FOREX PRO WEEKLY July 06-10, 2015

[Sive Morten]

Fundamentals

Although today we will talk on Canadian dollar, I would like to share with you interesting article that disclosures all stakes in Greece bet. It shows questions that stand under curtain and behind just Greek debt and creditors.
Paul Craig Roberts Warns Greek Government May Be Assassinated In This Crisis If They Pivot East To Stop World War III | King World News

Reuters reports dollar fell against a basket of currencies on Friday, hurt by softer-than-expected U.S. employment data amid thin volumes with most investors staying on the sidelines before Greece's weekend referendum on bailout conditions.

Volumes eased in the afternoon session in Europe with U.S. markets closed for Independence Day. Caution reigned, with investors trimming positions in riskier assets and currencies before the Greek vote on Sunday on an international bailout deal that could determine whether the country stays in the euro zone.

"With liquidity thin and the Greek referendum coming up, not many would want to take large positions going into the weekend. The U.S. jobs report has taken the wind out of the sails for the dollar for the time being," said Alvin Tan, currency strategist at Societe Generale.

The U.S. payrolls report showed employers hired 223,000 workers last month, fewer than the 230,000 increase forecast in a Reuters poll. The government also downgraded its reading on April and May job growth, while wage growth remained subdued.

Investors had been hoping that solid improvement in the labour market would reinforce expectations that the Federal Reserve will raise interest rates as early as September. Still, the report was not gloomy enough to quash expectations that the Fed would tighten later this year.

All in all, major currencies were hugging familiar ranges, with the euro supported by a poll that showed supporters of Greece's bailout terms taking a wafer-thin lead over the "No" vote backed by the leftist government.

Another poll by the Avgi newspaper, though, showed the 'No' camp were just in front.

"For the euro, a 'Yes' vote could lead to a bounce, but we would still prefer to sell it on rallies," added Societe Generale's Tan.

The International Monetary Fund warned on Thursday that Greece would need an extension of its European Union loans and a potentially large debt writeoff if it cannot implement economic reforms and its growth slows.

Analysts said negotiations after a "Yes" vote are likely to be prickly, and would keep gains in the euro limited.

Meanwhile, the Australian dollar fell to a 6-year low, hurt by disappointing domestic retail sales data and a continued sell-off in the Shanghai stock market. China is Australia's biggest trading partner and the Aussie is used as a proxy.

"We expect the Aussie to trend lower towards $0.72 medium-term," said Jane Foley, senior currency strategist at Rabobank.

Recent CFTC data does not give absolutely clear picture, but positions of bears look preferable. Open interest mostly was dropping on previous month, as well as Long positions, while shorts stand stronger and shows increasing since May. Two weeks ago we could see significant drop as in open interest as in long positions, while shorts again has showed increasing. This action mostly points on better chances of the bears to control market in short-term perspective.

Open Interest:

Speculative Longs:

Speculative shorts:

Technicals
Monthly
Monthly picture barely has changed since our previous discussion in the beginning of June. Price just has moved slightly higher inside the flag pattern. Monthly analysis mostly still stands the same and points on upward continuation to major target. Recent action just confirms that these thoughts seem correct by far.
Here is again our monthly analysis.
CAD trend is bullish. We do not have any yearly pivots here because CAD has passed through all of them, even YPR2 at 1.23 area. Last time we’ve discussed big AB-CD pattern in progress that already has passed above 0.618 target and has major destination point at 1.3420 that creates Agreement with major Fib resistance. This pattern is still valid and stands as cornerstone of our analysis.
As market right now stands at 50% Fib level and has reached monthly overbought – this creates Stretch pattern and CAD almost whole month stands in tight range. All these moments lead us to conclusion that upward action probably should continue. Here are our arguments:
- Market has not reached major AB=CD target and odds suggest that market never shows reliable bearish reversal until this target will not be hit;
- We see acceleration candle that increase chances on upside continuation. It seems that market has stopped mostly due overbought and Fib resistance;
- Market stands very tight right under resistance and forms the shape of bullish flag.
All these moments point on doubts of possible downward reversal, especially taking into consideration CFTC data.”
Thus, previous analysis has led us to conclusion that market probably will show bounce down to respect resistance and overbought, but this should not be reversal, but retracement that was triggered by perfect weekly DRPO “Sell”. Now this setup has been finished and market has returned back to upside action.
Market is not at overbought any more, but trend is still bullish here. If you will take a look at DOSC indicator you’ll see that it is coiling around zero. It means that Stretch pattern mostly has reached its target and worked out. Market was able to show retracement to the half of thrusting candle and this suggests possible further upside continuation. Besides, price has returned back in flag pattern that could be treated as “bearish trap” setup and also suggests upside breakout of the flag.
So, monthly picture mostly stands in favor of upside continuation in long-term perspective to our major long-term target 1.3470 – Agreement with major Fib resistance level.
Finally, previously we’ve discussed possible deeper downward retracement before market will turn to upside continuation; so, let’s see what has happened and what to expect from CAD now.

Weekly
On weekly chart we see very important changes since our last analysis. Last time we were wonder what upside action is. As market has formed perfect DRPO “Sell” – it could be just reaction on oversold and after that market could continue move down and form 2-leg AB-CD retracement. That is what we were talking about above – in monthly chart analysis. From the other side, CAD could continue move up as it is suggested by monthly picture. Now we see that CAD has turned finally to second scenario. In fact downward AB-CD was erased, since last week CAD has exceeded “C” point of this AB-CD pattern. In general picture looks bullish here, price has moved above MPP and almost has reached MPR1. Overall picture has the signs of bullish dynamic pressure, since trend holds bearish but market forms higher lows.
The one negative sign here is bearish stop grabber that has appeared also last week. As market is not at overbought this pattern has fewer chances to succeed. Besides, now there are more factors stands in favor of upside continuation, including oil prices, they have dropped significantly in June – almost for 10%. Now Brent August futures are trading around 55$, while in the beginning of the month they were around 61$.
That’s being said, theoretically market keeps chances on possible bearish reversal, but we think that chances on this scenario are very shy. Also, guys, you could easily recognize butterfly “Sell” pattern here that has target at 1.34 area – almost at the same level as our major monthly one.

Daily
Here again, we need to recall what we’ve discussed last time to better understand what to expect. Trend is bullish daily chart. Previously we’ve found very important tool – trend line that we’ve used for estimating direction. Last analysis was rather successful. We didn’t get completed AB=CD action, but DPRO “Sell” has worked excellent around first touch of this trend line. So, this action clarifies the nature of first downward bounce.
Since upside action from 1.1850 to trend line was reaction on weekly oversold, market should have continued downward action right after oversold condition been corrected, if market really was bearish. But this has not happened. As soon as DRPO “Sell” has been completed, CAD again has turned north and now is testing trend line for second time. Price even has not completed 0.618 AB-CD down on this DRPO Action. This clearly shows that market is not bearish. Now it stands again in similar conditions – overbought at trend line, but now we do not have any DRPO “Sell”. Instead of that we have upside AB=CD pattern and market already has passed its minor 0.618 extension. So, it tells that minor bounce down is possible, but it is definitely should not be too significant.

4-Hour
4-hour chart shows also inner AB=CD pattern that has been completed on Friday (right at daily trend line and overbought). May be we will get DRPO “Sell” here, it is possible. Anyway, despite how retracement will start, our major level to watch is 1.24-1.2430. We are not interested much with 1.25 area, although this is Fib level and WPP, mostly because market stands at overbought and this fact suggests deeper retracement. While 1.24 area, in turn, is significant support – MPP, WPS1 and K-support area. There we will be watching for buy opportunities.

Conclusion:
Long term analysis and fundamental background confirms our long-term view on CAD and its long term target around 1.3470 area. CFTC data, Crude oil prices and dollar appreciation now support upside action on USD/CAD currency pair.
In short-term perspective we have to find area where we could take long position. By now we think that 1.24-1.2430 area looks attractive for that purpose.



The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.

 

[Sive Morten]

FX Daily Update, Tue 07, July 2015

Good morning,


Reuters reports The euro slipped in Asian trading on Tuesday, but remained well off lows touched in the previous session ahead of a euro zone summit that investors hope might offer a way for Greece to climb out of its debt crisis and stay in the common currency.

"Maybe the market is pricing in some kind of possible agreement, though no one is eager to buy the euro," said Masashi Murata, currency strategist at Brown Brothers Harriman & Co in Tokyo.

Investors were also awaiting monthly U.S. trade data later on Tuesday, he said. Economists have said that the stronger greenback is pressuring exports.

"People would like to see what is going on with the U.S. trade deficit, which also can give some clues to the second-quarter growth rate in the U.S.," Murata said.

After Greek voters overwhelmingly rejected austerity at a weekend referendum, France and Germany urged Athens on Monday to muster further proposals and restart talks with its lenders. The country's banks have already been closed for over a week, and only emergency funding can avert their insolvency.

Germany's EU commissioner told German newspaper Bild that the Greek government would probably have to start issuing IOUs to pay wages and pensions and settle outstanding accounts, and that would render Greece unsuitable to remain in the currency union.

Despite the common currency's relative resilience in the face of the Greek crisis, the country's murky future in the euro zone and its deep fiscal woes cloud the currency's long-term prospects.

"The ongoing uncertainty will be negative for the euro and risk appetite," Kathy Lien, managing director of FX strategy for BK Asset Management, wrote in a note to clients.

"Therefore we like selling euros on the 1.11 handle. Anywhere below that provides poor risk reward," she said.

"I understand why the Greek people are venting their frustration. Fiscal consolidation is not making progress. They are in deflation. The world expects Greece and the EU to cooperate on a final bail out plan," Japanese Economics Minister Akira Amari said on Tuesday.

The Swiss franc, another perennial safe-haven currency, was nearly flat on the day against the euro, which was buying 1.0411 francs .

The Swiss National Bank, which confirmed last week it had been intervening to weaken the franc, declined to comment on market speculation on Monday that it was continuing to intervene.


So, as uncertainty on Greece still holds, EUR - also still holds in the range of last Monday. We already have talked about it in our recent analysis dedicated to EUR and nothing has changed yet. The same is on GBP - it is coiling around lower border of the wedge.
Meantime CAD shows some progress and we can make some update on it.

On daily chart we see that CAD is passing through trend line and MPR1. It tells us two moments. First is - this is not a retracement within bearish trend anymore. Second - market has decided to continue move directly to 1.2770 target. Retracement that we've expected to see - has not happened. It means that retracement will happen a bit later, after CAD will reach the target:

On 4-hour chart we do not see big sense to keep levels that we've drawn on weekend (we will need to re-draw them anyway). The thing that is really interesting for us is upside AB=CD pattern. Market has come passed through 1.0 extension, hence, our next destination is 1.618 one and it stands around 1.2780 - almost in the same area as daily AB=CD target:

So, this action confirms our analysis and expectation of further upside continuation. In short-term perspective, we expect move to 1.2770 area first, second - retracement down.

 

[Sive Morten]

Good morning,


Reuters reports dollar and yen gained on Wednesday with investors seeking the perceived safety of these currencies as Asian equities, notably volatile Chinese shares, fell across the board and hurt risk appetite.

The common currency had received some reprieve overnight to poke above $1.10 after euro zone members gave Athens until the end of the week to come up with a proposal for sweeping reforms in return for loans.

"The Greek situation tends to develop only during the European trading hours. Meanwhile in Asia the chief concern is how far Chinese shares could fall. Another factor to watch as a barometer of sentiment is sliding commodities, particularly copper," said Masafumi Yamamoto, senior strategist at Monex in Tokyo.

"The dollar is doing well against most currencies but the yen. Lower U.S. debt yields are one factor, impact from Bank of Japan governor Kuroda is another. It has become harder for the dollar to advance ever since he spoke out on the yen's weakness," Yamamoto said.

Although he later backtracked somewhat, BOJ Governor Haruhiko Kuroda described the yen as being "very weak" early in June, which the markets perceived as a form of verbal intervention.

The Shanghai Composite Index, already down about 16 percent so far this month, suffered another sharp slide on Wednesday as investors shrugged off a series of support measures by Chinese regulators.

U.S. crude hovered near three-month lows while three-month copper on the London Metal Exchange fell to a six-year trough overnight as the Greek debt saga and more recently turbulence in the Chinese stock markets fanned global growth fears.

The Australian dollar, usually sold off in times of heightened risk aversion, slumped to a fresh six-year low against the greenback.

The Aussie, often used as a China proxy, fell as far as $0.7390 , reaching a low not seen since May 2009.

Focus fell to how the European risk asset markets react to nose-diving Chinese stocks later in the day and Greece's formal request for a two-year loan programme it is supposed to submit on Wednesday, one of the steps Athens has to take before Sunday's European Union summit when its fate is likely to be decided.

Analysts at BNP Paribas said there was no reason to be particularly optimistic at this stage and warned that even a full resolution of Greek stress would still leave the door open for renewed euro weakness.

However, "price action does suggest scope for more short-covering if markets begin to anticipate a deal," they wrote in a note to clients.



So guys, Greece saga will be continued till Sunday. Currently we could take a look either at CAD or GBP as most interestng majors. Since on CAD we've spoken just yesterday, it has hit our target BTW and now we should be ready for retracement, let's take a look at GBP today.

Situation on cable is a bit complex. Recall that our former expectation of upside action to 1.60 mostly was based on weekly bullish engulfing pattern, that takes the shape of AB-CD pattern on daily chart. This target has not been quite completed. Now market has broken lower border of wedge pattern, but this is not sufficient argument to speak on final reversal down.
Right now market is approaching to very strong support area - Daily K-support, MPS1, oversold and attention - harmonic swing. Theoretically if market will keep harmonic swing, it still could turn up, form, say, 3-Drive "Sell" or something of that sort and complete 1.60.
That's why this 1.53-1.54 area is so important. If market will break it down - next destination probably will be again 1.45 lows...

On 4-hour chart we will get AB-CD 1.618 completion point:

On hourly chart market is forming Butterfly "buy"

So, you could either wait for clarification and then take corresponding position - either long if market will hold here or short, if market will break through 1.53
Or, second scenario - stick with hourly butterfly and see what will happen. Move stop to breakeven at first possibility. Because market right now stands at the edge between bullish and bearish trend.

 

[Sive Morten]

Good morning,


Reuters reports yen surrendered some of its gains on Thursday as a smidgen of stability returned to recently volatile Chinese stock markets, and investors locked in gains after the Japanese currency's biggest one-day rally against the greenback this year.

China's stock markets have plunged roughly 30 percent over the last three weeks. But the sharp selloff abated on Thursday, as investors took heart that measures taken by Beijing may have stemmed the savage correction.

Chinese police visited the office of the country's securities regulator on Thursday to investigate suspected "malicious" short-selling of shares, state news agency Xinhua said, the latest effort by authorities to prevent a further meltdown in the stock market.

"The yen's downside is probably limited, because nobody knows what will happen in China, and Japanese stocks are still fragile," said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm.

Data released early in the session was yen-positive, suggesting the Bank of Japan might have less reason to expand its ultra-loose monetary policy. Core machinery orders rose to a 7-year high in May, up for the third-straight month.

Japanese Prime Minister Shinzo Abe, speaking at a seminar, also said excessive yen strength has been corrected due to economic policies he put in place when he took office in late 2012.

This week's volatility in Chinese equities managed to distract many Asian market participants from developments in Greece in recent days.

Athens has formally applied for a three-year loan and European authorities launched an accelerated review of the request.

The greenback also came under some pressure overnight after U.S. yields eased following the release of minutes of the Federal Reserve's June meeting.

San Francisco Fed President John Williams said he still believed the Fed will start to hike this year but added he was "wary of acting before gathering more evidence that inflation's trajectory is on the desired path."

Greg Moore, senior currency strategist at RBC Capital Markets, said the minutes were taken as sounding slightly more cautious with 'many participants' concerned about the potential spillover from the Greek situation.

"Keep in mind these minutes reflect the committee's view of a few weeks ago and the Greece situation has only worsened since then," he said.
"On top of that, external spillover risks from elsewhere —China — have crept up in a significant way as well since then."

Also helping lift the Aussie on Thursday, data showed Australian employment defied expectations and rose for a second month in June, suggesting labour market conditions were improving.


So, guys, today we have to look at CAD again. On other majors there are no something really interesting. To be honest, it is really the task to find somehting for daily updates right now...
As we've suggested, CAD should touch 1.2768 target and complete AB=CD pattern and this has happened. Now market stands at overbought and AB-CD point. This is directional setup that DiNapoli calls as "Kibby trade". Anyway, situation suggests either retracement or at least flat action until CAD will abandon overbought:

We think that till the end of the week CAD hardly will continue move up, because Crude Oil also has hit strong support area:

If retracement will happen, then daily traders could watch for 1.25 area for taking long position. It includes former top, K-support and WPP:

Deeper retracement will be not welcome, because in this case CAD will move too deep below broken trend line. And this will be bad sign for bullish sentiment. Scalp traders probably could watch for scalp short, but we do not see any reversal patterns yet - just AB-CD's.

 

[Sive Morten]

Good morning,


Reuters reports euro rose across the board on Friday, jumping more than 1 percent against the yen, on optimism that Greece was making some progress in its efforts to secure more funding and stay in the currency union.

The yen and Swiss franc, currencies which tend to do well during turmoil in financial markets, both lost ground as demand for riskier assets picked up on the back of an extended rebound in Chinese shares.

The euro also rose 0.5 percent against the Swiss franc and the British pound . And while many in the market were hoping for a deal, there was a degree of caution about holding large bets in the euro going into the weekend.

"If there is a deal struck at the weekend, the upside for the euro is limited given other things going on," UBS currency strategist Geoffrey Yu said. "But if something bad happens, we would see the euro give up some of its gains."

Traders said the upside for the euro was rather limited given the European Central Bank has embarked on a trillion-euro asset buying programme, a policy that is likely to keep the currency on the back foot.

Also helping risk sentiment were signs that Chinese equities may have stabilised after a plunge. Shanghai shares rallied for the second straight day on Friday, helped by emergency steps from the government to arrest the dive.

"True, the yen is on the defensive. But it still has a long way to go before it reaches the 124 handle, where it was before, reflecting the still-cautious mood in the market," Barclays chief Japan FX strategist in Tokyo, Shinichiro Kadota, said.

"The China situation is fundamentally larger in scale than Greece. We just might see Greece come to a sort of resolution this weekend. But on the other hand Chinese stocks are up only after drastic government measures, so it is not yet a full 'risk on' by all means."

In addition to China and Greece, a speech by Federal Reserve Chair Janet Yellen on the U.S. economic outlook - due at 1630 GMT - will be a major focal point of the day.

Traders said any resolution to Greece's debt crisis might give the Fed added confidence to start lifting rates this year.


Today we will take a look at EUR. At first glance nothing has changed there. But this is not really true. If we will get lucky, we could get rare DiNapoli directional pattern that calls "H&S Failure".
On daily chart we indeed has nothing new. Our analysis still stands around long-ranged candle and its possible breakout. Here we will not repeat again the same thoughts. Just keep in mind 1.1150 level of MPP:

On 4-hour chart we see that market stands at strong K-resistance and WPP:

And now is the most interesting. On hourly chart we see that EUR is forming reverse H&S pattern. DiNapoli "H&S Failure" pattern suggests existance of strong resistance (K-area+WPP+MPP) around neckline. The major idea tells that after neckline breakout market meets strong resistance and it has no power to pass through it. This leads to price return back below neckline. As a result we could get early signal of failure, while classical failure will happen only if price will close below right shoulder.

But this is not end yet. H&S failure will lead market below head, and this in turn, will mean downward breakout of daily long-ranged candle. So, perpsectives of this pattern are thrilling. Now let's see whether we will get it....

 

[Brett Reynolds]

Who is this Dr King Sive!? My MI5 or CIA counterparts here in London have never heard of him!? I also asked around a few of the Russian Oligarchs and neither had they!? However, i contacted one of my Film Producer friends as i used to be an Actor here in London. It seems Dr King has been hired to write the script for the follow up movie 'Troy2' featuring Brad Pitt and Eric Bana! The amount he is being paid has not been disclosed as
The National Rifle Association in America and 'Tea Party' crowd want to keep it a secret!
I did here a rumour that he will be appearing at the studios of RT News here in London to publicise the film before the end of 2015! I wouldn't go there if i was him as 'Muslim extremists' have threatened to 'Blow it up' several times already!

 

[VStar]

I can't help but wonder if you missed this trend line also. I'm pretty new so this is more of a question. See the red line I drew ? Oh, and this is the hourly chart.

 

[RahmanSL]

Good analysis Chief, covering both technical and fundamental which I have added onto my trading notes
These past few weeks, I have basically been trading only the USD/CAD but mostly on the short side 'cause if and when I have to or want to leave opened positions running for TP to be triggered, at least I get some positive swaps instead of having to pay for them.
But if I see clear signs that market is trending either directions due to some news or other, I would do some quickie scalp trades to add to my equity.

The biggest worry for me in trading the USD/CAD is sudden and unexpected disruption to world oil supply (e.g attacks/hostile takeover on/of major oilfields, major accidents in offshore rigs, etc) that could very quickly changed the equation to the USD/CAD as the Canadian is oil export dependent.

The main reason I prefer trading the USD/CAD is because in event there is any sudden appreciation of the CAD it will be capped by the impending and widely expected US interest rate raise which will certainly rescue my shorts on the USD/CAD when it does finally come into effect.
But in the meantime, while waiting for the "US rescue", I will still be making some money from daily positive swaps on these "short" losing positions.

I look forward to more insights from you on the USD/CAD.....and thank you very much for sharing.

 

[stelore]

Dear Sive, thanks a lot for your generous work.

Waiting for news for EURUSD i was looking AUDUSD, it also looks interesting.

Many pips to all.

 

[csc2009]

Thanks Sive, very good analysis as usual.