Forex FOREX PRO WEEKLY, January 13 - 17, 2020

Sive Morten

Special Consultant to the FPA
Messages
14,036
Fundamentals

This week market shows moderate activity mostly driven by US-Iran incident, poor Germany data and Friday's NFP release. Although these factors are important in short-term, they barely impacts on long-term expectations. It is still an US/EU economy balance stands in focus. If EU will be able to show some improvement and breaking situation to better - EUR could turn to upside trade in 2020. If not - further drop stands in future.

German industrial orders fell unexpectedly in November on weak foreign demand and a lack of major contracts, data showed on Wednesday, suggesting that a manufacturing slump will continue to hamper overall growth in Europe’s largest economy. Germany’s export-dependent manufacturers are struggling with sluggish demand from abroad as well as business uncertainty linked to trade disputes and Britain’s decision to leave the European Union.

“The misery in manufacturing continues,” VP Bank economist Thomas Gitzel said, noting that the military escalation between the United States and Iran was now posing an additional risk for businesses.

Contracts for ‘Made in Germany’ goods decreased by 1.3% from the previous month, posting the steepest drop since July, data from the Economy Ministry showed. That confounded the Reuters consensus forecast for a 0.3% rise. Demand from other countries fell 3.1%, the biggest drop since February, whereas orders from domestic clients rose 1.6%. The reading for October was revised up to a rise of 0.2% from a previously reported fall of 0.4%.

Without bulk orders, industrial orders rose 1.0% in November, the economy ministry said, adding that the sector’s incoming orders had stabilized at a low level in recent months.

“At the same time, business expectations in manufacturing have brightened somewhat. So the outlook for industrial activity has improved a bit,” the ministry said.

German business morale hit a six-month high in December, a survey by the Ifo institute showed last month, suggesting that the German economy picked up in the fourth quarter despite the manufacturing crisis.

The German economy probably grew 0.5% in 2019, down from 1.5% in 2018. The statistics office releases preliminary gross domestic product growth data on Jan. 15.
For 2020, the government forecasts 1.0% growth, helped by a higher number of working days. On a calendar-adjusted basis, Berlin predicts 0.6% growth this year.

The U.S. dollar edged lower from four-week highs against the safe-haven Japanese yen and slipped versus the Swiss franc on Friday as possible renewed U.S.-Iran tensions weighed on market sentiment. The greenback was also pressured by weaker-than-expected U.S. payrolls data for December, which followed a batch of strong economic figures. The report, however, was unlikely to sway the Federal Reserve from its neutral stance on interest rates.

Over the last few sessions, the currency market has been badgered by geopolitical tension. The yen and Swiss franc had fallen from highs hit last week after the United States and Iran, in recent comments, moved away from an all-out conflict.

Concerns grew, however, after the United States imposed more sanctions on Iran on Friday in response to its retaliatory missile attack on U.S. forces in Iraq and vowed to tighten the screws further on the Iranian economy if Tehran continued to engage in what it described as terrorist acts.

U.S. Secretary of State Mike Pompeo, in an appearance at the White House, said he had “no doubt” that Iran had full intention of killing U.S. forces in a missile attack on a base in Iraq in retaliation for the U.S. killing of Iranian commander Qassem Soleimani.

“The fact that the U.S. is still sort of acting aggressively toward Iran and still taking a hard line, helped create demand for safe havens,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

Wall Street shares fell, while U.S. yields sank as investors flocked to the Treasury market.

The renewed U.S.-Iran tension came on the heels of a soft U.S. non-farm payrolls report. The dollar lost steam after the jobs data.

U.S. data showed non-farm payrolls increased by 145,000 last month, lower than market forecasts of 164,000. Data for October and November was revised to show 14,000 fewer jobs added than previously reported.

More importantly, average hourly earnings rose just 0.1%, after increasing 0.3% in November. Markets were expecting a 0.3% rise.

“The silver lining here is that a job and income growth slowdown has already been incorporated into our 2020 economic outlook. So while the December jobs and income data was somewhat worse than we forecast, the 2020 outlook for a U.S. GDP growth slowdown, but no recession, remains intact,” said Scott Anderson, chief economist, at Bank of the West.

The pound edged lower on Friday, holding near two-week lows against the dollar as a second policymaker joined Bank of England governor Mark Carney in signalling a potential rate cut. Bank of England policymaker Silvana Tenreyro said she would be inclined to back an interest rate cut in the coming months if growth does not pick up, adding to suggestions that the central bank is edging towards pumping more stimulus into the economy.

Carney said on Thursday there could be a “relatively prompt response” from the bank if the current spell of economic weakness persisted.

Although eventually likely, current talk of a potential rate cut is “premature”, said RBC chief currency strategist Adam Cole.
“Most of the comments we’ve seen have been quite qualified. there is probably sufficient uncertainty in terms of knowing how big the bounce in [economic] activity after the election will be, to make the case for waiting and moving later on than sooner,” he added.


Some optimism was generated for the British economy by a survey of recruiters on Friday that showed employers increased their number of new permanent staff for the first time in a year in December.

Analysts say that pound is now being kept weak due to uncertainty around Britain’s future trade relationship with the EU after a transition period expires at the end of the year.

British lawmakers approved legislation on Thursday that will allow Britain to leave the European Union on Jan. 31 with an exit deal, ending more than three years of tumult over the terms of the divorce. However, the vote was considered a non-event for markets after Prime Minister Boris Johnson’s landslide election win in December.

Still, the pound is expected to gain more than 3% against the dollar this year, supported by interest rate differentials and hopes for a smooth departure from the EU, a Reuters poll of nearly 60 forex strategists found on Friday. The polled analysts also expected that the pound would rise to $1.32 at the end of January.

In the short term, technical analysts highlight support for sterling at the 50-day moving average at 1.3010 that has so far held. But a break below 1.3000 is seen opening the path for sterling to a fall towards 1.2920.

Next week investors will be looking at GDP, output and inflation figures from the UK - all due on Monday.

The Democratic-led U.S. House of Representatives will send formal impeachment charges against President Donald Trump to the Senate as early as next week, House Speaker Nancy Pelosi said on Friday, setting the stage for his long-awaited trial.

Pelosi, the top Democrat in the House, has been engaged in a three-week cat-and-mouse game with Senate Majority Leader Mitch McConnell over the rules for Trump’s trial in the Republican-controlled Senate.

Democrats have demanded it include new witness testimony and evidence about the Republican president’s pressuring of Ukraine to probe former Vice President Joe Biden, a leading Democrat running for the right to face Trump in the November election.

CFTC data shows increasing of longs. Thus, on GBP net position has turned to bullish, while on EUR net short position has decreased, despite Middle East crisis in the beginning of the week:
1578744053446.png

Source: cftc.gov
Charting by Investing.com


In general, as Reuters reports - Speculators cut their net long bets on the U.S. dollar in the latest week to the smallest position in 18 months, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

The value of the net long dollar position was $9.07 billion in the week ended Jan. 7, down from $14.82 billion last week. This week's long U.S. dollar position is the smallest since the third week of June 2018.

In a wider measure of dollar positioning that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real and Russian ruble, the U.S. dollar posted a net long position valued at $4.33 billion, down from $10.98 billion a week earlier.

On Friday, the dollar fell from four-week highs against the safe-haven yen and slid versus the Swiss franc as investors fretted over possible renewed geopolitical tensions between the United States and Iran. A softer U.S. December employment report also dented the dollar. The recent thaw in trade-related tensions between the United States and China has sapped demand for the safe-haven U.S. currency.

Speculators boosted their long position in sterling to 16,510 contracts, up from 12,393 contracts in the previous week. The pound edged lower on Friday, holding near two-week lows against the dollar as a second policymaker joined Bank of England governor Mark Carney in signaling a potential rate cut.

As new financial year has started, analysts are hurry to make forecasts for the year, or even for longer perspective. The Fathom consulting is not an exception. It's new report, The 2010s – a decade in review is dedicated to decade ahead view, making a suggestion on global economy performance. Here is few extraction from it:

Global growth undoubtedly slowed last year, as an uncertain outlook for global trade led to manufacturing recessions in several major economies. However, the industrial slowdown has not yet fed through to the wider economy and Fathom’s Leading Indicator (FLI) suggests a brighter outlook for the New Year.

The decade began with a debt crisis in the euro area that saw investors fear for the solvency of many sovereigns in the periphery, with Greece still flirting with the idea of Grexit as recently as 2015. Around that time, investors also recognised that the slowdown in China was worse than previously feared, with Fathom’s China Momentum Indicator falling below 2%. 2016 saw the election of Donald Trump and the start of a prolonged period of trade uncertainty. Despite all these headwinds, the global expansion has continued, even if the pace of that expansion was slower than hoped.

The recovery has remained fragile and monetary policy has thus far failed to move away from the effective lower bound with low rates not proving to be the quick fix that had been hoped for ten years ago. In fact, Fathom analysis suggests that persistently low interest rates could prevent the process of creative destruction, thus lowering productivity and harming the supply side of an economy.

Looking ahead, Fathom expects trend growth to be lower still in the 2020s than it was in the 2010s. This reflects continued weak productivity growth and a further deterioration in the demographic backdrop, with the size of the working-age population set to decline in many economies. There will of course be peaks and troughs with some countries (most notably Germany, Japan and the UK) likely to see growth substantially below trend this year. For China, by some metrics now the world’s largest economy, the ultimate fate is likely to be Japanification and we continue expect the economy to slow in the coming quarters, before policy stimulus can kick in. With growth in most countries unlikely to exceed trend and technological change arguably leading to a flattening of some firms’ marginal cost curves, neither higher inflation nor higher rates are likely to be the defining features of the 2020s.


1578748282596.png


Technicals
Monthly


January has started with downside pullback which means just pause in long-term scenario and doesn't clarify anything yet. Bounce stands from 2020 Yearly Pivot, which could make sense later, especially if EUR will fail to break it up. In fact, its breakout is a crucial for long-term bullish scenario.

Last time we have discussed everything that relates to longer-term scenario. Thus, we said, that monthly time frame is the one where technical factors meet fundamental once. We've considered possible bullish scenario, which could take place if we're wrong about US tariffs on EU and if EU economy will show at least some improving. Right now investors keep net short positions on EUR (by the last CFTC report), understanding the same risks that we've mentioned previously and this is reasonable. Positive shifts in EU economy have to become stable and regular with no US tariffs on horizon.

From the technical point of view, we have October reversal month and 2019 Yearly Pivot Support 1. This year it holds downside action. We know the major feature of pivot supports - it has to hold downside action if this is a retracement. This is particular what we have right now and this is potentially bullish sign.

October candle is still valid and keeps its reversal features, as lows stand intact. Now everything depends on EUR itself. It has to show more active upside performance. The vital point which determine everything is 1.09 lows. It seems that it is just two weeks till the new year, but lows also stand just 150 pips from current market.

Conversely - sudden drop below 1.09 area and YPS1 will unlock our bearish view and downside continuation back to 1.03 lows. EUR has to show breakout either above 1.12 area or below 1.09 to unleash larger time scale setups. Until we stand in this range - we deal with tactic short-term setups on daily and intraday charts.

Finally, we have the bearish grabber that we treat as additional risk factor, because it also coincides with YPP, providing more resistance.

EUR has to move above YPP to erase the grabber and prove its strength. This is what we will watch here. Besides, market just completes harmonic upside pullbacks keeping major downside tendency intact. So it is no reasons for self-congratulations yet.

eur_m_13_01_20.png


Weekly

It is tough time for EUR on weekly chart as well. In addition to YPP, here price meets Fib level and upper border of the channel. And the breakout of this level is crucial for bullish scenario. Here, of course, we would like to see stronger upside performance. Currently it is too humble, telling no thrusting power in the motion.

To support monthly scenario weekly chart has to form bullish reversal, and preferably by some clear pattern. Currently it seems that we should focus on reverse H&S pattern. Current AB-CD pattern has XOP around 1.1450 Fib resistance and potential neckline. Right arm should be formed later around 1.1150 area.

This anticipated pattern is also useful as we could make judgement on EUR direction by comparing how it matches to the H&S project. While it follows it - it keeps bullish scenario. But if something goes wrong - this will be clear signal that sentiment changes and EUR turns downside.

Here is the low of "C" point has vital meaning, as drop below it tells that market destroys H&S setup. This will mean just one things - market will drop and put under question monthly bullish scenario as well.

eur_w_13_01_20.png


Daily

Here, on daily chart we do not like strong sell-off to support area, but would like to believe that K-support strength will be enough to keep downside action, which we could treat as "retracement" by far. Due NFP report and some other data EUR finally starts to show reaction that we were looking for in recent 2-3 sessions, since price has completed our 4H AB=CD pattern.
Taking in consideration some changes in net speculative positions as on EUR as on USD in general, it still could happen that we will get upside action right from here. Anyway, EUR has no choice. Because this level is equal to bullish scenario. Breaking the level will mean breaking the scenario. As we've said - it is relatively safe to buy at support, because at least 30% bounce should follow. And then we will see, what will happen next:
eur_d_13_01_20.png


Intraday

On 4H chart our "222' Buy pattern has started well. Also we have here hidden bullish divergence. As minimum target we have to use 1.1143 level, but it is also possible that EUR will proceed higher:
eur_4h_13_01_20.png


As EUR is done all preliminary steps for bullish scenario - completed important AB-CD extensions, reached major K-support on daily, formed bullish reversal price action on 1H chart - the one of the scenarios that we have is long entry at one of the minor supports, with stops below recent lows. EUR will not drop occasionally, because all major targets are hit. This drop, if it will happen - will be downside continuation. We do not know whether this scenario will work or not, but odds tell that this is best entry point by risk-reward ratio and combination of background factors.

eur_1h_13_01_20.png


Conclusion:

Long-term trend is yet to be clarified as event of this week mostly was tactical, making no impact on long-term EUR/USD balance. Technically, EUR stands at the edge and close to both scenarios.

In short-term perspective, we will keep an eye on EUR performance around major 1.11 support area, whether currency will be able to hold above it, or not.
 

sveckar22

Corporal
Messages
79
12.1.2020

Hi guys, I prepared a COT analysis for this week.

I wouldn't mind sharing my Spreadsheet file with everyone here, but I can't upload Excel file at the same time I don't feel comfortable sharing the link to my Google Documents since it includes my email address, does anyone know how I could share this file?

GOLD:

Last week Non-Commercial traders added to both their Longs and Short positions. The increase in Longs was 1,860 contracts, while the increase in Shorts was much bigger at 7,494 contracts which led to a decrease in Net Long positions.

12.1.2020 COT GOLD.JPG

DXY and EURO:

Not much has changed in DXY positions, we saw a small decrease in both Long and Short positions, but Net Long positions increased just slightly.

12.1.2020 COT DXY.JPG

And the Euro on the other hand Non-Commercial traders closed 16,720 Short positions and only 4,039 Long positions. This led to a decrease in Net Short positions.

12.1.2020 COT EURO.JPG

AUD:

A small increase in Long positions and a big decrease in Short positions, led to a significant decrease in Net Short positions.

12.1.2020 COT AUD.JPG

CAD:

Looks like we are getting a nice Short setup on USD/CAD, also Non-Commercial traders are adding to their Short positions and closing their Long positions. Last week Net Short positions increased by around 15,000 contracts.

12.1.2020 COT CAD.JPG

This is what I am looking at on the short term technical part, searching for a short position.

12.1.2020 UC 4H.JPG


GBP:

Non-Commercial traders are adding to their Long positions and closing their Short positions. Net positions are in positive territory for the third consecutive week now.

12.1.2020 COT GBP.JPG

JPY:

The situation on JPY is really interesting I think. As we saw USD/JPY rally last week, Non-Commercial traders have been closing their Long positions and adding to their Short positions, which led to a decrease in Net Long positions by around 13,000 contracts.

12.1.2020 COT JPY.JPG

NZD:

Non-Commercial traders have been adding to their Long positions, while they haven’t been closing many Short positions in the last few weeks. Net positions are now barely standing in negative territory.

12.1.2020 COT NZD.JPG

CHF:

A decrease in both Longs and Shorts led to an unchanged ratio between the two, while Net Long positions have decreased just slightly.

12.1.2020 COT CHF.JPG
 

Sive Morten

Special Consultant to the FPA
Messages
14,036
I wouldn't mind sharing my Spreadsheet file with everyone here, but I can't upload Excel file at the same time I don't feel comfortable sharing the link to my Google Documents since it includes my email address, does anyone know how I could share this file?

Hey, you could upload it on Google Disk and provide it by link address.
 

sveckar22

Corporal
Messages
79
Hey, you could upload it on Google Disk and provide it by link address.

Here it is, I hope it will work :)


 

Sive Morten

Special Consultant to the FPA
Messages
14,036
Morning everybody,

Let's keep up with our EUR setup. Our Monday entry setup on 1H chart has worked nice, and EUR has completed minimum target, reaching 3/8 resistance on 4H chart:
eur_4h_14_01_20.png


On daily chart now situation stands difficult. If you take a look at Dollar Index - you'll see that market is forming bullish H&S pattern right at important support area. It means that on daily EUR we also could recognize direct H&S pattern, accompanied to wide divergence:
eur_d_14_01_20.png


It means that future is not as cloudless as we would like it to be. First is - move stops to breakeven and book 50% of your result. Then see, what will happen. Since right arm of H&S is not completed yet - EUR has potential to reach 1.1180 area within this week. But the way, how it will happen could be different. Take a look, this is DXY. If it goes to the XOP first - EUR will have to stop upside action as well. Only if DXY starts to form right arm immediately - EUR could proceed directly to 1.1180 XOP target on 4H chart. But we do not know it for sure, so - manage your position as we said above...
dxy_d_14_01_20.png
 

Sive Morten

Special Consultant to the FPA
Messages
14,036
Morning guys,

Today we continue our cross-market view on EUR - DXY situation. It seems some clarity has come, at least DXY was not able to proceed right to daily XOP. In general, situation on daily EUR stands bearish, because trend stands bearish and current upside action is faded by the trend. So it cares features of just a retracement. Taking in consideration H&S pattern on daily DXY index - here we could get it as well. So, it might be that EUR is forming a right arm with the top around 1.1180 area:
eur_d_15_01_20.png


Our worry was not in vain yesterday. Indeed, EUR has shown some retracement and we've got different shape of AB-CD pattern. Now its OP target stands at 1.1165. At the same time, we have nice bullish engulfing pattern and grabber price action (on DXY as well), which shifts odds in favor of upside continuation. It means that DXY could start forming right arm today and EUR could proceed higher:
eur_4h_15_01_20.png


Since all construction mostly is based on recent lows of engulfing & grabber pattern. We the have the only setup here is to buy against this lows. Probably we could consider minor retracement on 1H chart. If you prefer more conservative approach, then, it will be better to wait either when DXY hits XOP to go long, or, when H&S will be in place and consider short entry around right arm's top...
eur_1h_15_01_20.png
 

Sive Morten

Special Consultant to the FPA
Messages
14,036
Morning guys,

Let's keep up with the EUR. Although it doesn't show impressive performance and we mostly deal with itraday minor swings, but -that's the only we have right now.

Yesterday our setup is done well and EUR indeed has reached 1.1160 area. What's next? On daily chart nothing is going on, EUR keeps bearish context by far as upside action is stuck around MPP and "covered" (better to say "faded") by bearish MACD trend. It means that upside action should be treated as retracement by far... Here we consider possible H&S pattern because of DXY performance, where this pattern looks more clear.
eur_d_16_01_20.png


Still, as the top of right arm has not reached yet, EUR potentially could climb a bit more - somewhere to 1.1180-1.12 area. Upisde action shows good pace, 3/8 level already has been broken. At the same time - we have "222" Sell", which potentially could trigger retracement:
eur_4h_16_01_20.png


Still OP target has not been reached for 3 pips. It means that EUR could show "final spike" to hit OP and retracement will follow. Conversely, EUR could just continue upside action. This is also possible. Take a look at 1H chart, I marked our entry by "arrow" symbol. It means that now we have a lot of options what to do with position. Definitely we should move stops slightly below K-support area around 1.1130 and maybe book 50% of result right now. In this case we are ready to any scenario. On DXY we should control rectangle consolidation that was broken yesterday. Market should not return back inside of it. In this case - close your longs here, on EUR.
eur_1h_16_01_20.png
 

Sive Morten

Special Consultant to the FPA
Messages
14,036
Morning everybody,

Let's keep up with the EUR. Daily situation stands the same - EUR keeps bearish context as upward action is faded by existed bearish MACD trend. So, we have to treat this action as retracement, at least currently.
eur_d_17_01_20.png


Based on an action that we see on intraday charts, it seems that it would be better to not take any new long positions by far. First, is - Dollar index returns back inside broken consolidation:
dxy_4h_17_01_20.png


And EUR is following our scenario - it drops right after reaching of OP target:
eur_4h_17_01_20.png


On 1H chart our setup with "222' Buy on top has worked fine and OP has been hit, but later market dropped below K-support. Another reason why I suggest stay aside today is DAX index. It seems that DAX could challenge all time highs and try to complete major OP target above them. Although there is W&R is possible, but while stocks will rise, EUR will stay under pressure. So, today probably it would be better to not buy it.
eur_1h_17_01_20.png
 
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