FOREX PRO WEEKLY July 28-01 August, 2014

[Sive Morten]

Monthly
The U.S. dollar hit an eight-month high against the euro on Friday after weak data on German business sentiment heightened concerns that geopolitical tensions were weighing on the euro zone economy. Germany's Ifo business climate index, based on a monthly survey of some 7,000 firms, fell to 108.0 in July, marking a third consecutive monthly decline and missing estimates of 109.4, according to a Reuters poll of economists.
"We continue to get strong economic releases out of the United States," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago. "At the same time, we are getting not-so-great economic releases out of Europe." Scalone said data on Thursday showing that U.S. weekly jobless claims hit their lowest level since 2006 bolstered views of an improving U.S. labor market. Earlier this month, data showed a surge in U.S. nonfarm payrolls growth in June. Analysts said the weak German business sentiment underscored the impact of tensions surrounding Russia and Ukraine on Germany, Europe's biggest economy. The potential impact of hard-hitting sanctions against Russia also likely hurt business confidence in Germany, they said.
European Union ambassadors reached a preliminary agreement on Friday to push ahead with sanctions against Russia but details have yet to be worked out, diplomats said. Analysts have said that the sanctions could hurt European growth by hindering trade between Russia and Germany.
"The geopolitical tension and uncertainty are already exerting a palpable effect on sentiment toward Europe and the euro," said Richard Franulovich, senior currency strategist at Westpac Securities in New York.
The dollar rose against the euro after Commerce Department data showed orders for long-lasting U.S. manufactured goods rose more than expected in June, but analysts said the positive impact faded after traders assessed lackluster details, including downward revisions for May.
Analysts eyed next week's Federal Reserve policy meeting, on Tuesday and Wednesday, and the U.S. government's non-farm payrolls report for July, to be released on Friday. Economists expect U.S. employers to have added 235,000 jobs in July, according to a Reuters poll.
"There is a chance of a bit more hawkish tone to the Fed's statement," said Scalone of TJM Brokerage, in light of recent strong U.S. jobs growth.
So, guys, recent information just confirms our suggestion on coming week. Previously we said that all USD-related assets will be under pressure, since on coming week situation is moderately bullish for USD. Concerning EUR – here is too much difference in sentiment of US and EU fundamental numbers, nice earnings reports from US companies and investors’ expectations on more hawkish Fed speech. These moments probably will lead to gradual USD appreciation on coming week till we will get clarity from the Fed.

Technical
Today we again will take a look at EUR, because we do not see something really better and more interesting than EUR, at least among the majors. Still we see interesting phenomenon on JPY, but it stands on weekly chart and we will discuss it below.
It seems that our suggestions on EUR/USD in general were correct and EUR has continued move down. Now it has passed below 1.3475 area – Yearly pivot point. It does not mean yet that EUR has broken it, since Yearly pivot is rather wide range. Still, now market stands at very significant moment. It is probable that July could become edge month for medium-term direction. As very important data and information stands ahead, EUR still has chances to form something reversal – as we said previously, appearing of bullish grabber right at YPP level definitely will tell us that market should exceed 1.40 level and probably even could reach YPR1~1.42 area. Conversely, failure at YPP will be great challenge on further downward action. In this case nearest downside target stands on YPS1 ~ 1.3060
We’re speaking about as upside as downside scenarios, because right now nothing is lost yet for bulls. Yes, recent action is bearish and overall situation stands a bit more in favor of bears, but just minor hint on dovish policy could turn market from top to bottom. In recent time Fed very often dissapoints investors and rethorical question why this couldn’t happen again? From that point of view it seems possible, especially if we recall Bernanke statements on private dinners, where he said that Fed will keep rates low longer than investors would like it. Thus, monthly grabber could be some kind of prophecy for this event. Actually we do not much care whether Fed will push USD up or down. We will be winners anyway, since we mostly need action in any direction and this probably will happen.
Technically market stands in tight range since 2014. Thus, 1.33-1.3850 is an area of “indecision”. While market stands inside of it we can talk about neither upward breakout nor downward reversal. At least, reversal identification could be done with yearly pivot – if market will continue to move lower, this could be early sign of changing sentiment.
That’s being said, market stands around crucial area and July could clarify what will happen next. All we need on monthly chart is patience... Now market is preparing for plunge down, but dovish surprise from the Fed is not excluded.

Weekly
On previous week market has shown solid donward action. Trend holds bearish here, but market is not at oversold. On weekly chart market does not give us any patterns to trade immediately. Still, weekly picture contains some important issues.
First of all – action below MPS1. This confirms that market stands in strong bearish trend that should continue. Another important moment that market is breaking through rock hard support – Weekly K-support, YPP, MPS1 and that was also AB=CD 1.618 support as we mentioned it on previous week. But right now price stands slightly below all this stuff.
Here again, we can return to range of hammer pattern. Now it is clear that market has broken it down. As we’ve said previously, when market forms long candle it usually holds following price action for some time, because market needs to accustom to new range. At the same time this will increase potential energy of breakout. Now breakout has happened. Usual destination point is 2 times length of the hammer to the downside. This area stands around 50% support (EUR most prefferable level, right?) around 1.3330 area. Below we can find only 5/8 support area 1.3230 and Agreement (btw BNP Paribas in letter to his clients has mentioned that they expect to see 1.32 area, but I do not remember the timing).
So, the fact that market forces in strong support and stands below it assumes that it could reach weekly target. At the same time, we have closer targets on daily chart and it will probably depend on pace till Fed meeting. If EUR decline pace will be fast then it could reach weekly target as well, prior 30th of July.

Daily
Trend is bearish on daily, market is not at oversold. Based in this picture our task for beginning of the weak is relatively simple – wait for reaching of next significant level at 1.3380. This will be 1.618 butterfly, Double Top target, WPS1 and minor 0.618 target of AB=CD down. It is difficult to count on any, even minor retracement prior it will be hit, since market has passed through all significant supports already. As we’ve suggested on previous week – retracements from support were really shy and it could mean that EUR stands under serious pressure.

4-hour
Here trend is bearish. Nothing really interesting, guys, here. Yes, we have this hint on butterfly “buy” at 1.3408, but this is probably just “noise” around major levels. Major question will still stand around price action speed. If downward action will be fast, then market could move even lower than 1.3380, but this level is major one for next week. Our riding on downward action within previous 2 weeks was really nice and next important decision we probably will make only in August. Market right now stands very close to target and the potential room to it is not as important and not very attractive for trading.

Conclusion:
So, guys, EUR has reached hot point on big picture – edge of YPP, trend breakeven point and support area. Till the end of July we probably should get further direction. Although currently situation stands in favor of USD, but we can’t exclude surprises from Fed. Thus, it is not safe to take strategical positions right now and better to wait for beginning of the August.
In short-term situation tactical target at 1.3380 stands relatively close and to be honest our journey on the way to it is coming to an end. Thus, we can’t call you to take new short position since there is rather shy room till this area. But we should not think that we miss something, since with end of July clarity we probably will get new solid direction (despite whether it will be up or down) and will have enough time to take position.


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]

GBP/USD Daily Update, Tue 29, July 2014

Good morning,

As picture on EUR still stands the same, I've tried to find some setup that could joy us till FOMC meeting. And looks like GBP is most suitable one. Actually, guys, market is waiting and no long-term setups were found. Current fundamental moments are more interesting rather than techical...

Thus, "The euro's fate will all be about the FOMC and then the nonfarm payrolls at the end of the week. I'm looking for a $1.3400 to $1.3470 range until then," said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore, referring to the Fed's two-day policy meeting that starts on Tuesday.

In a sign of the increasingly bearish market sentiment toward the euro, data from a U.S. financial watchdog late last week showed that speculators increased their net short position in the euro to 88,823 contracts in the week to July 22, the most bearish positioning against the single currency since late November 2012.

The U.S. economy needs to do well in order for such euro-selling sentiment to persist, said Daisuke Karakama, chief market economist for Mizuho Bank in Tokyo. "If bets accumulate too much in that direction though, you do have to be wary about the possibility of a sudden reversal," Karakama said. While the latest data on currency speculators' positioning shows that euro-selling momentum has increased, it can also be seen as a sign that there is now more fuel for a short-covering bounce in the euro, Karakama added.

CFTC Data
EURO (Contracts of 125,000 euros)
Long 58,142 59,506
Short 146,965 122,352
Net -88,823 -62,846

So, we have: 146965/(146965+58142) = 71.65% of Shorts. Extreme points before reversal usually stands around 80%, but 20K increasing just for 1 week could be significant. Besides, we will get another CFTC report before FOMC meeting and we need to take a look at numbers.

Besides the Fed policy meeting and U.S. jobs data, euro zone inflation and PMI surveys for China and the euro zone later this week are also on investors' radar.

Speaking about technical moments - it is better to focus on some tactical trades that probably will be completed till Fed. For example, GBP. On daily chart we see bounce down from long-term resistance area. At the same time this is first bounce after long move up. Now market stands at support - 3/8 Fib support, previous top and MPP. Move down has sufficient number of candles for DiNapoli pattern - either DRPO or B&B.

On 4-hour chart we also have lightning bolt AB=CD at ~1.6940. If market will form, say Butterfly or somthing - this could trigger bounce up and take the shape some daily pattern.

But, as you can see this is short-term setup that does not impact on big picture and force balance. Just a retracement. Such kind of setups is safer to trade, rather than taking of longer-term trades right now...

 

[Sive Morten]

GBP/USD Daily Update, Wed 30, July 2014

Good morning,
currently, guys, it makes sense to prepare update on GBP only. Eur gradually but stabely continues to creep to our 1.3380 destination. Situation has not changed there and does not demand any update.
Other currency also does not provide any valuable setup right now.
Today also we will get 2Q GDP release. It will be first big issue in the sequence of events of current week.

So, GDP... On daily chart price was not able to stop at MPP and 3/8 support and moves lower. Right now it stands at 50% Fib support and very close to WPS1. Actually, we do not care match how deep price will move before we will get DiNapoli pattern - B&B or DRPO "Buy". Because the context for trading is thrust down and the longer thrust is - the better for us.

Based on intraday action, today we also will not get daily patterns. Yesterday we were watching for AB=CD and butterfly and now they are completed, but the manner of completion looks suspicious. We do not like recent black candle and acceleration right to AB=CD target and direct move to 1.618 butterfly point just by single candle. Odds suggest that this butterfly will fail and market probably will move lower:

But here, you can see the framework of this process - who to deal with DiNapoli pattern. Thus, as soon as you have thrust on daily, wait for some support, drop time frame, watch for reversals. If you do not have it - wait for another lower support and again, drop time frame etc...
So, now we assume that GBP probably will move lower still and it is not probably the time for daily patterns yet.

On hourly chart we just draw one of possible scenarios that stands in relation with possible DiNapoli pattern. If this would be H&S, then, daily pattern could trigger appearing of right shoulder...

That's being said. Potential on GBP still exists, but patterns will appear not today, probably.

 

[Sive Morten]

EUR/USD Daily Update Thu 31, July 2014

Good morning,
briefly on some fundamental issues:
Earlier Wednesday, government data showed gross domestic product grew at a 4 percent annualized rate in the second quarter, above the 3 percent rate that had been expected and a sharp reversal from the weather-impacted first quarter, when the economy contracted a revised 2.1 percent.
The dollar's rally was tempered somewhat after the Fed on Wednesday reaffirmed it was in no rush to raise interest rates, even as it upgraded its assessment of the U.S. economy and expressed some comfort that inflation was moving up toward its target.

"We got the taper as expected, and the real viewpoint of the committee is they can keep monetary policy accommodative even after we reach our inflation and employment goals," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

Junichi Ishikawa, market strategist at IG Securities in Tokyo, said any selling that resulted from the Fed meeting "is likely to be temporary. It gave a fair view on the economy and despite expressing concern about the labour market, it took note of declining unemployment. Most important of all, it made a more confident assessment on inflation."

"It wasn't a dovish message, but not necessarily a hawkish one either, although the Fed did leave a psychological impact on the market with its latest view on the economy and inflation," said Ishikawa.

Separately, the ADP National Employment Report showed companies hired 218,000 workers in July, below analysts' projections of 230,000 and less than June's total.

Not helping the common currency, data showed annual inflation in Germany slowed to 0.8 percent in July, an outcome that pointed to another soft reading for EU-wide inflation due out later in the day.

"We remain constructive on the USD and continue to run long USD/JPY and short EUR/USD recommendations," analysts at Barclays wrote in a note to clients.


Speaking on technical picture - our analysis on GBP is still valid, thrust is continue and no patterns have appeared yet. Thus, let's take a brief look at EUR, because tomorrow NFP could make solid impact and everything could change again. That's why today view is mostly "preliminary" to weekly research.

Daily chart shows that market finally has hit our target - 1.3380 has been reached. This WPS1, butterfly target and Double Top pattern. Also this is support area of Yearly Pivot point.

On 4-hour chart we do not have any extended patterns yet, but we will be watch for them. Right now we see fast downward channel and only minor hint on possible support - morning star pattern.

So, guys, right now we suggest do nothing, wait and monitor possible patterns and signs of reversal at least till NFP tomorrow.
The same is true for GBP - thrust is good, we just need to be patient and wait for appearing of the pattern.

 

[Sive Morten]

Good morning,
so guys, as we've suggested FX world will change by the end of current week. We have not got NFP yet, but drastical action already appears.

The major reason for that stands with following issues:

Data showing that U.S. labor costs recorded their biggest gain in more than 5-1/2 years in the second quarter this year came a day after the Fed upgraded its assessment of the U.S. economy while reiterating it was in no hurry to raise rates.

"If we start to see wages moving higher that's got a be a signal that we are getting closer to the Fed's mandates," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

The CBOE Volatility index <.VIX>, often referred to as Wall Street's fear gauge, jumped 27.2 percent to close at 16.95, its highest level since April 11.

Speaking on today's NFP, here is Reuters info:

The U.S. jobs report due at 1230 GMT could provide a clue. A Reuters survey of economists showed payrolls probably increased by 233,000 in July.

"If it comes in above 250,000, I think that's the threshold for a positive surprise," said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.
Such an outcome could lift the dollar to levels around 103.50 to 104.00 yen, he said. Standard Chartered, however, is expecting nonfarm payrolls to increase by a below consensus 200,000, and for the dollar to pull back to levels around 102.50 yen, Henderson added.

Analysts at BNP Paribas expect payrolls to increase by 225,000. "Data in line with our forecasts should leave markets focused on the possibility that the Fed begins tightening policy in the first half of 2015 rather than waiting to Q3, keeping US front-end rates and the USD supported," they wrote in a note to clients.


Since, guys NFP is still ahead, today we again will take a look at tactical issue. And it stands on AUD.

Daily AUD shows fast AB=CD down. Market has reached deep 0.786 Fib support and what is more important - daily oversold:

If we take a look at 4-hour chart, here we have thrust down, close above 3x3, below... we need close above, right?
This is potential setup for DRPO "Buy" that could start retracement to 0.9350 area. We can't exclude this, mostly because of NFP and because of really tough week. Investors could turn to fixing at the end of the month and week. Thus, 100 pips bounce is probable, why not?

I do not know what pattern we might get on hourly chart, but as a rulle DRPO is accompanied by butterfly or H&S...

So, keep watching.

 

[minimax]

COT

Hello

Checked COT...may or may not mean something...as Sive says...

NS = Net Short (source: Dukas Copy)
Number = contracts in 1000



Have a nice weekend!

 

[auna]

no short Sven ..does that mean we should go long till 1.3480 at least

 

[Sive Morten]

no short Sven ..does that mean we should go long till 1.3480 at least

No. We need to wait for Fed and NFP. If data will be negative for USD (dovish comments and weak NFP) - we could think about long, but not now.

 

[Kleinerbroker]

Dear Sive

thank you for our continuous support to us .

Taking the chance of us waiting for news end of this week, perhaps you could spend some time during the transcourse of this week and explain a bit more in depth how you did decide on position of Yearly Pivot . It works so well as reference during first half of this year, that I think I should understand much better , how you fixed the 1,3475 .

Starting point for some additional words could be your respective lesson : https://www.forexpeacearmy.com/fore...49-forex-pro-weekly-january-06-10-2014-a.html

in which you explained us

Technical
As this is first research in 2014 and following to our tradition, let’s draw new Yearly Pivots on the chart. On previous year market has done well around them. Prticularly speaking has tested YPP~1.2975 in summer and has finished year right around YPR1.
Appearing of YPP=1.3475 in current situation could play significant part on our analysis, since market stands just 100 pips above it. As we know that price always gravitates to pivot, this moment significantly increases the probability of more extended move down in short-term perspective.

Thank you in advance / Spasiba

Best regards
KB

 

[minimax]

eurusd insight

Hello

Hope you enjoy(ed) weekend.

Here is H4 chart..I think move is not done and expect sideways, relatively nice moves, full of zigzags to finish red 5th wave as ED up to FOMC.
If I am correct we should go long and stop between 1,3575 and 1,3650, i like 1,3620..but we should stay in this zone until next week...If we jump above 1,3650 i think it is most probable we run to hit 1,3750 and maybe higher but about such development later..in such case we get another pattern..


Good trading in coming week!