1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Forex FOREX PRO WEEKLY, June 24 - 28, 2019

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Jun 22, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    12,175
    Likes Received:
    16,693
    Fundamentals

    Despite that now we have a lot of different political events that make impact on global situation, such as new issues in Iran/US confrontation, failed elections of President of the European Commission, UK political chaos and some others, it seems that now the major thing that will form the shape of the markets is Fed policy. Personally for me, it is still the riddle, despite recent Fed statement, as it looks a bit irrational in current circumstances and we talk about it below, what things confuse me.

    This week, as Reuters reports - The dollar fell on Friday to three-month lows against a basket of currencies on bets the Federal Reserve would start lowering interest rates, while the yen rose to a five-month high versus the dollar on growing tensions between Iran and the United States.

    The greenback’s weakness propelled the euro to three-month highs. The single currency was also buoyed by stronger-than-forecast survey data on French and German business activity.

    The dollar extended its losses for three straight sessions since the Federal Reserve on Wednesday signalled it was prepared to lower interest rates later this year.

    The Fed and the European Central Bank this week hinted they were open to ease policies to counter a global economic slowdown, exacerbated by global trade tensions.

    “Now it’s going to be a horse-race between the Fed and ECB on policy easing,” said Ed Al-Hussainy, senior rates and currency analyst at Columbia Threadneedle Investments in Minneapolis.

    The focus now shifts to whether Washington and Beijing can resolve their trade dispute at a summit in Japan next week of leaders from the Group of 20 leading world economies.

    U.S. President Donald Trump and Chinese President Xi Jinping are due to meet at the G20 next weekend, but analysts say chances of a decisive breakthrough are low.

    The dollar enjoyed a brief respite on news of stronger-than-forecast sales in U.S. existing homes in May.

    The encouraging news offset IHS Markit data that showed manufacturing growth weakened to its most sluggish level since September 2009 in June, while services sector activity slumped to its lowest level since February 2016.

    Friday’s U.S. data did not change traders expectations the Fed would lower key lending rates, as early as July. They priced in the probability policy-makers will have reduced rates by at least 75 basis points by year-end, based on calculations by CME Group’s FedWatch tool on its interest rates futures.

    Source: cmegroup.com
    upload_2019-6-22_12-4-18.
    U.S.-IRAN TENSIONS

    Meanwhile, Iran’s downing of an unmanned U.S. surveillance drone stoked fears about a military conflict between the two nations following a spate of attacks on oil tankers in the Gulf region.

    An initial wave of safe-haven buying of the yen faded following news that Trump shelved a missile strike against Iran and preferred dialogue with Tehran, especially over its nuclear program.

    “The Iranians for their part refused the overture for now, so tensions remain high, but the risk of conflict appears to have eased,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

    On Iran/US tensions I would say that no hot conflict will follow and tensions will ease soon. Some political piking will hold but actually they always were. Situation with Iran should be treated not separately but in context of recent Middle East Campaign Iraq and Syria. With this point of view, US now have neither political nor military resources to start hot conflict with Iran.

    CFTC data shows that it seems market believes Fed and takes at its face value as net short position has dropped 1.5 times:
    upload_2019-6-22_12-15-32.
    Source: cftc.gov
    Charting by Investing.com


    Now few comments on recent Fed decision. It seems that situation here stands more complex than at first glance and involves not only some economical factors but political background and market sentiment. The latter one for long time already shows that it wants recession and prepares to recession.

    Talks on markets about possible major reversal have started few months ago. Even last year there were a lot of talks that Fed makes mistake and wrongly starts hawkish rate cycle. D. Trump also was accusing Fed that it breaks US economy and they should have to cut the rate instead. Now every time when any US bearish factor seen on the market - result is the same. Everybody in media talks that this is early sign of worsening and recession. For example, we could recall recent reaction on NFP data. I've talked about it two weeks ago. Report was not bad - wage inflation stands above 3% since the beginning of the year, but markets wanted it to be and it has become. It is also amazing moment with wage inflation data - every time, despite whether data is 3% or 3.4% expectation consensus stands 0.1% higher - at every report this year, which let markets treat it as "bad" result. Would you think that this is artificial badness?

    This is the sentiment. But you could ask - how it makes impact on Fed policy. Fed is a king and it dominates over the markets. Not quite. Sentiment could anticipate Fed decisions and markets takes action ahead of Fed decision. Fed becomes a hostage, because if it doesn't do what markets want - situation on markets could out of control with huge volatility and collapses, but Fed can't accept this, especially on bond and currency market. Below we show how it impacts on current Fed policy.

    Second factor is political. Next year US President elections. As usual, election campaign starts in autumn. What usually happens before elections? Right, stock market is rising. If Fed starts rising rates, it could create negative economical background around elections and D. Trump personally and nobody wants to be part of this. But hardly this is major issue, as well as US/Sino tariffs war which makes more theoretical harm to US rather than real one.

    Now lets go back to the US data. Wage inflation since the beginning of the year stands above 3%, unemployment at record lows, NFP hits all records, Sales and consumption stands at maximum, stock markets as well. This combination suggests overheat of economy and Fed has to rise rate.

    Finally, let's combine everything. Theoretically Fed has to hike rates gradually and continue tightening cycle. If it doesn't do it, Inflation soon will reach unprecedented levels and we could meet repeating of 2008 collapse. Investors are not simps and have started action on Fed's anticipation, starting move assets out from risky markets (stock market in particular), which we saw in the beginning of the year.

    That was promising to become a collapse as well and Fed had to turn to dovish rhetoric, which now has led them as far as to hints on rate cut instead. Fed now is trapped as it also can't boost rate by few steps at once. In this case it will be no difference between either boost hike or stock market bubble blow few year later due natural process. Anyway it will be economical disaster.

    Thus, Fed has to rise rates due economical situation but it can't due market sentiment, wary of too strong negative reaction. All these factors leads me to only one acceptable conclusion. Fed deceive markets trying to smooth negative effect. To promise rate cut and not to do it will give softer effect than keep rising it. I do not exclude the fact that Fed expects strong change in statistics within few months, maybe it knows it for sure already and it needs just to play for time to change rhetoric back to hawkish again. May be I miss something, but in current circumstances I do not see any other solutions. Rate cut now is a suicide and just anticipate unavoidable collapse.

    Now we stand in difficult situation. Hypothesis that we've described above contradicts to long-term Dollar index analysis that we have. It seems that something should happen and either our fundamental suggestion on Fed policy will be wrong or technical situation will change. Still, reversal process on the chart could change the shape, lasting longer and forming different pattern, say, diamond which doesn't exclude higher USD level with simultaneous keeping intact long-term bearish sentiment. We suggest that clarity should appear in autumn.

    [​IMG]


    Technicals
    Monthly


    Monthly chart creates no new range and stands inside one that was formed in the beginning of the month. So the intrigue still stands around major support where price stands right now.

    Our nearest culmination point is Fed July meeting which should clarify whether we right or wrong in our hypothesis. Our plan (according to fundamental issues) tends to idea of downside breakout.

    As we've said last week, changes are still look insignificant, trend 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.
    eur_m_24_06_19.

    Weekly

    As investors hew to Fed policy, we keep scenario with potential bullish reversal pattern on weekly chart, first time we introduced couple weeks ago. This is reverse H&S pattern. As road to the head's bottom was choppy as upside road to neckline also could be choppy.

    Weekly trend stands bullish and market hits our first Fib resistance level of 1.1376. Still, major upside target is neckline around 1.16 K-resistance area.

    The specific of H&S pattern is its dual character. It keeps door open for both scenarios. Upside scenario is based on reverse H&S while downside scenario could be confirmed by its failure, which happens around Right arm bottom. But now we're on the way to the neckline.
    eur_w_24_06_19.

    Daily

    On daily chart we follow the the same AB-CD pattern and idea of reverse H&S pattern which starts to work. On Friday market has exceeded COP target and broken the neckline. OP stands slightly above K-resistance. XOP is also important for us. It is not shown here but it creates an Agreement with weekly neckline and K-resistance area at 1.1556 level.

    Now EUR stands at K-resistance area and Overbought condition. As market stands in extension stage, reaction on OB condition should not be too strong. Besides, the EUR unique habit is to show small retracements on direct thrusting action. Thus, we could suggest retracement somewhere to neckline.
    eur_d_24_06_19.

    Intraday

    4H chart provides nothing but Fib levels. No signs of retracement yet. Nearest support coincides with WPP around 1.13. K-area of 1.1255-1.1277 could be treated as vital signal area that market should not break down.
    eur_4h_24_06_19.

    On 1H chart we have no signs of retracement as well. Local OP coincides with daily one and it is possible that market will try to hit it on Monday first and start retracement second. Hourly chart shows that 1.13 area is K-support as well and nearest levels stands at 1.1336. We would suggest that if retracement will be the first and OP target is second - retracement should be small, either 1.1336 or 1.1300 area. Conversely, if OP will be hit first, retracement will be deeper, somewhere to 4H K-support area.
    eur_1h_24_06_19.

    Anyway, current situation provides limited possibility for trading. It is not time to go long as market is overbought near major resistance, and it is too early to go short as we have no bearish patterns and major targets are still stands above the market.

    Conclusion:

    Today we put large fundamental background of big doubts on real Fed policy. This hypothesis will be tested in July Fed meeting.

    In short term perspective, while everybody hew to Fed promises, upside action should continue.


    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.
     
    Ananthan, chalo, Deltoid88 and 7 others like this.
  2. Joh

    Joh Sergeant Major

    Joined:
    Oct 11, 2007
    Messages:
    951
    Likes Received:
    209
    Felt weird, prior to yr report thinking how can i have/see it so differently re a variety words and written stuff - very glad to get your thoughts as there is much overlapping and agreements within- logically nothing in concrete as yet but a lovely sigh of relieve as a respite - My motto is keep on fighting on and that has just been made easier with you generous report .
    Thank you Sive.:)
     
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    12,175
    Likes Received:
    16,693
    Thanks for support, Joh.
    Indeed, it sounds too revolutionary probably, but I was not able to find any other explanation and decided to share with my thought.
    They are definitely arguable, but this is how I see the situation...
     
    #3 Sive Morten, Jun 23, 2019
    Last edited: Jun 23, 2019
    chalo and RahmanSL like this.
  4. RahmanSL

    RahmanSL Major

    Joined:
    Jan 16, 2010
    Messages:
    2,526
    Likes Received:
    217
    Hi Sive ....just a quick post to say your analysis & point of view are always appreciated and held in high regards by me.

    I am paying close attention to developments in Iran-US conflict and US-China trade tariffs meeting which I believe will affect market in the week & weeks to come.

    Cheers and all the best my friend!
     
    Sive Morten, Joh and chalo like this.
  5. Deltoid88

    Deltoid88 Sergeant

    Joined:
    Sep 19, 2018
    Messages:
    156
    Likes Received:
    254
    Update on EUR. Bearish action is denied in short term. I think that we are now in bullish, blue wave C which should have 5 waves, we are currently in wave 3. Daily chart is crucial, look at photo bellow. That wave C is last part of bullish correction and its targets is 1.17-1.18 zone for now. After wave C is over red wave B will be completed and door will be opened for new wave down, red wave C with targets under 1.1106 lows.

    Monthly chart:

    EURUSDkMonthly.

    Weekly chart:

    EURUSDkWeekly.

    Daily chart: This chart shows what I meant in description. It shows what is going on and where are we at now.

    EURUSDmDaily.

    4H chart:

    EURUSDkH4.

    How to trade this?

    Every bearish retracement should be seen as buying opportunity against 1.1181 lows, but since this is wave 3 retracements are likely to be shallow, 23.6-38.2 fib levels.

    Long entry in zone = 1.126-1.1330, SL=1.1180, TP zone = 1.1420-1.1570
     
    Sive Morten, Joh and chalo like this.
  6. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    12,175
    Likes Received:
    16,693
    Morning guys,

    There are some technical problems with mailing service. I hope it will be fixed soon. You could not get mail notes on update/reports for some time. So check for them here directly.
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    12,175
    Likes Received:
    16,693
    Morning guys,

    EUR has not shown any reaction on COP target on Monday and keep going right to OP. Now, on daily chart there are two major details for us. Strategically, we're watching for XOP around 1.1550 because this is Agreement resistsance and this is neckline of large weekly reverse H&S, that we've discussed in our weekly report.
    Second issue is tactical. Now EUR stands at K-resistance and Agreement (as OP has been hit). Price is also overbought. Definitely this is not the moment for taking new long position. At the same time, as upside momentum is strong, retracement also should not be too strong. it would be perfect, if price holds above the neckline, i.e. ~1.1320 area:
    eur_d_25_06_19.

    On 4H chart we have 2 K-areas. First one is 1.1272-1.1295 and I would treat it as vital. If EUR drops below first K-area, neckline of our daily H&S and breaks second K-area - it will be difficult to talk about bullish context.

    Tactically, we have good thrust up and could keep an eye for DiNapoli patterns, or any other bullish continuation patterns around 1.1320 K-area, such as "222" Buy.
    eur_4h_25_06_19.
    It is not forbidden to short the market but wait for clear bearish pattern (we do not have any yet) and appoint realistic targets, not too extended.
     
    chalo, Deltoid88, maciek9669 and 4 others like this.
  8. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    12,175
    Likes Received:
    16,693
    Morning guys,

    So, we proceed with EUR reaction on OP target and strong daily resistance. Yesterday's session also has become a reversal one, so it increases chances on some continuation down, whether it will be deep or small.
    We still consider 1.1320 area as first one where we could take long position. On daily chart this is the neckline of our H&S pattern:
    eur_d_26_06_19.

    On 4H chart fast B&B trade has happened, our 1.1320 area here is K-support and coincides with WPP. As on daily we have bearish engulfing as well, probably we should watch for some AB=CD pattern down. Next K-support of 1.1280 is vital area. If market drops below it - this significantly reduce odds on upward continuation to daily XOP:
    eur_4h_26_06_19.

    On 1H chart we have few extensions to watch for. Initial minor XOP, that has not been quite reached yesterday, but our major pattern is blue AB=CD. Although it is a bit choppy but we could recognize it. Downside action could be completed by butterfly pattern as well. Thus, now it seems that we could get not bad background around 1.1320 - major K-support, AB-CD Agreement and butterfly. This lets us to consider possible Buy trade around it.
    eur_1h_26_06_19.

    That's being said, today we're watching for slightly deeper upside retracement, maybe 1.1375 then action to our 1.1320 area.
     
    FreddyFX, Vokin, maciek9669 and 2 others like this.
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    12,175
    Likes Received:
    16,693
    Morning guys,

    So, on daily chart we have minimal changes - another HW pattern has been formed here. Retracement comes difficult and it confirms solid support on EUR. Thus, our suggestion that 1.1320 area is most probable retracement destination seems to be correct.

    But, this is just for now. We have G20 on horizon, but what is more important, today we have US GDP and PCE for QII and tomorrow PCE for May. In weekly report we said that market anti USD sentiment should pass the test of statistics. And today the moment has come. Be very careful if you plan to trade today. Volatility could be very strong.
    eur_d_27_06_19.

    In general, our intraday setup is the same. EUR is coiling still around 1st Fib support level. The only important detail here - is W&R of HW pattern's top. This is tactical bearish sign, which increases chances on 2nd leg of retracement. So, maybe market still get to our 1.1320 K-support
    eur_4h_27_06_19.

    On 1H chart our retracement has happened. But due W&R butterfly will be different. With this small changes, major AB=CD pattern is the same, as well as target. Also here we hint on bearish dynaimc pressure. As MACD shows upside trend, market is forming lower tops. it seems that at least short spike down has chances to happen.
    eur_1h_27_06_19.
     
    Ananthan, FreddyFX, Vokin and 3 others like this.
  10. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    12,175
    Likes Received:
    16,693
    Morning guys,

    On EUR today we see important sign. Market stabbornly doesn't want to move lower without any significant reasons. There is no real support below market and in different time it could easily drop for 50 pips more, especially after reaching daily K-area and Agreement with OB condition. But take a look - price is forming inside sessions and market stands flat. It means two things.

    First is, we have to recall 3-period rule, which tells - if market doesn't go in a predefined direction for 3 periods - close the trade. This is for those who keeps shorts right now. Bulls also have to adjust trading plans as we could not get 1.1320 entry point.

    Second is - such standing tells that EUR is building an energy and upside action could start at any time. We can't say definitely whether it will be real upside continuation or some short-term spike, but it probably will fast.
    eur_d_28_06_19.

    On 4H chart after W&R of HW pattern's top - EUR has not broken its lows, but stands inside its range. Due this standing we could identify signs of bullish dynamic pressure - while MACD shows bear trend, price stands flat:
    eur_4h_28_06_19.

    On 1H neither of our ideas with lower standing target were completed. They were not erased by price action, but market just doesn't go there, forming triangle consolidation. This leads to the same conclusion.
    Thus, although we do not care about loss now as we do not have any shorts - we care about our entry point around 1.1320 area, which could be not reached. Thus, one of the decision here is to split position in 2 parts and take 30% while price stands inside the triangle. If EUR still drop to 1.1320 - take the rest.
    eur_1h_28_06_19.
     

Share This Page