked by Fed minutes. In general, release was treated mostly positive, and supportive for current Fed hawkish strategy. Overall situation with interest rates and inflation forecast makes some market participants think that Fed could take even tighter steps and rise rate 4 times this year. Still, according to Fedfund watch tool by CME, chances on this are not very high. Thus, investors expect first rate change to 1.75% in March with 83% probability, to 2% in June with 66% prob., and to 2.25% in Nov-Dec with ~36% probability. Chances on 2.5% rate now stand rather low, approximately 21.%. At the same time, this odds have risen for 5% since 24th of January, when 4th rate increase was treated with just 17% chances.
    Source: cmegroup.com
    [​IMG]

    Last week, on 21st of February US 10-year bonds have reached 2.91% yield level and now some opinion appears that dollar was a bit overextended down without any confirmed reasons but mostly on emotional expectations of strong EU growth.
    According to recent Reuters FX review, "rising Treasury yields, a view that the dollar’s sell-off had been overdone, and minutes from the Fed’s January rate-setting meeting that offered a relatively upbeat tone helped the index notch a gain of 0.9 percent this week.
    “You have seen sentiment around the dollar shift,” said Charles Tomes, senior investment analyst and trader at Manulife Asset Management, in Boston.
    “A lot of market participants are taking some risk off the table if they did have longs in other strategies,” he said."

    On coming week all eyes will be on Federal Reserve Chair Jerome Powell’s first semi-annual testimony to Congress. It will take place on Tuesday and everybody will watch for updates on the central bank’s view.

    Second issue that could make impact on EUR/USD is coming government elections in Italy on March 4th.
    On March 4th as well a German Social Democrats’ poll of its members on joining another coalition government with Chancellor Angela Merkel’s conservatives. May be they will not have decisive meaning for the market, but still, this could hold investors from increasing long positions on EUR and wait till the end of the week.

    This week Fathom consulting has made a release concerning US stock market. They think that US bubble hardly will blow in 2018 as overall global economy shows strong upside momentum, which accompanied with tax cut programme should boost corporate earnings. This should be also support for USD, as demand for US assets will support demand for US currency as well, especially with more attractive yields levels. Mostly they rely on their own sentiment indicator which is a good tool for understanding situation in general. It shows another increasing to 6.1% in January.

    Some flows already are re-distributed from Australia and NZ. Australia was a carry trade leader for few recent years as they keep relatively high rate and healthy economy with low debt burden, AAA rating which was attractive for investors. Right now situation is changing. "The Australian and New Zealand dollars slipped as investors bet interest rates in the two countries will remain at record lows while the United States continues to tighten policy."

    So, coming week probably will be a waiting tome as two major events should come - first testimony of new Fed chairman and - big political events in EU on Sunday.

    COT Report

    Last week shows first careful bearish steps in CFTC data. Although price has not changed significantly, net long position has dropped while open interest has increased. These changes stand with small numbers, but direction is important. It means that new shorts have come to EUR...

    upload_2018-2-24_12-37-33.

    Technical analysis
    Monthly


    So, guys, as we've mentioned on Forum in different threads - situation really stands tricky as on EUR as on DXY. Today we will take a look at DXY, just because nothing to add to EUR analysis. On Friday video we said that will be waiting for butterfly pattern and see what will happen.

    Usually, when situation stands tricky and unclear - I'm waiting for the time when it will be clear again. Usually it happens when some clear patterns appear that agree with overall context.

    on Monthly of Dollar index situation stands according our expectations. Market indeed shows response to strong support area, at least it is kept by this area. Area itself is rather strong as it includes major all time 3/8 Fib level, although price stands slightly below it now.
    When we do not have direct AB-CD extensions to estimate target, we use different tools. Here we also see that downside action has reached precisely 1.27 extension of last upside swing. Overall action reminds megaphone (widening top) pattern.
    Downside action was rather strong and straight. As a result DXY has formed bearish reversal swing. Normal behavior of the markets usually shows deep upside retracement after reversal swing. This is quite reliable feature because it comes from nature of the markets. As Dollar was in long-term upside trend - strong upside momentum is still here and it couldn't be faded immediately, it needs time to calm down. Only strong and unexpected political, economical process could speed up this process or totally ignore it.
    That's being said, while market still holds above major support area - this scenario can't be taken off the table.
    As we can see - Yearly Pivot support 1 stands at 87 area. In general index could drop to it without breaking overall situation. This will be normal action for any market - retrace to PS1 on a bull trend. While support 1 holds retracement - uptrend is still valid.
    Speaking on upside targets, with "deep" retracement up we could understand action, say, to YPP around 95 as it has not been tested yet. It will be approximately 1/2-5/8 bounce up.

    So, monthly picture shows that this is not good time yet for taking short position.
    dxy_m_26_02_18.

    Weekly

    Weekly picture stands as quintessence of uncertainty. Trend stands bearish by far here, but could we say that market is not preparing for upside bounce? Not quite. Price has formed bullish reversal pattern, which is butterfly "Buy".
    Also we see that bullish divergence is growing, but has not been formed yet.

    Major problem here stands with shy upside reaction that could be treated two-fold. From one point of view - this is potential, as we could say that market stands at strong support and reaction is still too small, so it should be bigger.
    From another point of view - shy reaction on strong support could indicate very strong bearish pressure.
    This is also might be true, because take a look at reaction on major monthly 3/8 support around 91 area. It was rather small, market has not shown even minor 30% bounce out there.

    But, what is also important - we have rising volatility precisely at this level, but not on major 3/8. Volatility indicates more aggressive struggle of opposite sides. Some bullish reserves have stepped in here, and this could change balance, if their strength will be sufficient for that.

    So, weekly chart just shows the nature of the problem. Answers we should search somewhere on daily and intraday charts. But - as longer market will stay at level without bounce as weaker it will be, i.e. chances on breakout will be rising.

    Daily

    This chart probably shows more bullish signs rather than bearish. First is W&R of the bottom, which is typical for Double Bottom patterns and the same reversal session as on EUR. But what seems even more important is overall dollar background now, which could be described as "May be dollar is not as weak as we thought" and speed of upside recovery. This is very important. Recall how hopeless downside action was looking last Friday. It was big drop against US inflation statistics result, it was action against common sense, actually.
    But this week market has recovered. This is difficult to expect when bears indeed control market. Mostly it could mean that drop was a "last challenge" and could indicate inability of bears to push market lower.
    Also do not forget about overextended long positions on EUR...

    Technically, except WR, we have strong bullish divergence, a kind of "MACD Hook" as many called this issue, when lines have not been crossed significantly. Some analog of DiNapoli grabber. Yes, bearish engulfing around daily OB could trigger some minor drop, but, IMO bulls have minor advantage...
    dxy_d_26_02_18.

    Intraday

    Here, on a way up market has not formed any meaningful retracement, which is curious after so furious plunge on week before. Now market is forming clear pennant pattern here. Classic technical analysis tells that this is bullish continuation pattern. Even as retracement has started market is coiling around nearest minor 3/8 support.

    Also, guys, if you will take a look at other markets, GBP and Gold in particular - you'll see that they weren't able to complete minor reverse H&S patterns on 4-hour charts. This could be a confirmation of dollar strength in short-term perspective.

    Upside breakout will give us butterfly "sell". First it should push market right to daily Fib level of 91.30 area.

    Downside breakout will not mean that situation has turned bearish, but it could be just AB=CD retracement to K-area around 89.35-89.40 level. Which, in turn, also could give us bullish pattern - "222" Buy.

    So, we do not care much on pennant result, as upside breakout will lead to starting retracement a bit later and we will be able to take long position anyway. Downside breakout could give us "222" Buy pattern, if, of course, it will not be a collapse of despair.

    dxy_1h_26_02_18.

    Conclusion:

    Dollar Index stands right now in situation that is very difficult for analysis. Indirect factors suggest USD strength, but they were not implemented yet by price action.
    In the beginning of the week - all eyes on intraday pennant. Lazy downside breakout will be the sign of possible upside continuation and could give "222" Buy pattern.



    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. Stag

    Stag Sergeant

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    Hi Guys, last week I said in my foreword that reading my posts requires the basic knowledge of the Wave Principle. In the absence of a common language we all speak, we have poor communication quality and many of you may find my posts even disturbing or simply useless.

    To avoid this frustration, this time I will use much less labeling on my charts and will demonstrate a method called the Kennedy Channeling Technique (KCT), a very simple approach that allows you to utilize the essence of the Wave Principle in your work - without being an expert elliottician.

    You still have to learn a bit - it takes 30 minutes -, but once you got it, you will be able to interpret the price chart without having a deep understanding of the Wave Principle and all of its one hundred rules and guidelines - but still applying the Wave Principle with confidence.

    Is it worth 30 minutes? If yes, please start with this video tutorial and come back when finished.

    ***

    Now having finished the webinar, hopefully you got a new glass along with a new interpretation of the same chart. What you understand now is:
    • if you see a three-wave price move, you can and will draw one distinct channel (corrective or deceleration channel)
    • if it becomes a five wave price move breaking your corrective price channel’s boundary, you may expect a larger advance and will be able to draw three distinct channels (base / acceleration / deceleration channel).
    • three waves = one channel, five waves = three channels. If it is a five wave move and it starts penetrating the acceleration channel's boundary in the opposite direction, the advance probably has completed its third wave and a corrective price move may be under development (and you can draw a deceleration channel).
    • and finally, when the correction is complete, deceleration channel breaks in the direction of the main trend and you can bet on one more advance.
    Furthermore now you must be aware of that countertrend price action (= corrective wave patterns like zigzags, flats and triangles and even more complex double or triple-three corrections) tends to be contained within parallel lines, 80 percent of the time.

    That’s it. Let’s start with the Euro.

    The Euro

    Well Guys, this one is rather tricky now. As I promised, I will try to make it as simple as possible with the help of the KCT technique.

    The bottom line: from 1.2165 or above Euro should resume its bull trend to complete a five wave advance.

    Monthly

    Here we have a huge corrective price channel with a nice overlapping price action (overlapping usually means corrective) within parallel lines and now it is approaching its upper boundary. At this time there is not much to do with it, but it warns you the possibility of the resumption of the larger trend - up.

    TV_EU_180223_M.


    Daily

    Our simplified KCT chart shows that:
    • we have a massive 1 year advance with a price action still above its base channel suggesting we have a healthy bull trend
    • the acceleration channel was broken in last September suggesting a third wave was complete.
    • then a sharp corrective pattern played out and found support on the base channel’s upper boundary (typical for fourth waves) at 1.1553.
    • KCT suggested a new impulsive advance from 1.1553 and when its wave 3 started unfolding, we drew its base channel.
    • breaching its base channel’s upper boundary confirmed it was a five wave advance
    • the acceleration channel was broken in February confirming a wave 3 top was in place at 1.2537 and our KCT suggested the Euro started a corrective phase. But soon afterwards a quick surge started from 1.2206 and a new high was hit at 1.2556, suspecting wave 5 is in.
    • the advance from 1.1553 is supposed to be a five wave advance followed by a sizeable drop.
    And this is where the rubber meets the road: how can we interpret with confidence this situation?

    For answers, we need to consider possible patterns based on what we already see and have to switch to lower timeframes. These patterns are:

    bull-market-patterns.
    As you can see, all the patterns above are built from corrective structures (except the last wave of a flat).

    TV_EU_180223_d.

    Flat scenario

    It is a likely scenario at time of writing. A flat is a three-wave corrective pattern labeled A-B-C, where waves A and B always have 3 wave corrective structure, while wave C is always a five wave motive wave (either impulse or diagonal). That's why we call the flat a 3-3-5 structure. The most common type of flat is the expanded flat. In an expanded flat, wave B ends beyond the start of wave A, and wave C ends beyond (or even more substantially beyond) the ending level of wave A.

    We had a three-wave decline from 1.2537 down to 1.2206, followed by a three-wave advance to a new high at 1.2556 fulfilling the requirements for wave “A” and “B” of a flat. Considering that the subsequent decline requires five waves down to complete a motive wave (either an impulse or ending diagonal), odds favour an expanded flat as the operative wave pattern. The tricky thing here is that the decline seems to have just one of the required five waves. If this is the case, we should see smaller and smaller overlapping waves breaching 1.2206 one or two times, followed by a quick reversal once five waves are complete (see pic below). 1.2165 should not be breached.

    As shown earlier, the guideline for entering a trade when the operative pattern is a flat is to enter when prices move through the extreme of wave 4 of "C". This should help prevent you from trying to pick bottoms.

    EU-flat-small.

    Triangle scenario

    Is it a triangle? At this stage, it is definitely not. It is too early to say, it needs further price action but can’t be excluded in this wave 4 position, because sideways price action and converging trendlines often signal a triangle pattern (a running triangle in our case).

    A triangle reflects a balance of forces and always occurs in a position prior to the final actionary wave in the pattern of one larger degree, as wave 4 in our case. It contains five overlapping waves within converging trendlines that subdivide 3-3-3-3-3 and are labeled "A-B-C-D-E".

    If it is going to be a triangle, price should stay within the channel above 1.2206 and we can expect a new high within a few weeks.

    Ending diagonal scenario

    Being a terminating pattern, it shows up in the fifth wave position of impulse waves and in the wave “C” position of "ABC" corrections (e.g. flats). Once an ending diagonal terminates, a sharp and swift reversal starts that goes below to the level where it began and typically much further.

    The quick surge from 1.2206 to a new high at 1.2556 complies with the minimum requirements of an ending diagonal, but somehow it is not the real one. For me, it does not have the right look and seems to be much more a 3 wave structure.

    But if it is an ending diagonal, we have a complete 5 wave sequence from 1.1553 to 1.2556. I will give credence to this scenario if any advance finds resistance at 1.2360 and an impulsive fall starts on Monday or Tuesday, dropping far below 1.2165.

    In case of a still unfolding ending diagonal, we should see further consolidation far above 1.2206 (see my earlier post). For the wave 5 target, my sights are set on 1.2613, the level wave 5 will have traveled the same distance as wave 1 (topped at 1.1961).

    EU-impulse-down_small.


    The Dollar index

    Daily


    It's still premature to confirm the Dollar Index has bottomed. The main reason I favour this scenario is that I can’t count five waves down (see pink labelling). The favoured count suggests a wave 4 correction is still unfolding, so dollar strength is likely to prove temporary but it has more room for its run higher.

    Sive asked the question “Have you seen ever when the bears are in control of the market and a so strong collapse has happened and the next week you see an action to the upside that shows no even minor retracement?” in his weekend video with a good reason.

    The Wave Principle offers an answer: within an impulse, the fourth wave often sports a flat or expanded flat. And flats have a character like this. So if a flat scenario plays out, that can be an explanation:

    TV_DX-F_180223_h4.

    The bottom at 88.27 did satisfy expectations for wave "b" of an expanded flat, and the advance from there still can be the "c" leg of this „tricky” sideways pattern. Tricky means „c” wave is a third wave - a powerful motive wave - suggesting a start of a new trend with its steep rise. But when it is complete, price should turn sharply.

    There's no evidence the run is complete. Targets for „c” wave top lie between 90.60 – 92.00. Only breaching 92.50 would negate this flat scenario in favour of further advance, while 88.27 holds as support.

    It is still too eraly, but on the larger scale, the structure of current rally from 88.27 should help determine whether a larger wave (5) is underway or not (poking above 92.50 would be the first sign the dollar index may have bottomed already). If the impulsive drop starting from 103.82 was a start of a new downtrend, the advance from 88.27 would have a corrective structure and its progress will be limited to 97-99 area.

    Good luck for the coming week.
     
  3. Butcherfx

    Butcherfx Private, 1st Class

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    The Eur/Usd moving back from big resistance.

    EURUSDMonthly.

    Wash & rinse of level and we can see that high is holding. Likely pullback for this could be down to disrespected weekly COP and OP at 1.2155 / 1.2125 previous resistance now wıll act as support.

    EURUSDWeekly.

    Take note of that weekly sell is approaching and if we get through that we can move down to one of these confluence lower supports.

    EURUSDWeeklysupport.

    Looking at our daily; 1.2160-1.2170 confluence is the beginning of support together wıth weekly disrespected expansıons..Any bounce in lower timeframes (before reaching the support zone) will be a selling opportunity for a move into that support area.

    EURUSDDaily.
     
  4. Venelin

    Venelin Master Sergeant

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    Great job, Stag and much appreciated!
     
  5. Venelin

    Venelin Master Sergeant

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    Also on the euro I would consider another modern option-failed flat :) as described here:

    Capture.JPG Anyhow, on the bigger picture Euro is probably topping, and if we do not have the top already in @1.2556, 1.2615 would be perfect text book top. Do not get me wrong-I am not trying to catch tops. On the downside correction would end @ 1.1550 area and if not 1.1130 is next zone of interest.
     
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  6. Joh

    Joh Sergeant Major

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    Hmm interesting, am no expert but with a Recession (Fathom) forecast in the UK and the US dollar getting stronger you may have a point here.
     
  7. Venelin

    Venelin Master Sergeant

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    4E254E11-BA8F-449F-AC78-B821029BA967. I know it is too early to expect it,( almost pointless), but this also could be one possible scenario- starting with a Weekly DRPO LAL sell, then turning into H&S with 1.1130 ultimate target.
     
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  8. IanN

    IanN Private, 1st Class

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    Hehe ok Butcher, now I know that you share the content of Pieters Videos, not just the info but also the words you use are exactly the same ;)

    But continue by all means, the info is great and his and Sives Videos are the ones I love! Maybe someone who likes them will sign up on fibtrader.co.za/ for them :)

    Cheers
     
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  9. Venelin

    Venelin Master Sergeant

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    And here it is my very long term chart on the Euro, alternative on the parity (and beyond) scenario: 26-2-2018 г- 5-56-29.
     
    #9 Venelin, Feb 25, 2018
    Last edited: Feb 25, 2018
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  10. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Guys, This is awesome.

    Stag and Rodge - your analysis is very cool and valuable. This gives people a lot of material to take different looks at what is going on. Stag work is just amazing, so interesting material.

    Thanks guys,
    and to everybody how is involved and take part in this. When we all put here some views - this is quite different story compares to just mine analysis

    Hi, Ian
    As I know Roger (ButcherFX) has learned from Pieter. He has attended standard and private seminars on DiNapoli techinque... So, may be this is the reason...
     
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