Forex FOREX PRO WEEKLY, June 17 - 21, 2024

Sive Morten

Special Consultant to the FPA
Messages
18,984
Fundamentals

No doubts, Fed meeting this week stands in focus. Also I would add here the rumor, a kind of conspiracy theory, that S.Arabia - US agreement on selling oil for US Dollars is over. Of course, nobody have seen this agreement, but it is suggested that S. Arabia had an obligation to invest revenues for Oil export in US Bonds. In fact, it doesn't matter whether this is truth or rumors, because this information was put in public sphere and makes impact on the market already. Besides, S. Arabia Prince Ben Salman doesn't come on G7 meeting. Maybe it means something as well.

Market overview

The dollar gained on Thursday despite a soft U.S. producer price inflation report for May, after the Federal Reserve adopted a hawkish tone at the conclusion of its meeting on Wednesday. Data on Thursday showed that U.S. producer prices unexpectedly fell in May, with the headline producer price index (PPI) dropping 0.2% last month after advancing by an unrevised 0.5% in April. Core prices were flat, after also seeing a 0.5% increase the prior month.
“Today's PPI comes on the heels of a softer than expected CPI ... which is going to feed into what probably is going to be a somewhat softer core PCE deflator when we get it at the end of the month,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

But optimism over cooling inflation was not enough to keep the dollar down. The U.S. currency rebounded after Fed officials on Wednesday unexpectedly forecast only one interest rate cut this year and pushed out the start of rate cuts to perhaps as late as December. Fed Chair Jerome Powell said policymakers were content to leave rates where they are until the economy sends a clear signal that something else is needed - through either a more convincing decline in price pressures or a jump in the unemployment rate. Other data on Thursday showed that the number of Americans filing new claims for unemployment benefits increased to a 10-month high last week.
"It was a bit overdone, the reaction (to) that CPI. It was almost a relief that it wasn't worse. And that's what sparked such a strong knee-jerk reaction," said City Index market strategist Fiona Cincotta.
1718442008995.png


Traders had pared bets that the Fed will cut in September after Friday’s employment report for May showed more jobs growth than expected, while wages also rose more than was anticipated. Those bets were revived, however, after Wednesday’s CPI report. Fed funds futures traders now see two cuts this year as likely, with a first cut in September seen as a 68% probability, according to the CME Group’s FedWatch Tool. The dollar is likely to remain supported as Fed policy contrasts with more dovish international central banks.
“I'm not convinced that the dollar's top is in place on this move,” Chandler said. “We might not be yet at the maximum policy divergence. This political uncertainty in Europe is sufficient to keep the dollar bid,” Chandler said.

A New York Fed survey on Monday showed that the U.S. public’s outlook on the future path of inflation was mixed in May, though inflation is seen as being 3.2% a year from now, compared with April’s expectation of 3.3%. Meantime Michigan survey 5-year inflation expectations has reached record levels:
1718442352949.png


The U.S. 10-year note yield, seen roughly steady at 4.35% at end-August, is then forecast to decline to 4.23% and 4.13% in six and 12 months respectively, according to median forecasts from 55 fixed-income strategists and analysts in a June 6-11 Reuters poll.
"For yields, we think it's more choppy sideways and then lower towards the end of the year. We're still in the camp of inflation pressures easing and eventual Fed rate cuts - one or two - by year-end," said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research. "But there's going to be continued volatility because the market's reaction to every data release will remain amplified and if they don't meet expectations, we'll get a big reaction. We have to acknowledge the economy over the last couple of years has been a lot more resilient than most people expected."

Robust economic data has also driven strategists to push up median forecasts for the interest-rate sensitive 2-year Treasury note yield - now seen falling only 22 bps to 4.62% by end-August and about 40 bps to 4.45% in six months from 4.84% currently.
"Most of the soft data - the surveys and so on - have come in weaker than expected so far, leading forecasters to believe a weakening in the economy is just around the corner; whereas hard data has continued to be strong," Jabaz Mathai, head of G10 rates and FX at Citi, said. "So the question in people's minds - the timing of when the economy actually goes into a recession - has been extremely difficult to answer, causing the postponement of rate cut pricing. It's a mixed environment, so rates are likely to stay in a range in the near-term," Mathai added.

Asked what was more likely for the U.S. yield curve over the coming month, 70% of respondents, 14 of 20, said it would steepen, nine of whom said it would be led by short-term bond yields declining more than long-term ones, or 'bull steepening'.

Far-right parties gained ground in European Parliament elections on Sunday. The euro fell on Monday after gains by the far right in European Parliament elections on Sunday prompted French President Emmanuel Macron to call a snap national election. Shares in French banks, tollroad operators and renewable energy firms fell sharply on Monday as well.
The increase in support for right wing parties was "generally what was expected, but the surprise element is that Macron has reacted by calling a snap election, so that makes the market more nervous," said Lee Hardman, senior currency analyst at MUFG.

Many euro zone banks are still far from meeting FASB 9 accounting rules on the provisions needed to protect against loan losses. A surge in interest rates and new geopolitical risks ranging from the war in Ukraine to a disruption of established trade patterns with China and the U.S. are making regulators nervous again.

German inflation rose in May due to higher services prices, the federal statistics office said on Wednesday, confirming preliminary data. German consumer prices, harmonised to compare with other European Union countries, rose 2.8% in May from a year earlier. They had risen 2.4% year-on-year in April.
"The inflation rate is slightly up again, mainly due to the continued increase in service prices," said Ruth Brand, president of the statistics office. By contrast, energy and food prices have had a dampening effect on overall inflation since the beginning of the year," Brand said.

But this is not the end of the story - just a week ago Germany also showed increase in unemployment, which is together with inflation could become a bad sign for ECB and C. Lagarde.

THE FED MEETING RESULTS

Before we start with the Fed analysis, let's briefly take a look at current situation in global economy. Particularly we're interested with industrial and production sector. Because this is the core factor for necessity of the rate cut:
1718444751225.png


Thus, because of inflation, rates need to be raised, and because of the decline in industry, they need to be reduced! Since the main specialists are in the United States, their concerns are broadcast to all central banks. And they are now most concerned of inflation. Accordingly, the rates are high and, as can be seen from the charts above, the real sector of the economy, primarily industry, is rapidly collapsing. In the context of the US elections, monetary policy is likely to be softened. We suggest it might be rate cut in July. But truth is, increase of liquidity by any kind of emission, such as QE has equal chances to happen instead. Inflation will rise, of course, the rate of economic decline will increase …

Second moment to consider is falsification of job market statistics that we've considered a month ago. Now this topic has turned public and has reached highest levels. Even J. Powell talked about it on press conference. He said "There is an opinion that the growth inhe number of jobs is somewhat exaggerated. But this indicator is still very strong.This is no longer the overheated market that was in the United States a few years ago."

Another big media source who indirectly confirmed this is "The Economist".
It is the million-person mystery, and its solution will help determine just how strong American growth truly is. According to an official survey of employers, America’s economy has added 1.2m jobs in net terms since the start of the year. But a separate survey of households paints a completely different picture: that the country has in fact shed about 100,000 jobs over the same time period.

The Fathom writes the same - which is also big UK analytics agency. But they explain this with migration. With the household survey pointing to just 0.38 million jobs created over the past year, compared to 2.76 million on the establishment measure. Fathom has previously written about how the discrepancy might be explained by an increase in net inward migration. A broader range of economic data, from initial claims to spending, suggests that the economy continues to add jobs. However, that is often the case until it is not. Job losses mount slowly and then all at once. Without conclusive data, members of the FOMC must therefore hope that not only does employment continue to rise but that this recent discrepancy goes down – as does inflation:
1718448848426.png


Then J. Powell also said a few interesting moments. If you combine separate sentences, you could find it really interesting:
Our priority is to fight inflation in the United States. ️Rates level holds the growth of the economy — the very action that we sought. Today's inflation report is really very good, I hope it will mark the beginning for a whole series of good data in the future. We have made good progress in the fight against inflation... but we cannot know what the future holds for us."
The U.S. banking system seems to be in good shape. We have made good progress in the fight against inflation... but we cannot know what the future holds for us. Right now we HAVE AN OPPORTUNITY to approach the issue of lowering rates cautiously. We DON'T HAVE a PLAN to wait until something breaks in the U.S. economy and then try to fix it.
No one is considering a rate hike as a baseline scenario. BUT I can't announce the dates of the Fed's rate cut either… There are several triggers that will prompt us to lower the rate in the country to mitigate the policy."

It doesn't look as hawkish speech at all. To me it looks more like verbal preparation for the rate cut as it contains too many hints on progress with inflation and ability to cut rate even right now. Cherry on the pie is unexpected jump in budget deficit. The US budget deficit in May turned out to be significantly higher than forecast. The figure for the month exceeded $ 347 billion, while experts expected only $ 250 billion. U.S. government spending increased by more than 22% year-on-year, while revenues decreased by more than 5 percent. Two-thirds of the fiscal year has passed, and the cumulative deficit has exceeded $1 trillion and $200 billion during this time.

Besides, population sentiment is changing rapidly. Americans’ concerns about inflation and interest rates have hit their highest levels in two years, according to a survey released by credit-reporting firm TransUnion Wednesday. Half of respondents said interest rates were among their top three financial concerns, and 84% cited higher prices for everyday goods like groceries and gas. Housing costs also weighed on the poll participants.
“The inflation rate is growing less quickly, but you’re still finding things are much more expensive than they were just a couple of years ago,” Charlie Wise, senior vice president at TransUnion, said in an interview. “Consumers generally don’t differentiate between inflation and prices. So inflation continues to be a bigger and bigger concern.”
1718450096407.png


CONCLUSION:

First thing that we have to acknowledge is Inflation goes nowhere. It is here and it is growing despite any CPI or any other official data. 0.1% MoM fluctuations is just the scale of statistical error, nothing more. Concern over inflation is growing as it is shown above. Besides, despite all trash talks, the Fed has changed its forecast on inflation. Forecast for 2024 the rate was increased from 4.6% to 5.1% and inflation to 2.6%, while for 2025 the rate forecast was also slightly increased from 3.9% to 4.1%. But more important is the increase in the long-term (neutral) rate from 2.6% to 2.8%. Don't forget, it is temporal...
1718450860701.png


But this information has a meaning only for economists and fundamental analysts, like we are (LOL). For now inflation has decreased enough, stands slightly above 2%. Thus, the rate downside move for 0.25% will make no serious impact in reality. While market, populistic and media reaction could be huge. Other problems in economy and political tasks overwhelm potential negative effect from 0.25% rate cut.

The election targets are of a higher importance. What the US authorities would like to achieve by common sense? To win elections they need to make electorate happy, or to feel happy for some time. But the degree of happiness is decreasing rapidly. And the major indicator of happiness is the stock market bubble, because around 60% of americans have investments on stock market. And they are becoming unhappy. According to LSEG data, U.S. equity funds, in particular, faced big outflows as investors sold a net $21.93 billion during the week, the most since December 2022.

U.S. bond market participants are worried market liquidity will keep deteriorating as the U.S. Treasury continues to issue large amounts of debt to back deficit spending while dealers struggle to keep up with the ballooning size of the market. Dealers' intermediation capacity is constrained because of higher capital requirements that discourage banks from holding large positions.
"I do worry about market liquidity," Chris Concannon, chief executive of MarketAxess, a fixed income electronic trading platform, said at the conference. "Right now we issue Treasury debt to pay interest on Treasury debt ... and if you look at the players supporting liquidity, they're not increasing," he said.
It is a significant loss in U.S. Treasury market functionality when intensive use of dealer balance sheets is needed to intermediate bond markets, as in March 2020. What happens if you have a Treasury auction and nobody shows up? That's a real concern. And that's where liquidity really matters. Recent auctions shows first signs of a potential problem. Besides, the interest rate burden makes heavy pressure on the US budget.

Finally, one of the most important signals of the recession in the United States has just worked (data for April appeared on June 7) - borrowing by individuals on revolving credit lines has fallen. They stopped growing in March, but decreased, albeit slightly, in April. Historically, this has always happened when a formal recession has already begun. The consumer realizes that his personal income in the future may not be as great as it seems, so he begins to borrow and spend less. This correlates with the data on consumer sentiment decreasing. By the way, stock market also was falling in April...

Speaking about job market - it is nothing to add here. Official data is falsificated. This is indirectly confirmed by turning this subject to public sphere. As you understand - this can't be done just occasionally and might be treated as another point in favor of dovish policy. Besides, the one thing that we should remember - unemployment trend never changes until economy cycle changes the direction. Now unemployment is raising.

So, mentioned factors bring multiple reasons to seriously consider possible rate cut in July. Indeed, the Fed doesn't like surprises and usually prepares any move. But now it seems that waiting until September might become "too late" decision for Democrats. If of course J. Powell doesn't play more nuanced game on political arena.

With the raising inflation in EU again, the conjuncture of EUR/USD could change. We will not make any special bets for this scenario right now, but in July I wouldn't take any short positions at the eve of the Fed meeting...
 
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Technicals
Monthly

June performance brings EUR too close to the lows of the May grabber. Actually this chart shows that June EUR touches MACD as well, but it doesn't match to reality - CME shows that it is not. Anyway, 1.0605 lows now look as vital area for short-term performance.

Both grabbers that we have on EUR - bearish on IQ chart and bullish on Monthly chart are confirmed by the same ones on Dollar Index. Besides, there is a scenario when they could work both - if EUR will not go above 1.10 local minor top here, which is a minimum target for monthy pattern.
eur_m_17_06_24.png


Weekly

This chart shows why we have called to not hurry with a bearish position. As you could see right on Friday's evening everything has changed and we've got bullish grabber. Inflation has increased in Germany. Due to our fundamental view, EUR has reasons to show upside action. The collapse of last week is mostly of political kind and Macron's mess, which could be short-term. We'll see. Downside action looks strong enough, so grabber could fail, but for now context remains bullish. And let's wait for clear confirmation for any bearish position right now:
eur_w_17_06_24.png


Daily

And now we have two ways to act. First is the simple one - just buy EUR with the stops below the lows with weekly grabber and forget about it. Second is more careful way - wait for clear bullish signs on daily/intraday charts and changing of the daily trend back to bullish. It seems as more reasonable approach. Although the 1st one has its own precious.

eur_d_17_06_24.png


Intraday

EUR now stands at the critical point. Bulls have to turn it up, otherwise bullish context will fail. And not only on the daily/weekly time frames, but on monthly as well. Because downside targets of XOP and potential butterfly are already in an area of 1.0530 and this is below of 1.0605 monthly grabber level. Besides, we have no significant support levels. It means that current level is the last one where long position theoretically could taken.

And we have "222' Buy, as OP target mostly is done:
eur_4h_17_06_24.png


On 1H chart we have great thrust down, so let's take a look at bullish patterns around the bottom. Maybe we will get DRPO "Buy" for example. Other words, we need to get bullish pattern with low potential risk that could let us to try to go long. If this scenario will fail, downside action should continue. The hope is that French political bearish effect will not last too long here.
eur_1h_17_06_24.png
 
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Fundamentals

No doubts, Fed meeting this week stands in focus. Also I would add here the rumor, a kind of conspiracy theory, that S.Arabia - US agreement on selling oil for US Dollars is over. Of course, nobody have seen this agreement, but it is suggested that S. Arabia had an obligation to invest revenues for Oil export in US Bonds. In fact, it doesn't matter whether this is truth or rumors, because this information was put in public sphere and makes impact on the market already. Besides, S. Arabia Prince Ben Salman doesn't come on G7 meeting. Maybe it means something as well.

Market overview

The dollar gained on Thursday despite a soft U.S. producer price inflation report for May, after the Federal Reserve adopted a hawkish tone at the conclusion of its meeting on Wednesday. Data on Thursday showed that U.S. producer prices unexpectedly fell in May, with the headline producer price index (PPI) dropping 0.2% last month after advancing by an unrevised 0.5% in April. Core prices were flat, after also seeing a 0.5% increase the prior month.


But optimism over cooling inflation was not enough to keep the dollar down. The U.S. currency rebounded after Fed officials on Wednesday unexpectedly forecast only one interest rate cut this year and pushed out the start of rate cuts to perhaps as late as December. Fed Chair Jerome Powell said policymakers were content to leave rates where they are until the economy sends a clear signal that something else is needed - through either a more convincing decline in price pressures or a jump in the unemployment rate. Other data on Thursday showed that the number of Americans filing new claims for unemployment benefits increased to a 10-month high last week.

View attachment 92916

Traders had pared bets that the Fed will cut in September after Friday’s employment report for May showed more jobs growth than expected, while wages also rose more than was anticipated. Those bets were revived, however, after Wednesday’s CPI report. Fed funds futures traders now see two cuts this year as likely, with a first cut in September seen as a 68% probability, according to the CME Group’s FedWatch Tool. The dollar is likely to remain supported as Fed policy contrasts with more dovish international central banks.


A New York Fed survey on Monday showed that the U.S. public’s outlook on the future path of inflation was mixed in May, though inflation is seen as being 3.2% a year from now, compared with April’s expectation of 3.3%. Meantime Michigan survey 5-year inflation expectations has reached record levels:
View attachment 92917

The U.S. 10-year note yield, seen roughly steady at 4.35% at end-August, is then forecast to decline to 4.23% and 4.13% in six and 12 months respectively, according to median forecasts from 55 fixed-income strategists and analysts in a June 6-11 Reuters poll.


Robust economic data has also driven strategists to push up median forecasts for the interest-rate sensitive 2-year Treasury note yield - now seen falling only 22 bps to 4.62% by end-August and about 40 bps to 4.45% in six months from 4.84% currently.


Asked what was more likely for the U.S. yield curve over the coming month, 70% of respondents, 14 of 20, said it would steepen, nine of whom said it would be led by short-term bond yields declining more than long-term ones, or 'bull steepening'.

Far-right parties gained ground in European Parliament elections on Sunday. The euro fell on Monday after gains by the far right in European Parliament elections on Sunday prompted French President Emmanuel Macron to call a snap national election. Shares in French banks, tollroad operators and renewable energy firms fell sharply on Monday as well.


Many euro zone banks are still far from meeting FASB 9 accounting rules on the provisions needed to protect against loan losses. A surge in interest rates and new geopolitical risks ranging from the war in Ukraine to a disruption of established trade patterns with China and the U.S. are making regulators nervous again.

German inflation rose in May due to higher services prices, the federal statistics office said on Wednesday, confirming preliminary data. German consumer prices, harmonised to compare with other European Union countries, rose 2.8% in May from a year earlier. They had risen 2.4% year-on-year in April.


But this is not the end of the story - just a week ago Germany also showed increase in unemployment, which is together with inflation could become a bad sign for ECB and C. Lagarde.

THE FED MEETING RESULTS

Before we start with the Fed analysis, let's briefly take a look at current situation in global economy. Particularly we're interested with industrial and production sector. Because this is the core factor for necessity of the rate cut:
View attachment 92920

Thus, because of inflation, rates need to be raised, and because of the decline in industry, they need to be reduced! Since the main specialists are in the United States, their concerns are broadcast to all central banks. And they are now most concerned of inflation. Accordingly, the rates are high and, as can be seen from the charts above, the real sector of the economy, primarily industry, is rapidly collapsing. In the context of the US elections, monetary policy is likely to be softened. We suggest it might be rate cut in July. But truth is, increase of liquidity by any kind of emission, such as QE has equal chances to happen instead. Inflation will rise, of course, the rate of economic decline will increase …

Second moment to consider is falsification of job market statistics that we've considered a month ago. Now this topic has turned public and has reached highest levels. Even J. Powell talked about it on press conference. He said "There is an opinion that the growth inhe number of jobs is somewhat exaggerated. But this indicator is still very strong.This is no longer the overheated market that was in the United States a few years ago."

Another big media source who indirectly confirmed this is "The Economist".


The Fathom writes the same - which is also big UK analytics agency. But they explain this with migration. With the household survey pointing to just 0.38 million jobs created over the past year, compared to 2.76 million on the establishment measure. Fathom has previously written about how the discrepancy might be explained by an increase in net inward migration. A broader range of economic data, from initial claims to spending, suggests that the economy continues to add jobs. However, that is often the case until it is not. Job losses mount slowly and then all at once. Without conclusive data, members of the FOMC must therefore hope that not only does employment continue to rise but that this recent discrepancy goes down – as does inflation:
View attachment 92922

Then J. Powell also said a few interesting moments. If you combine separate sentences, you could find it really interesting:




It doesn't look as hawkish speech at all. To me it looks more like verbal preparation for the rate cut as it contains too many hints on progress with inflation and ability to cut rate even right now. Cherry on the pie is unexpected jump in budget deficit. The US budget deficit in May turned out to be significantly higher than forecast. The figure for the month exceeded $ 347 billion, while experts expected only $ 250 billion. U.S. government spending increased by more than 22% year-on-year, while revenues decreased by more than 5 percent. Two-thirds of the fiscal year has passed, and the cumulative deficit has exceeded $1 trillion and $200 billion during this time.

Besides, population sentiment is changing rapidly. Americans’ concerns about inflation and interest rates have hit their highest levels in two years, according to a survey released by credit-reporting firm TransUnion Wednesday. Half of respondents said interest rates were among their top three financial concerns, and 84% cited higher prices for everyday goods like groceries and gas. Housing costs also weighed on the poll participants.

View attachment 92923

CONCLUSION:

First thing that we have to acknowledge is Inflation goes nowhere. It is here and it is growing despite any CPI or any other official data. 0.1% MoM fluctuations is just the scale of statistical error, nothing more. Concern over inflation is growing as it is shown above. Besides, despite all trash talks, the Fed has changed its forecast on inflation. Forecast for 2024 the rate was increased from 4.6% to 5.1% and inflation to 2.6%, while for 2025 the rate forecast was also slightly increased from 3.9% to 4.1%. But more important is the increase in the long-term (neutral) rate from 2.6% to 2.8%. Don't forget, it is temporal...
View attachment 92924

But this information has a meaning only for economists and fundamental analysts, like we are (LOL). For now inflation has decreased enough, stands slightly above 2%. Thus, the rate downside move for 0.25% will make no serious impact in reality. While market, populistic and media reaction could be huge. Other problems in economy and political tasks overwhelm potential negative effect from 0.25% rate cut.

The election targets are of a higher importance. What the US authorities would like to achieve by common sense? To win elections they need to make electorate happy, or to feel happy for some time. But the degree of happiness is decreasing rapidly. And the major indicator of happiness is the stock market bubble, because around 60% of americans have investments on stock market. And they are becoming unhappy. According to LSEG data, U.S. equity funds, in particular, faced big outflows as investors sold a net $21.93 billion during the week, the most since December 2022.

U.S. bond market participants are worried market liquidity will keep deteriorating as the U.S. Treasury continues to issue large amounts of debt to back deficit spending while dealers struggle to keep up with the ballooning size of the market. Dealers' intermediation capacity is constrained because of higher capital requirements that discourage banks from holding large positions.

It is a significant loss in U.S. Treasury market functionality when intensive use of dealer balance sheets is needed to intermediate bond markets, as in March 2020. What happens if you have a Treasury auction and nobody shows up? That's a real concern. And that's where liquidity really matters. Recent auctions shows first signs of a potential problem. Besides, the interest rate burden makes heavy pressure on the US budget.

Finally, one of the most important signals of the recession in the United States has just worked (data for April appeared on June 7) - borrowing by individuals on revolving credit lines has fallen. They stopped growing in March, but decreased, albeit slightly, in April. Historically, this has always happened when a formal recession has already begun. The consumer realizes that his personal income in the future may not be as great as it seems, so he begins to borrow and spend less. This correlates with the data on consumer sentiment decreasing. By the way, stock market also was falling in April...

Speaking about job market - it is nothing to add here. Official data is falsificated. This is indirectly confirmed by turning this subject to public sphere. As you understand - this can't be done just occasionally and might be treated as another point in favor of dovish policy. Besides, the one thing that we should remember - unemployment trend never changes until economy cycle changes the direction. Now unemployment is raising.

So, mentioned factors bring multiple reasons to seriously consider possible rate cut in July. Indeed, the Fed doesn't like surprises and usually prepares any move. But now it seems that waiting until September might become "too late" decision for Democrats. If of course J. Powell doesn't play more nuanced game on political arena.

With the raising inflation in EU again, the conjuncture of EUR/USD could change. We will not make any special bets for this scenario right now, but in July I wouldn't take any short positions at the eve of the Fed meeting...
Thanks Sive for your detailed and insightful fundamental analysis which I totally agree with.
Continuous fundings of forever wars & conflicts will hurt the USA economy even more which they simply cannot afford.
 
Technicals
Monthly

June performance brings EUR too close to the lows of the May grabber. Actually this chart shows that June EUR touches MACD as well, but it doesn't match to reality - CME shows that it is not. Anyway, 1.0605 lows now look as vital area for short-term performance.

Both grabbers that we have on EUR - bearish on IQ chart and bullish on Monthly chart are confirmed by the same ones on Dollar Index. Besides, there is a scenario when they could work both - if EUR will not go above 1.10 local minor top here, which is a minimum target for monthy pattern.
View attachment 92925

Weekly

This chart shows why we have called to not hurry with a bearish position. As you could see right on Friday's evening everything has changed and we've got bullish grabber. Inflation has increased in Germany. Due to our fundamental view, EUR has reasons to show upside action. The collapse of last week is mostly of political kind and Macron's mess, which could be short-term. We'll see. Downside action looks strong enough, so grabber could fail, but for now context remains bullish. And let's wait for clear confirmation for any bearish position right now:
View attachment 92926

Daily

And now we have two ways to act. First is the simple one - just buy EUR with the stops below the lows with weekly grabber and forget about it. Second is more careful way - wait for clear bullish signs on daily/intraday charts and changing of the daily trend back to bullish. It seems as more reasonable approach. Although the 1st one has its own precious.

View attachment 92927

Intraday

EUR now stands at the critical point. Bulls have to turn it up, otherwise bullish context will fail. And not only on the daily/weekly time frames, but on monthly as well. Because downside targets of XOP and potential butterfly are already in an area of 1.0530 and this is below of 1.0605 monthly grabber level. Besides, we have no significant support levels. It means that current level is the last one where long position theoretically could taken.

And we have "222' Buy, as OP target mostly is done:
View attachment 92928

On 1H chart we have great thrust down, so let's take a look at bullish patterns around the bottom. Maybe we will get DRPO "Buy" for example. Other words, we need to get bullish pattern with low potential risk that could let us to try to go long. If this scenario will fail, downside action should continue. The hope is that French political bearish effect will not last too long here.
View attachment 92929
For the time being, I am going to stay away from EUR/USD due to political and economic uncertainties in the USA and EU.
I will keep shorting the USD/JPY at the high 157.xxx and 158.xxx for the simple reason that the BOJ will need to do something other than jawboning their Yen back to life.
Another pair that I am interested in is going long on silver (XAG/USD) below the 28.8xx levels because of the ongoing Russia-Ukraine conflict and Israel-Palestine war, and also the political & economic uncertainties in the USA, UK, and the EU which favors precious metals.
 
US yields and USD are diverging now. I`d put my money on USD-catching up i.e. USD down. Also stop on EUR/USD is pretty clearly defined, and upside profit potential is better from risk-reward perspective!
Happy trading to all!
 
Morning everybody,

So, it seems that Macron's political dust starts to settle a bit, so as EU stock market as EUR is getting some relief after Friday's mess. Will it keep going - we should see. For now I do not see any sense to make forecasts and guess on direction. Divergence between US Dollar and yields still holds, and this is another reason why I do not want to make any forecasts right now. Maybe retail sales report will bring some solution we will see...

For now, those who wants to follow the bullish setup that we have - could try it, others could just wait when this setup will be finished in any way.
eur_d_18_06_24.png


On 4H chart picture mostly stands the same. EUR starts reaction on "222" Buy pattern:
eur_4h_18_06_24.png


On 1H chart market is coming to 1st resistance area of 1.0740-1.0750 which is also local XOP target. Once downside pullback will start, if you do not have long position yet, it is possible to watch for 1.07 K-support area for this purpose:
eur_1h_18_06_24.png


Because we have bullish directional pattern on weekly chart, we do not consider now any short position taking.
 
Good morning,

So, today is a holiday in the US, market probably will be thin... Daily picture has not changed too much. Mostly action stands inside the same swing of weekly grabber pattern:
eur_d_19_06_24.png


Yesterday we've tried to use the 2nd chance to enter on a long side from 1.0710 K-area on 1H chart. It was OK attempt, besides Retail Sales have helped us with this. Upside XOP is done. Now both our long positions are with breakeven stops. In fact, guys, we've done all that we could do. Preparation for weekly grabber setup is over and now let's hope that it will work. We could just wait for next EUR step here.

Of course, maybe 3rd chace to enter could be formed as well, if EUR will show another moderate pullback, we'll see... Anyway you've got an idea how to deal with it
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If still EUR will break all this stuff and drop under 1.0650 area, it will trigger chain downside reaction with drop under 1.06 with cancelling monthly bullish grabber as well. This might become the epic turn with opening significant trading space to the downside. We'll see. But it seems clarity should come relatively soon, within few weeks. Upside action doesn't look too strong by far, right?
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Greetings everybody,

So, on EUR currency we have no progress by far. Thus, we could take a look, say, on GBP. It is interesting situation there. First is, the UK is the first one who returns back to 2% inflation level. This might be especially important at the eve of BoE meeting.

Market has two major "pain" points. First is 1.31 top that holds long term bearish context. In fact, GBP has the same quarterly bearish grabber as EUR. Second is, 1.23 lows. Since we have huge triangle on daily chart, it is potentially bullish, but whatever direction it will be broken, following action will be rather extended. It might be either big upside butterfly pattern or enormous downside AB=CD pattern.

In shorter-term, we have bearish context on daily chart. Inside the triangle potentially reverse H&S might be formed. Thus, 1.25-1.26 level seems interesting for potential bullish position, as well as for potential H&S failure. It is culmination point on daily time frame:
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On 4H chart we see a kind of H&S pattern. 1.2780 level might be interesting for short position if you trade intraday:
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It also will be an Agreement resistance if cable hits 1.2760 XOP target:
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But you also need to decide whether to act prior BoE meeting or better to wait for results. I usually choose the 2nd way. That's being said, bulls just are waiting for 1.25-1.26 on daily chart. While bears could watch for 1.2760-1.2780 area intraday for potential short entry.
 
Morning everybody,

So, while GBP scenario more or less is working, EUR, due today's weak France and Germany PMI data puts the bullish scenario at the edge. In fact our long positions are stopped out at breakeven points. Although nominal bullish context is not failed yet and there are even theoretical chances that it could work, we prefer to not take new long position by far:
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There are some reasons for that. First is, performance of the US bond market and dollar index, they are showing strength right now. Besides, today is Friday already and weekly grabber that we have has big chances to fail. Second - market was not able to show any meaningful upside price action through the week, when news background was neutral. Now we have weak PMI in EU, so the question is - could market show strong action on negative background?
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Theoretically chances on Double Bottom still exist and you even could try to trade it, although it is more a gambling now. But, taking it altogether overcomes validity of bullish context and makes us to do nothing today, postponing decisions on next week.
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