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Forex FOREX PRO WEEKLY, March 04 - 08, 2019

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Mar 2, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    It is difficult choice this time guys, as many markets provides interesting setups, while EUR is our major currency pair that we're tracking. At the same time I just can't miss chance to consider CAD setup, as it looks very promising. As situation on EUR stands steady, we dedicate today research to CAD and update EUR later, on the week.

    Fundamentals

    As Reuters reports - the dollar rose on Friday, hitting 10-week-highs against the yen, as risk appetite improved amid a more upbeat outlook on the euro and the prospect of a trade deal between China and the United States.

    "Risk-on sentiment amid a global stock rally worked in favor of the euro and commodity rivals like the loonie, Aussie and kiwi dollars, while rising Treasury yields have pulled the greenback out of its biggest hole in weeks," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

    Friday's slew of weaker-than expected U.S. economic data weighed on the dollar initially, especially the manufacturing index, but the greenback rallied to trade higher on the day.

    The dollar was earlier supported by data on Thursday showing U.S. gross domestic product had grown at an annual 2.6 percent rate in the fourth quarter, exceeding forecasts for a 2.3 percent gain. Benchmark 10-year U.S. Treasury yields have risen about 7 basis points this week. The yield surged to 2.731 percent on Thursday, its highest since Feb. 6.

    The euro, meanwhile, was little changed against the dollar at $1.1377. It traded flat in London after data showed underlying inflation in the euro zone remained subdued. The euro zone single currency rose earlier after news that a U.S. manufacturing index had fallen in February to its lowest since November 2016 suggested economic momentum has slowed this year.

    The Institute for Supply Management's U.S. manufacturing index fell to 54.2 in February from 56.6 the previous month. The prices paid index, a measure of inflation, also fell, to 49.4, the weakest since February 2016.

    Other economic data were also soft, with a weaker-than-expected University of Michigan consumer sentiment index for February as well as a drop in both U.S. personal income and spending. These reports underscore expectations for weaker growth momentum in the first quarter.

    "All of these things are putting a damper on the dollar. The market was looking for a stronger recovery after the shutdown," said Joe Trevisani, senior analyst, at FXstreet.com in New York.

    "They're saying that the shutdown is transitory and wouldn't have that much of an impact. But looking at these numbers, that's not the story they're telling. It's not a big collapse, but it's not as strong as people thought," he added, referring to the 35-day partial U.S. government shutdown that ended Jan. 25.


    Earlier data showing a drop in both U.S. personal income and spending had little impact on the dollar. A key inflation gauge in that report showed the headline rate falling to 1.7 percent from 1.8 percent, with core inflation at 1.9 percent in December, just below the Fed's 2 percent target.

    The Canadian dollar closed lower against its U.S. counterpart on Friday, after news that Canada's economy grew at a slower-than-forecast pace in the fourth quarter lowered expectations the Bank of Canada would
    raise interest rates any time soon.

    Canada's gross domestic product grew at an annualized rate of 0.4 percent in the fourth quarter, down from 2.0 percent in the third quarter and slower than the 1.2 percent rate expected by analysts, largely due to lower export prices of crude oil and crude bitumen, Statistics Canada said on Friday.

    GDP edged down 0.1 percent in December as a result of reduced output across most goods-producing industries.

    "It was softer than expected obviously, with the quarter up 0.4 percent in GDP terms," said Nathan Janzen, senior economist at the Royal Bank of Canada. "It looks like a lot of the weakness can be attributed to softening of the oil patch. If you're the Bank of Canada, it's another reason to hold off on raising interest rates for a while."

    The central bank, which is widely expected to leave its benchmark interest rate on hold next week at 1.75 percent, said in January that low oil prices harmed the economy in the fourth quarter of 2018 and will continue to do so in the first quarter of this year.

    Canada's current account deficit widened to C$15.48 billion in the fourth quarter from a revised C$10.11 billion deficit in the third quarter as a sharp drop in energy prices triggered a higher deficit on trade goods, data from Statistics Canada showed.

    Separate data from Statistics Canada showed that producer prices fell by 0.3 percent in January from December on lower prices for energy and petroleum products. Analysts had expected a 0.1 percent increase in industrial prices.

    COT Report

    Speculators raised their bullish bets on the U.S. dollar in the week to Feb. 19 to the largest position in four weeks, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.

    The value of the dollar’s net long position, derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars, was $23.81 billion.

    That compares with a net long position of $22.15 billion the previous week.

    Speaking on CAD, net short position has decreased this week from "-42K" to "-36.4K" contracts, due good performance of crude oil within few weeks and because of extreme levels of net short position of CAD. So it could be explained as technical reversal as well.

    As market has shown pullback, now short position again has room to expand. Taking in consideration fundamental background this could happen within few weeks.
    upload_2019-3-2_11-10-21.

    Source: cftc.gov
    Charting by Investing.com

    So overall sentiment and fundamental background suggests moderate weakness in CAD within few weeks, at least it doesn't contradict to technical setup that we have.

    Last time we've talked about CAD month ago (4th of February) and found attractive setup. Although it is based mostly on technical moments, not on big shifts in fundamental background, but these moments stand on monthly and weekly charts which is promised to be solid action on daily time frame.

    Technicals
    Monthly


    Recall that our discussion has started with strong bearish engulfing pattern by the close of January candle. Pattern stands at major 5/8 resistance. January black candle has closed below the lows of December, which could be treated as Reversal month as well. On a way down market also has tested YPP.

    Strong support here stands at 1.2706 as YPS1 and 1.22-1.25 K-area.

    For the monthly chart, this is tactical setup, because it doesn't suggest too extended targets, as they should stand somewhere inside recent upside swing. But... this is for monthly time frame. For daily one this could be long-term direction which makes trading process easier.

    As usual, first step that we're waiting for is minor pullback inside the body of engulfing pattern. This pullback is very important for us, as it should provide entry point. Also it is not forbidden to trade it long on daily chart. Second step of trading plan - downside extension.

    Now, as month has passed we see that first stage stands under way.
    cad_m_04_03_19.

    Weekly

    Downside reversal point also was an XOP final upside target. Reversal has a shape of perfect Evening star pattern. According to our previous analysis, upside pullback should have good chances to start right from K-support as it also coincides with YPP.

    And this indeed has happened. Now on weekly chart we're waiting for AB-CD upside action of different length - 1-1.618. Most probable though 1-1.272, I suppose. This should give us "222" Sell pattern that becomes the major background of 2nd stage of our trading plan - short trade.

    On daily and intraday charts we focus on 1st stage - upside action.
    cad_w_04_03_19.

    Daily

    Here you can see our butterfly that was formed month ago and this was a part of background of coming upside action. Now butterfly has become a part of H&S pattern. Upside action was fast on Friday, so chances are not bad that we get a continuation.

    As butterfly is skewed a bit down, we consider just two extensions - OP and 1.27 XOP but not 1.618 one. Both stand around major 5/8 Fib resistance level, which makes this area our potential level for short entry.

    Now market stands at 3/8 Fib resistance which suggests some retracement in the beginning of the week.
    cad_d_04_03_19.

    Intraday

    On 1H chart we have pretty nice thrust. As market pretends on upside breakout, at least theoretically, pullback should not be too significant. 1.3240 Fib support looks like suitable level for this purpose. It also coincides with WPP.

    If retracement will be gradual, especially if it takes AB=CD shape and we'll get "222" Buy pattern here - it could be used for long trade as well.
    cad_1h_04_03_19.

    Conclusion:

    Canadian dollar provides very interesting setup now. Since setup is forming on monthly chart - it could provide weeks and weeks of clear direction for trading on daily time frame.
    Next week we expect continuation of upside action on daily chart which should provide as better and safer area for taking short position and, chance to make long trade as well.


    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.
     
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  2. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning everybody,

    So, while our CAD setup develops well, we could take a look at EUR again. Market mostly stands indecision and doesn't let us to make a conclusion on long-term perspective. As uspide action as downside one looks weak.

    Despite that nature of recent drop mostly looks bearish, as EUR was not able to break daily resistance and proceed above COP target, but dropped and erase AB-CD pattern, dropped below flag consolidation - it still has not lost all chances on upside continuation.

    I wouldn't dare to suggest that we will get whole AB=CD up, but at least some upside action is possible. But to make it real, EUR has to hold above major intraday support:
    eur_d_05_03_19.

    On 4H chart market has completed our target - harmonic swing was doubled and price stands around major 5/8 Fib support and WPS1:
    eur_4h_05_03_19.

    Hourly chart shows our H&S pattern, sell-off was rather fast, market easily has exceeded OP. Here we could keep on eye on following scenario. Fast drop suggests that XOP should be hit. At the same time we could watch for bullish reversal pattern. Most probable seems butterfly "Buy". If we will get all this stuff - we will be at major support& Agreement with bullish reversal pattern on the back.
    This makes bullish position taking relativey safe. Minor bounce has to happen and we could move stops to breakeven and be prepared, say, to NFP.
    Conversely, break below 1.13 area probably will mean downside continuation back to 1.12 lows.
    eur_1h_05_03_19.
     
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  3. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. This downside action looks more corrective then impulsive. I am on board with Stag, blue wave B probably ended at 1.1233, after that we had blue wave 1 which had shape of leading diagonal, and ended at 1.1419. I think corrective wave 2 is finished or about to finish. I closed my short positions and open long ones against 1.1233 bottom.

    Daily chart:

    EURUSDkDaily.

    4H chart:

    EURUSDkH4.

    1H chart:

    EURUSDkH1.

    How to trade this?

    Entry for long positions in zone = 1.1290-1.1350, SL = 1.1232, TP1 zone = 1.1480-1.1580, TP2 zone = 1.1725-1.1880
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    EUR has completed all our perliminary conditions for long position taking. This gives at least some hope on minor upside pullback. At the same time there are a lot of signs of weakness on the market and it significantly reduce upside potential.

    First is - sell-off is faster than upside action. This is bring confusion in classification what is major action and what is retracement.
    eur_d_06_03_19.

    Second, market has broken K-support, 2x harmonic swing and WPS1. This is not good sign. Now price stands at final bulls' outpost - major 5/8 Fib support. This area has some features, since this is invalidation area for bullish setup, it provides best risk/reward ration for long position.
    At the same time, breakout of this level means that EUR should follow lower, first to 1.12 lows:
    eur_4h_06_03_19.

    On 1H chart our XOP target has been hit, we've got bullish divergence and butterfly also has been completed. It means that market either shows upside action or context turns bearish.
    If you decide to go long here - don't count on significant daily AB-CD, it will be possible only by some external driving factor. Technical picture shows weakness and suggests only minor technical pullback now:
    eur_1h_06_03_19.
     
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    First guys, take a look at CAD - our weekly setup mostly is done. Now we start watching for market reaction on 5/8 Fib level and potential XOP target. As we've discussed, somewhere around bearish signs should appear as monthly chart suggests another leg down.

    Speaking on EUR our suspicious are seemed to be correct. Upside bounce stands too weak. This is not the way how bullish market turns to rally up from major support area. It means that downside action is more continuation rather than retracement of previous upward swing.

    Yesterday we've pointed a lot of bearish signs that makes me think on downside continuation back to 1.12 lows first.

    Situation could change but only by some external factor - poor NFP, verbal intervension by Trump or Powell, some news on US-Sino tariffs ect. Internally, EUR looks bearish and you can see it on the chart.
    eur_d_07_03_19.

    On 4H EUR still stands around major Fib support, no breakout has followed yet, but, guys, this is not the way how bullish market should behave. All previous bearish thoughts are the same here - drop in extension of 2x harmonic swings, below pivots, below WPS1. Poor reaction on major support after completion good reversal background:
    eur_4h_07_03_19.

    On 1H chart, as we've suggested pullback has happened. And yes - it was mostly technical, just 50% reaction on butterfly pattern. Despite that here we could recognize "222" Buy - overall picture looks weak and IMO we do not have sufficient context for long entry right now.
    eur_1h_07_03_19.

    Thus, I would suggest another drop here. BTW, guys, on daily Dow we have DRPO "Sell". This also gives a hint on coming USD strength.
    #US30Daily.
     
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  6. gwynfor

    gwynfor Private, 1st Class

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    Hi Guys,

    been keeping a low profile because I didn't have a wave count.

    But on 11 December I did say

    "Because my maroon wave e gave a throw over past my a c trendline then I think this supports my wave count, in which case my next target is around 1.1190."

    The wave count was obviously wrong, the market has been up to 1.1570 in the meantime. But the market got there eventually.

    Though as far as I can recall the target at 1.1180/1.1190 was based on a target set by Sive, maybe this one [ EURUSDWeekly. EURUSDWeekly.
     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    So, ECB has done its dark deed - "The euro’s big hit on Thursday came as the ECB pushed back the timing of its first post-crisis interest rate hike to 2020, cut its economic forecasts and launched a new round of cheap bank loans."

    Economists polled by Reuters expect to see 180,000 jobs added in the United States last month, after two months of staggering growth. The U.S. economy added 304,000 jobs in January and 222,000 in December.

    So, guys, recent few months in every weekly report we talk on fundamental EUR weakness and now ECB just has confirmed our view on EU economy perspectives. This is the subject for next weekly report, in shorter-term we just tell that EUR stands at monthly 1.1185 Fib support, that finally has been hit and daily oversold. It means that this is not good point for taking short position at daily/weekly time frame. In fact we have bullish daily "Stretch" pattern in place, which suggests some relief and upside bounce. As a rule Stretch target is reached when DOSC indicator returns back to zero level. This is dynamic target and is changing day by day. Today it stands around 1.1275 area.
    eur_d_08_03_19.

    Since 1.1185 is weekly Fib level, market could fluctuate around it for some time and reaction could follow with some delay. On intraday charts market could show minor downside continuation for 40-50 pips more due strong momentum. This action could become even stronger if NFP data will be positive today.

    Here we should not forget about upside weekly COP on Dollar index, that was our major technical background of EUR drop, and it has not been reached yet.

    On 4H chart we do not see anything special yet, just Fib resistance levels. 1.1265 K-area is the one that could be useful if any short-term bearish setups will be formed. But now we do not see any patterns yet.
    eur_4h_08_03_19.

    The reason why I think that EUR could drift a bit lower is butterfly type action on 1H chart. Reaching of 1.27 was very fast and strong. After minor relief in most cases market follows to 1.618. Besides, price now stands stable below 1.12 lows with no attempt to show fast return and jump. Thus, this is not W&R guys.
    eur_1h_08_03_19.

    That's being said - neither bearish nor bullish trades could be taken now on daily/weekly time frames. Because market stands at strong support, but we do not have yet any bullish patterns, except daily Stretch may be, but this is not sufficient.

    On intraday chart, be aware of NFP release, it makes tricky any trading today. Technically, 1.1265 K-resistance is suitable for short-term bearish trade with target around previous lows, or a bit lower - use Oversold level to control downside potential. For example, we could get "222" Sell pattern.

    I do not see any short-term bullish patterns yet.
     

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