Sive Morten
Special Consultant to the FPA
- Messages
- 18,776
Fundamentals
On this week we do not have a lot of new fundamental issues. Fed has not brought any surprises and mostly was treated as dovish step, keeping chances on just 3 rate changes this year. Investors will look for minutes protocol next week.
Major concern that stands on market is tariffs of course. We've talked a lot about it last week. Here I would just say that there are too many obvious comments on this subject. They are mostly stand around mutual steps from other countries and that it will hurt global economy. Tariffs when they were applied earlier in 19-20 century were additional reasons for global wars etc... All these stuff is true. But, I think this is a mistake to think that Trump do not know it. To think that he acts impulsively. When I'm reading all these articles in the net on this sub, it seems that D. Trump is most stupid person in the words, compares to all these "experts" who knows better what Trump wants to do and why he is doing it... I think that this is a mistake to think so.
Definitely something stands beyond this demarche. I will not be surprised if these measures were agreed with other participants - China, EU and others. Current politics, guys, it is very tricky thing. Mass media keeps picture and news surround that people are comfortable with, or in habit with, but beyond this news real steps are quite different. I do not know, this is a kind of pseudo-reality, like in Matrix movie
That's why, although I do not know what stands beyond tariffs, but definitely this is weighted, well-thought step, which track some political target. We could only gamble on real reasons for that. Maybe initially some political agreement was made that US will open market for some goods, and other countries will not object of US political domination in some area, who knows.
US stands in so tight relation with major trade partners, such as China, that it is almost impossible to forecast who will win in trade war, if somebody will win at all. China has weak social policy, no pension plans, so it strongly depend on demand from US, because this will be social collapse in case of closing US market for China goods. This is major source of income for population, which is 4 times greater than in US. At the same time, inside US are a lot of people with low personal income as well who survives by purchasing of China goods. Besides, China is one of major holders of US national debt. If dollar revenue in national trade will decrease, China will decrease US bonds purchasing. And now US cares 20 Trln burden. China step could trigger chain reaction and this will be very painful, if not a disaster of a global scale.
Still, pure trading effect probably will be in favor of US, because they have negative trading balance... Anyway, if you have thoughts on this subject, don't hesitate to share with them on forum.
That's being said, meantime, as it was correctly mentioned in Reuters news on this subject:
"People seem to be being just a little cautious with so many headlines coming out, and wondering what the next headline could be and how the market is going to react to it," said Chuck Tomes, senior investment analyst at Manulife Asset Management in Boston.
COT Report
Recent COT report has more bullish signs rather than bearish. Net long EUR position is growing, as well as open interest. This tells that new longs are coming to market. At the same time position stands highly saturated. This combination mostly stands in favor of upside continuation but hardly any historical breakout will happen.
Technicals
Monthly
Monthly chart mostly stands untouched by events of last week. 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.
Taking in consideration COT data, I would suggest upside action to YPR1 around 1.26 area, but hardly major upside breakout will happen, as EUR position is fully loaded. But to push market higher stable flow of new buyers is needed. Now we see that almost everybody already stand long.
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.
And, finally, as we've said above - saturated net long EUR position hardly will let price to break this area any time soon. Thus, our conclusion here is - "yes" to fluctuations below YPR1, while "no" to upside breakout and moving to next 1.3860 area.
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. Thus, monthly/weekly basis stands untouched.
While we see solid action against USD on commodities - really big rally on gold market and crude oil, positive action on GBP, JPY and CAD as well, EUR doesn't respond on it and doesn't show anything of this kind by far.
In fact, we have almost inside week that adds nothing new to weekly picture. Last week we've talked on possible reaching of AB-CD COP target around 1.22, but it seems that EUR has real difficulties to reach it by some support. Taking in consideration that this is minor target and stands relatively close - it could become a bullish sign. Combining this with conclusions that we've made on COT report, picture could be treated as bullish.
If market will stand in this position 2-3 weeks more - this could take a shape of bullish dynamic pressure, as trend now is bearish here, while price doesn't show any downside action.
Daily
In last two weeks EUR shows a bit chaotic action. Trend by MACD has no special meaning during this kind of price behavior. The only thing that we could recognize here is triangle consolidation, which probably should broken on coming week as price already stands in last quarter of triangle.
As we said many times before, contraction stage has a special feature - market keeps door open for mirror patterns in opposite directions. Thus, here you could imagine as upside as downside butterfly.
Still, the grabber that we've got on Thu has not triggered downside continuation and now market is challenging upper trendline.
So, although we do not have clear upside continuation signals right now, but taking all moments that we see as here as on weekly chart together, it seems that minor advantage stands on bullish side.
Besides, previous long-term momentum also stands in favor of bulls, because triangle is forming right on top after strong upside rally.
Intraday
Approximately the same picture we have on intraday charts. Although price looks really heavy and moving up with difficulties, it still keeps bullish back line. "222" Buy pattern and major 5/8 support still hold
So, it is very difficult to catch some logic in price action on intraday charts, to find some direction in this mess. Coming week also will be short one due Easter coming, besides, we will not get any important statistics.
That's why it will be safer to wait upside impulsive breakout and take position on some retracement. If you still would like to do something while EUR stands inside, it would be better to follow recent market's logic. This logic shows keeping major bullish setups but also showing of deep retracement. Swings are rather wide here, as you can see.
As we have "222" Sell pattern on hourly chart, it means that EUR has chance to drop either to trend line support and COP target around 1.2310, or, completion of whole AB=CD at 1.2270 and forming large "222" Buy here. Thus, they are two levels that could be watched for position taking...
Conclusion:
So, our bullish scenario will be valid until market stands above 1.2150 lows. At the same time, market now shows rather chaotic action and it seems that investors stand indecision. Although indirect signs point on some bullish advantage here, it is better to wait either clear signs of upside breakout, or, at least use deep retracement on intraday charts for position taking.
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.
On this week we do not have a lot of new fundamental issues. Fed has not brought any surprises and mostly was treated as dovish step, keeping chances on just 3 rate changes this year. Investors will look for minutes protocol next week.
Major concern that stands on market is tariffs of course. We've talked a lot about it last week. Here I would just say that there are too many obvious comments on this subject. They are mostly stand around mutual steps from other countries and that it will hurt global economy. Tariffs when they were applied earlier in 19-20 century were additional reasons for global wars etc... All these stuff is true. But, I think this is a mistake to think that Trump do not know it. To think that he acts impulsively. When I'm reading all these articles in the net on this sub, it seems that D. Trump is most stupid person in the words, compares to all these "experts" who knows better what Trump wants to do and why he is doing it... I think that this is a mistake to think so.
Definitely something stands beyond this demarche. I will not be surprised if these measures were agreed with other participants - China, EU and others. Current politics, guys, it is very tricky thing. Mass media keeps picture and news surround that people are comfortable with, or in habit with, but beyond this news real steps are quite different. I do not know, this is a kind of pseudo-reality, like in Matrix movie
That's why, although I do not know what stands beyond tariffs, but definitely this is weighted, well-thought step, which track some political target. We could only gamble on real reasons for that. Maybe initially some political agreement was made that US will open market for some goods, and other countries will not object of US political domination in some area, who knows.
US stands in so tight relation with major trade partners, such as China, that it is almost impossible to forecast who will win in trade war, if somebody will win at all. China has weak social policy, no pension plans, so it strongly depend on demand from US, because this will be social collapse in case of closing US market for China goods. This is major source of income for population, which is 4 times greater than in US. At the same time, inside US are a lot of people with low personal income as well who survives by purchasing of China goods. Besides, China is one of major holders of US national debt. If dollar revenue in national trade will decrease, China will decrease US bonds purchasing. And now US cares 20 Trln burden. China step could trigger chain reaction and this will be very painful, if not a disaster of a global scale.
Still, pure trading effect probably will be in favor of US, because they have negative trading balance... Anyway, if you have thoughts on this subject, don't hesitate to share with them on forum.
That's being said, meantime, as it was correctly mentioned in Reuters news on this subject:
"People seem to be being just a little cautious with so many headlines coming out, and wondering what the next headline could be and how the market is going to react to it," said Chuck Tomes, senior investment analyst at Manulife Asset Management in Boston.
COT Report
Recent COT report has more bullish signs rather than bearish. Net long EUR position is growing, as well as open interest. This tells that new longs are coming to market. At the same time position stands highly saturated. This combination mostly stands in favor of upside continuation but hardly any historical breakout will happen.
Technicals
Monthly
Monthly chart mostly stands untouched by events of last week. 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.
Taking in consideration COT data, I would suggest upside action to YPR1 around 1.26 area, but hardly major upside breakout will happen, as EUR position is fully loaded. But to push market higher stable flow of new buyers is needed. Now we see that almost everybody already stand long.
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.
And, finally, as we've said above - saturated net long EUR position hardly will let price to break this area any time soon. Thus, our conclusion here is - "yes" to fluctuations below YPR1, while "no" to upside breakout and moving to next 1.3860 area.
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. Thus, monthly/weekly basis stands untouched.
While we see solid action against USD on commodities - really big rally on gold market and crude oil, positive action on GBP, JPY and CAD as well, EUR doesn't respond on it and doesn't show anything of this kind by far.
In fact, we have almost inside week that adds nothing new to weekly picture. Last week we've talked on possible reaching of AB-CD COP target around 1.22, but it seems that EUR has real difficulties to reach it by some support. Taking in consideration that this is minor target and stands relatively close - it could become a bullish sign. Combining this with conclusions that we've made on COT report, picture could be treated as bullish.
If market will stand in this position 2-3 weeks more - this could take a shape of bullish dynamic pressure, as trend now is bearish here, while price doesn't show any downside action.
Daily
In last two weeks EUR shows a bit chaotic action. Trend by MACD has no special meaning during this kind of price behavior. The only thing that we could recognize here is triangle consolidation, which probably should broken on coming week as price already stands in last quarter of triangle.
As we said many times before, contraction stage has a special feature - market keeps door open for mirror patterns in opposite directions. Thus, here you could imagine as upside as downside butterfly.
Still, the grabber that we've got on Thu has not triggered downside continuation and now market is challenging upper trendline.
So, although we do not have clear upside continuation signals right now, but taking all moments that we see as here as on weekly chart together, it seems that minor advantage stands on bullish side.
Besides, previous long-term momentum also stands in favor of bulls, because triangle is forming right on top after strong upside rally.
Intraday
Approximately the same picture we have on intraday charts. Although price looks really heavy and moving up with difficulties, it still keeps bullish back line. "222" Buy pattern and major 5/8 support still hold
So, it is very difficult to catch some logic in price action on intraday charts, to find some direction in this mess. Coming week also will be short one due Easter coming, besides, we will not get any important statistics.
That's why it will be safer to wait upside impulsive breakout and take position on some retracement. If you still would like to do something while EUR stands inside, it would be better to follow recent market's logic. This logic shows keeping major bullish setups but also showing of deep retracement. Swings are rather wide here, as you can see.
As we have "222" Sell pattern on hourly chart, it means that EUR has chance to drop either to trend line support and COP target around 1.2310, or, completion of whole AB=CD at 1.2270 and forming large "222" Buy here. Thus, they are two levels that could be watched for position taking...
Conclusion:
So, our bullish scenario will be valid until market stands above 1.2150 lows. At the same time, market now shows rather chaotic action and it seems that investors stand indecision. Although indirect signs point on some bullish advantage here, it is better to wait either clear signs of upside breakout, or, at least use deep retracement on intraday charts for position taking.
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.