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Forex FOREX PRO WEEKLY, May 06 - 10, 2019

Discussion in 'Sive Morten- Currencies, Gold, Bitcoin Daily Video' started by Sive Morten, May 4, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    This week we have a kind of deja vu, guys, of last week, as situation precisely repeats the one that we saw last week on GDP report. The same story - strong numbers, but the weakness in inflation component. NFP data shows great numbers around 263K which is 1.5 times greater than expected. But hourly earnings shows 0.1 worse numbers than expected and this was the reason of absolutely the same type of price action - drop on first reaction, then upside reversal.

    This is the great lesson, that confirmed how important to get position in advance, if you plan to hold it during data release and it illustrates why we've paid a lot of attention to this moment in our daily reports.

    Despite a lot of noise around report, it doesn't need some additional analysis, as everything was said last week, when we've put detailed fundamental view on the same situation. Lack of inflation is temporal situation and it gradually should start to change.

    Also we keep here the link on very important Fathom consulting report, that puts the vector of our analysis for perspective of few months. We've talked on it two weeks ago and it is still valid and has great importance.

    As Reuters reports - The dollar slipped against a basket of currencies on Friday as traders focused on the weaker aspects in the April U.S. payrolls report, brushing aside a stronger-than-forecast in hiring and a drop in the jobless rate to an over 49-year low.

    Traders turned their attention to the modest 0.2% monthly pace of wage growth and the drop in the job participation rate, which analysts blamed for the catalysts for some selling in the greenback.

    "These soft details didn't provide a compelling reason to add to already pretty big long dollar positions," said Eric Viloria, currency strategist at Credit Agricole in New York.

    Adding to the downward pressure on the dollar was a surprise drop in a measure of U.S. services activity from the Institute for Supply Management to a 20-month low in April.

    Moreover, comments from two regional Federal Reserve chiefs supported bets the U.S. central bank might lower key lending rates by the end of the year even though Fed Chairman Jerome Powell said two days earlier he did not see the need to raise or cut rates right now.

    Chicago Fed President Charles Evans said at an event in Stockholm that lower U.S. rates may be needed if the economy softens.

    St. Louis Fed President James Bullard told CNBC television the Fed's policy rate is "a little tight" and that current readings of inflation are uncomfortably low.

    Interest rates futures implied traders saw about a 52% chance the Fed would lower rates at its Dec. 10-11 policy meeting, compared with 50% late on Thursday, according to the CME Group's FedWatch program.

    But, at the same time we see two interesting things. First is - sentiment slowly but has changed a bit as probability of rate cut has dropped in recent two weeks:
    upload_2019-5-4_12-22-59.
    Source: cmegroup.com

    Second - take a look at speculative position, guys. Nobody hurry up to close shorts:

    upload_2019-5-4_12-24-19.
    Source: cmegroup.com, cftc.gov

    It seems that reaction on weaker inflation component in any US statistics is becoming a new feature. It reminds me the moment of "Finding Nemo" cartoon, in dentist bowl, when crab shouts "bubbles, bubbles" every time when bubble machine makes them, despite that this happens every few minutes.
    Here is the same, on any statistics release we hear shouts of "weak inflation, weak inflation" and short-term buying with upside reversal on the market. But sooner rather than later it should become the habit and reaction gradually becomes weaker. Within few sessions market turns in previous direction.

    Here is some comments of investors on report results, provided by Reuters:

    So as a bottom line, we still keep our view the same. Dollar stands with better fundamental background compares to EUR and downside action on EUR/USD should continue. Of course, with potential stronger inflation downside action could be stronger. But, we are where we are...

    Technicals
    Monthly


    Monthly time frame barely was touched by recent action. April month stands narrow, but May stands inside one even to April.

    Monthly was standing quiet for long time and every week we tell about two major scenarios that we keep an eye on. They are 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.

    Now EUR shows very slow action and to say definitely that "yes" we're going lower we would like to get stronger action as 50 pips below major level doesn't mean yet on monthly chart that it is broken. Only fundamental background lets us to suggest that probably it does. Besides, recently market has moved above 1.12 again. MACD trend stands bearish, no oversold here.Downside targets stand the same - first is YPS1 at 1.09 and second one is AB-CD COP target around 1.03, i.e. previous lows and bottom of the rectangle.

    In current circumstances it makes no sense to talk about bullish scenario.

    As we said this many times previously - indirect technical factors point on market's weakness, at least in long-term perspectives. Our major long-term driving factors are - Brexit, deteriorating situation in EU economy and politics, its high reliance from US, Brexit and lack of preparedness to change in Fed policy. By our view these factors will make the game in nearest 1-2 years, or even longer.

    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. Following 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_06_05_19.

    Weekly

    Weekly chart shows the same lazy action. Our suggestion that it is too early to speak on real downside breakout was correct. Price now stands slightly above the support level again. Thus, EUR doesn't show "major" breakout yet, overall action is gradual and slow as price still stands inside wedge consolidation.

    Unfortunately here we haven't got another bearish grabber for a few pips, so no patterns on weekly by far, guys.

    At the same time, weekly COP on dollar index has not been hit yet, which suggests some downside continuation here, on EUR, as well.

    eur_w_06_05_19.

    Daily

    But on the daily chart, guys, we have quite different story. Despite sharp reversal on Friday - both of our grabbers are still valid and market stands below MPP. It means that bearish setup that we've discussed last week is still valid and it will be valid until market stands below recent top of 1.1270. Now we need time to see whether grabbers will work. If they will, one of the possible ways is butterfly pattern.

    eur_d_06_05_19.

    Intraday

    On next week we need to keep an eye on how market will behave inside grabbers' downside swing. As our scenario suggests bearish view, at least until grabbers are valid, the only logical upside target stands 1.1230, which is COP around 5/8 Fib level. Also here we have bearish grabber, but chances are not really good that it works, as upside action was rather fast.

    Market could hit COP differently. For example, if we get AB=CD action - we also will get "222" Sell, which perfectly fits to daily view.

    eur_4h_06_05_19.

    That's being said, with bearish daily grabbers on the back, personally I do not want to go long and if somehow EUR will complete clear bearish patterns near 1.1265 top - this could be good setup for short entry.

    Conclusion:
    Things that we've talked last week on GDP, now we could say about NFP - we still think that recent NFP data gives good image of US economy. Despite that data was mixed and we haven't got big drop that we were counted on, this is temporal measure as data was good anyway. It means that we keep our long-term bearish view on EUR, although downside pace could be slow, at least until some new strong factor will appear.
    On the beginning of the week, we sit on the hands and look for market behavior inside recent downside swing.


    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. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning everybody,

    In general our trading plan stands the same, as EUR shows slow action by far. On daily both of our grabbers are valid and we keep bearish scenario here. The only tricky thing that exists now is opposite grabber on Dollar index. Thus, we have opposite grabbers on EUR and Dollar index and this is not good.

    Now we do not see any suitable trading setups on long side here, the only solution that could be used - is to follow Dollar index. If you have a bullish view, you could try to use Index pattern as a background, but better to take position as closer to its top as possible, to minimize the risk.

    On EUR we do not see any bullish signs by far.
    eur_d_07_05_19.

    On 4H chart upside action this week is much slower, compares to what we saw on Friday. Overall price action reminds wedge pattern as upside power gradually is exhausting. Now price struggles with 5/8 Fib level. Our COP target stands at 1.1230 area, which almost agrees with daily K-resistance 10 pips higher:
    eur_4h_07_05_19.

    If market will reach COP, it also completes hourly AB=CD OP target, which stands at the same area. In this case we should get '222" Sell pattern around daily K-resistance. As CD leg stands very slow, chances on downside reversal there are not bad. At least, we should get meaningful pullback and ability to move stops to breakeven. This is short term trading plan for bears...
    eur_1h_07_05_19.
     
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  3. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. Although Sive points out good reasons for bearish continuation in EUR I still keep my bullish view intact as long as price stays above 1.1134. I believe we are in 1212 structure, in which 2nd wave 2 is about to finish in 1.1180-1.1190 zone, and after that powerful wave 3 of wave 3 could start to upside breaking all resistance levels and finishing over 1.14 level.

    Daily chart:

    EURUSDkDaily.

    4H chart:

    EURUSDkH4.

    1H chart:

    EURUSDkH1.

    How to trade this?

    Long entry in zone 1.1180-1.12, SL1=1.1134, SL2=1.1109, TP zone = 1.14-1.174
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    Deltoid provides interesting view on long-term picture, as I'm not an expert in EW, it is interesting for me to see what potential action could follow by EW...

    In this daily update we take a look at closer perspective and keep up with our intraday setup. On daily chart no activity - market is coiling inside yesterday's session, which, in turn, was high wave pattern, showing indecision.

    Currently as we've mentioned yesterday situation stands tricky for position taking on daily/weekly basis as we have opposite patterns on EUR and Dollar Index. So, it would be better to wait for clarity.

    Meantime, paying attention to indirect signs, I would suggest that bearish context is still valid. Action stands slow and choppy, no signs of thrust action and it makes me think that bearish context is still valid here, on daily, as we do not see factors that could change fundamental background. May be something will change, I don't know, but this should some strong external impact - either political or economical.
    eur_d_08_05_19.

    Now we could focus on intraday setups. Thus, bears could take in consideration this "222" Sell, that could be formed around 1.1250 area. At this moment daily major grabber still will be valid, and AB=CD action should finish precisely around daily K-resistance area:
    eur_4h_08_05_19.

    Yesterday market has confirmed lows of the week, and we have our initial AB-CD pattern which is still valid and its target stands at 1.1235. I'm not sure of position taking with daily grabber on Dollar Index, but, here, market could form the butterfly and if you have bullish view, it is possible to drop time frame more and watch for "222" Buy pattern on right wing. This could be bullish setup for 1-2 sessions. May be later it will shift to larger scale...
    eur_1h_08_05_19.

    Thus, these two setups on intraday charts that we see by far, as daily picture needs some clarity.
     
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  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    It seems that our doubts on upside perspectives become a reality, at least price action on EUR looks heavy and we also see some other signs of weakness on intraday charts. On daily price can't break through MPP, forming inside sessions. Situation could change, but only by some external factor - say, progress in Trump-Xi negotiations. If market stands at its own - I tend to idea of downside continuation.

    Potentially, if daily grabbers work - we could get butterfly pattern with targets below recent bottom:
    eur_d_09_05_19.

    On 4H chart is another sign of weakness. Take a look, here we have AB=CD, which is based on GDP release rally, but price can't hit even minor COP target, stopped by weak intraday 5/8 Fib level. It means that our "222" Sell is also under question. Now we need to keep an eye on week lows at 1.1166. This is segregation line that keeps valid as our AB=CD of "222" Sell", as minor AB-CD target on hourly chart.

    Once these lows stand - EUR keeps chances on upside action. For example, upside butterfly could be formed. As it is shown on 4H chart - its 1.27 target coincides with COP while 1.618 one with our AB=CD pattern inside potential "222" Sell. If these lows will fall, downside direction will be opened. Personally, I'm not impressed with price action that looks too weak and choppy and right now I do not see any good setup for trading on any side.
    eur_4h_09_05_19.
     
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  6. Stag

    Stag Sergeant

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    Hi guys, it's been a while since my last post so let me show you my updated scenarios.

    The larger structure ufolding from 1.2556 has reached its moment of truth. Our critical key level is 1.1324. Be ready for an explosive price action - either direction.

    EURUSD_190509_scenarios.
     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    Stag provides valuable update above that we need to keep in mind when market comes to 1.1325 tops. Meantime, we're still inside recent downside swing and discuss what could happen today.

    As we've suggested, the external driving factor shakes the markets across the board and this is US-Xi trade talks. As a result EUR shows upside spike, coming back to major K-resistance area. Our major grabber is still valid. But on daily chart overall situation remains tricky as dollar index contradicts to EUR. This combination is not comfortable for taking any long-term position by far. As we've said previously, on daily EUR there are two setups possible - either downside butterfly or upside AB=CD. As major crucial points are still valid in both direction - both patterns are still possible also.
    eur_d_10_05_19.

    It seems that we were right on 4H chart - as major 1.1166 lows hold, EUR has formed a butterfly and all our targets were hit - COP, "222" Sell AB=CD. Also the latter setup has been triggered, and if you have opened short position, now it is better to move stops to breakeven. By the way, this is the only bearish setup that was formed and no more will be until final clarity on direction. If you have missed it - no chance to go short will be in nearest future:
    eur_4h_10_05_19.

    Now is about upside perspectives. Market hits OP target and stands above resistance area, forming pennant pattern. Butterfly is done as 30% retracement already has happened. Bulls could wait for minor "222" Buy here. Invalidation point stands the same - 1.1160 lows.
    eur_1h_10_05_19.

    That's being said, bears here need to move stops to breakeven, relax and watch the movie, while bulls could try to use "222" Buy, if it will be formed and be aware of 1.1160 lows breakout.
     

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