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FOREX PRO WEEKLY, July 09-13, 2018

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Jul 7, 2018.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    While major long-term driving factors mostly stand the same, recent price action was driven by recent NFP report. Speaking on fundamental reasons that will drive markets withing few months, we point ECB/FED policy difference, which stands in favor of US Dollar and US domination in trading war that now wallops on China, but also is expected in EU. While tariffs volumes are small by far, but perspective of 200Bln against China looks impressive.
    These two major driving factors, and Brexit of course, make negative impact on EUR in long-term perspective.
    Another important event that will follow on 16th on July is Trump and Putin meeting. I would suggest that this will be decisive moment for the whole world for long-term perspective.
    It sounds pompous, but I suspect that some secret agreements could be achieved on US/Russia balance in the world and destiny of different organisations, such as NATO and puppet governments.
    Don't surprise, guys. Many forumers here accused me that this never will happen, when I've talked about changing of US role in the world, EU trend to independence, uniting of North and South Korea. But all this stuff now comes to reality. We never know what particular agreements will be achieved, but we will see it by events that will take place.
    The age of transparent political action is gone, when everything is decided by real wars. Now is the time of hybrid policy and wars. When leaders come to some agreement - they initiate some political and social processes that look like natural and lead to achieving of agreements aim. These processes stand under disguise of media noise and leaders themselves could publicly talk against public events.

    For example - Trump few months ago threatened N. Korea, sent US fleet and planned invasion. Last month he met Kim Jong Un personally and supported South and North uniting.
    Another example - Trump threatened B. Assad, initiated two missile attacks. But, who was harmed in result, where all tomahawks fell? US now stands under way of leaving Syria and do not pretend any more on B. Assad leaving.

    That's being said real events now are hidden under media noise of opposite attitude and events. The same will be this time. Don't listen what Putin and Trump will tell - look what they will do. And the fact that Trump comes to Putin ahead of EU is a big advantage for US.

    In fact, that all political events that we've mentioned last time are the parts of the same puzzle.

    Now on short-term factors. As Reuters reports, U.S. nonfarm payrolls advanced by 213,000 jobs in June, the Labor Department said. Data for April and May was revised to show 37,000 more jobs created than previously reported.

    The unemployment rate, however, rose to 4.0 percent from an 18-year low of 3.8 percent in May, while average hourly earnings rose 5 cents, or 0.2 percent, in June after increasing 0.3 percent in May.

    “We are of the thinking that the strong economic gains make a September hike a likely event,” said Marvin Loh, senior global market strategist at BNY Mellon on Boston.
    “Without an acceleration of wage growth, a fourth hike at the end of the year is a more difficult call and futures shows that hesitation, placing just 50 percent odds on that event,” he added.

    Indeed, guys, if we will take a look at CME Fed watch tool, we will see that chances on rate increase on September meeting still stands high, but next rate change probability has dropped:
    upload_2018-7-7_13-38-30.

    When we've taken look on this table at the end of June - probability was around 53% for meeting on 19th of December.

    My suggestion is light drop in monthly inflation will not hurt perspectives of US rate change in long-term. This probably will be short-term reaction. Fathom indicates that economy climate has improved in US.
    [​IMG]
    "Consumer spending may have risen by less than expected in May, but the US economy looks set to expand at a healthy clip in Q2, despite the ongoing trade disputes between the US and its key trading partners.

    Our US Economic Sentiment Indicator (ESI) jumped from 5.1% to 6.1% in May, the second highest reading in 14 years. We have long argued that the ESI is unlikely to remain at such heady heights indefinitely, and the recent escalation in trade tensions may well cause the ESI to slip back again in June. That said, given the abundance of job openings, rising wages and optimism due to tax cuts, a sizeable drop looks unlikely for now, despite the trade-related uncertainty. Moreover, tensions between the US and its key trading partners has been simmering for months with few clear signs that this has had an adverse effect on sentiment."


    We expect the economy to expand at a brisk pace in Q2, and before Friday’s consumer spending data we had pencilled in official GDP growth of 4.5% annualised. In real terms, spending was unchanged last month, compared to the consensus estimate of a month over month gain of 0.2%.
    Furthermore, economic data released earlier this week showed that the US trade deficit narrowed in May, and that inventories rose in the same month; trade and inventories seem likely to make positive contributions to GDP in Q2. The upshot is that we are sticking to our GDP growth forecast for 2018 as a whole of 3.2%, which is above the consensus estimate of 2.9%.


    There was no new release of COT data this Friday.

    That's being said, it seems that EUR has got just temporal relief due a bit weaker than expected wage growth numbers. But this is definitely not enough to talk on some long-term reversal of major downside tendency yet.

    Technicals
    Monthly


    July has no impact yet on overall monthly picture because it stands as inside candle by far. June, in turn also was an inside for May candle. As trading range is narrowing - it means that market turns to some consolidation around major support of YPP and Weekly K-support area.

    Since we have bearish view on EUR in a perspectives of 6-12 months, major concern stands not around direction, but around manner of price action. Particularly speaking - whether we will get our 1.20 bounce before turning south or, EUR will continue down immediately. Taking in consideration recent action, it seems that bounce gets some probability support.

    Position of grabber also looks interesting, because it contradicts to other inputs. Grabber suggests action above 1.26, but this scenario doesn't agree with ECB policy and investors sentiment that we see from COT report. Since they are mutually exceptive scenarios - one of them should fail.

    Also, long-term price behavior stands bearish. Reversal down has happened after completion of harmonic swing and around YPR1. The fact that EUR has failed to break through YPR1 tells that upside rally from 1.03 to 1.26 was just a retracement within larger bear trend. Now it is particularly interesting how EUR will behave around YPP. Drop below it will open road to YPS1 at ~1.09 which corresponds to our fundamental 1.10 target.

    It means that to make grabber work we need to get strong positive fundamental factor. Current inputs that we have definitely are not sufficient for drastic upside reversal on EUR.
    eur_m_09_07_18.

    Weekly

    Weekly chart also mostly stands the same. We see that upside action is started, but it seems it feels some difficulties as it goes heavy. No fast acceleration up from neckline. May be it will follow a bit later, but what we really need to worry about - may be it has not started yet, and some minor dive will happen before real upside action will start. This is what we're interested in short-term.

    In broader picture EUR still keeps chances on H&S scenario as price holds well around major support and potential neckline.

    Just to remind you, our basic scenario suggests upside bounce back to 1.20-1.21 area, where market should form right arm of our H&S pattern. If, by that time, when arm will be completed, no major shifts in EU/US balance will happen - drop to 1.10 could become a reality. Whole action will take approximately 6 month. 1.09 - 1.10 area is major 5/8 Fib support and YPS1.

    Alternative scenarios, such as immediate downside breakout and failure of H&S pattern in 1.20 area, if EUR
    will not stop but continue upside action now look less probable as both of them need extra strong political or economical driving factors which we do not have on a table yet.

    Here we need to keep our concern of untouched major support area. EUR has turned up but major supports still has not been touched.I would prefer testing of weekly support first just because untouched is perfect situation for traps of different kind and fake downside breakouts. Everything could happen, of course, but it is better to get stronger signs of upside action to be sure that it is indeed tending to 1.20...
    eur_w_09_07_18.

    Daily

    It's not much to add on daily chart to our daily comments. So, EUR has completed our "222" Sell pattern and stands right at the triangle's border. Could it turn down? Sure, because, as we've estimated above, driving factor for recent rally is not too reliable.

    If EUR indeed will turn down here - we could return back to discussion of butterfly "Buy" as well. Mostly it will depend on what we will see on intraday charts:
    eur_d_09_07_18.

    Intraday

    4H chart shows that our setup for last week mostly is completed - "222" Sell has reached point where at least theoretical downturn could happen. CD leg takes the shape of butterfly "Sell". CD leg is slower than AB. Usually it leads to reversal from "D" point rather than just retracement before upside continuation.
    eur_4h_09_07_18.

    Minor 1H butterfly has been completed as well. Upside action has stopped right at WPR1. On coming week we should keep an eye on possible downside reversal. Here we could use this trend support as indicator. It's breakout could mean that market could drop back to lows or even to 1.1450 area.
    If price confidently will break 1.18 and hold there, then probably bearish scenario will be cancelled and we should be ready for further upside action:
    eur_1h_09_07_18.

    Conclusion:

    Right now we do not see any changes in fundamental background and even more - some US efforts for EU destabilization, it has big chances for negative effect in long term perspective for EU.
    Thus, 1.20-1.21 retracement still stands on the table, but, danger is threatening EU and re-establishing of long-term bear trend after retracement is very probable.

    In shorter-term perspective our task is relatively simple - we need to get either 1.1850 upside breakout or clear bullish reversal pattern, such as daily butterfly or something of this kind. While market stands inside triangle it could be a lot of negative surprises around and position taking could be rather expensive issue.

    I have some doubts on perspectives of recent rally by few reasons. First is it was triggered by short-term factor, second - sentiment on EUR stands bearish and this makes recent rally fragile as no new longs have been opened last week.


    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.
     
    #1 Sive Morten, Jul 7, 2018
    Last edited: Jul 7, 2018
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  2. RahmanSL

    RahmanSL Major

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    Hi Sive.....101% agree with you on the Euro which I perceived as weak.
    I have got out of the EUR/TRY carry trades (with pretty good profits) because I/we really don't know what that re-elected Turkish President is going to do next in terms of exerting control on their central bank interest rate position............I have switched to EUR/ZAR which has been pretty good for both Carry & Day trading.

    All the best!
     
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  3. FreddyFX

    FreddyFX Sergeant

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    Master Sive, as ALWAYS, an excellent analysis of the EURUSD activity !!!

    Again an advise to the newbies, if in doubt, STAY OUT !!!
     
  4. JOELIBOK

    JOELIBOK Recruit

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    Hi Sive, Great analysis and indebt info on Euro-US political and economic sphere. Wonderful insight for short and long term trade. Well done!
     
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  5. PassPP

    PassPP Recruit

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    Thanks Sive
    Looking forward reading Stag s comments in the perspective of EW!
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    So, let's see what has change on Monday. Daily picture has no big difference compares to weekend chart. Now price is coiling with our triangle trendline resistance. EUR has no strong barriers above - no Fib levels, OB or pivots. It is relatively free space. That's why shooting star pattern and possible downside reversal will be definitely a bearish sign:
    eur_d_10_07_18.

    On 4-hour chart we have the same "222" Sell and it will be valid while market stands inside "X-A" swing. The fact that EUR has climbed slightly higher that OP target has reasons.
    eur_4h_10_07_18.

    And these reasons you can see on 1H chart. In fact, the CD leg of "222" pattern takes the shape of butterfly, which has slightly higher 1.27 extension. Actually we've talked about it last week. besides, some minor AB-CD's also have extensions above 4H OP target. But anyway all of them stand in our resistance cluster of 1.1760-1.1780 that we've mentioned last week.

    Now, you can easily recognize H&S pattern on top. It is difficult to talk about perspectives of global reversal down, but EUR has very good chances to show at least 3/8 retracement down - to complete as butterfly minimal target as H&S target. IT will be around 1.1685.
    Thus, if you plan to go long - it makes sense to wait at least till this level, although, I suggest that it could be chain reaction down because currently EUR doesn't have valuable reasons for rally:
    eur_1h_10_07_18.
     
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  7. Stag

    Stag Sergeant

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    Morning guys, PassPP asked me so a quick update again on my last week post.

    Intraday

    The Euro followed my preferred scenario and took a sharp reversal in the red target zone advancing in an impulsive manner from there, exceeding my minimum price target.

    To make it short, as long as prices are trending above 1.168x chances are that the Euro will try to reach the dark green zone or even beyond. Breaking below 1.168 would open the door for further weakness towards back below 1.16.

    EU_180710_h1.

    Weekly

    If you apply the KCT technique on a daily chart or above, you can see an attempt of a break above the yellow price channel. Closing above on the weekly timeframe would be an early sign of further bullishness (see Fib 38-62% levels). So worth watching for weekly close.

    EU_180710_d2_Bloomberg.

    Good luck!
     
  8. PassPP

    PassPP Recruit

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    Thanks Stag ,
    then we wait patiently .
     
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  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning everybody,

    Let's take a look what has changed on EUR since yesterday. On daily chart situation stands mostly the same - market is coiling around triangle resistance. In fact, within a week we should be ready for growing volatility and nervousness. Trump arrives to Brussels recently and he will meet Putin on Monday. So, there will be a lot of rumors around this. Second issues - tariffs war. Trump is not kidding and its already 200Bln of new 10% tarriffs against China on the table. European companies inentionally or occasionally but start thinking about this in relation to themselves...

    On daily chart nothing has changed yet. EUR keeps chances on breakout still. We need to see clear bearish signs on intraday charts to talk on opposite, but we do not have it yet:
    eur_d_11_07_18.

    On 4H chart we still have our "222" Sell, while on 1H chart our yesterday setup with 3/8 retracement and H&S has worked perfectly. Now, as we do not have clarity yet on longer term perspective, all that we could do is just focus on some minor intraday patterns as we did yesterday with this H&S. For example, here we could get upside AB=CD retracement up from our 1.1688 support and this will become "222" Sell, or, may be some other pattern will be formed. If market somehow will hold above 1.1688 support - it will mean that butterfly could continue and EUR could move higher to 1.618 extension...

    That's being said, while we're waiting for stronger signs of rally or plunge, we could focus only on some very short-term patterns unfortunately...
    eur_1h_11_07_18.
     
  10. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    So, today we have more action and it seems that our weekend suspisions are not in vain. EUR has failed to show uspide breakout as NFP data (in fact it was positive) and CFTC report shows fragile foundation for rally. EUR has turned down right at triangle's border.

    Now, let's not run ahead of train and treat this pullback as retracement by far. Yes, downside breakout is possible, but EUR still has some support level ahead:

    eur_d_12_07_18.

    On 4H chart our "222" Sell stands in focus, and now we have downside AB-CD pattern. First target is OP at 1.1657. Next one is XOP around 1.16. As we see clear acceleration of CD leg, chances that EUR will proceed to XOP are not bad. Thus, first is OP, minor retracement then, and after that action to XOP could follow.
    eur_4h_12_07_18.

    Right now EUR just hangs above OP target, forming a kind of flat consolidation. Price is below as WPP as MPP. It means that within few hours we could get butterfly which will touch OP and some upside retracement should follow then, which also could take the shape of "222" sell as the one that we've mentioned yesterday.
    currently it is difficult to suggest how retracement will develop, but, 1.17 lows could become logical destination of it:
    eur_1h_12_07_18.
     
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