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Forex FOREX PRO WEEKLY, March 18 - 22, 2019

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Mar 16, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    This week guys, everything was turning around Brexit and multiple Parliament voting on whether to exit without a deal or not and is it make any sense to postpone it.

    As Reuters reports - the dollar fell broadly on Friday and was set for its biggest weekly drop in more than three months, dragged lower by weak U.S. economic data, while sterling was slightly below its highest level since June 2018, hit Wednesday after Britain’s parliament rejected a “no-deal” exit from the European Union.

    U.S. manufacturing output fell for a second straight month in February and factory activity in New York state was weaker than expected this month, offering further evidence of a sharp slowdown in economic growth early in the first quarter.


    Friday’s reports extended the streak of weak economic data and underscored the Federal Reserve’s “patient” stance toward further interest rate increases this year. Fed officials are scheduled to meet next Tuesday and Wednesday to assess the economy and deliberate on the future course of monetary policy. The U.S. central bank raised rates four times last year.

    “Data today on factory growth and the Empire State index also underwhelmed. Consequently, the Fed next week is likely to keep in wait-and-see mode on interest rates, a cautious stance that’s checked the dollar’s rise,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.

    While no change in rates is expected next week after the Fed paused a multi-year rate-hiking cycle in January, officials might strike a more cautious view on the outlook for the global economy after a volatile week in currency markets.

    The pound paused for breath but stayed on course for its biggest weekly gain in seven weeks on growing expectations that Britain will not crash out of the EU without a deal on March 29.

    The UK parliament voted to seek a delay in Britain’s exit from the EU, following a decision to avert a no-deal Brexit.

    “The market has some reassurance that the chances of a no-deal Brexit are very low, which is the reason why the currency market has taken this news as a positive. These votes have removed the worst-case scenario,” said Ugo Lancioni, head of global currency at Neuberger Berman in London.

    Have you thought guys, why it is a lot of fuss around EU-UK agreement and why this agreement is so important. What's the problem with Brexit without a deal and what other climbdown UK wants from Brussels?

    At first glance it seems that no problems. Would you like to exit - please, do it. New borders are agreed, what other concerns do we have? Why T. May goes to EU almost every day.

    The answer is simple - money. As EU as UK do not worry about borders, custody fees etc. This is mostly technical problems and could be regulated in one or other way by special entities of both sides. But money... EU needs to get big contribution for UK exit. Sum is not estimated precisely but it stands around 50-70 Bln EUR plus UK share of total EU debt which also will be around 30 Bln of 270 Bln. Of course this contributions will be spread for decades, but this is significant sum. Hard Brexit suggests no contributions from UK to EU budget.

    It seems that T. May has worked on decreasing of this sum with Brussels and partially it was done. But, as Junker has said - no more climbdown.

    Why this topic is important for EU as well. I suspect that EU stands under hazard of big restructure. Big and core countries are not satisfied with poor migrant policy and large support to junior members - Eastern nad Baltic countries, Greece etc. Now all eyes stand on the way how UK will exit. Just imagine what will happen if it leaves free of charge. This fact tells that everybody could leave EU for free and pay nothing.

    This subject is not far-fetched. Here is last Fathom consulting report on this subject. Although probabilities of exit are low but everything could change depending on Brexit results:

    Fathom uses CDS spreads and zero-coupon bond yields to calculate the market-implied likelihood of member states abandoning the euro and returning to their own national currencies. The calculations reveal that investors’ perceptions of such a risk were little changed in February and that they continue to see this as an unlikely outcome. Italy continues to be seen as the country most at risk, but its market-implied probability still remains close to 10%. Concerns over Grexit ― once deemed a near-certainty by investors ― have also abated in recent years, with Fathom’s indicator for Greece dropping to 2% in February. A similar message is reflected in gauges of public opinion ― last November’s Eurobarometer survey revealed strong support for the euro, with 67% of Greeks and 63% of Italians polled indicating that they remain in favour of the single currency.

    [​IMG]

    I will not be surprised if Core EU, "elder 14" members could launch process of reforming to narrow "circle of trust". And this will put under question countries that either bollix to policy of major countries, especially Germany or, do not match to conditions of EU membership - national debt, inflation, EU contributions etc.

    So, IMO under cover of discussion of "important political and economical" issues, in reality we have trite mercantilism and nothing more.

    There are some UK domestic factors exist also. For example, I suspect that Parliament doesn't care much on what T. May has achieved, they just lust her retirement. But this subject doesn't have any relation to our major discussion.

    Thus, as Brexit could be major precedent of EU leaving process, it will not end fast and simple. UK stands here subdued as it cares burden of national voting results on Brexit and it has to exit, while EU has more advantages and freedom in this process. No doubts Brussels will twist arms to UK and suck it as dry as possible.

    Technicals
    Monthly


    This week we do not see any big action. Market shows response to major 5/8 Fib support.

    Thus, our analysis here still stands the same. We mostly wait for clarity - either downside breakout and start action to 1.08 and later to 1.03 or ability of the EUR to hold above 1.12 and turning up. Market stands at support area around major 5/8 Fib level. In case of upside action, YPP will be important target , because, as a rule, market tends to touch YPP through the year. But after recent events chances on rally stand phantom.

    As Fathom consulting expects first rate change by Fed in June, but market is not ready for this step (as wee see from Fed watch tool by CME) - this is the first moment when EUR could show big action. By our view this should happen somewhere in summer.

    As we said this many times previously - indirect technical factors point on market's weakness, at least in long-term perspectives, as EUR can't jump out from strong support within more than 5-6 months and just lays upon it. Trend stands bearish here.

    Monthly situation shortly could be described as indecision with light gravitation to the downside. In fact, long standing around Yearly Pivot last year confirms things that we've discussed above. MACD trend stands bearish here.
    Thus we keep valid our downside COP target around 1.03 by far.

    Just by using of common sense, guys, in nowadays it is difficult to expect something positive as in global economy as in politics. Hence, any bad new triggers demand for safe haven assets and US dollar. Just by this simple logic odds stand in favor of downside trend rather than sharp upside reversal.

    So, although on technical picture we see just light and indirect signs of EUR weakness, political background stands negative. This is the major reason why I do not believe in resurrection of bull trend on EUR in this year.
    eur_m_18_03_19.

    Weekly

    Last week we said that it is most difficult chart for understanding, because here we could find as bullish as bearish signs. Fallen wedge and strong support works for bulls, while long-term standing on support line and fundamental background add points to the bears.

    We do not have a lot of new inputs this week as well. In fact recent week was inside one, but if you're sharp-eyed enough, you'll see that price action repeats. Here we have the one that I call as "2 bar grabber". It happens when market changes trend by first close and turns back at second one. The same action we had at the end of 2018 and it triggered upside continuation. It means that next week could happen something similar. Although overall price action on weekly chart has no momentum and mostly sideways, on daily chart upside action could last for some time.
    eur_w_18_03_19.

    Daily

    Here, on daily situation mostly stands the same and we also have Friday inside session. Thus, what we've said on Friday daily video is still valid. As market has shown strength and broken intraday strong resistance levels, it could move up more.

    Although we see reaction on daily K-resistance area, but it is too small to talk on reversal and mostly reminds consolidation under strong level and possible attempt of breakout.

    Harmonic swing target also is not completed yet. Trend stands bullish here. That's being said what we've talked earlier, we should repeat now - although major bearish tendency is still valid, market shows strength and we should not take any short positions until we get clear bearish patterns at strong levels. Until we get it, we treat current context as bullish.
    eur_d_18_03_19.

    Intraday

    Here is what we will watch in the beginning of the week. Market has to complete major XOP target here and finalize upside action by butterfly pattern. XOP target also coincides with daily harmonic swing destination.

    As both targets stand relatively close to K-resistance area we expect some downside reaction as soon as targets will be hit. May be it will not lead to major reversal, but moderate retracement has good chances to happen:
    eur_1h_18_03_19.


    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. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. Price action proved my first analyze was perfectly correct, that upside wave from 1.1233 was just C wave of wave 4, after that wave 5 started and bottomed at 1.1175 to complete wave B, after that we saw bounce which I think is start of C wave, which could have shape of impulsive wave, 5 waves structure and could go over 1.17 level.

    Bad for me I did not stay all the way with my analysis, closed my shorts too soon, and open longs too soon. Expensive mistake.


    Weekly chart:

    EURUSDkWeekly.

    Daily chart:

    EURUSDkDaily.

    1H chart:

    EURUSDkH1.

    How to trade this?

    First position, scalp long entry in zone = 1.1320-1.1330, SL1=1.1313, SL2=1.1299, SL3=1.1293, TP zone = 1.1350-1.1380
    Second position, sell entry in zone = 1.1350-1.1380, SL=1.1420, TP zone = 1.1250-1.1290
    Third, main position, long entry in zone = 1.1250-1.1290, SL=1.1174, TP zone = 1.17-1.19
     
    #2 Deltoid88, Mar 17, 2019
    Last edited: Mar 17, 2019
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  3. Deltoid88

    Deltoid88 Sergeant

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    Update on GBP. Around 1.25 level I said that correction from fall from 1.43 level may start soon, and that indeed happened. I think that we are in bullish wave 3 of final wave C of that correction which I expect to end in zone 1.35-1.37 zone, to complete bullish wave 2, and after that I expect continuation of bearish trend to break lows in 1.24 zone.

    Weekly chart:

    GBPUSDkWeekly.

    Daily chart:

    GBPUSDkDaily.

    1H chart:

    GBPUSDkH1.

    15 MIN chart:

    GBPUSDkM15.

    How to trade this?

    First position, long entry in zone = 1.3260-1.33, SL1=1.3228, SL2=1.3202, SL3=1.3049, TP zone =1.3450-1.3680
    Second, main position, sell entry in zone = 1.3450-1.3680, SL=1.4377, TP1 = 1.15, TP2 = 0.95
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Mate. GBP is too politicized right now - just take a look at this neurotic fluctuations, I'm not brave enough to forecast what will happen, but... as proverb tells - No pain, no gain.
    Let's hope you'll be right ;)
     
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  5. Deltoid88

    Deltoid88 Sergeant

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    Update on GBP. It looks like wave 4 is still active, and that wave 3 is completed at 1.3378, I expect C wave of wave 4 to end in rectangle zone, and after bullish wave 5 can start to challenge 1.35-1.37 zone.

    GBPUSDkH1.

    How to trade this?

    1st position, sell entry in zone 1.3260-1.3280, TP1=1.3192, TP2 zone =1.3130-1.3150, SL=1.3302
    2nd position, long entry in zone 1.3130-1.3192, TP zone = 1.345-1.37, SL=1.3003
     
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  6. Deltoid88

    Deltoid88 Sergeant

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    Sometimes I need little less bravery to be honest :D I like to trade volatile instruments, it is risky, but also very interesting.
     
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  7. PassPP

    PassPP Private

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    dear Sive ,
    great writing BUT are you confident that contribution is 0 in case of hard Brexit , I d be tottally surprised if it s so .
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi buddy, well, I'm definitely not an expert in this subject so, I appeal to the papers in the net and brought the link in report.
    But it's only a tentative opinion. Otherwise what big difference in hard and soft brexit? I suggest that there two major topics - contributions and soft accomodation period when common economy space will be valid for some time. In hard brexit - no accomodation period and contributions also stand under quesiton. Borders are the same as with hard as with soft Brexit, I suppose.
     
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    So, our short-term target on EUR has been hit. Now market stands at breakeven point. This is the border between retracement and new upside trend. As you can see on daily chart, price stands at MPP and harmonic swing target:
    eur_d_19_03_19.

    On 4H chart our XOP and butterfly are done as well:
    eur_4h_19_03_19.

    The only thing that we could let market to do is 3-Drive pattern. Breaking above 1.1370 will mean no downside reversal and upside continuation above 1.1420:
    eur_1h_19_03_19.

    So there are multiple ways to trade EUR today, guys, depending on your view. Bulls should sit on the hands and wait upside breakout, erasing of all bearish patterns. Theoretically it is possible to use stop entry order above 1.1375, but it could be risky - today is Brexit voting in UK. Thus, better to wait for upside breakout.

    If you have bearish view, you have three ways - take short position now with stops above 1.1375. If it is too much - wait for 3-Drive pattern with stops above 3-Drive. Finally, you could wait when reversal could happen and market starts dropping then try to jump in on minor retracement. If EUR starts drop right now - we could get H&S pattern, which also could be used for position taking at the top of right arm. So, let's keep watching.
     
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  10. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    Not much changes today. Actually we have inside session on daily. EUR definitely feels some barrier as upward action has stopped at our target of harmonic swing and intraday XOP. While market stands at this level - we can't get final answer whether upside rally follows or downside reversal. So, we're still in stand by mode:
    eur_d_20_03_19.

    On 4H chart we have multiple bearish grabbers at top, but...
    eur_4h_20_03_19.

    On 1H chart sideways action around the same top tells that some upside swing should happen, whether it will be just completion of 3-Drive or real upside breakout and continuation:
    eur_1h_20_03_19.

    Thus, trading plan stands the same - bulls should wait upside breakout of 1.1375 area, while bears are watching for either 3-Drive completion or forming greater pattern, such as H&S with attempt of position taking around right arm's top.
     
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