Sive Morten
Special Consultant to the FPA
- Messages
- 18,664
Fundamentals
This week, guys there are more technical issues that could be interesting for discussion rather than fundamental ones. There are just two events that stand in focus. Tomorrow's Italy elections and recent Trump legal act of tariffs on Steel and Aluminium export. It is interesting historical moment, especially on example of 1930's Import tariffs of Smoot–Hawley that as a rule protectionism in economy leads to strength of nationalism. For example, one of the economic reasons of WWI was attempts of France and GB to hold fast industrial development of Germany. Currently, with strong mutual involving of national economies to each other, especially large ones, such as US, EU, China - starting of import tariffs could lead to chain reaction with hardly forecasting final. And, as history shows, it ultimate cases it could lead to war of different scale.
Another interesting observations on trade wars is “Historically, the dollar loses from trade wars, which underscores our structural bearish views, especially as the ramping up of twin deficits will require international funding over the next few years,” said Mark McCormick, head of North American FX strategy at TD Securities in Toronto.
I suspect that this tariffs is a part of big economical game of D. Trump. Major direction of this game is destroy former Neocon democrats ambitions of global domination, significantly reduce spending, safe budget money and re-direct them on US domestic economy needs. Trump wants to make US works for their people but not for small group of crazy World's rulers. As a result, US will restore health of its national economy, but will loose role of World hegemon, or better to say - will refuse it intently. US will be a kind of Canada or Australia with healthy economy, happy people but at the same time will keep solid role in global politics. Now he needs to break old relationships that new US doesn't need any more. To do this, he needs from time to time announce unpopular measures that will accelerate this process. As a result, I think, 3-5 years may be I see NATO disintegration (although it will exist legally for some time more), evacuation of US military forces out from EU and EU integration into Euro-Asia trade space. Also it is unclear what will happen with US limitrophes in EU - Poland, Baltic states and some other "new members" of EU in Eastern Europe. They could be abandoned by everybody... There is already some tensions between Poland and Brussels. Poland actively obstructs building of North Stream 2 and other projects that core EU needs. So, Germany and Co hardly will tolerate this in his homestead.
Speaking on second topic - Italian elections, here is just one question exists. Whether S. Berlusconi coalition will win or not. If they will - they will create majority in parlament. Although Berlusconi personally can't take any official posts due scandal 5 years ago, but his party is a step forward to new political and economical order in Italy and in direction of EU-Asia (through Russia) united economical space. In this case EU will show gap up on Monday open.
If Berlusconi’s coalition can not get a majority, Italy will be left with a hung parliament and political deadlock.This is not something new. Actually in Italy this happens more often than in any other country in EU. Besides, in Germany there was the same problem and it still stands on the table, but no significant negative impact on EUR has followed.
Here is the article on coming elections, where situation is described with more details.
COT Report
Recent CFTC data shows that recent downside retracement on EUR has small impact on speculative positions. Take a look at changing of open interest and net long position in last 4 week. While open interest stands flat - speculative position fluctuates. It seems that it reflects action of short-term traders. Before retracement longs were turned to shorts. Last week, when retracement mostly was over - take a look, position has increased again with the same open interest. It means that shorts were turned back to longs again. Still upside potential is still limited as total position stands near highs, although it has some room to grow a bit.
Source: Oanda.com
Techincal
Right now, guys, there are a lot of valuable setups on different currencies, EUR(DXY), GBP, Gold. Also I see really cool setup on CAD and strongly recommend you to re-read post of ButcherFX on AUD and compare to what really has happened on the market. Roger placed view of Pieter van Wyk, official DiNapoli expert. And it seems that scenario with W&R now stands under way...
Also I do not know what to do tomorrow - either to show you CAD setup, or, as usual, take a look at Gold market...
Monthly
No big changes on monthly chart has happened. It stands in "Buy" mode, price is pulling back out from strong resistance of K-resistance 1.2516-1.26, accompanied by YPR1 @ 1.2617 area. There is not overbought on monthly chart.
Resistance area is rather strong and current retracement still looks too small to be treated as proportional respect to it. At the same time, market also could easily fluctuate inside the range till the previous top of ~1.26 and challenge them. So, monthly picture doesn't provide us something new.
Weekly
Weekly chart brings very important issue. Retracement down was due monthly K-resistance and, here on weekly - major COP target and butterfly "Sell". Butterfly has reached minimum respect target - 3/8 support. Now weekly chart has turned to "buy" mode as well and formed bullish grabber. It means that we could buy on retracement against current lows of 1.2154.
Recall that last week we had "Oops!" bullish setup on daily and it has started well.
Speaking on upside target - market should take out previous tops of 1.2555. As Yearly pivot stands around 1.2616, it very probable that it could be reached...
Daily
Daily time frame in "Sell" mode, but here we have "Ooops!" bullish directional pattern, and, according to DiNapoli "Direction" overrules "trend". That's why "Direction" here is up as well. Here I will not repeat all explanation of "Oops!' pattern, you could re-read it on a link above.
Now market has reached first resistance of 3/8 Fib level and MPP. Those who has not jumped in yesterday could get a chance to buy on retracement that could happen on Monday. But here we still have a big uncertainty factor of Italy elections result.
Intraday
Right now market stands at major COP target on 4-hour chart. Here we easily could recognize potential reverse H&S shape. This gives us clue, where to expect retracement bottom and our entry point. Depending on what will happen in Italy - retracement could start differently. In a case of upward gap opening, market could open around OP and start retracement then. In general this will not change overall setup. We do not care much from which level retracement will start, we just need retracement to buy.
Hourly chart has turned to "Sell". Following the harmony of reverse H&S, it seems that most probable downside destination is K-area of 1.2248-1.2266 and WPP.
Conclusion:
Situation on EUR shows solid upside potential. We do not know what results of Italy election will be and how it will impact on markets, but according to current situation, it seems that area around 1.2250-1.2260 will be suitable to taking long position.
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.
This week, guys there are more technical issues that could be interesting for discussion rather than fundamental ones. There are just two events that stand in focus. Tomorrow's Italy elections and recent Trump legal act of tariffs on Steel and Aluminium export. It is interesting historical moment, especially on example of 1930's Import tariffs of Smoot–Hawley that as a rule protectionism in economy leads to strength of nationalism. For example, one of the economic reasons of WWI was attempts of France and GB to hold fast industrial development of Germany. Currently, with strong mutual involving of national economies to each other, especially large ones, such as US, EU, China - starting of import tariffs could lead to chain reaction with hardly forecasting final. And, as history shows, it ultimate cases it could lead to war of different scale.
Another interesting observations on trade wars is “Historically, the dollar loses from trade wars, which underscores our structural bearish views, especially as the ramping up of twin deficits will require international funding over the next few years,” said Mark McCormick, head of North American FX strategy at TD Securities in Toronto.
I suspect that this tariffs is a part of big economical game of D. Trump. Major direction of this game is destroy former Neocon democrats ambitions of global domination, significantly reduce spending, safe budget money and re-direct them on US domestic economy needs. Trump wants to make US works for their people but not for small group of crazy World's rulers. As a result, US will restore health of its national economy, but will loose role of World hegemon, or better to say - will refuse it intently. US will be a kind of Canada or Australia with healthy economy, happy people but at the same time will keep solid role in global politics. Now he needs to break old relationships that new US doesn't need any more. To do this, he needs from time to time announce unpopular measures that will accelerate this process. As a result, I think, 3-5 years may be I see NATO disintegration (although it will exist legally for some time more), evacuation of US military forces out from EU and EU integration into Euro-Asia trade space. Also it is unclear what will happen with US limitrophes in EU - Poland, Baltic states and some other "new members" of EU in Eastern Europe. They could be abandoned by everybody... There is already some tensions between Poland and Brussels. Poland actively obstructs building of North Stream 2 and other projects that core EU needs. So, Germany and Co hardly will tolerate this in his homestead.
Speaking on second topic - Italian elections, here is just one question exists. Whether S. Berlusconi coalition will win or not. If they will - they will create majority in parlament. Although Berlusconi personally can't take any official posts due scandal 5 years ago, but his party is a step forward to new political and economical order in Italy and in direction of EU-Asia (through Russia) united economical space. In this case EU will show gap up on Monday open.
If Berlusconi’s coalition can not get a majority, Italy will be left with a hung parliament and political deadlock.This is not something new. Actually in Italy this happens more often than in any other country in EU. Besides, in Germany there was the same problem and it still stands on the table, but no significant negative impact on EUR has followed.
Here is the article on coming elections, where situation is described with more details.
COT Report
Recent CFTC data shows that recent downside retracement on EUR has small impact on speculative positions. Take a look at changing of open interest and net long position in last 4 week. While open interest stands flat - speculative position fluctuates. It seems that it reflects action of short-term traders. Before retracement longs were turned to shorts. Last week, when retracement mostly was over - take a look, position has increased again with the same open interest. It means that shorts were turned back to longs again. Still upside potential is still limited as total position stands near highs, although it has some room to grow a bit.
Source: Oanda.com
Techincal
Right now, guys, there are a lot of valuable setups on different currencies, EUR(DXY), GBP, Gold. Also I see really cool setup on CAD and strongly recommend you to re-read post of ButcherFX on AUD and compare to what really has happened on the market. Roger placed view of Pieter van Wyk, official DiNapoli expert. And it seems that scenario with W&R now stands under way...
Also I do not know what to do tomorrow - either to show you CAD setup, or, as usual, take a look at Gold market...
Monthly
No big changes on monthly chart has happened. It stands in "Buy" mode, price is pulling back out from strong resistance of K-resistance 1.2516-1.26, accompanied by YPR1 @ 1.2617 area. There is not overbought on monthly chart.
Resistance area is rather strong and current retracement still looks too small to be treated as proportional respect to it. At the same time, market also could easily fluctuate inside the range till the previous top of ~1.26 and challenge them. So, monthly picture doesn't provide us something new.
Weekly
Weekly chart brings very important issue. Retracement down was due monthly K-resistance and, here on weekly - major COP target and butterfly "Sell". Butterfly has reached minimum respect target - 3/8 support. Now weekly chart has turned to "buy" mode as well and formed bullish grabber. It means that we could buy on retracement against current lows of 1.2154.
Recall that last week we had "Oops!" bullish setup on daily and it has started well.
Speaking on upside target - market should take out previous tops of 1.2555. As Yearly pivot stands around 1.2616, it very probable that it could be reached...
Daily
Daily time frame in "Sell" mode, but here we have "Ooops!" bullish directional pattern, and, according to DiNapoli "Direction" overrules "trend". That's why "Direction" here is up as well. Here I will not repeat all explanation of "Oops!' pattern, you could re-read it on a link above.
Now market has reached first resistance of 3/8 Fib level and MPP. Those who has not jumped in yesterday could get a chance to buy on retracement that could happen on Monday. But here we still have a big uncertainty factor of Italy elections result.
Intraday
Right now market stands at major COP target on 4-hour chart. Here we easily could recognize potential reverse H&S shape. This gives us clue, where to expect retracement bottom and our entry point. Depending on what will happen in Italy - retracement could start differently. In a case of upward gap opening, market could open around OP and start retracement then. In general this will not change overall setup. We do not care much from which level retracement will start, we just need retracement to buy.
Hourly chart has turned to "Sell". Following the harmony of reverse H&S, it seems that most probable downside destination is K-area of 1.2248-1.2266 and WPP.
Conclusion:
Situation on EUR shows solid upside potential. We do not know what results of Italy election will be and how it will impact on markets, but according to current situation, it seems that area around 1.2250-1.2260 will be suitable to taking long position.
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.