FOREX PRO WEEKLY June 22-26, 2015

[Sive Morten]

Fundamentals
Reuters reports euro declined against other major currencies on Friday, weighed down by anxieties Greece may soon default on debts that also drove safe-haven buying of the dollar.

Greece is days away from potentially missing debt repayments of 1.6 billion euros to the International Monetary Fund, and investors are looking to an emergency meeting next week where euro zone leaders will try to find a way to unlock aid for Athens.

Germany, the biggest European contributor to bailout programs that have kept Greece afloat for five years, insisted it still was not too late for Athens to come to terms with its creditors at the EU and IMF.

The European Central Bank on Friday raised the ceiling on emergency liquidity that Greek banks can draw from the country's central bank for the second time this week, a banking source told Reuters.

Bankers told Reuters that about 4.2 billion euros had flooded out of Greek bank accounts this week despite central bank efforts to restore calm.

Versus sterling, which strategists say is something of a safe-haven, the euro fell as low as 71.22 pence , its weakest since May 28. It was last down 0.11 percent to 71.48 pence.

The euro was also lower against the Swiss franc and yen, both traditionally safe plays .

The dollar had been trading weakly since Wednesday, when Federal Reserve policymakers dulled expectations of imminent hikes in U.S. interest rates, but rose modestly on Friday.

"Greece remains highly combustible, and that's a recipe for dollar strength and risk aversion," said Richard Franulovich, senior currency strategist at Westpac in New York.

The dollar gave up early gains against the yen, hurt by a price rally in Treasuries debt that lowered U.S. bond yields. It last stood at 122.62 yen , off 0.28 percent.

The dollar has been rallying for nearly a year but this week was on track for a third consecutive week of losses. Some analysts still see the dollar climbing.

"When we get to where we can see the white of the eyes of the Fed rate hike, we will have a second wave of the dollar rally," said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.

We will not talk on EUR today because Greece and EU will take emergency meeting on 22nd of June, on Monday and will try to resolve difficult situation with Greece debt burden. Even banks in Greece could be closed in this day. As EUR right now is a hostage of solution on Greek debt and we can’t foresee the result, our analysis will have minor value. So let’s better take a look at GBP.
CFTC report shows significant changes compares to last week. Open interest has dropped but this decrease mostly was driven by hedgers’ position. Speculative positions mostly have not changed, while hedgers have decreased as longs as shorts. Currently it is difficult to find correct explanation why this is happening. The only conclusion that we could do here is the same – current action is retracement as it is accompanied by decreasing open interest. Probably sooner rather than later cable should turn down again.

Open interest:

Shorts:

Longs:

Technicals
Monthly
Since our recent discussion GBP shows some important changes. In the beginning we continue to keep our long-term analysis that we’ve made in December 2013 in our Forex Military School Course, where we were learning Elliot Waves technique.
https://www.forexpeacearmy.com/forex-forum/forex-military-school-complete-forex-education-pro-banker/30110-chapter-16-part-v-trading-elliot-waves-page-7-a.html

Our long term analysis suggests first appearing of new high on 4th wave at ~1.76 level and then starting of last 5th wave down. First condition was accomplished and we’ve got new high, but it was a bit lower – not 1.76 but 1.72. This was and is all time support/resistance area. Now we stand in final part of our journey. According to our 2013 analysis market should reach lows at 1.35 area. Let’s see what additional information we have right now.
Trend is bearish here, but GBP is not at oversold. Couple of months ago market has reached strong support area – Yearly Pivot support 1 and 5/8 major monthly Fib level. Market gradually struggling through YPS1 but it seems that first attempt to pass through it has failed. It means that we could meet meaningful pullback and already see it. Although in long term it will not mean the capitulation of the bears. This will be probably just temporal pullback, respect of support and correction after unsuccessful attempt to pass through support right on first challenge. CFTC data also tells on the same as we’ve discussed above.
New information here is downward thrust. Occasionally I’ve counted the number of bars there, and guys, it has 8 black candles. Theoretically this thrust is suitable for B&B “Sell” pattern. We do not mention DRPO, since we come to conclusion that current upside action is retracement and it can’t lead to appearing of DRPO on monthly chart. I’m not sure about B&B, it looks a bit shy on overall picture, but this pattern is definitely the one that we should monitor. Some of you were hurry to treat May candle as B&B, but right now we see that market has closed below 3x3 DMA and uncompleted B&B condition, since we didn’t get 3x3 DMA penetration. Right now, June month could fix it. Appearing of B&B harmonically build in our overall view of possible downward continuation.
Beyond B&B we have also bullish engulfing pattern that usually suggests upside development in the shape of AB-CD pattern on lower time frames.
In fact here we have just one major downward destination point. Monthly chart give us just single AB-CD pattern with nearest target at 0.618 extension – 1.3088.

Weekly
Weekly chart right now is interesting as add-on of monthly B&B pattern. Last week cable has completed our analysis and reached predefined target, that is 1.60 area - minor 0.618 AB-CD target, weekly overbought and 50% Fib level. Morning star pattern that has confirmed support on re-tested trend line also has done well.
What important conditions B&B have? It suggests reaching of major Fib level within 3 closes above 3x3 DMA. June candle with high probability will close above 3x3 and market already has reached 50% level. At the same time B&B rules do not forbid market continue action, say, to 5/8 Fib resistance, because cable theoretically has 2 months in reserve to start B&B action down. So, it means that we do not know definitely whether market will re-establish bear trend right now or it will take 1-2 months more of upside action and B&B will start from higher level. Both scenarios are valid from B&B trading rules point of view. The difficulty also comes from reversal patterns that we have on daily chart. They point on possible downward action, but whether it will be reversal or temporal retracement?
Thus, our thought here is that we should try to take short position from 1.60 area. As cable stands at strong resistance – this is not just Fib resistance, this is also Agreement and weekly oversold. Odds suggest that market should show some respect of this area. If even this will not turn to B&B action – we should have enough time to protect our position with breakeven stops. Later, if market will continue upside action – we will be watching for next level, etc.

Daily
Daily chart has twofold meaning for us. First is, it points on how we could take short position and how will be better to do this. As you can see recently upside action mostly has stopped due meeting overbought. It has not completed major targets. It means that in the beginning of the week somehow it should continue upside action and reach as AB=CD target as complete Butterfly “Sell” 1.27 level. This should happen right around 1.60 area and this will be our signal for taking short position.
Second – take a look most recent upside thrust has 9 candles and is suitable for separate minor B&B “Buy” by itself. So, if market will show minor downward retracement on Monday, scalp traders could think about taking short-term long position with 1.60 target.

4-Hour
Now let’s talk on possible B&B. First of all – we can’t guarantee that it definitely will be formed. Market could stay for some time flat and then continue action to daily targets. But conditions that we have right now make possible its appearing – overbought and upside thrust suggest retracement. To get B&B we need rather deep retracement, since B&B rules suggest reaching of major Fib level of B&B thrust. First level stands at 1.5650 area and is accompanied by WPS1.
Theoretically reaching of this level agrees with bullish trend. Market is at overbought, hence, retracement should be deeper. At the same time, 3/8 Fib support is just 30% retracement. Also we know that WPS1 holds retracement on bullish trend. From that standpoint cable could reach 1.5650 and keep bullish trend intact. All that we need is just wait whether this will happen or not. If not – we will be watching for taking short position from 1.60 area, after daily targets will be hit.

Conclusion:
Long term picture and CFTC data suggest that current upside action is retracement. Currently we do not know where it will finish. This could happen as from 1.60 level as from higher one – major 5/8 Fib resistance.
At the same time GBP right now stands at strong weekly resistance area that includes AB-CD minor target, Fib level and overbought. Market also is forming reversal patterns on daily chart that agree with the same 1.60 area. This significantly increases chances if not on reversal but at least on meaningful bounce down. That’s why our analysis suggests taking short position around 1.60 level as soon as daily targets will be hit.

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

 

[Sive Morten]

GBP/USD Daily Update, Tue 23, June 2015

Good morning,


Reuters reports today euro fell on Tuesday as traders looked beyond an endless stream of headlines indicating progress in Greek debt talks while the dollar gained traction from solid U.S. housing data.

In Asia, a survey on Chinese manufacturing showed that factory activity may be stabilising but not stopped contracting, undermining commodity currencies.

Despite more optimism on Greece in global equity markets and elsewhere, a cautious mood prevailed in the currency market as a deal remains elusive and as the euro zone's economic outlook pales in comparison to others.

"Frankly, we just don't know what will happen next so we need to see how things will unfold. The euro's levels are still high and people are scared of its downside in case the talks break down," said Kyosuke Suzuki, managing director of forex at Societe Generale in Tokyo.

Euro zone ministers on Monday welcomed new reform proposals from Greece as a possible basis for an agreement to avert a looming default ahead of its payment to the International Monetary Fund at the end of the month.

Yet, both German Chancellor Angela Merkel and the IMF's managing director, Christine Lagarde, said there was still a lot of work to be done.

Traders expect more twists and turns in coming days as creditors pore over the proposals from Athens before planned meetings, one by finance ministers on Wednesday and the other national leaders on Thursday.

"We wait, there is a vast amount of commentary and expectation, and even a fair degree of optimism. And nothing might happen for a few days at least," said Emma Lawson, senior currency strategist at National Australia Bank.

The euro's drop also partly reflected resurgence in the dollar, which was aided by upbeat housing data and a jump in Treasury yields.

U.S. home resales surged to a 5-1/2-year high in May as first-time buyers stepped into the market, helping to rekindle expectations that the U.S. Federal Reserve could raise interest rates as early as September.

The dollar also pushed higher against commodity currencies, which did not get much help from a Chinese manufacturing survey.

The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index (PMI) edged up to 49.6, a three-month high, from 49.2, but remained below the 50 mark which separates contraction from expansion.
The New Zealand dollar slid to a five-year low of $0.6845 , having been on the skids since the Reserve Bank of New Zealand surprised some by cutting interest rates earlier in the month and keeping the door open to more easing.



While Greece epopee is still lasting, investors already are tired from this endless story. Despite what will happen with coming Greece to IMF payment - this will be just tactical solution and postponing of real problems. What will be with next payment? This reminds me turmoil around US debt ceil talks every year... Obviously Greece has no money to make any payments, it has 300B debt and no reforms could enforce Greece economy that could generate 300B of excessive cash to make these payments. It means that EU will have to pay most part of debt for second time... First is when they have provided these loans, second - when they will pay them out to IMF. This is the only way how EU could hold Greece inside. Economically this is absolutely poor jorney, so it's obvious that the core of price thinking - is whether geopolitical role of the Greece is worthy of 200-300B for EU. That's the price tag, and that's the question that they are thinking about, but obviously not about Greece economy...We still will wait for tactical solutions.

Now - about GBP. So looks like cable has chosen the way with small retracement first and 1.60 move second. IF this is really true, then we start monitoring daily B&B "Buy" trade. Recall that 1.5925 area is not just daily overbought. This is also weekly AB-CD target, weekly overbought and we expect deep retracement on Cable. But before this retracement will start market probably should complete as daily AB-CD as butterfly. Particularly these patterns could become reversal ones.
Meantime, as market stands at daily overbought it can't move to 1.60 right now, it needs some retracement. Here is appearing chance for daily B&B "Buy". Background of this trade we've discussed in weekly research. Market has started retracement but hasn't moved through 3x3 DMA yet. We need to see cable reaches at least 1.5645 level to start B&B:

On 4-hour chart we see something like DRPO "Sell" and our major level to watch is Fib support and WPS1:

And last one here... Theoretically guys, we could get DRPO "Sell" Failure pattern on daily chart instead of B&B. It also could lead cable to 1.60. But I still hope to see B&B...So, let's keep watching...

 

[Sive Morten]

GBP/USD Daily Update, Wed 24, June 2015

Good morning,


Recent Reuters report - dollar hovered near its highest in over a week against a basket of major currencies on Wednesday as the market's focus shifted from Greece to prospects for higher U.S. interest rates.

The dollar index still held on to the bulk of the gains made on Tuesday, when it climbed 1.2 percent - its best daily performance since late May.

"Investors seem to be once again pushing Greece into the background, which I think...means the focus shifts back to fundamentals and hence we're seeing this resumption of dollar strength," he said.

Reasonably positive U.S. data and comments from Federal Reserve Governor Jerome Powell, who said he was prepared to raise interest rates twice this year, had helped bolster the greenback on Tuesday.

The moves seen on Tuesday appeared to be driven by positioning rather than fundamentals, said Greg Moore, senior currency strategist at RBC.

"At the margin, U.S. data that was on balance slightly positive, and the Fed's Powell revealing his forecast for two hikes this year may have supported price action, but EUR and USD were already on the move prior to those developments."

U.S. data on Tuesday showed new home sales increased to a more than seven-year high in May, while a gauge of U.S. business investment spending plans rose.

There was no major development in talks between Greece and its creditors but investors remained hopeful that a deal will be reached soon. Greek shares <.ATG> rallied 6.1 percent on Tuesday.

"Markets appear to have interpreted the prospect of a deal between Greece and its creditors as removing a source of uncertainty, which may allow the Fed to commence hiking interest rates in September," analysts at ANZ wrote in a note to clients.

Greece's Prime Minister Alexis Tsipras will meet European Central Bank President Mario Draghi, IMF head Christine Lagarde and European Commission President Jean-Claude Juncker on Wednesday.

The meeting will take place in Brussels in the afternoon, before a 1700 GMT meeting of the euro group of finance ministers that will aim to end the logjam in debt negotiations.



So, our major GBP analysis is still intact. We're still expecting some minor bounce down, then move to 1.60 and then greater reversal south. The pattern that we would like to get on first stage is B&B "Buy" by some reasons. First is, it has better chances to appear because it suggests deeper retracement, at least to 1.5650 FIb support. As GBP was at overbought on daily chart - it could tend to deeper retracement. From that standpoint, B&B is perfect pattern. Second - it will give us best level for entry and 350 pips of potential result till 1.60:

On daily chart yesterday we've got first close below 3x3 DMA, but this is not B&B yet, since market has not reached 3/8 Fib support. Don't be decieved by current white candle. Of cause, market could form some other patterns, say 3-Drive, DRPO Failure or others, but as we've said, B&B has better chances due daily OB and currently we should treat this upside action as retracement. Probably we still will get cable at 1.5645 level.

On 4-hour chart we also see that this will be WPS1 as well:

That's being said, we think that hourly chart shows very probable scenario of getting AB-CD compounding retracement down. It could give us perfect shape for B&B entry since it will create Agreement around WPS1. We can't expect anything better:

 

[Sive Morten]

Good morning,


Reuters reports today dollar dipped versus the yen on Thursday, awaiting U.S. data for fresh cues after giving back gains following an impasse in Greek debt negotiations.

The euro was treading water after showing a more limited response.

The greenback had benefited as the market's focus appeared to shift back to the prospects of higher U.S. interest rates from the Greek saga, which began the week with optimism that a deal would finally be concluded.

But it lost traction as U.S. debt yields fell when the talks stumbled yet again, with euro zone finance ministers accusing Athens of refusing to compromise despite a payment deadline looming fast next week.

The market will have another chance to check the pulse of the U.S. economy when consumer spending growth indicators are released later in the day, with upbeat readings expected to add to the case for the Federal Reserve to hike rates later in the year.

"The market's focus is on how much the U.S. economy has recovered in the second quarter from the first quarter. There aren't many events in the Tokyo and London trading hours until the U.S. consumer spending indicators are released, so a wait-and-see mood is likely to prevail until then," said Masashi Murata, a senior currency strategist at Brown Brothers Harriman in Tokyo.

The euro reacted less to the latest impasse in the Greek debt negotiations, sticking to a tight range and little changed at $1.1214 , keeping some distance from a two-week low of $1.1135 hit on Tuesday.

"Euro/dollar responded less compared with dollar/yen as the underlying optimism that a deal will be sealed by the month's end remains intact, even though there's some pessimism that the talks may break down," said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

"Such optimism is reflected in the fact that the euro is actually garnering bids against sterling and the Swiss franc. The next focal point is tonight's meeting of European Union leaders and whether governments' top-level participants can reach an agreement."

European Union leaders are due in Brussels for a summit later on Thursday.

The New Zealand dollar found relief on bargain hunting, crawling away from five-year lows struck earlier this week on simmering prospects of more interest rate cuts from the central bank there.



So let's continue with our daily B&B. Market already has closed twice below 3x3 DMA but still can't reach 3/8 Fib support. Theoretically today is last session when it could do this. After that B&B will not look as perfect as it could be.
Another important moment here is possible bullish stop grabber. IT would be perfect if GBP will give us as grabber as reaching 3/8 Fib support. But if it will form grabber and will not reach Fib level - this will be tricky situation:

On hourly chart we still have in progress AB-CD pattern. Right now market has reached minor 0.618 target of this pattern and turned to shy retracement up. If we will plot extensions of both retracements - then we could get potential situation for 3-Drive "Buy" pattern right at Fib support 1.5645. But in this case AB-CD will not be completed.

IF we will get particularly this scenario - better to place stop below AB-CD completion point, because market theoretically could show spike down and fast return up. Context will be valid but this action could wash us out of the trade...
So, let's keep watching. Today, or at least tomorrow we will have to make a decision on this trade.

 

[Sive Morten]

GBP/USD Daily Update, Fri 26, June 2015

Good morning,


Reuters reports today dollar lost some ground on the yen but edged up against the euro on Friday, as Greece's continued struggle to reach a funding deal with lenders kept the common currency on tenterhooks.

"The euro itself is still struggling. The downward pressure is intact," said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign-exchange research firm.

"Rangebound trading will continue, until the next news trigger on Greece," he said.

Euro zone finance ministers ended their third meeting in a week without agreement on Thursday, setting up a last-ditch effort on Saturday to try to avert the prospect of Greece defaulting on a repayment to the International Monetary Fund due on Tuesday.

That could trigger a bank run and capital controls, possibly setting Athens on a path out of the euro zone. A so-called Greek exit would create considerable market turbulence, the head of the Swiss National Bank warned, adding the bank would fight a rush to buy already overvalued Swiss francs.

With Greece hogging the headlines once again, U.S. data was relegated to the background. Figures on Thursday showed U.S. consumer spending recorded its largest increase in nearly six years in May, providing further evidence that economic growth was accelerating in the second quarter.

Data released early on Friday showed Japan's household spending in May rose for the first time in more than a year. Other data showed a robust jobs market fuelled hopes that companies will begin lifting wages needed to spark inflation towards the Bank of Japan's ambitious 2 percent goal, though core consumer prices rose just 0.1 percent in the year to May.

The New Zealand dollar slipped about 0.2 percent on the day to $0.6890 as investors perceived a dovish spin on a central bank report.

The Reserve Bank of New Zealand said in its statement of intent for 2015 to 2018 that it would keep investigating the use of macroprudential tools to control the housing market.

That could leave the central bank room to cut interest rates further if needed, without the fear of fuelling a house price bubble, traders said.



So, guys, markets are still waiting for Greece, Merkel has appointed ultimate date for resolving this question is on Monday.
So, let's try to finalize our GBP trade. On daily chart yesterday market has not reached 3/8 support but has formed bullish stop grabber instead of that. It leads us to following conclusions. First is, grabber itself could lead market to 1.60 target. Second - althgough we haven't got B&B, it does not mean that market will not be able to reach Fib support. Other words, risk of reaching 1.56-1.5645 area is still exists...

Current situation does not provide us easy decisions. Here are scenarios that we could apply:

1. Conservative - do nothing, wait for possible reaching of 1.56 area. For example, market could form butterfly "Buy" here. It's 1.618 extension coincides with AB-CD target, WPS1 and Fib level. This could give us Agreement, and may be even reverse H&S on next week.

2. Attempt to play on grabber. Take long position with stop under grabber's low.

3. Combine previous two ways, apply scale-in. Say, take some part of position right now, but with stop below 1.56. If market will follow 1st scenario - add more around 1.56. If it will turn to rally here - we will have at least part of position.

Here we also could watch for 1.58 level. Since this is "C" point of AB-CD, if market will take it out - it could be a confirmation that GBP hardly will return back to 1.56 and chances on upside continuation will increase.
So, as you can see currently this setup as not as clear as it was initially...

 

[pathfinda]

Hi,

I will also watch for some retracement to 1.5835 and try to take long setup (scalp) to around 1.60. At that point, if it will come to it I am getting in with short setup with a S/L 1.6065 and T/P around 1.5675 - 1.5700. At that level, if we will get to it, we need to re-analyze the whole thing. So hopefully another succesfull week is ahead.

Thank Sive.

 

[Stag]

Hi Sive, based on EWT it is still possible that we see wave (C) unfolding from 1.457x as part of the huge correction started in 2009. Breaking the red line would extend fall below 1.35.

 

[Nick Monty Pirini]

Hi,

I will also watch for some retracement to 1.5835 and try to take long setup (scalp) to around 1.60. At that point, if it will come to it I am getting in with short setup with a S/L 1.6065 and T/P around 1.5675 - 1.5700. At that level, if we will get to it, we need to re-analyze the whole thing. So hopefully another succesfull week is ahead.

Thank Sive.

I think you mean you wait until price retraces to 1.5635 and then look for a long entry (to 1.600 area)? You are confusing me a little. But that is all cool. It is always good to see others put their thoughts forward.

 

[kureja]

Hi,
i have read the analysis and have a small question that @ weekly analysis there is written that "Thus, our thought here is that we should try to take short position from 1.60 area" which area will be consider as 1.60 area ? i mean will it be between 1.5900 to 1.60 or else? will be great full to have the guidence.

 

[ochills]

Good Morning Commander in pips. First thanks Immensely for Ur priceless gift and your great consistent.
pls Commander last week GBP/USD reaches overbought on daily time frame and my DOSC does not move above the previous high, despite the fact that DOSC touch the OB level. In forex Military school U said one should recalculate level of OB/OS if DOSC create a new over bought level, but DOSC does not move above the previous level I use for the calculation of recent OB reached. So do I recalculate and if yes, Current oOB level cannot be use because is not higher than the previous.
thanks as usual