FOREX PRO WEEKLY March 16-20, 2015

[Sive Morten]

Fundamentals
Reuters reports Dollar-buying momentum lifted the greenback to a fresh 12-year high against the euro on Friday, overcoming disappointing U.S. inflation and consumer sentiment data that would normally weaken it.

Positioning ahead of the Federal Reserve's monetary policy meeting next week was also seen as a potential reason for the seemingly incongruous move up by the dollar, analysts said.

The euro fell over 1.60 percent to a low of $1.04625 on the EBS trading platform .

"What makes us uncomfortable is that the dollar's drive higher is not being supported by front-end yields. They are down the past few days. It is not a yield advantage driving the dollar higher, but it feels like a momentum market," said Vassili Serebriakov, currency strategist at BNP Paribas in New York.

"We see a risk of a dollar pullback on the Fed next week but a bias to buy on that," he said.

U.S. producer prices fell 0.6 percent last month, the first drop since the series was revamped in 2009, pointing to tame inflation that could argue against an anticipated June interest rate increase by the Fed.

In addition the University of Michigan's consumer sentiment index fell in March, although inflation expectations rose for a second straight month to its highest since September.

The European Central Bank's quantitative easing program, meant to stimulate borrowing and investment, stands in contrast to the expectation the Fed starts raising interest rates later this year, enhancing the dollar's yield advantage.

"Dollar-buying momentum is overcoming rising European yields. It remains unclear what's driving this higher because the data and the curves would argue more (for) its weakness," said Sebastian Galy, senior currency strategist at Societe Generale in New York.

Galy referred to a pause in European bond buying that has driven yields to record lows and in some cases negative levels.

Sterling fell over 1 percent to a fresh near five-year low of $1.4697 . Bank of England Governor Mark Carney said on Thursday he was in no hurry to raise interest rates, fueling cable's weakness.

The euro dropped 1.55 percent to 126.915 yen, its weakest point in over 1-1/2 years . Meanwhile the dollar was little changed against the yen, rising just 0.11 percent to 121.395 .


Today, guys, we will take a look at GBP again. EUR situation does not need any update by far, on NZD we’ve spoken just yesterday and our trading plan now stands in progress.
So, CFTC data shows significant increase in open interest – as short positions as long were increased. What also is interesting – hedgers’ positions also have increased correspondingly. Still, right now shorts approximately two times greater than longs. Increasing of shorts mostly has been triggered by BoE comments about postponing of interest rate hiking on 2016 year. At the same time solid jump in long positions suggests that market could show upward retracement.

Open interest:

Speculative Shorts:

Speculative Longs:

Technicals
Monthly
Since it is still valid – I would like to keep showing you monthly chart and analysis that we’ve made in December 2013 in our Forex Military School Course, where we were learning Elliot Waves technique.
https://www.forexpeacearmy.com/forex-forum/forex-military-school-complete-forex-education-pro-banker/30110-chapter-16-part-v-trading-elliot-waves-page-7-a.html
Our long term analysis suggests first appearing of new high on 4th wave at ~1.76 level and then starting of last 5th wave down. First condition was accomplished and we’ve got new high, but it was a bit lower – not 1.76 but 1.72. This was and is all time support/resistance area. Now we stand in final part of our journey. According to our 2013 analysis market should reach lows at 1.35 area. Let’s see what additional information we have right now.
Trend is bearish here, but GBP is not at oversold. Couple of weeks ago market has reached strong support area – Yearly Pivot support 1 and 5/8 major monthly Fib level, where we’ve taken our B&B “Sell” trade. Although market right now stands ~200 pips below this level, it seems that it has not been broken totally yet. But the fact that market gradually struggling through YPS1 looks bearish.
In fact here we have just one major destination point. Monthly chart give us just single AB-CD pattern with nearest target at 0.618 extension – 1.3088. Still, here we have another one non-Fib orienteer – lower border of current consolidation. If we will treat it as sideways action then lower border will stand ~1.42-1.43 area. But first we need to get over current support level and see what market could give us here. Currently 1.30-1.31 area looks unbelievable, but if we would suggest parity on EUR/USD and starting rate hiking cycle in US – why not? Still, this is very long-term picture and right now we’re mostly interested in reaction of the market on current support level. Since market has taken attempt to move through it – it has met oversold as on weekly as on daily chart and this could lead to short-term upside retracement. On monthly chart market is not oversold.

Weekly
Our major context stands on weekly chart. It seems that shy moving below former lows has happened due existence of 1.618 target of single AB-CD pattern that we have here. Thus last week market has touched it. Combination of AB-CD objective point, weekly oversold and, take a look, bullish grabber give not bad chances on possible upside retracement. Although grabber suggests taking out of previous highs at 1.5550, but we mostly will be focused on conservative destination – K-resistance area around 1.5225-1.5265. If market will get there – we think what to do next. So, conclusion from weekly chart – watch for possible upside reversal patterns on daily and intraday charts that could let us to take positions on possible weekly retracement.

Daily
As plunge just has finished or paused, daily chart does not provide yet any patterns. Here we see that GBP is also at oversold here. At the same time market has reached 1.27 extension of previous retracement. We do not have butterfly or any other harmonic pattern, but extensions of retracement also work as support. One of the possible reversal patterns here could be DRPO “Buy” – thrust down looks nice and absolutely suitable for this pattern.

Intraday charts
On Intraday charts we do not have any patterns yet – just move down. Let’s hope that on next week market will form something interesting – pattern that will confirm our expectation on upside retracement.


Conclusion:
In long-term perspective expectation of US rate hike in 2015 and opposite postponing of this procedure in UK on 2016 makes us think that downward action will continue and it seems not impossible reaching of our target 1.30 within 2015-2016.
Meantime in short-term perspective market looks a bit overextended to the downside and could show upside retracement with not small potential of 400-500 pips. Our first step of trading plan – wait for reversal patterns on 4-hour and daily chart.



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.

 

[Sive Morten]

FX Daily Update, Tue 17, March 2015

Good morning,


Reuters reports euro held firm on Tuesday after soft U.S. data and nerves ahead of this week's Federal Reserve policy meeting braked the dollar's rally and helped the common currency pull out from 12-year lows.

The euro was steady at $1.0568 , having rebounded overnight from $1.0457, its lowest since 2003.

The euro has been under pressure since the European Central Bank activated its 1 trillion euro bond-buying quantitative easing scheme last week and drove euro zone bond yields to record lows.

It got some relief after Monday's weaker-than-expected U.S. manufacturing, industrial output and housing data pushed down U.S. debt yields and cooled the dollar's advance.

Traders see the market getting little nervous ahead of the Fed's policy-setting meeting on Tuesday and Wednesday.

Expectations have been rising that the Fed will drop the word "patient" from its statement on the timing of interest rate increases - which has fanned expectations for tightening as early as June and helped prompt the dollar's recent surge.

But some traders have also cautioned that the dollar's strength and its potential negative impact on the economy might be mentioned by the Fed.

"The focal point for the Federal Open Market Committee meeting still remains whether 'patient' will be dropped or not, and another word might be used as a replacement," said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

"But the dollar's recent strength, which is very much a political factor as well, may also get a mention and hurt dollar longs. It is a factor that participants will be keeping at the back of their minds," he said.

Participants will also keep an eye on how other asset markets react to the Fed's statement and comments from its chair Janet Yellen after the meeting.

"The main point is how Treasury yields respond to the Fed. Despite the removal of 'patience,' prospects of a September, rather than June, rate hike may linger given the dollar's appreciation and lower oil prices," said a currency trader at a large Japanese bank.

"Yields are likely to start rising when 'patience' is removed and support the dollar, but the key is whether yields can remain elevated even if the prospect of a September hike are seen to remain intact," he said.

The Bank of Japan concluded its two-day policy meeting on Tuesday, at which the central bank stood pat on monetary policy and maintained its massive stimulus. Market reaction was limited because the outcome was as expected.

The Australian dollar dipped slightly after minutes of the Reserve Bank of Australia's showed policymakers had left the door open at their latest policy meeting for further interest rate cuts.

The RBA cut interest rates to a record low of 2.25 percent in February and stood pat this month.


So, all eyes on Fed and as it was specified - "market stands a bit nervous". Thus our thought on possible contraction of positions and upside retracement seems reasonable.
Currently we have 2 setups - one stands on GBP, but it longer-term, while short-term stands on NZD.
On GBP we still wait for patterns that could point on upside retracement, but we do not have any yet. Also, guys, we have DRPO "Buy" on EUR, but it has the same nature as NZD setup. Both of them are tactical and mostly based on positions' contraction before Fed.
Meantime, NZD shows some progress that lets us better estimate the target.
On daily chart we see that MPP coincides with daily overbought around 0.7450 and hardly NZD will pass this area immediately:

On 4-hour chart we see a lot of new details. First of all, take a look that many targets of different patterns stand in the same area - 0.618 AB=CD, butterfly and grabbers. All of them point on 0.7450-0.7465 level. And this level agrees with daily resistance.
Another nuance here is - slow CD leg of AB-CD. It means that NZD hardly will continue move higher and we should take 0.618 target as most probable destination.
Also we call those of you who have taken longs in our entry point - move stops to breakeven since Fed could bring surprises. Invalidation point of this short-term bullish setup stands at 0.7310 lows. If market will move below them it will erase all bullish patterns - AB=CD, butterfly and grabbers:

Butterfly could slightly change the shape and become a bit wider, but this will not change trading plan.

 

[Sive Morten]

NZD/USD Daily Update, Wed 18, March 2015

Good morning,


Reuters reports dollar stood steady in Asia on Wednesday just hours before the Federal Reserve was expected to take a major step toward lifting interest rates for the first time in almost nine years.

A Fed statement is due at 1800 GMT, followed half an hour later by a press conference with Chair Janet Yellen. The central bank will also release members' forecasts for inflation and interest rates, and some analysts suspect the trajectory of future increases could be lowered.

A string of strong payroll reports has left the strong impression the Fed will drop its reference to being patient on policy but still make a rate increase conditional on economic developments, in particular inflation.

"Our baseline view is that the Fed can start its normalisation process around mid-year," said Tom Kenny, an analyst at Australia and New Zealand Bank.

"That said, any further drift lower in core inflation could see it delayed, as could an aggressive appreciation of the dollar," he added. "Yellen's outlook for the dollar, core inflation and wages will be critical."

Fed funds have been stuck between zero and 0.25 percent since the end of 2008 and the last time the Fed raised interest rates was in mid-2006.

The contrast between the Fed and the rest of the world could not be more stark given no less than 24 central banks have eased policy so far this year.

The European Central Bank's quantitative easing campaign is in its infancy and the Bank of Japan's bond buying still has a year or more to run, making for a bullish background for the U.S. dollar.

However, the dollar's recent rise has hit Wall Street shares as some U.S. multinationals appear to be feeling pain from it, posing risks to the greenback, some traders said.

"I think we cannot rule out the risk of further fall in U.S. shares, which will disrupt money flows. In such an environment, the dollar could fall given many people have big long positions in the dollar," said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.



So, guys, our story with NZD is continuing. Upward action from first support area has failed and pointed on lower action. At the same time daily pattern is still valid and does not exclude chances of upside action from lower levels. In fact, this probably will be last bullish chance for short-term NZD. May be it will start due comments from Fed:

On hourly chart we see that minor AB-CD retracement has led to upside action, but this was not sufficient to start real upside AB-CD action. That's why we always recommend to take positions at solid Fib levels. They will give you chance to move stops to breakeven if even you will be wrong. That is what we did with our first upside entry.
Right now we have approximately the same pattern but of bigger scale. Here we could get "222" Buy pattern from 0.7285 area. Downward AB=CD also creates Agreement with Fib support. Very probable that riddle will be resolved on Fed comments. This is probably last bullish chance for NZD during current week. If market will drop lower - then, it probably will lead to further downward continuation as on daily as on weekly charts:

 

[Sive Morten]

FX Daily Update, Thu 19, March 2015

Good morning,


Reuters reports dollar steadied on Thursday, rising off lows hit overnight after the Federal Reserve struck a much more dovish than expected tone on interest rates.

The Fed dropped the word "patient" from its statement in terms of raising interest rates, as expected, but also downgraded its views on the economy and inflation and lowered its interest rate trajectory. That signalled a far more gradual path to policy normalisation than many investors had foreseen.

Fed Chair Janet Yellen, who like most central bankers tends to avoid discussing currencies, told reporters the strong dollar is compressing inflation "at least on a transitory basis," which suggests a tacit admission that the soaring dollar had stalled the central bank's policy-tightening plan.

"Most people think the Fed looks very dovish, and might start to hike not in June, but maybe in September or October," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

"Yellen wants to get a free hand in the timing of hiking rates," he said.

"Our technical analysts now say we are looking at a bullish short-term trend reversal in EUR/USD that opens up $1.1016 and $1.1098 on the topside," said Elsa Lignos, senior currency strategist at RBC Capital Markets.

"But fundamentally we like layering into a EUR/USD short and adding to the position between $1.1050 and $1.11, targeting an eventual move to parity."

Still, the sharp dollar selloff dealt a severe blow to the confidence of many dollar bulls. Some market participants said strong U.S. data was needed for sentiment to turn and the dollar to resume its rally, while others said positioning suggested the dollar's correction could continue in the meantime.

The greenback's slide apparently caught many investors short. The latest data from the Commodity Futures Trading Commission on Friday showed currency speculators piled into long dollar bets in the week ended March 10, with net long positions rising to their highest level in four weeks.

"People are still cautiously buying dollar/yen," Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm. "I'm convinced that even after this selloff, the dollar has a solid base against the yen because people are buying on dips."

Commodity currencies also benefited from the dollar's slide. The Australian dollar hit an overnight peak of $0.7846 . It was last down about 0.6 percent at $0.7730 but well off a six-year trough of $0.7561 set earlier this month.

Central bank meetings in Switzerland and Norway will take centre stage later in the session.


So, guys, dovish comments from Fed have let our analysis on GBP and NZD hit the target. Another important moment - CFTC data. Recall how we've calculated our ratio on EUR and during multiple weeks told that ratio stands at crucial levels of 85-88% where retracement is possible.
So, what's next? Today, probably will be day of silence because currently is unclear, whether markets could make upside retracement a bit greater or just turn down again. The same concern we hear in Reuters news.
That's why today we mostly take a look at our trades on GBP and NZD.
On GBP market mostly has accomplished our plan, but to understand how this has happened - we need to go from intraday to daily chart. In our analysis on weeken we've said - everything in place, we need just bullish reversal pattern to step in. But we've got it only yesterday's evening, right before Fed testimony. This was butterfly "Buy" pattern. In the morning, when we've prepared daily update - we had just upside retracement and it was impossible to recognize the pattern yet:

This upside action, in turn has given us B&B "Sell" on daily chart that also has reached target few minutes ago.

Our longer-term strategy is to sell the rally, since GBP has long term target around 1.30. But right now it is unclear yet - whether market will form some AB=CD up or retracement is over.

On NZD you can see everything by yourself - "222" Buy setup has worked perfect and completed not even 0.618 but whole AB=CD pattern. So, our daily "morning star" retracement has finished:

Now we will be watching for 0.7380-0.7410 K-support area. Actually our initial suggestion was to get just AB=CD upside retracement, as reaction on oversold and now we have potentially perfect "222" Sell pattern here. Still, if market will hold above K-support, it will keep chance on 1.618 AB-CD - further upside continuation. If not and it will break through K-support, erase long bar of Fed statement - we should be ready for new lows...

 

[Sive Morten]

FX Daily Update, Fri 20, March 2015

Good morning,


Reuters reports dollar eased in Asian trade on Friday but remained well above this week's lows plumbed after the Federal Reserve's dovish stance on interest rates sent the greenback tumbling.

The dollar's plunge on Wednesday after the Fed cut its inflation outlook and its growth forecast did not alter the long-term view that divergent global monetary policy expectations will bolster the U.S. currency in the months ahead.

"The FOMC outcome did not rule out a rate cut, so pressure will remain on the yen as before. Today, there is a shortage of fresh trading incentives, so the yen has come back a bit, as we near the end of the month, quarter and Japanese fiscal year," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo.

The Bank of Japan stood pat on policy earlier this week, as it has every month since expanding its massive stimulus programme in October last year.

BOJ Governor Haruhiko Kuroda has stuck to his view the central bank will to meet its 2 percent inflation target around the year beginning in April, even if it meant expanding its stimulus further.

But government officials attending the BOJ's February meeting signalled to the central bank that it shouldn't rush in accelerating inflation, minutes of that meeting showed on Friday.

Improving U.S. labour conditions suggest the Fed bank might position itself for a rate hike later this year, if other areas of the economy show strength.

On the U.S. data front on Thursday, the number of Americans filing new claims for unemployment benefits rose only marginally last week, indicating the labour market remained on solid footing.

In stark contrast to the Fed, the European Central Bank launched a quantitative easing programme this month that sent several key European yields to record lows and some into negative territory.

While market players' consensus expectation for the U.S. central bank's interest rate hike have shifted, the overall trend has not. A majority of Wall Street's top banks now see the Fed holding off until at least September before raising rates, with odds fading for a June hike, a Reuters poll showed.

"Our core views have not changed across commodity and FX markets: we remain bearish on commodities and bullish on the USD in the G10 and EM areas," strategists at RBC Capital Markets said in a note to clients.

"In fixed income, we have shifted from bearish to a neutral stance for U.S. 10-year yields, preferring to step aside for better perspective after multiple whipsaws have chopped us up over the last three weeks," they added.

Undermining the greenback, U.S. Treasury yields wallowed not far from multi-week lows struck after the Fed meeting. The yield on benchmark 10-year notes slipped to 1.954 percent in Asian trading from its U.S. close of 1.976 percent on Thursday.


As we've said yesterday, markets across the board need some pause to re-assess overal situation around Fed information. So, today makes sense may be to take a look only on short-term setups that we can trade today.
And again - NZD shows most clear setup. On daily chart market stands stably around MPP and does not show any serious pullback. Trend is bullish on daily chart and this makes possible another leg up here:

Since we want to follow very short-term setup, our primary chart is 4-h. IF you remember, our yesterday concern was about next direction - whether market will try to make another leg up, or, retracement is over and bearish trend will continue..
now we see some signs that former scenario is more probable than the latter. But target has chanced. Probably it will not be 1.618 of AB=CD, at least today, but only previous highs.
Take a look - market was able to hold above our K-support and turned to upside. Simultaneously it has formed the chain of bullish grabbers that suggest taking out previous top. May be market will take shape of butterfly, it is not quite clear yet:

This is most clear setup by far among major currency pairs.

 

[stelore]

Hello Sive,
thanks for your usual, invaluable job.

On my FxPro charts I see a similar situation for EU, possible DRPO buy (or BB) sell on 1D and on 4H a (probable?) DRPO buy with Bullish Grabber.
Can you, please, explain why we don't watch at it? Is because of Geopolitic or because we didn't reach parity yet?
I'ld like to understand in what I'm wrong, not to make stupid mistakes.....

Thanks a lot for all
Have a nice weekend
Stefano

 

[Sive Morten]

Hello Sive,
thanks for your usual, invaluable job.

On my FxPro charts I see a similar situation for EU, possible DRPO buy (or BB) sell on 1D and on 4H a (probable?) DRPO buy with Bullish Grabber.
Can you, please, explain why we don't watch at it? Is because of Geopolitic or because we didn't reach parity yet?
I'ld like to understand in what I'm wrong, not to make stupid mistakes.....

Thanks a lot for all
Have a nice weekend
Stefano

Hi Stefano,
no, setup on 4-H EUR is OK, but we have nothing more. While GBP gives you setup on weekly chart that could point direction for weeks.
That's why we've chosen GBP for weekly research while EUR setup we probably will mention in daily updates.

 

[Venelin]

Hello Sive,
thanks for your usual, invaluable job.

On my FxPro charts I see a similar situation for EU, possible DRPO buy (or BB) sell on 1D and on 4H a (probable?) DRPO buy with Bullish Grabber.
Can you, please, explain why we don't watch at it? Is because of Geopolitic or because we didn't reach parity yet?
I'ld like to understand in what I'm wrong, not to make stupid mistakes.....

Thanks a lot for all
Have a nice weekend
Stefano

Hey Stefano,
If you take a look at 8 hour euro chart you will see a beautiful possibiliy for drpo buy that COULD form in the next 8h.
Will see if we could get the sdignal

 

[coolieboya]

Greetings wonderful people. Can someone please help me with glossary of dinapoli terms and words sive uses here.I Will be very grateful.

 

[Sive Morten]

Greetings wonderful people. Can someone please help me with glossary of dinapoli terms and words sive uses here.I Will be very grateful.

https://www.forexpeacearmy.com/forex-forum/sive-morten-analysis/10877-glossary.html
May be there are missed some. But you'll get them in process of discussion... Or you can read in the book directly. This is simplest way.