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FOREX PRO WEEKLY, March 12-16, 2018

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Mar 10, 2018.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    So, last week guys, have brought mixed results. As ECB on Thursday has given the hint that inflation still stands mostly weak, as Draghi said - "regional inflation remained subdued and rising protectionism was a risk."

    As recent NFP data also hasn't brought any clarity. Although numbers were outstanding, but major component, wage growth pace, was insufficient to push dollar higher. This brings no changes to market expectation of three Fed moves in this year:

    “While this is good news for the U.S. economy, this doesn’t change anything with the Fed. The path of three rate hikes stays as our base case,” said Chuck Tomes, senior trader at Manulife Asset Management in Boston.

    So, action of central banks last week keep status quo unchanged. It is interesting what will be said on 21st of March - next Fed meeting. As investors expect there should happen next rate increase...but this is mostly tactical question.

    What is really interesting right now is strategical, long-term shifts that could happen due new financial policy of D. Trump administration. Those people and experts who fall in hysteria with tariffs take too narrow view on going processes. We need to take a look at this in complex. In fact, his sudden steps in economy is a continuation of his unexpected (for somebody) victory on elections. This is new policy and new role of US in the world.
    Those of you who read us at least for year, should remember that some times I've said that US will change their place and role in global policy and economy. US needs to shake off old Demoncrats and Neocons burden that put americans at the edge of catastrophe. When by using different economical tools ruling elite drawn all resources from the country and use them for satisfaction of their own ambitions and interests, trying to control and dominate at any point on the Sphere.

    Second task for Trump is to get rightful place in global policy. Right now it is obvious that there will be no Pax Americana any more (unipolar world), but there is still a time to make it bi-polar. Besides, nobody wants to create a multi-polar world. As US as Russia has made too much efforts to take their dominant place in the world and they do not want to put here new players. As you know, there are a lot of candidates - China, EU, and others. Currently, world is moving to bi-polar system. Definitely Russia stands as one of this system, but who will be second. And US will have the chances to take this role.

    At the same time, becoming one of political centers will help US to safe a lot of resources and complete first task - make US prosperous again and force economy to serve their citizens but not vice versa.

    Don't forget that D. Trump is a billionaire, he knows more about economy than we all together. So, thinking that he doesn't understand and wasn't able to suggest possible consequences is blear-eyed conclusion. My opinion is D. Trump uses different unpopular measures as a tool to break old unfavorable relations and links and trigger process of taking new US role in the world. We do not know what agreements stand beyond huge contracts on basic metals delivery, may be some political points as a part of deal were stand beyond them.
    If this political points are not necessary any more - Trump needs to break these agreements that were painful for US economy. From that standpoint - tariffs are very effective tool.

    Now we're a watchers of the excited and furious period in history. It happens once in a century or even rarer. Previous world balance is broken. Now we are looking at political process of new world. First will be a struggle for second place in be-polar world. US will need to take all efforts to take it. Besides they have big advantage to do this. Second stage - is how two major players will prevent creating of multi-polar world.

    In this new world some important processes should happen rather soon. EU will go on integration with Eurasia area - Russia, China and Middle East will be involved. EU will build new defense and security system with Russia, will build his own army. US military bases in EU will be closed probably. So EU should get real independence finally. NATO will be reformed and loose its primary purpose - to be an equilibrium to Russia military forces. I'm not sure that it will survive at all. There are already some argy-bargy due Turkey behavior on Middle East, that is, second largest NATO member... These processes will be rather hard for Eastern Europe countries, as they will take all burden of being blind allies of US policy. Even now they try to put a spoke in a wheel of favorable for EU core economical projects such as North Stream -2, Turkey stream. Last year South stream was blocked by Bulgaria... This is without recalling of sanctions that also was mostly US initiatives but EU has taken huge loss from it while US barely was hurt.

    The major problem for us, traders - this could lead to breaking and cracking normal economical processes and markets behavior. Now it is rather difficult to make technical analysis on major currencies. Just take a look at our discussion on forum. Situation changes every day.

    COT Report

    Recent report brings nothing new to overall picture. Two weeks before some shorts were closed, while last week some longs were closed as net long position and open interest have dropped. Still, theses changes are rather small and investors mostly keep longs in EUR. So, CFTC data shows minor fluctuations, but it doesn't show yet major trend breaking which still remains long here:

    upload_2018-3-10_12-28-54.
    Techincal
    Currently guys, it will be very difficult to create clear step-by-step trading plan for coming week. Situation stands too sophisticated and spread probabilities among two directions almost equally. The one thing that we've got last week - our cloudless scenario of direct action to 1.26 area was broken. At the same time, overall bullish context is still valid. So we need to understand bears' strength here and what chances on total downside reversal. The problem is exacerbated by different reactions among markets on NFP release. Thus, USD/CAD shows action which hints on upside continuation on EUR, while on GBP we've got second bearish grabber on daily chart, which suggests downside continuation. So it seems that truth stands somewhere in the middle :cool: If we will not be able to estimate clear direction, at least we will try to specify edge levels that will confirm direction once they will be broken by price action.

    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. The one thing that we could add here is either price action should show deeper retracement or tight consolidation just under strong level will suggest upside breakout.
    eur_m_12_03_18.

    Weekly

    Last week we've talked about grabber and its most probable upside target, which is 1.2615 - Yearly Pivot Resistance 1. Major level here is, of course, grabber's low at 1.2150. While it will hold, from weekly point of view we do not need to search other entry points to fade weekly sell against monthly buy.

    EUR shows rather flat reaction on reaching strong resistance. We at monthly K-area and major weekly COP target. But reaction stands even smaller than in "B" point. By classic technical analysis market is forming bullish flag right under strong resistance. Although weekly/monthly context remains bullish, this is poor consolation for us, because it is too long distance till 1.2150 and understanding of "invalidation point @ 1.2150" gives us no advantage in trading.

    Our major question is whether EUR will go lower and closer to 1.2150 or not?

    eur_w_12_03_18.

    Daily

    Daily stands in "Buy" mode and situation here is rather blur. Friday action was an "indecision cross" and with very tight range. Still CME Futures shows that there wasn't a record trading volume in this session, despite NFP release. So, what bearish signs worry me here.
    First is Pivot framework. Take a look that upside action was stopped without solid reason. Even before dovish ECB comments and when market already has broken through major Fib resistance. Price action was stopped by MPR1. By Pivot analysis, it means that this upside action should be treated as retracement of bear trend which is still valid.
    Second - let's try to estimate result of ECB+NFP action. Definitely it is bearish.
    Finally, I do not like an acceleration out from "C" point down and tail close. Formally, EUR has closed below MPP on Friday...
    That's being said, from daily chart I could make only one conclusion - I will not be hurry on taking long position here. As a compromise between keeping bullish setup valid and deeper retracement, we could suggest action to COP @ 1.22 area. But, to be honest, if this action indeed will happen - hardly EUR will stop there.

    Solution should come from price action around current level within 1-2 trading sessions on coming week, I suppose.
    eur_d_12_03_18.

    Intraday

    All intraday analysis stands around daily cross. In fact, direction of breakout will determine overall action. On 4-hour chart of EUR reverse H&S pattern is forming. It looks better on Dollar Index chart. And now market stands in a bottom of right arm. Here, I think we need to take a look at BC leg range. If EUR will break "C" point down - it will mean that daily cross also has broken down and downside action will continue.
    While upside breakout of "B" point will mean the opposite - upside trend is valid and action could continue higher.
    eur_4h_12_03_18.

    The same is for hourly chart. On Hourly opposite H&S is forming. To keep it valid, EUR should not exceed "B" point significantly. That's why former BC leg is important on direction estimating:
    eur_1h_12_03_18.

    So, as you can see, action above 1.2360 will show overextended upside retracement for normal bearish market and will erase hourly H&S pattern. This, in case will confirm 4-hour bullish pattern and will point us direction. That's why on Monday - our focus should be on a range of 1.2270-1.2360.

    Conclusion:

    Although bullish scenario is still valid, last week we've got clear signs of weakness on EUR. This makes us to be more diligent and selective in a moment of position taking. On coming week we should get an answer on short-term direction.



    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. Lolly Tripathy

    Lolly Tripathy Master Sergeant

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    The analysis is simply superb and enough
    Thanks sive sir
    And specially my dear friends Stag venelin you both are superb too
    Thanks for sharing ur views
     
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  3. FreddyFX

    FreddyFX Sergeant

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    Seems that now the meaning of PATIENCE is more valid than ever.
    The market will show its hand, with or without Trump tweeting all the time.
     
  4. Stag

    Stag Sergeant

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    Hi Guys, on the larger scale the favored count still suggests a wave 4 correction was complete at 1.2154 and we see the early stages of an ending diagonal unfolding (my alternate count is a still unfolding wave 4 correction, a triangle possibly). 1.2154 should hold for any bullish view.

    EU_180309_h2.

    Intraday

    My working assumption is that the wave-a decline ended at 1.2272 (see my friday posts). A drop below 1.2272 would negate my count I'm working with on the chart.

    The highlighted wave (a) recovery ended after five waves against 1.2272 possibly with a truncation. The setback seems to be corrective and might represent wave (b) of circle b. If it can extend the recovery impulsively above 1.2334, it would bolster the bullish view for a pink (c)-wave rally towards the common projections in the green area.

    If it represents a correction, the Euro should reverse from there and resume its decline. Circle wave-c should reach at least 1.2270 and possibly lower levels of the red area where it would travel a distance equal to 1.0 times the distance traveled in wave a.

    I continue to look higher against Fridays's 1.2272 low.

    EU_180309_m15.

    Good luck for the coming week.
     
  5. verbazo

    verbazo Recruit

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    Thank you for the analysis.
    You addressed the theme of the new world and that the US need to take the second place in bipolar world.

    "Definitely Russia stands as one of this system, but who will be second. And US will have the chances to take this role." "Now we are looking at political process of new world. First will be a struggle for second place in be-polar world. US will need to take all efforts to take it."

    Is it not so that US is now leading the world and Russia can take the place in bipolar world? As I see US don't want to loose his leading position (aljazeera.com/news/2018/02/trump-increase-military-budget-china-russia-180210141816045.html).
    I know it is just a your view but it is interesting to know why you think so?

    All the Best
     
  6. Stag

    Stag Sergeant

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    You're welcome, Lolly. :)
     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Verbazo,
    Well, I'm just trying to follow common sense. If there was no Russian challenge (let's call it in this manner) to US domination - it wouldn't be necessary to talk about bi-polar system right? Only this fact tells that Russia is a absolutely independent player of global policy. Next moment is only Russia was able successfully break US game on Middle East and in Ukraine (Crimea joining) without any response. It means that US has no effective tools as political as military to force Russia cancel its own game. At the same time we did see what has happened in Iraq, Libya, Yugoslavia, with those who has tried to stand against US. Among all countries in the world nobody else could do this. That's the answer.
    You probably was confused a bit that I've said "second" place. Here I do not mean lower role, strength or importance, but just number. So, you could call Russia as second, while on first place is US and other rivals. This doesn't change the overall idea.
    Besides, it is enough to compare US role, power, say in 2007 and in 2017 - this is big difference.
     
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  8. Stag

    Stag Sergeant

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    Guys, it is also worth considering this correlation. The Swiss Franc seems to be ahead of the Euro, so a reversal may be just around the corner:

    USDCHF-vs-EURUSD.
     
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning, guys,

    let's see what new inputs we have on EUR. Today we will be watching for Core CPI release. It is expected 1.8%, so any better numbers will be supportive for USD...

    On daily EUR we have two side-by-side bullish grabbers, which theoretically suggest upside continuation. But it is not as easy as it stands. If you will take a look at dollar index - it has same grabbers but in opposite direction. It means that they are not very reliable at this moment:
    eur_d_13_03_18.

    Besides, grabbers bring nothing new as their invalidation points coincide with our "BC" range that we've discussed in weekend:
    eur_4h_13_03_18.

    So, this "BC" range still stands in the center place of our analysis. Still, on hourly chart, the shape of upside action mostly stands in favor of downside continuation. it is too gradual for final part of reverse H&S pattern. It is even clearer on dollar index chart.
    Mostly this price action stands in favor of hourly direct H&S, which suggests downside continuation:
    eur_1h_13_03_18.

    That's being said, price behavior that we see on DXY and EUR by our view, look more as bearish rather than bullish. Still, to make final decision we need to get breakout of our "BC" range.
     
  10. Stag

    Stag Sergeant

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    Not much news here, prices are moving ahead in a corrective price channel if we apply the KCT technique. I expect a bounce up back to 1.237 as long as 1.229 holds as support.
     
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