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Forex FOREX PRO WEEKLY, June 03 - 07, 2019

Discussion in 'Sive Morten- Currencies, Gold, Bitcoin Daily Video' started by Sive Morten, Jun 1, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    This week price action was really difficult to trade, not only on EUR and FX market but on commodities as well. This happens every time, when market is driven by external political factors and news, when investors scare and do not know in what direction to run and emotionally reacts on any new word of politicians.

    Beyond this volatility, which is short-term, we could miss some important factors that will make shape of the market in long-term perspective. There are two of them - EU election results and rising economical tensions between EU and US.

    Last year (or even more) we talked that EU will change as politically as economically, it should change the direction of its development, all allies and unions will break or change. This process stands under way right now. Relationship between EU and US is chilling. UK, as all-time US ally leaves EU as well. Now US is too busy with China and neighbors - Mexico and Canada, but soon US turns to EU. Even now, when US puts sanctions on Iran, Russia, Venezuela, Cuba - it intentionally but indirectly hurts interest of other countries.

    EU also starts to feel this burden, not heavy by far, but something tells me that pressure will increase. Recent Cuba story - The European Union said on Thursday it would take "measures" in response to a decision by Washington to allow lawsuits in US courts against companies using premises confiscated by the communist government of Cuba . New set of anti North Stream 2 sanctions, ban of any cooperation in space sphere, and famous Huawei scandal - this is just few to mention here. And this process is getting stronger momentum and it is naive to suggest that EU is able to stay aside from it.

    So, we expect that breaking of old order and decreasing of old power center unavoidable leads EU to reorganization, when core countries suddenly recall that they have own economical and political interests and own citizens, and they do not want to work, feed and utilize resources of nation in favor of others, on orders from Brussels.

    And here we come to second important event of this week - elections result. Here we see the confirmation of thoughts, that we just have said. Brussels determines everything and overrule any decision of domestic governments - it decides which country should accept refugees and how much, ignoring population opinion, it decides where Germany, France or Italy money will be distributed and invested etc. Thus, the EU-leaving sentiment becomes stronger in EU and this sentiment shows its way in election results.

    Centre-right wins EU vote, but eurosceptics make gains - The centre-right European People's Party (EPP) has won the most seats in the European Parliament, but eurosceptic parties have made strong gains, officials have said.

    The EPP won 178 seats, just ahead of the 152 won by traditional centre-left rival the Socialists and Democrats, but various populist, eurosceptic and right-wing parties won more than 100 seats, parliament spokesman Jaume Duch told reporters.

    Along with a surge for the Greens, that meant four groups occupying the pro-EU middle ground lost under 20 seats, securing 505 seats out of 751, according to a projection by the European Parliament.

    That may complicate some policymaking, as a two-party "grand coalition" of the conservative European People's Party (EPP) and the Socialists (S&D) no longer has a majority.

    The Parliament's projection put the EPP on 178 seats, ahead of the S&D on 152, with the liberals on 108, up 39 seats, and Greens on 67, up 15. On the far-right, two groups in the current parliament had a combined 108 seats, a 40% gain from 2014.

    The European Parliament election will usher in weeks and possibly months of hard bargaining over who will run EU institutions. Party spokespeople for the four pro-EU centre parties were quick to talk of plans for a broad coalition.

    Thus, maybe effect is not as strong as it was expected, but changing of power balance definitely will find the way in EU policy, especially, in EU major countries. Any political restructuring and reforms always make impact on economy and this will be bearish factor for EUR in a long term.

    In shorter term, the most important news was on Mexico tariffs as a new spiral of US global trade war. As Reuters reports - the dollar held up against its key rivals on Thursday after fears of an escalation in the Sino-U.S. trade standoff forced investors to take shelter in safe-haven assets, including government bonds.

    As the dispute between the world’s two biggest economies showed no signs of abating, worries that global growth will be hurt have rippled through financial markets in recent sessions, with riskier assets in particular taking the brunt of selling.

    “The outlook for global growth, and any drag from the festering trade dispute, remain key issues for markets,” said Michael McCarthy, Sydney-based chief market strategist at CMC Markets.

    “The data over the next twenty-four hours has potential to either confirm or dispel the gloom,” he wrote in a note.


    Offering the latest sign the standoff between Washington and Beijing is far from ending, Chinese Vice Foreign Minister Zhang Hanhui said on Thursday that provoking trade disputes is “naked economic terrorism”, ramping up the rhetoric against the United States.

    Chinese newspapers had warned the day before that Beijing could use rare earth elements to strike back at the United States after U.S. President Donald Trump said he was “not yet ready” to make a deal with Beijing over trade.

    The impact of escalating trade tensions between Washington and Beijing is starting to show up in economic data, with a key measure of Chinese manufacturing activity disappointing investors, and Trump’s latest salvo fuelled a rush on Friday to safe-haven assets such as government bonds and the yen.

    “As the United States isn’t likely to fall into a recession anytime soon, there’s a likelihood that risk sentiment may improve based on the economy’s strength,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

    The benchmark 10-year U.S. Treasury yields hit as low as 2.210% overnight, their lowest since the middle of September 2017.

    The European Commission wrote on Wednesday to the Italian government asking it to explain a deterioration in the country’s public finances, a move that sets the stage for a possible legal clash with the eurosceptic coalition in Rome.

    Taking aim at what D.Trump said was a surge of illegal immigrants across the southern border, Trump vowed on Thursday to impose a tariff on all goods coming from Mexico, starting at 5% and ratcheting higher until the flow of people ceases.

    Trump’s surprise duties on Mexican imports “spurred sharp losses in the Mexican peso and a general risk-off move that strengthened the yen,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.

    The dollar’s broad losses on Friday were compounded by comments from senior policymakers, with the U.S. Federal Reserve Vice Chair Richard Clarida on Thursday discussing the possibility of rate cuts should the world’s biggest economy take a turn for the worse, though he also said he thought the U.S. economy is in “a very good place”.

    U.S. interest rates futures implied traders expect at least one rate cut from the Federal Reserve by year-end.

    Goverment data on Friday showed a modest pickup in inflation in April, while a private report indicated a stronger-than-forecast improvement in U.S. Midwest manufacturing activity in May. Stronger-than-forecast data on U.S. consumer spending and income in April tempered some worries about a slowing U.S. economy.

    As a result, we do not see any big shift in EUR/USD sentiment. CFTC data shows that investors still hold net bearish positions:
    upload_2019-6-1_12-26-25.
    Source: cftc.gov
    Charting by Investing.com

    And the last one thing that could change the shape of the markets. As Fathom Consulting suggests, Fed could change approach to inflation targeting, which could affect the Fed policy measures:

    In recent years the widespread practice of targeting low rates of inflation has been found wanting. Our chart shows a long moving average of inflation in six inflation-targeting economies: the US, the euro area, the UK, Japan, Canada and New Zealand. Central Banks in each of these economies are charged with targeting an inflation rate of 2% Some economists have blamed this recent tendency to undershoot on a fall in the neutral rate of interest. Some commentators believe that the Fed might soon switch to targeting average inflation over a period of time, rather than current inflation, in an attempt to correct this downward bias.

    [​IMG]

    Technical analysis
    Monthly

    Last time we've made cross market analysis, involving Dollar Index to understand what could expect soon. The overall picture has not changed on long-term charts, but currently it is still unclear by what factors major reversal should happen. In EU we see critical but stable condition, so the only reason for sudden rally on EUR could be unexpected weakness in USD, although reasons are also unclear by far.

    While we're waiting for clarity - overall situation on monthly chart stands the same. Mays stands as inside month to April and price lays upon major Fib support, without any attempt to jump out from it. Trend stands bearish. Flag pattern was broken down and EUR enters in wide rectangle consolidation of 1.05-1.15 range.
    As it doesn't want to leave it, it seems that EUR more is bearish rather than bullish and next valuable support is YPS1 of 1.0940. At least currently we do not see any clear bullish sign on monthly chart.
    eur_m_03_06_19.

    Weekly

    On weekly chart market more and more narrows the trading range and we have lasting sequence of grabbers in different directions. This week again - we've got bullish grabber, which suggests action above 1.1262 top. Long lasting bullish MACD divergence can't get started to work as well. When bullish patterns in place but something keep them on hold and doesn't let them to work - could it be another sign of bearish pressure strength? Too tight trading range is always subject to explosive exit. The only question is - in what direction it will be. On weekly dollar index we do not have grabbers.
    eur_w_03_06_19.

    Daily

    On daily chart overall situation is not very difficult, at least in short-term. While price holds above the lows - upside action could happen. We have weekly grabber, and here, on daily - we've got morning star pattern, which makes possible some upside continuation. Thus, 1.1262 area target, that we've mentioned last week - mostly stands the same. Now it also will be MPR1 of June.

    The same story on downside breakout. Breaking through the lows means that our next stop is 1.1050 area of daily Oversold and some extension targets.

    Thus, if we have bearish view - we should ignore bullish setup and patterns, and wait for proper bearish one. The opposite is true for the bulls - while market is above 1.11 lows, it is possible to take tactical long position based on the patterns that we have. Still, for truth sake - it seems that market stands in a kind of indecision, that also might be silence before the storm.
    eur_d_03_06_19.

    Intraday

    If somehow bullish target will be reached, the bearish setup of larger scale could be formed on 4H chart. OP target stands right around K-resistance and this will be rather strong area, including OP. Large "222" Sell pattern will be formed. Thus, if you have bearish view, you could consider this pattern:

    eur_4h_03_06_19.

    On hourly chart there are a lot of things stand. First, is our suggestion on minor H&S pattern is done, xop (gray) is hit, B&B is done but it was a bit dramatic due PCE data release. The fact that B&B has not become a pattern that triggers downside continuation but has hit just minimal target suggests that upside potential still exists.

    Now we turn to more extended AB-CD pattern. In "C" point we also have a grabber which suggests action above recent top. Price now stands around COP. As no new top was formed, we could focus only on Fib levels, shown on the chart. Keeping in mind morning star daily pattern - drop should not be too deep. Appearing of "222' Buy is advantage. If market is still bullish it should proceed to OP after retracement. May be butterfly "Sell" will be formed to finalize action to OP target. The major task for bulls is to take position as closer to "C" point as possible, with initial stops at least below "C" but preferably below A.
    eur_1h_03_06_19.

    Conclusion:

    Although we see chances for short-term, tactical upside action on daily/intraday basis, we do not see yet any changes in long-term as technical as fundamental background. Last week we talked on long term setup on dollar index which potentially points on Dollar weakness. But currently it is still a question for us, what particular patterns could trigger this weakness. More probable that any EUR appreciation (if it still will happen) will be based not on EUR strength, as we do not see conditions for that but on USD weakness.



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

    Stag Sergeant

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    Greetings guys, our forecast was correct, prices went lower and reached the bottom of the projected target area in three waves - and as we know, three waves are corrective moves.

    The rise from 1.1116 is impulsive, we have five waves completed far above both Kennedy channels and our critical key level at 1.1175 also has broken already - all of them are bullish signs.

    The rise is subject to a 50- 78.6% Fibonacci retracement of red wave 1, creating a potential reversal zone between 1.1150 - 1.1130 (a possible retest of the lower boundary of the base channel). The favored count suggests it will complete a wave 2 correction and it would offer a bullish opportunity.

    Printing above 1.18 will signal wave 2 has bottomed and breaking higher will suggest the third wave of the impulse advance is underway towards some higher targets, i.e. the 1.682 Fibonacci projection of wave 1 around 1.124.

    So we have supportive signs in favor of higher prices but note, that a break of 1.1116 would negate this bullish view.

    Good luck.

    EU_190531_eod.
     
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  3. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. In this update I will share bullish and bearish view longer term, and also explain in what wave I think we are currently in, and give my prognosis what will happen. Short term I expect downside action to continue breaking 1.1106 lows, and failing to break 1.1215 level. After new lows are reached, I expect true bullish action to start. I do expect significant bullish bounce, but think we are not there yet.

    Monthly chart: Bullish view.

    EURUSDkMonthlyBullish.

    Monthly chart: Bearish view. This scenario I consider more probable then bullish one. Point is that in both cases short term action should be the same, difference will happen after.

    EURUSDkMonthlyBearish.

    Weekly chart: More closer look of bearish scenario. We are currently in red wave A which is part of correction of bullish blue wave A which reached top on 1.2553. I think we are in wave 5 of wave 5 of that red wave A which means it is very close to end, which means significant bullish correction is around the corner. Since red wave 1 of that red wave A was the longest, red wave 5 is capped by length by red wave 3 for rule that wave 3 can not be the shortest one to be respected. That rule gives us clear stop loss level for any bullish position, it is 1.0967. That level should not be reached before significant bullish correction happens.

    EURUSDkWeekly.

    Daily chart: More closer look and full wave count. Red wave 1 of red wave 5 of red wave A was diagonal, which means wave 5 of wave A can not be diagonal. It looks like we have printed wave 1 of that wave 5, and that we are now on the end of wave 2, or on the beginning of wave 3. Look hourly charts.

    EURUSDmDaily.

    4 H chart: Here I want to show shape of red wave 4 which had shape of extended flat. Wave B was complex in that red wave 4. I think that bullish, impulsive action from new lows on 1.1106 was not part of bullish reversal, I believe it was just wave C of wave 4 which finished at 1.1215 level. After that we printed clear 5 waves to downside completing red wave 1 of wave 5, givving the hint we are going to new lows nder 1.1106. After that sharp bullish correction followed, which I think is trap for bulls. That is just wave 2 of wave 5, correction on wave 1. My expectations is that bullish action will be short lived, and that prices will collapse lower to new lows under 1.1106 completing red wave 3 of wave 5. After that shallow wave 4 as bullish correction should follow failing to reach 1.1118 level to respect the rule that red wave 5 should not be diagonal since wave 1 was diagonal. After shallow wave 4, new bearish red wave 5 should make one more new low somewhere in 1.10-1.1050 zone. After that I expect significant bullish action to occur. That is my main trading plan, first to go short against 1.1215 level, and then to go long in 1.10-1.1050 zone against 1.10968 level.

    EURUSDkH4.

    1 H chart: More closer look and full wave count.

    EURUSDkH1.

    15 MIN chart: There is decent probability that wave 2 is already finished. It had shape of sharp ZigZag, being just short to reach OP target. It suggest price can go lower fast, since we are entering in wave 3 which I expect to be fast to downside breaking easily 1.1106 lows.

    EURUSDmM15.

    How to trade this?

    First position: Short entry immediately in zone = 1.1160-1.1190, SL = 1.1217, TP zone = 1.10-1.1050.
    Second, main position : Long entry in zone = 1.10-1.1050, SL = 1.0967, TP zone = 1.16-1.17
     
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  4. Joh

    Joh Sergeant Major

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  5. RahmanSL

    RahmanSL Major

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    As usual Sive, excellent analysis which I highly value & follow in my daily trades. However I believe the forex market will be determined more by geopolitical events in the coming days.

    First it was withdrawing the US from APEC…then it became Canada & Mexico with revision of NAFTA which was subsequently put on hold…. then China was targeted with 25% trade tariffs and China promise of likewise tariffs retaliation…. then it was back to Mexico with 5% progressive tariffs until Mexico “do something” to stem influx of “economic refugees” across the US-Mexican borders…then India was targeted with termination of their “beneficiary developing country” (the generalized system of preferences, a decades-old program designed to promote economic development around the world)effective June 5, 2019.

    Last week Trump made a State visit trip to Japan to play golf-watch & banquet with Abe.. watch Sumo wrestling-audience & banquet with the new Emperor - made unsettling statement that N. Korea test fired only a small missile which doesn’t bother him but which alarmed Japan and most of the UN member countries… then Trump openly sided with N. Korea Kim’s statement about John Bolton, the NSA of the United States, calling him a "warmonger" and "defective human product". Then Trump & entourage got into Airforce1 and flew back to the US with (Trump’s hope) that Japan is in the US’s court over the trade war with China. To Trump, South Korea should already be on the US side because of US protection against North Korea potential threat.

    Next week Trump will be on 3 days state visit to the UK in an apparent bid to get the UK onto the US side because all indication suggest the EU will be next on Trump’s tariffs war list. The leaders of both France & Germany have mutual dislike of Trump and so both countries will specifically be singled out for trade tariffs. How Trump is going to do that without collective tariffs imposition on the EU as a whole need to be seen.

    Trump is interfering with the UK’s politics by openly stating that Boris Johnson will make an excellent next Prime Minister which will probably not go down well with the British people and a massive anti-Trump protest can be expected during the State visit.
    Then Trump ill advised the UK to simply leave the EU without a Brexit deal.

    So, how will all that affect the Euro in the foreseeable future?
    In my opinion it's not good at all.
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Right. Trump is very attention person, we probably should hear a lot of sharp and shock statements. Besides, NFP on horizon as well.
     
  7. Synchronicity

    Synchronicity Sergeant

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    I've been watching the DAX for a while and it has closed May with a solid looking stop grabber which suggests taking out the 10278 low. The upswing was to 0.618 retrace of the swing down from the high of 13600.

    Monthly chart
    DAXM1.

    On the weekly the drop stopped at the top of a K area 11600 - 11700 so watching here for some signs of a retracement suitable for a short entry.


    DAXW1.
     
    #7 Synchronicity, Jun 2, 2019
    Last edited: Jun 2, 2019
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Yes, Mike. DAX is very thrilling topic. Last year I've traded the H&S on the top it was done perfect at XOP, then upside action has followed and it has become more extended that I thought initially. Here is my initial suggestion as on AUG 18:
    [​IMG]
    When I saw more extended action, also it is fundamental background has changed a bit, I thought, whether it could be upside 3-Drive to ~14500.
    But now, with new inputs, it seems that downside action should continue. Interesting, what the pattern it will be on a way down...
     
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  9. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. My short term expectations proved wrong, EUR progressed higher breaking 1.1215 level. What I think is going on is that we are forming 5 waves in wave C of red wave 4, and that after five waves are completed, we will fall back down under 1.1106 lows in wave 5 of wave 5. I still do not think this is start of major bullish correction, only bullish wave C of wave 4.

    4 H chart: Full wave count and my expectations. We are in wave 3 of wave C, and still think it has some fuel left. After that I expect not too deep correction after which wave 5 should follow making one more higher high, completing wave 4 and open the door for wave 5 to develop pushing price under 1.1106 lows.

    EURUSDkH4.

    1 H chart: More closer look and more detailed wave count.

    EURUSDkH1.

    How to trade this?

    Use every bearish correction for long entry, it is still unclear what shape that correction will have but long entry is zone = 1.119-1.1220, SL1=1.1115, SL2=1.0967, TP zone = 1.1275-1.1290
    Main idea is to make short entry after 5 waves are completed, but we are not there yet. Stop loss levels for short entries could be 1.1326 and 1.1449.
     
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  10. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    It seems that our EW experts (Stag, Deltoid) are done well. Indeed, despite deep retracement, that was a warning sign personally for me, they said that this is OK, it should be by EW and EUR keeps chances on rally.
    So this has happened. Personally, I watched for tactical setup only - morning star bullish pattern that we've discussed in report and its 1.1230 target, which is done already. But EUR is climbing higher and now we have to consider more extended targets and keep an eye on 1.1326 level, which has special meaning by EW analysis. The upside breakout opens wide upside potential for EUR, as I understand correctly what Stag and Deltoid talked about it...

    Still, somehow I suggest that this will be not today scenario. Now market is coming to resistance cluster on daily. Price already stands at MPR1, but slightly higher we see daily OB level, and K-resistance. It means that EUR probably should hit some intraday targets and turn to retracement:
    eur_d_04_06_19.

    I would consider 1.1280-1.13 area as a target which market could reach today. First - we have XOP here that is not done yet:
    eur_4h_04_06_19.

    Another, closer XOP we also have on hourly chart. By the way, this XOP is based on our Morning star setup:
    eur_1h_04_06_19.

    So, short-term trading plan suggests reaching of these targets and then some pullback. As we have perfect thrust up on 4H chart and market at daily resistance, we will keep an eye on DiNapoli patterns - B&B, DRPO and such patterns as 222 "Buy" at some Fib level.
     
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