Hi buddy. At this moment I would say - nothing awful happens yet. JPM has got a great deal. By spending around 150 Bln cash he has got 3-4 times larger assets. JPM has ~ 1Trln cash position. Lets add Citi, GS, WS, MS and other whales - and we could say that they could absorb few dozens of FRBs. IT is also good for FDIC and US Treasury - they do not need to spend own cash.
So, I would call it as banking system centralization by far. This is the answer on the question whether it is dangerous right now or not. The safety margin is enough by far to control it.
But, overall tendency is bad, of course. Definitely it has psychological effect already. In longer term perspective it could lead to underfunding of real sector.
Thus, in a bottom line - "is it dangerous for banking system, or vital right now? No." If tendency continues or accelerates, could it become vital in perspective of 8-12 month?" Yes.
So, our short-term plan is done - by yesterday's dive, EUR officially confirmed 1H H&S failure. Yesterday bulls sit on the hands, not the bears' turn.
On daily chart I do not repeat again the same things that were said about bullish context, dynamic pressure etc. With upside action now, that we see on EUR - it stands the same. Potential upside target is 1.1120:
On 4H chart market is coming back into the channel, giving the hint of bearish trap:
Finally, on 1H chart we could transpose our small, failed H&S into larger one:
And bulls now could consider 1.0990-1.10 area for potential entry. Fed risk is an another question. Now bears shoud sit on the hands and wait when H&S will either fail or be completed.
So, although we were correct on direction yesterday, but we haven't got our H&S pattern on 1H chart. Today we see couple of moments that are important. In general, our 1.1120 OP is not completed, and the same picture you could see on GBP with uncompleted XOP. So, supposedly EUR should try to touch it. Besides, it has not formed the new top that is suggested by bullish dynamic pressure:
Today the only intrigue that we have is ECB. Chances that it will be 50 bp shift are around 15%. While 25 bp is priced - in already. It means that it is highly likely starting of pullback if 25 bp change will happen. Thus, if you believe in 50 bp - you could try long position right now. If not - it would be better to wait when C. Lagarde press conference will be over. Because chances on retracement, when you have both central banks behind is significant.
On 1H chart, I would consider, as the first level - 1.1040 support. It is K-area, previous tops and yesterday's Fed starting point. If market will reach it and action will be gradual, not a collapse, it seems suitable for long re-entering.
So, as we've said yesterday - 25 bp ECB move should trigger the result booking and downside pullback. Although it was looking furious on intraday charts - on daily it brings nothing new by far. Although GBP is climbing higher and almost completed our 1.2660 XOP target, EUR is lagging, but keeps chances to reach OP.
Still, today I would not hurry up with long position taking by few reasons. First is possible 4H chart grabber in nearest 4 hours and coming NFP numbers:
Second - 1H chart performance. Market has destroyed potentially perfect bullish context, dropping below 1.1035 strong support area that we've discussed today. Drop was very fast right to XOP Agreement support, that is also contradicts to our trading plan. Now price has dropped back in lower trading range. Current upside action takes AB-CD shape and we get "222" Sell around 5/8 resistance.
So, with this collection I suggest that market could try at least to re-test 1.0960 lows, just because of strong downside impulse. But if we get 4H grabber - it drops lower. Thus, It makes sense to wait with any new long entry. Bears probably could try to ride on this "222" Sell, and keeping an eye on the same 4H grabber. Just be aware of NFP later ...