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Forex FOREX PRO WEEKLY, June 10 - 14, 2019

Discussion in 'Sive Morten- Currencies, Gold, Bitcoin Daily Video' started by Sive Morten, Jun 8, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    So, it was a bit tricky week for trading, as we've got real setup only on Friday, before NFP release, while other setups were very difficult to catch as it was very fast and represents reaction on external events - D. Trump speeches and other issues of this kind.

    First we talk on near-standing moments, major events that form the shape of current market, and then I want to attract your attention to important moment.

    Currently all markets twist and turn around tariffs news and central banks policy, because former trends start to change. Especially it relates to Fed. On chart below you can see how investors' expectations changed within last month - now the advantage stands for those who expects 25 or even 50 points drop on December meeting:
    upload_2019-6-8_13-7-11.
    Source: cmegroup.com

    ECB also added some fuel to fire. As Reuters reports - The euro jumped half a percent against the dollar on Thursday after the European Central Bank refrained from hinting at an interest rate cut and instead pushed back the timing of its first rate hike since the 2008 financial crisis.

    The euro rose because investors had expected an even more dovish signal from the ECB and an acknowledgement of weak economic growth in the bloc.

    “One of the more dovish outcomes we envisaged did not materialize. The (ECB) governing council extended its forward guidance timing, but also under-delivered on the TLTRO front,” TS Securities told clients.

    The ECB said it would lend to banks at a rate just 10 basis points above its minus 0.4% deposit rate in a new targeted longer-term refinancing operation, or TLTRO.

    Money market futures are now pricing in a 45% chance of a 10 basis point euro zone rate cut by the end of year versus 75% before the ECB statement.

    The ECB “is taking a more proactive approach, rather than the wait-and-see approach you’re seeing from the Fed,” said Minh Trang, senior foreign exchange trader at Silicon Valley Bank.

    That has led the euro to rally and the dollar to fall because “if (the Fed) is behind the curve, they’ll have to make more drastic moves if the economy turns on them,” said Trang.

    “If you look at the last six months, (the Fed) has been behind the curve. The market began pricing in a (U.S.) rate cut six months ago.”


    The dollar index fell to a two-month low of 96.749 midweek on investor risk aversion and dovish comments from members of the Fed, including Chair Jerome Powell, that heightened prospects of an interest-rate cut.

    Friday data also has not increased the optimism of investors. The U.S. dollar index fell on Friday to its lowest since March 26 after the U.S. Department of Labor’s employment report showed that job growth slowed sharply in May and wages rose less than expected.

    The weak data suggest that the loss of momentum in economic activity has spread to the labour market, which will further support forecasts that the Federal Reserve will cut interest rates this year. Rising expectations of a cut have pulled the dollar 1.2% lower this week.

    “It’s a soft report. It’s a soft enough report that a June rate cut should probably be on the table for discussion,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

    Nonfarm payrolls increased by 75,000 jobs last month, falling below the roughly 100,000 needed per month to keep up with growth in the working-age population.

    Tepid employment added to lackluster data on consumer spending, business investment, manufacturing and homes sales suggesting the economy was losing momentum in the second quarter. Growth has cooled as the stimulus from last year’s tax cuts and spending increases fades.

    “Unlike a lot of the reports we’ve seen where the headline is strong and the details are soft, or vice versa, this is just soft. Headline is soft, details are soft,” said Anderson, noting that the average duration of a spell of unemployment rose substantially and the employed share of the population fell.

    Expectations for a rate cut in June rose to 22.5% on Friday from 16.7% the day prior, and for July chances rose to 69.1% from 58.0%, according to CME Group’s FedWatch tool.(Chart above)

    The market is now pricing in two to three rate cuts in 2019, with only a 1.3% chance that rates will be at their current levels in December.

    The broad cool-off in hiring happened before a recent escalation in trade tensions between the United States and two of its major trading partners, China and Mexico, which could hit hiring further. Fed Chairman Jerome Powell said on Tuesday the central bank was closely monitoring the implications of the trade tensions on the economy and would “act as appropriate to sustain the expansion.”

    Now situation around Mexico gets the relief, but the same we saw in US-Sino relationships, when tariffs announced, cancelled then announced again and now they are applied.

    Personally, I was not expecting solid NFP numbers on employment - market is highly saturated with just 4% unemployment rate (and 7% of U6 unemployment), but was watching for wage inflation, which shows slower levels - 3.1% annually. Still, I'm not susceptible to overestimate the negative degree of recent report. In fact - 3.1% or expected 3.2% whether it is really so drastic difference? If we take a look at recent 5-6 reports - we will see that every time market was waiting for 3.2-3.3% and every time real data was 0.1% lower. Once it was even better than expected. How long market will react on the same difference?

    Probably we need to wait for new update from Fathom consulting as situation has changed. It is interesting to see what they think about it, as divergence between statistics and market expectations increased. Recent Fathom view suggests two rate increase in nearest 12-18 months. Now I agree that US economy is losing pace, but IQ GDP was above 3%, overall statistics is not as bad and It seems that investors run ahead of train and blacken the picture. We need to be patient and keep the head chill, trying to not add emotions to statistics.
    It looks a bit curious - when investors day by day see new tensions and ongoing processes but expect better numbers. Expectations should be adjusted downside, and the the fact that US economy shows the same 3.1% in current circumstances is more the plus rather than minus.

    This idea shows confirmation in CFTC data. Take a look investors do not hurry up to close shorts on EUR, despite all relations about USD weakness and other stuff. This fact just confirms that we need to be careful in our conclusions.
    upload_2019-6-8_13-49-3.

    Source:cftc.gov
    Charting by Investing.com


    And here is the second thing, that I would like to share with you. You could treat it differently and be skeptical on it, but I try to follow the logic and the things that I saw. Those of you who stays with us for a long time already probably remember what a hot discussion was around US President election and how said that D. Trump will win. We said this in Report of 26-30 September of 2016
    Our suggestion was based on the words of Mr. Roldugin is well-known сellist and Putin's friend have said that "some wise people have said me that Trump will become a President". Reuters also quotes his words in the article. You could talk a lot about Russian probes and Mueller investigation - but to be honest - I do not care. The only thing that I want to know is result, impact on the market. And what stands behind it - it is not important.

    Why I'm telling that. Yesterday Putin and Xi talked a lot about US Dollar and global economy situation on Saint-Petersburg economy forum. Just few people keep an eye on this forum, but this is shortfall attitude. Meantime, S-P forum takes the lead role and steal the show of Davoc forum for second year in a row. Sometimes some very important information could sound there.

    Here is what Reuters tells on Putin's speech.

    Aggressive U.S. tactics such as a campaign against Chinese telecoms firm Huawei will lead to trade wars - and possibly real wars - Russian President Vladimir Putin said on Friday, in a show of solidarity with China alongside its leader Xi Jinping.

    In some of his strongest words on the subject, Putin accused Washington of “unbridled economic egoism”. He singled out U.S. efforts to thwart a Russian gas pipeline to Europe and a U.S. campaign to persuade countries to bar Huawei, the world’s biggest telecoms equipment maker, from supplying network gear.

    “States which previously promoted free trade with honest and open competition have started speaking the language of trade wars and sanctions, of open economic raiding using arm-twisting and scare tactics, of eliminating competitors using so-called non-market methods,” said Putin.

    The world risked slipping into an era when “general international rules will be exchanged for the laws of administrative and legal mechanisms ... which is how the United States is unfortunately behaving, spreading its jurisdiction over the whole world,” added Putin.

    “...It’s a path to endless conflicts, trade wars and maybe not just trade wars. Figuratively speaking, it’s a path to battles without rules that pit everyone against everyone else.”

    And here is most important thing -
    Putin also complained about the U.S. dollar, calling it an instrument of pressure whose role in the financial system should be reconsidered.

    Changes in the global economy "call for the adaptation of international financial organizations (and) rethinking the role of the dollar which... has turned into an instrument of pressure by the country of issue on the rest of the world," Putin said.

    So, we could have different relation to this. But, guys, they predicted US elections, the competition was so strong that it was impossible actually. H. Clinton already ordered the victory articles in newspapers, when news on D. Trump victory has come. It means that they knew.

    From all these things I come to conclusion that D. Trump will win the 2nd term and closer to the end of 2nd term something really bad should happen with US Dollar. You could believe it or not - no matter. Just keep this in mind. If we will get some strong bearish background on USD by the end of 2nd D. Trump term - we will know what to do...

    Surprisingly, this view coincides with our long-term reversal setup on Dollar Index that we've discussed two weeks ago, which suggests starting of long-term downside trend (or even collapse) on US Dollar.
    dxy_m_10_06_19.


    Technical analysis
    Monthly


    Our cross market analysis, involving Dollar Index gives clear signal on possible USD weakness. Last week we said "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."

    Now we've estimated the major factor - market expectation on worse statistics and review on Fed policy, starting as soon as July meeting.

    On technical chart situation just starts to change as we see first meaningful pullback up from major 5/8 Support. Changes are still look insignificant, trend still stands bearish. Monthly chart is rather large and any upside action will have retracement feature, until 1.26 area breakout. The first meaningful resistance here stands around YPP of 1.1740 area, which approximately agrees with 3/8 Fib resistance (not shown here).

    eur_m_10_06_19.

    Weekly

    Jump on the bandwagon, and following to massive enthusiasm of recent rally, finally we could take different view on EUR (at least until IIQ US GDP release:rolleyes: ). Still we can't ignore real bullish signs that now stand in place and make impact on sentiment.

    First is trend has turned bullish, price has broken the resistance of long lasting wedge pattern and close above 25x5 DMA - DiNapoli indicator for long-term tendencies. Week shows almost tale close. Although all this stuff doesn't promise us success, it provides clarity. Now we exactly know our invalidation point and some targets.

    Current reversal is based on 1.11 lows and monthly Fib support. The failure of bullish setup suggests breakout through this level. Until price stands above it, market keeps chances on upside continuation.

    Personally, I could recognize here just one potential pattern - reverse 1.27 H&S. It suggests action to 1.1550 area first, where neckline should be, then drop to ~1.1250 - bottom of right arm and then major upside extension. Price is not at overbought here, so, EUR easily could follow to this setup.

    Upside action also could be choppy, as downside action to the head's bottom also was choppy. Nearest weekly resistance is 1.1376.
    eur_w_10_06_19.

    Daily

    Despite excellent performance and bullish trend, EUR stands at the point that is not suitable for taking long position. Indeed, price has shown strength on Friday when our K-resistance was broken, even in overbought condition. This is big rare for financial markets.

    Here we expect retracement, but it could happen differently. The first scenario suggests upside continuation to K-resistance around weekly level and then a pullback. Conversely, market first could show the pullback and then continue upside action to weekly resistance in a way of AB=CD pattern. Actually, potential shape of reverse H&S hints on this scenario as well.
    eur_d_10_06_19.

    Intraday

    On 4H chart we have few extensions that create resistance around 1.1355-1.1360 area. All other upside targets have been broken already:
    eur_4h_10_06_19.

    On 1H chart we follow our Friday pattern, as its OP has not been hit yet and stands in the same 1.1355 area.
    eur_1h_10_06_19.

    So, intraday analysis suggests, that if market intends to start retracement soon - this should happen somewhere around 1.1355. If no reversal will happen - be prepared to upside continuation to 1.13760-1.1392 major daily/weekly resistance.

    Still, for the truth sake, we do not care much where and how retracement will start, as we do not have intention to trade EUR short. The only thing that we care is to get market at support level for long entry, and preferably with bullish continuation pattern on the back.

    Conclusion:

    Short-term fundamental driving factors have been discovered this week and triggered solid upside action. Still they have not been tested yet by real statistics. We think that July Fed statement and IIQ GDP release will provide real test of them.

    In longer-term view we see factors that negative for US Dollar and this negative effect could be significantly stronger than it seems right now. We think that negative impact should get maximum strength closer the end of 2nd term of D. Trump presidency. Until that moment downside trend could start but probably will be gradual. Technical long-term analysis of Dollar index suggests major downside reversal as well. Indirectly our worry is confirmed by rally on gold market, which we think stands in a phase of global trend shift to bullish. As we suggest, this combination looks worthy of our attention.


    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, Jun 8, 2019
    Last edited: Jun 8, 2019
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  2. FreddyFX

    FreddyFX Sergeant

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    What worries me the most is how the Big Boys manipulate the market again. SO often we are given the feeling what to do, while meanwhile they already plan to reverse their actions. In plain Dutch, hahahaha, the feeling to go LONG, while they will move SHORT soon. Time will tell, as always.
     
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  3. trendy163

    trendy163 Recruit

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    Again, great report Sive, thank you. It is amusing/interesting that Putin is accusing the US of aggressive tactics, given Russia's invasion of Crimea (and the recent shooting at Ukraine's ships), which is a rather more direct sort of aggressive tactic.

    Then, in 2014, it was reported that, "Putin declared at the weekend he had the right to invade Ukraine to protect Russian interests and citizens." source: https://www.reuters.com/article/us-...in-tightens-crimea-grip-idUSBREA1Q1E820140303

    It appears not so unlike Trump's view that the US has a right to protect itself from Huawei and IP theft.

    Perhaps they both are right, or not. Clearly, both are taking political positions that benefit themselves.

     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Yes, buddy. There are a lot of contradictions, but this is all around politics. I'm mostly interested in impact on the markets, what will happen with US Dollar. I'm sure that this kind of comments are not just wish-wash and definitely something stands beyond it. We do not know how it will turn, but we need keep it in mind.
     
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  5. RahmanSL

    RahmanSL Major

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    First off Sive thanks very much for your valuable insights which I read weekly to better prepare for the trading week ahead.

    "From all these things I come to conclusion that D. Trump will win the 2nd term and closer to the end of 2nd term something really bad should happen with US Dollar..."

    Yesterday 8-June-2019 I read & heard over at Bloomberg & CNBC that even the Republicans are getting "tariffs weary" and are looking at ways to veto Trump's tariffs policies. The Democrats are of course actively exploring ways to impeach Trump. That makes me think that perhaps Trump might possibly not even survive his term in office or not be nominated for re-election in 2020. Time will tell I supposed!

    Hearing Trump U-turned on imposing tariffs on Mexico on Monday 10-June-2019 (which is expected to strengthen the MXN on Monday's market opening) made me think just how easy it would be for Trump or his family/closed associates to capitalize on the forex market from his offhand tweets on his economic policies. Of course that can be interpreted as "inside trading" and is a criminal offense.

    All the best and take care!
     
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  6. RahmanSL

    RahmanSL Major

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    First off Sive thanks very much for your valuable insights which I read weekly to better prepare for the trading week ahead.

    "From all these things I come to conclusion that D. Trump will win the 2nd term and closer to the end of 2nd term something really bad should happen with US Dollar..."

    Yesterday 8-June-2019 I read & heard over at Bloomberg & CNBC that even the Republicans are getting "tariffs weary" and are looking at ways to veto Trump's tariffs policies. The Democrats are of course actively exploring ways to impeach Trump. That makes me think that perhaps Trump might possibly not even survive his term in office or not be nominated for re-election in 2020. Time will tell I supposed!

    Hearing Trump U-turned on imposing tariffs on Mexico on Monday 10-June-2019 (which is expected to strengthen the MXN on Monday's market opening) made me think just how easy it would be for Trump or his family/closed associates to capitalize on the forex market from his offhand tweets on his economic policies. Of course that can be interpreted as "inside trading" and is a criminal offense.

    All the best and take care!
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    That's particularly makes me think about D. Trump victory of 2nd term. All political foes can do nothing. I suggest that if they could - they retired Trump long time ago, and they have tried and trying right now. But unsuccessful.
    Second - there is no politician in US of the same level as D. Trump. Theoretically, who could replace him? Saunders, Biden hardly could do this. They are old and associated with Clinton and Obama politics. Besides, the information that we see in media not necessary means attitude of common Americans. We have decepticon media.

    Anyway, as you correctly said - we will see.
     
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  8. RahmanSL

    RahmanSL Major

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    With 23 (and counting) Democrats declaring their presidential candidacy, there are very few from the Republican side which have since dwindled down to only one.

    President Trump formally launched his bid for re-election on Feb 17, 2017 and was followed by former Gov of Massachusetts Bill Weld. But at 73 and older than Trump by one year, his chances of unseating Trump are very much in doubt.

    Two individuals, Bob Corker US Senator from Tennessee and John Kasich Gov of Ohio, have expressed their interest but have since kinda withdrawn their presidential bid but might go for it if the climate is right.

    Polling of Republican voters suggest that despite Trump’s strong support inside the party, 43% of GOP voters say they want to see a primary challenge to the president and 56% do not, that’s a slight increase from last fall.

    If Trump loses his bid for reelection (and perhaps even if he wins), the 2020 Republican primary (or rather, the lack thereof) will be a mystery for future political scientists to puzzle over “How could a president who is historically unpopular, careens from crisis to crisis, and faces a serious threat of impeachment cruise to re-nomination without a serious challenge?”

    There is a moral case for doing so, which is basically Weld’s: “Trump has no business being president, and so challenging him is the right thing to do, even if it’s doomed.”

    With Hogan and Kasich out, it’s possible that Trump’s only real challenger will be William Weld, and even his candidacy is more symbolic than serious.

    Who knows? Perhaps, in the run-up to the presidential race, a younger & charismatic challenger might still come forth from the Republican’s rank to become the next President of the United States of America.

    …. or not, in which case the world will probably be stuck with Trump for another 4 more years to keep Investors & Traders on their toes teetering on massive nervous breakdown.

    BUT, as Investors & Traders, we should also look upon crisis as an opportunity to capitalize upon.

    Cheers & all the best!
     
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  9. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. There is decent probability that recent upside action was just retracement, and that it could end very soon. If that is the case bearish action could resume breaking 1.1106 lows.

    Monthly chart: Big upside action is near, but I think we are not there yet. This chart shows it.

    EURUSDkMonthly.

    Weekly chart: More closer look what monthly chart suggests. We are very near of end of wave 2, which has shape of extended flat. This means red wave 3 of wave C could start very soon with targets under 1.1106 lows.

    EURUSDkWeekly.

    Daily chart: Full wave count what is going on. We are in blue wave 5, final leg of blue wave C, which is final part of bullish retracement. After blue wave 5 is finished, red wave 2 will be completed opening door for start of bearish red wave 3 which should break 1.1106 lows easily. This scenario is invalid if price break 1.1570 level, no before that, but I expect bearish action to start very soon.

    EURUSDmDaily.

    4H chart. More closer look at complete red wave 2 and all waves inside of it.

    EURUSDkH4.

    1H chart: Invalidation level of 1.1570 is quite far, and it is not attractive level for stop loss use.Stop loss level for short positions which can be used is 1.1370. That is the point where wave 5 of wave 5 could not reach respecting the rule that wave 3 can not be shortest one. I expect one more puny higher high after which collapse should start erasing all gains EUR made in last weeks.

    EURUSDkH1.

    How to trade this?

    1st position scalp long entry in zone = 1.1320-1.1335, SL=1.1306, TP zone = 1.1350-1.1360
    2nd main position, sell entry in zone = 1.1340-1.1360, SL1=1.1371, SL2=1.1571, TP zone < 1.1106

    To sum up: main goal is to enter short position. Even in case my analysis is wrong, that we are not going to break 1.1106 lows, some retracement should happen at least allowing us to have trade with no risk, or at least high risk/reward ratio.
     
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  10. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning everybody,

    Yesterday was a holiday in EU, and personally I do not see any valuable setups by far on EUR. Although market has dropped a bit, but our question still stands on the table - whether we will get major retracement now, or EUR proceeds action to major 1.1376-1.1390 resistance. As we have no clear patterns, I think it is better to wait for 1-2 days.

    Thus, today we update our GBP view as it comes to the moment of position taking. On Friday we already talked about it and the core of setup is 4H reverse H&S pattern. On daily market has completed major OP and stands at minor 78.6% Fib level. This is not enough for reversal, but it could be enough for tactical bounce up:
    gbp_d_11_06_19.

    On 4H chart market is coming to 5/8 Fib support, where the bottom of right arm should be formed and theoretically we could consider taking of long position:
    gbp_4h_11_06_19.

    On 1H chart it would be nice if we would get this picture. COP target creates an Agreement with major Fib support, and this is good sign for us. Appearing of butterfly could be also an advantage. All these patterns increase the strength of support and hence - our protection, because increase the chances on upside pullback once position will be taken. This, in turn, gives us chance to move stops to breakeven and turn to riskless trade:
    gbp_1h_11_06_19.

    Of course, this is also not superb setup, but, at least here we see clear patterns and harmony among time frames, compares to EUR.
     
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