FOREX PRO WEEKLY, June 27 - 01, 2016

Sive Morten

Special Consultant to the FPA
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Fundamentals

Sterling pared losses against the U.S. dollar after plunging 10 percent to its weakest in 31 years on Friday following Britain's vote to leave the European Union, but still remained more than 7 percent lower on widespread market uncertainty.

Sterling was last down 7.37 percent against the dollar, at $1.3765, after touching its weakest since before the 1985 Plaza Accord of $1.3228. Traders said Bank of England chief Mark Carney's comments that the central bank stood ready to provide extra support helped sterling recover.

The euro also pared losses against the dollar after touching its lowest level against the greenback in three and a half months of $1.0914, but was still hobbling and last down 2.4 percent at $1.1112.

The euro is expected to struggle given worries about the impact of Brexit on the euro zone economy. Analysts expect months of economic and political turmoil which will dwarf the pressure on UK markets following sterling's "Black Wednesday" in 1992 when Britain was forced out of the pre-euro Exchange Rate Mechanism.

Analysts said uncertainty about how central banks would react to the vote, its impact on European economic growth, and whether it would catalyze more countries to exit the European Union cast a wave of uncertainty across markets.

"The bottom line is the initial directionality that we've seen on the back of the vote in our view can persist," said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York.

He said that Credit Suisse's European economists had slashed economic growth forecasts for the euro area to 1 percent from 2 percent by the end of 2017, and cut the UK's forecast to negative 1 percent on the view that the UK could face a recession following the vote.

The uncertainty boosted the dollar and the yen, which benefited from safety buying. While the dollar rose sharply against the euro and sterling, it was last down 3.5 percent against the yen at 102.38 yen after touching a more than two and a half year low of 99.11 yen.

Speculation that the Bank of Japan could also act limited the yen's advance, but the dollar was still on track for its biggest one-day drop against the yen in more than six years.

Japanese Finance Minister Taro Aso said Prime Minister Shinzo Abe had instructed him to cooperate with the Bank of Japan and closely consult with Group of Seven partners in responding to market moves. Aso added that excess volatility in currency markets was undesirable and he would respond to market moves when necessary.

The dollar was last up 1.2 percent against the Swiss franc at 0.9696 franc after the Swiss National Bank became the first major central bank to intervene and drive down the value of its own currency.

"The uncertainty is still at a very high level," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago. He said sterling could fall to $1.28 by year-end, while the euro could fall below parity with the dollar within that time frame.

The dollar index, which measures the greenback against a basket of six major currencies, was last up 1.96 percent at 95.358 after touching its highest level in more than three months of 96.703.


UK buys a pig in a poke
by Fathom Consulting

Yesterday, the UK voted to leave the European Union despite betting odds suggesting a strong likelihood of a vote to remain. Following this, Prime Minister David Cameron announced his resignation, with a new Prime Minister to be in place by October’s Conservative Party Conference. Investors are now facing, at best, several years of uncertainty regarding the terms on which the UK conducts its business with the rest of the world.

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Source: http://fingfx.thomsonreuters.com/gfx/rngs/1/792/1115/index.html
Inevitably UK growth will be weaker, both this year and next, than it would have been had the country voted to remain. But in contrast to a number of other forecasters, outright recession is not our central case, largely because we expect to see a significant fall in sterling through the remainder of this year, providing a boost to net trade. If we are right about the currency, inflation will move above 3% and into letter-writing territory by the middle of next year, which the MPC will ‘look through’, just as it did between 2010 and 2012, when inflation hit 5.2%.

It is technically possible, though politically unlikely, that this may not cause the UK to leave the EU. Parliament may choose to disregard the result on the basis that a clear alternative was not chosen, or the vote could be used as a bargaining chip for further renegotiation with the EU. We look ahead to the likely impacts on both the macro-economy and financial markets assuming that the UK does indeed leave the EU.

Brexit wounds of uncertainty

Ultimately, the economic consequences of voting to leave the EU may be small – the independent body Open Europe estimates the long-run impact on the level of GDP to be between -2.2% and +1.6%, with an even narrower ‘politically realistic’ range.

But the short-term consequences are more clear cut. The UK’s future is one of heightened uncertainty. It is not yet clear how quickly the UK will leave the EU – it could be a matter of days if we renege on our treaty obligations, which we see as highly unlikely, or more plausibly it could be anywhere from two to ten years.

We have previously estimated that the risk premium attached to UK assets could increase by as much as 200 basis points if the UK voted to leave, mirroring what happened when it became clear that the UK was not going to join the euro. Additionally, we said that if markets were to decide that the current account ought to be brought swiftly back to balance then sterling would need to fall by 30%-40% in effective terms and that Brexit may be the trigger for this.
Alpha-Now-24.06.16-Fathom-StRRiM-Sterling-Relative-Risk-Metric.jpg


Market reactions

At the time of writing, the FTSE 100 is down by 5% and the FTSE 250 down by over 9%. FTSE 100 equities derive a higher portion of their revenues from abroad, softening the blow. Bourses across the developed world are down and there has been a flight to safe-haven assets including gilts, Bunds and Treasuries. Gilt and Treasury yields are down 20-30 basis points across the curve while Bund yields have moved into negative territory again.

GESAM simulations

Using GESAM, we have estimated the combined impact of a 30%-40% fall in the currency, alongside a 200 basis point increase in the risk premium on sterling assets, which in our view would produce a 20%-30% fall in equity prices.
Alpha-Now-24.06.16-UK-GDP.jpg


Following yesterday’s vote, GDP growth is likely to slow at a more dramatic pace over the next two years than we had previously expected, as uncertainty undermines both investment and consumption. We expect investment to be flat or falling on average over the next two years, before gradually picking up again as the UK’s position in the world gradually becomes clearer. Brexit would also have consequences for EU countries, creating a negative feedback loop for the UK.

A sudden fall in sterling is likely to send inflation into letter-writing territory by mid-2017, possibly as high as 4% if sterling falls by 30-40% in effective terms. The MPC is almost certain to look through any overshoot, rather than raise rates in a weak demand environment, particularly when the current level of house prices is unsustainable at anything other than near-zero interest rates.

Market attention will now shift to the possibility of a further reduction in Bank Rate. In our view, a cut to either 25 basis points, or to zero, would be little more than a futile gesture, with few macro-economic consequences. But that does not mean we would rule it out.
Alpha-Now-24-06-16-UK-Inflation.jpg


Although there is a risk that Brexit could trigger a house price crash – we previously estimated that the housing market may be as much as 40% overvalued – this is not a likely outcome in our view unless the MPC decide to raise interest rates. Consequently, we view a slowdown to a more modest pace of house price inflation than we had forecast for the UK remaining a member of the EU.

UK was already slowing

We have argued for some time that without further stimulus the UK would begin to slow. The UK failed to fix its banking system in the wake of the financial crisis, having a detrimental impact on trend growth, and the Chancellor’s demand stimulus was already beginning to show signs of fading before the referendum was announced.
Alpha-Now-24.06.16-UK-GDP-productivity-employment.jpg


The problems which have tied the MPC’s hands with respect to interest rates – dangerously high household debt, a highly overvalued housing market and a record current account deficit – all remain in place.

COT Report

Today guys we will take a look at EUR. Not really because I like technical picture there - NZD and GBP picture are more interesting, but just because we haven't taken a look at it for a long time already and picture needs to be updated.
CFTC data shows that speculators hold bearish net position. Compares to last week, it has increased slightly while open interest mostly stands the same. It means that some traders have reversed their positions from longs to shorts. In general we also see that short position is growing since the begining of the summer, as well as open interest. This tendency was paused just for Brexit voting, as public opinion polls every time provided contradictive information and this has led to volatility even on COT numbers. Still, now we could describe current situation as moderately bearish by CFTC chart.

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Technical
Monthly

Reversal candle that we've discussed last time has become even greater and has increased its reversal quality. As we have said previously - EUR right now shows many bearish signs, as mentioned reversal candle, inability to reach YPR1 etc.

Now short-term sentiment shows that US rate hike expectation has dropped, but not drastically and summer rate change is possible. Impact of previos poor NFP was mild and many analysts expect high NFP data on June.

Currently EUR stands at rather strong support area. This is lower border of downward channel and all-time 5/8 Fib support. Here EUR has formed Butterfly "buy" and it has reached first 1.27 extension here.

EUR is forming typical reversal candle in May. Price has moved above April top and tends to close below April's lows. It could not get extended continuation, but usually market shows downward continuation within next 1-3 candles. But we're on monthly chart guys...
Sometimes reversal candles lead to collapse, as it was on EUR around 1.40 area. Thrust down has started particularly by reversal candle in March 2014.

Also, market starts to show signs of bearish dynamic pressure. Although trend has turned bullish in summer of 2015 - EUR still can't abandon sideways consolidation and move above 1.15 area.

Finally EUR was not able to reach YPR1 and returned right back down to YPP. This is bearish sign. Following this logic next destination could be YPS1 right around parity and 1.618 butterfly target. This is just another destination point that we have here.

That's being said, appearing of reversal candle brings nothing good to bulls. Currently we can't precisely forecast the consequences of its appearing, but even minor results will bring 1-2 months of downward action inside current 1.04 -1.15 consolidation... Although potential bearish impact could be even stronger.

Finally we have another bearish sign that looks like bearish dynamic pressure. Take a look that although trend holds bullish - market shows inablitity to move up, even from strong support area. Next strong support stands precisely at parity and will become a culmination of downward action, since this level includes support line, YPS1 and butterfly 1.618 target. Brexit results hardly will bring prosperity to EU and probably will become another bearish driving factor for EUR.

That's being said, we treat long-term perspective for EUR as moderately bearish. Any rate hike from the Fed will accelearte dropping here.

eur_m_27_06_16.png


Weekly
Here we first recall what we've said last time.
Trend has turned bearish on weekly chart. Market has dropped below MPS1. These moments give a hint that current move down could get further continuation. Despite multiple fluctuations in wide range - market keeps valid the shape of butterfly. It is especially interesting that during last upside action EUR has stopped slightly below the top of major butterfly swing. As well as 1.05 low was slightly higher that low of March 2015. This lets EUR to keep chances on this large butterfly that has the same targets around parity as monthly one by the way....

But let's get closer to shorter-term perspective. Careful analysis of the swings shows that EUR keeps almost equal all downward harmonic swings inside this consolidation. Sometimes they are slightly greater, sometimes slightly smaller, but this difference is mild and mostly they are equal. So, we've estimated that that EUR should move slightly lower to major 50% support around 1.1060 area.Now this has happened.

Here again we mostly support our previous view that EUR will move down further. This stubborn standing around 1.1050-1.11could be explained combination of daily levels and YPP. But on Brexit turmoil EUR has pierced it strongly and right now this level becomes weaker and we have reversal candle on monthly chart.

Take a look carefully at weekly chart - we have drop out from the top. Last time when this has happened EUR has doubled harmonic swing on a way down and reached 1.05 lows. As we have similar situation here - harmonic swing again could be doubled. In this case we again will appear around 1.05 lows.
But this is not the end guys. Right now we see relatively rare candlestick pattern that calls "3 black crows". This is bearish reversal pattern and very often becomes a sign for significant downward action. Thus, in perspective of 1-2 months we really could get downward continuation here, on EUR.

And finally in last 3-4 weeks we clearly see inability of market to turn up again. This behavior amazingly correpsonds to the same action when EUR has dropped down from 1.16 top. After first wave of drop - it also has tried to turn up by some retracement but later failed and dropped to 1.05. Here we see very similar behavior.

If this time we will get the same continuation as last time, i.e. double of harmonic siwng - then, we again should appear around 1.05 area... But second appearing of the price there could become a fatal and EUR easily will follow to butterfly target and parity destination.
eur_w_27_06_16.png


Daily

Daily chart shed some more light on perspectives of price action in nearest future. As we've estimated on weekly chart - EUR has broken harmonic swing tendency to the downside. On daily chart it takes shape of steep AB=CD pattern that creates an Agreement with major 5/8 Fib level.

On Friday downward action was held by extreme oversold and strong support area and upside retracement has started.

As CD leg is very fast and steep - it suggests more action to the downside. Particularly speaking - to 1.618 target of this AB-CD after retracement will finish. If this will happen - then market definitely will reach previous lows. And as we've estimated above - significantly will increase chances to reach major target around parity.

Thus, overall situation around EUR stands bearish.
eur_d_27_06_16.png


Hourly

So, upside retracement could take different shape, and become slightly higher or lower. Right now EUR already has reached it's favorite 50% resistance and it could happen that upside retracement will stop right here.
At the same time we have potential butterfly "Sell" pattern that should finish at next 1.23 major Fib level. Thus, somewhere between 50% and 61.8% Fib level and as butterfly will be completed - EUR could turn down. At least on Monday we will monitor for this setup.

eur_1h_27_06_16.png


Conclusion:
Support where market stands on monthly chart is very long-term and wide. Standing there could last for months or even years, and may be sometime upward action will happen there. But right now, EUR shows bearish signs for perspective of 1-2 months. It's really high probability exists that move down will continue at least to 1.05 area or even deeper.

In shorter -term perspective we expect minor retracement up on daily and intraday charts before move down will continue. On coming week we will watch for it's starting point.


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.
 
Good morning,

(Reuters) The dollar and yen steadied and sterling crawled away from a 31-year low on Tuesday as risk aversion triggered by the shock of Brexit eased slightly, although many investors were still wary of calling a bottom for the battered pound.

The euro was little changed at $1.1042, having put a bit of distance from Friday's three-month low of $1.0912. The pair was confined between $1.1054-1.1010, its narrowest intraday range in nearly three weeks.

The greenback also moved in tight range against its safe-have Japanese counterpart, standing virtually flat at 102.04 yen.

On Friday the dollar had fallen to 99.00 yen, its lowest since late 2013, when it became clear that Britain had opted to leave the European Union.

"The fallout from Brexit had held sway through yesterday's European and North American sessions, sending the pound even lower. But for now, the market is experiencing a lull in absence of fresh factors and dollar/yen appears to be holding out well," said Kyosuke Suzuki, director of forex in Japan for Societe Generale.

The pound inched up 0.5 percent to $1.3298. Having skidded from highs near $1.5000 on Friday, the pound fell as far as $1.3122 overnight, reaching a low not seen since 1985.

In the latest blow for Britain, ratings agencies Standard & Poor's and Fitch downgraded its sovereign credit standing, judging last Friday's vote to leave the European Union would hurt the economy.

"While the USD and JPY have retained their safe haven status, the lack of clarity on the future relationship between the UK and Europe suggests that the GBP adjustment still has more to go," said Rodrigo Catril, currency strategist at National Australia Bank.

"Markets remain sensitive to Brexit headlines and in a day devoid of major data releases, the two-day EU Leaders summit commencing later today has the potential to be a weighty source of market volatility."

Central bank policy makers from across the globe have an opportunity to soothe frayed market nerves at a European Central Bank Forum in Portugal as well.

ECB President Mario Draghi is due to speak on "The future of the international monetary and financial architecture" later in the day. On Wednesday, Federal Reserve Chair Janet Yellen participates in a panel.

Against the yen, sterling was up 0.6 percent at 135.75, scraping out some breathing space between a 3-1/2 year trough of 133.18 plumbed Friday. The euro fell 0.6 percent to 82.99 pence, after scaling a two-year peak of 83.79 pence overnight.

The Australian dollar, sensitive to shifts in risk sentiment, added 0.7 percent to $0.7380 but it was still well below last week's high of $0.7650.


So, as we've updated our view on EUR on weekend - now it's time to return back to NZD, since we have excellent setup in progress here as well.

As you probably remember we expect deep retracement on weekly chart here. On daily chart last time we've discussed patterns that could trigger this retracement. First one was a butterfly "Sell" on 4-hour chart right at the eve of Brexit voting, but right now it is shifting to H&S pattern.
So, those of you who have missed entry by butterfly - now have good chance to take part in this journey. On daily chart NZD stands at oversold and shows upside bounce:
nzd_d_28_06_16.png


On 4-hour chart you can better see as butterfly as potential H&S pattern. Take a look, here we also have nice hidden bullish divergence with MACD. Untouched WPP stands around 5/8 Fib resistance @0.7150 area where right shoulder top should appear:
nzd_4h_28_06_16.png


On hourly chart we have Gartley "222" Buy and AB-CD pattern that creates an Agreement resistance right around 5/8 Fib resistance:
nzd_1h_28_06_16.png


That's being said, overall picture mostly supports weekly idea and now we're watching for 0.7150 area for taking short position.
 
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Good morning,

(Reuters) The yen gained in Asian trade on Wednesday while a semblance of stability helped the pound and the euro hover above their post-Brexit lows, though the battered European currencies remain hampered by longer term uncertainty.

Even as the markets' risk averse mood eased slightly and regional equities gained, lessening the appeal of the perceived safe-haven yen, the dollar shed 0.4 percent to 102.34 yen JPY=. But it held far above its 2-1/2-year low of 99.00 touched in highly volatile trade on Friday in the immediate aftermath of the UK referendum.

"Dollar/yen is its own beast now," and is not just moving on risk sentiment, said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets. "Pretty much everyone has been calling for a stronger yen, and that's generally the trend, so you don't go long dollar/yen and you look for rallies to sell into."

Japanese authorities have warned in the past that they could intervene in the currency market to stem the yen's rise, but traders suspect the hurdle for yen-selling intervention is high.

At the same time, worries over how Brexit could disrupt the global economies are likely to keep many investors cautious.

"A sense of uncertainty and worry about risks remain in the markets," Japanese Prime Minister Shinzo Abe said at a meeting between the government and the Bank of Japan to discuss market developments after the Brexit vote rocked global financial markets.

The meeting was the second between Abe and the BOJ after Britain's shock vote to exit the European Union, with more expected as Tokyo looks to put in place safeguards against potential instability in financial markets.

The euro skidded 0.5 percent against the Japanese currency to 113.23 yen EURJPY=

The British pound fetched $1.3337, little changed on the day and holding well above Monday's 31-year low of $1.3122.

The euro also stabilized at $1.1067, off its 3 1/2-month low of $1.0912 hit on Friday.

Against sterling, the common currency traded at 82.95 pence, within sight of its Monday's high of 83.80, its highest level in more than two years.

"The pound may not visit the lows touched earlier in next couple of days, but it will likely do so if we look at a longer time frame, say to September or December," said Masafumi Yamamoto, chief FX strategist at Mizuho Securities.

As European currencies recovered some of their poise and the yen firmed, the dollar index, which tracks the greenback against a basket of six major currencies .USD Index ticked down 0.2 percent to 96.038, pulling away from Monday's high of 96.705.

The dollar had risen on Tuesday after U.S. first-quarter economic growth was revised up to 1.1 percent from the previous reading of 0.8 percent.

But undermining the dollar, U.S. money markets are pricing out any chance of the Federal Reserve raising interest rates in the coming 12 months, suggesting a tempering of the currency's yield allure.

Today, guys, we do not have many objects to choose from. GBP is strongly depressed, so it is absolutely unsuitable for daily discussion, NZD we've disccused just yesterday. Well - EUR currency again...

On daily chart the major part of our analysis is AB=CD pattern. CD leg has very fast speed of dropping and this is key feature. As a rule, when market drops in this manner to 1.0 target - it should continue to 1.618 after pullback. Pullback we see now. 1.618 target stands around 1.06 area. As we've explained in weekly research - second drop to 1.06 will become a half way to parity. That's why we're fascinating right now on EUR view and see good potential with medium-term trading on short side.
eur_d_29_06_16.png


How far EUR could climb? Personally I like two levels - 1.1150 area and 1.1230. First one seems more probable to me, because this will be EUR favorite 50%, WPP, YPP and it will be enough to leave oversold on daily chart.
eur_4h_29_06_16.png


Still hourly chart shows that 5/8 retracement is also possible. Thus, AB=CD pattern has target around it and creates Agreement resistance. Also we could get Butterfly "sell" with 1.27 extension in the same area
eur_1h_29_06_16.png


But to be honest, I do not believe too much in possible action to 1.1230. EUR is forming pennant/trianlge pattern. Taking into consideration real disagreement in EU, that Brussel is hurry up UK to apply Lissabon article on abandoning EU - EUR will stand under pressure. That's why we treat 50% retracement as significant.
 
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Good morning,

(Reuters) The dollar took a breather in Asia on Thursday but remained near a 3-1/2-month high against a basket of currencies hit in the wake of Britain's stunning vote to exit from the European Union, while the battered sterling continued to struggle.

The dollar index, which tracks the greenback against a basket of six major rivals, edged up 0.1 percent to 95.836 , on track for a monthly loss of 0.1 percent.

While the U.S. currency mostly benefited from the massive wave of risk aversion that crashed over global markets after the Brexit vote, fading expectations of a U.S. interest rates this year have stolen some of its thunder.

Interest rate futures suggested traders saw the Fed holding policy steady - or even cutting rates - through at least early 2018.

The dollar index rose as high as 96.705 on Monday, when the pound plumbed 31-year lows after the results of the UK vote on Friday.

Sterling was down 0.2 percent at $1.3395, well above Monday's nadir of $1.3122 but still poised to lose more than 7 percent for the month.

Sterling "has come a long way, and there is still a lot of uncertainty," said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong.

"We've got month-end shenanigans as well, with some fund managers rebalancing their hedges, so that could also add to the volatility today," she said.

The euro was nearly flat against the pound at 82.85 pence edging away from Monday's high of 83.80, which was its loftiest peak in over than two years.

"The odds may be against them but investors are hoping that the worst is over for currencies and equities and the gaps on Friday will be filled," Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, wrote in a note to clients.

"But considering there's been had no additional clarity on the terms of Brexit or the outlook for the UK economy and global economy since Britain's decision to leave the European Union on Friday, we don't see fundamental support for the recent moves," she said.

Chaos also continued in Britain's political arena, as both main opposition Labour Party and ruling Conservative Party headed for leadership battles.

Japan's foreign ministry said Prime Minister Shinzo Abe would have separate phone talks with British Prime Minister David Cameron and German Chancellor Angela Merkel later on Thursday.

The euro remained under pressure, down 0.2 percent at $1.1101, but remained well above its 3 1/2-month low of $1.0912 hit on Friday last week. It was down 0.3 percent for the month.

Against its perceived safe-haven Japanese counterpart, the dollar was steady at 102.80 yen, well above its 2-1/2-year low of 99.00 hit in volatile trade on Friday.

It was still on track to shed more than 7 percent for the month.

The yen tends to appreciate sharply in times of global risk, creating headaches for the Japanese government and threatening to push the country back into recession.

Data released earlier in the session showed that Japan's industrial output fell in May at the fastest rate in three months, highlighting concerns about falling exports and doubts about weak consumer spending.

The Australian dollar fell 0.3 percent to $0.7433, but was still well off its post-Brexit lows. The outcome of the British vote on Friday pushed it as low as $0.7305 from $0.7650 earlier that session.

So, guys, our NZD setup stands on the way according to our expectation. Today I've taken a look at Crude Oil and setup seems to be interesting to me. On weekly chart we could get bullish grabber that suggests further upside action.
The intrique stands around harmonic swing. Market just has completed it. If top will be broken, it could lead to significant increase in crude oil price. But, now we're mostly interested in grabber per se. It suggests upside action. Hence USD/CAD should go down due strong relation between them:
brnt_w_30_06_16.png


On daily CAD chart we could get nice butterfly "buy" with 750+ pips profit potential and 1.2250 target:
cad_d_30_06_16.png


On 4-hour chart we see how price has stopped - and 3 time has tried to break it but finally has failed, formed wedge pattern that already has been broken down. So, now minor retracement up could be used for short entry. Stop should be placed above butterfly top on daily chart. Yes, this is far, but this is weekly setup, guys, adjust your trading position if you will decide to be involved with this setup
cad_4h_30_06_16.png


That's being said, I just have thought that this scenario could be interesting. It's mostly tactical but rather big scale though, since stands on daily/weekly charts. May be someone will like it...
 
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Good morning,

(Reuters) The yen climbed sharply against the dollar, euro and sterling on Friday, as political uncertainty and a Reuters report that the European Central Bank was not considering loosening its rules on monetary easing boosted demand for safe havens.

The euro recovered against the dollar after sources told Reuters that the ECB is not currently discussing buying government debt out of proportion to euro zone countries' shareholding in the bank, and the hurdle for abandoning this capital key is high.

The euro had fallen sharply on Thursday, along with European bond yields, and had continued its fall on Friday, on a Bloomberg report that the ECB had been considering giving up the capital key due to a shortage of German paper, which investors see as safe and have piled into in the aftermath of Britain's vote to leave the European Union last week.

But after Reuters reported on Friday that several other changes would be first considered before any such move, the euro inched up to trade flat on the day at $1.1110. In choppy trade for European stock markets, the yen hit day's highs of 102.435 versus the dollar, up 0.8 percent.

After hitting a 2-1/2-year high in the wake of the vote for Brexit, the safe-haven yen had eased off this week, falling for three successive days against the dollar and euro as sterling made a recovery from a 31-year low.

But with political uncertainty in Britain remaining high, and after the head of the Bank of England said that more stimulus would probably be needed over the summer to prop up the economy, sterling fell back towards its lows against the dollar, and fell more than 1 percent against the yen on Friday .

"We will have much more global repercussions to all of this ... and given the risk that global growth will slow, I don't think investors are going to move out of the yen in great numbers," said Rabobank currency strategist Jane Foley, from London.

Foley also suggested that the Australian and New Zealand dollar might be acting as "geographical safe havens" as their economies were strong enough and they were far enough removed from Europe that they were seen as somewhat insulated from its current problems.

Against the yen, sterling skidded to 136.11, but held off a 3-1/2 year low of 133.65 set last Friday.

Against the euro, the pound's falls have not been so steep, although it hit its weakest since March 2014 against the single currency on Thursday.

"It's been said that the euro zone is vulnerable to Brexit after the UK but the euro hasn't fallen much perhaps because the impact is not just clear yet," said Makoto Noji, senior strategist at SMBC Nikko Securities in Tokyo.

"But when you consider, the euro zone will have to take the brunt of rise in sterling so the economy will likely suffer. The market will probably start to price that in when things become clearer."

So, today guys as NZD as EUR almost has reached our predefined levels and we have to make a decision on short entry. (Our CAD setup also feels good BTW). But I've thought that NZD needs our attention more than EUR.

So, on daily chart is nothing really new - right now you could easily recognize H&S shape:
nzd_d_01_07_16.png


As we have to make a decision on short entry - we mostly are interested in intraday charts. Thus, 4-hour chart shows that 0.7172 level almost has reached:
nzd_4h_01_07_16.png


Hourly chart gives even more clarity. We have AB=CD (based on "222" Buy) pattern that creates Agreement resistance with 0.7170 Fib level. CD leg is very slow thus, chances on reversal looks significant. On the top of CD leg butterfly "Sell" is forming and this is very good sign. Appearing of bearish reversal patern brings more confidence with downward reversal around 0.7172 area.
So, if you want to trade it - you could either based your trade on butterfly directly or apply DiNapoli Minesweeper entry technique. Minesweeper suggests - that you need to wait when trend will shift bearish first and market will start dropping. As soon as it will happen - you need to take short position at first minor upward retracement (3/8 Fib level as a rule) from this starting downward action. Choose what you like more. Butterfly gives better entry point but Minesweeper is safer.
nzd_1h_01_07_16.png
 
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