Forex FOREX PRO WEEKLY, May 30 - 03, 2022

Sive Morten

Special Consultant to the FPA
Well, guys, this week we've got a lot of data, including statistics and multiple speeches from different authorities. Markets were inspiring with the changing situation and shown solid upside performance - stocks, bonds and all currencies against the dollar. The euphoria stands so strong that it starts to spread the opinion that inflation probably tops in September which makes no need to the Fed to rise rate higher. What a delusion... But let's take a look at it step by step.

Market overview

The dollar edged lower on Friday on its way to a second-straight weekly decline as traders pared expectations for U.S. Federal Reserve interest rate hikes and as improving inflation and consumer spending data eased recession fears.

"We continue to think that the best of the broader USD rally is behind us now and while the USD may not fall significantly yet, further gains seem unlikely," strategists from Scotiabank said in a client note. The "Fed is fully priced and expectations for rate hikes later in the year may be subject to revision if the economy slows more quickly than expected," they said.

The greenback hit a nearly two-decade peak above 105 earlier this month but has declined along with outlooks for the magnitude of likely Fed rate hikes this year, which have been fueled in part by fears over runaway inflation.

"The dollar is losing altitude as the view of the Fed pausing rate hikes in the fall gains traction," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Minutes from the Fed's May meeting this week showed most participants believed 50 basis-point hikes would be appropriate at the June and July policy meetings, but many thought big, early hikes would allow room to pause later in the year to assess whether tighter policy is helping to tame inflation. Officials across the policy spectrum have backed the planned June and July rate hikes, aligning behind Powell's push to make lowering inflation the Fed's top priority. But beyond that, officials have begun laying out a broad range of positions, from a outright pause in rate increases this fall to calls for an aggressive string of half-percentage-point increases at the September, November and December meetings.

Analysts at Citibank said they would be looking "for any discussion of growth versus inflation concerns" as Fed officials try to navigate the economy out of its current inflation dilemma without causing a recession or pushing the unemployment rate substantially higher. Which we suggest impossible to achieve.

Although inflation continued to increase in April, it rose less than in recent months, data showed on Friday. The personal consumption expenditures (PCE) price index rose 0.2%, the smallest gain since November 2020, after shooting up 0.9% in March. For the 12 months through April, the PCE price index advanced 6.3% after jumping 6.6% in March.

Benchmark U.S. Treasury yields were lower on Friday, but briefly bounced off session lows after the April inflation figures, which boosted hopes that the worst of soaring price pressures has passed (!!)

A separate report showed U.S. consumer spending rose more than expected last month as households boosted purchases of goods and services. Next week's key U.S. report will be the nonfarm payrolls numbers for May at the end of the week.

The euro has been the chief beneficiary of the dollar's decline, but that momentum has also stalled as investors believe much of the expected rate hikes from the European Central Bank have been priced into current levels.

Sounds great, right? But what the reason of sudden reversal on the stock market and dropping of the interest rates for the 2nd consecutive week? Are we so wrong in our analysis and situation has improved drastically just after single 0.5% rate change? Watch this:

We already have seen this chart last week, when we've discussed coming liquidity tightening from the Fed. In fact, the QT (quantitative tightening) starts not in June 2022, as it is announced, but first steps already have been done in December. Fed doesn't push liquidity in single direction but tightening mixes with easing. For example, take a look that firs 2022 rally of the S&P after drop has happened right in the period of tactical Fed "easing". And - bingo! What do we see now - the next easing is coming and markets with the glorious screaming "hurrah!" show the pullback.

Indeed, effect is quite comparable to QE, as $ 118 billion was received from the US Treasury by markets in recent 2 weeks, and the net change in liquidity, taking into account the Fed's operations on the open market, stands +109 billion in favor of the market. The previous "easing-tightening steps" from mid-April to mid-May consists of net liquidity decreasing by $400 billion, which was synchronized with the fall of the markets. Approximately the same thing worked from mid-December 2021 to February 2022, when they withdrew almost half a trillion dollars and increased liquidity in the financial system by 200 billion from February 16 to April 13 has led to upside pullback
. :cool:

But it seems that nobody sees this. Take a look what investors think about current situation, what comments do they give.

The index rose 6.6% this week, snapping a seven-week losing streak, though it is down around 13% for the year to date. Net weekly inflows to U.S. stocks stood at their highest level in 10 weeks, data from BofA Global Research showed Thursday.

"It's very clear that everyone at the Fed is on board for 50 basis-point (interest rate hikes) for the next two hiking meetings. But after that, it's unclear what they do, and if there is a sharp slowdown in growth, they may be able to wait a little bit," said Anwiti Bahuguna, senior portfolio manager and head of multi-asset strategy at Columbia Threadneedle Investments, who recently raised her allocation to equities.

Concerns over the impact of higher rates at a time when inflation may have peaked will likely mean the central bank will pause its tightening in September, leaving its benchmark overnight interest rate in a range of 1.75% to 2% if financial conditions worsen, BofA strategists said in a note.

Expectations of Fed hawkishness have eased, with investors now pricing in a 35% probability that the Fed funds rate will be between 2.25% and 2.50% after its September meeting, down from a 50% probability a week ago, according to CME. The Fed has already raised rates by 75 basis points this year. Minutes from the central bank’s latest meeting showed officials grappling with how best to navigate the economy toward lower inflation without causing a recession or pushing the unemployment rate substantially higher.

Signs that growth may be slowing have helped bolster Treasury prices, suggesting investors are increasingly looking to bonds for safety rather than as assets that could be at risk during times of high inflation, said Anders Persson, chief investment officer of global fixed income at Nuveen. The market is pricing in a slowdown, but not a recession, Persson said, making riskier parts of the fixed-income market, such as high yield bonds, more attractive.

Some investors, however, believe a turning point may be near. Esty Dwek, chief investment officer at FlowBank, is betting the central bank will begin to see signs that inflation and growth are slowing by August, when policymakers hold their annual meeting in Jackson Hole, Wyoming. "The Fed is past peak hawkishness," she said.

But more respectable analysts understand what is going on:

Among those sounding the warning are hedge fund manager Bill Ackman, a member of the Fed’s investor advisory committee on financial markets, who on Twitter this week urged the central bank to quell inflation by raising rates more aggressively. In general, we agree with the position that softer economic growth raises risks of weaker corporate profits, in theory paving the way for softer share prices. Several Wall Street banks have in recent weeks warned that the chances of a U.S. recession are rising, along with an increased likelihood of the low-growth, high-inflation environment known as stagflation. And we agree with them.

Home sales have fallen for a third straight month, while big misses from retail giants such as Target Corp and Walmart Inc shook their share prices last week. The Atlanta Fed's GDPNow estimate of real GDP growth for the second quarter fell to 1.8% on May 25, from 2.4% the previous week.

Now, let's go further...

The U.S. Federal Reserve is carrying $330 billion in unrealized losses on its holdings of U.S. Treasury and mortgage-backed securities as of the end of March, according to newly released financial statements showing the impact of rising interest rates on the market value of the Fed's balance sheet. The losses on the Fed's investments, an $8.5 trillion portfolio that surged higher through asset purchases designed to keep financial markets stable through the pandemic, pose a potentially tough political problem for the central bank. Bill Nelson, chief economist at the Bank Policy Institute, said that adjusting for the appreciation in its assets the Fed had seen through the end of last year, the unrealized losses were an even larger $458 billion.

A New York Fed report earlier this week flagged potentially large losses to the Fed's portfolio, given that interest rates are expected to continue rising. The report also flagged a further issue: As the Fed raises its short term interest rate, it will do so by offering larger payments to banks for the reserves they deposit at the Fed, increasing the central bank's expenses. As its balance sheet shrinks, meanwhile, its interest earnings will decline, potentially pushing the Fed towards operating losses.

New York Fed officials in the report said the Fed would be able to fund its operations and conduct monetary regardless. But it could mean sharp declines in a key metric watched closely by elected official: the profits that the central bank remits to the U.S. Treasury. Those have climbed during the era of "quantitative easing" and hit a record $107 billion last year, but could fall to zero as Fed monetary policy shifts.

U.S. bank profits dropped 6.5% in the first quarter of 2022 to $59.7 billion, as larger firms grew their loan loss provisions in response to heightened economic and geopolitical uncertainty, the Federal Deposit Insurance Corporation reported on Tuesday. Bank profits were down 22.2% compared to the first quarter of 2021, driven by banks with over $10 billion in assets setting aside more funds to guard against loan losses.

New home sales in the United States fell 16.6% month-on-month in April, the largest decline in nine years, and new orders for U.S.-made capital goods rose less than expected in April. And take a look at the prices - hits ATH for the whole history of observation. This is real numbers of inflation, guys... 30%...

From this moment above it should be clear the size of the snowball that could rise as long as fed rate keep moving higher - downside revaluation of the bonds on Fed balance, higher payment to the banks on reserves, finally big expenses to serve national Debt as well. Although it stands upon the Treasury, but what's the difference?

That's being, said here is the modern investors expectations:
The equivalent of a half-point rate hike from the Federal Reserve has been priced out over the last three weeks, putting the peak in rates at 3% next June. That implies cumulative U.S. rate hikes of 210 basis points this cycle, versus 255 bps at the start of May, according to Fed Fund futures that reflect expectations of future interest rate moves. In Britain too, despite expectations of 10% inflation this year, recession signals are forcing a shift, with 120 bps of rate rises priced until June 2023, from 165 bps at the start of May. That would take rates to around 2.4%.


"While it is not the base case view of our Economics team ... we think the Fed might make the case that reaching 1.75%-2% provides a normalization of policy which then offers an opportunity to pause and assess the impact on jobs and inflation," strategists at JP Morgan said in a client note.

The implied yield on the eurodollar futures June 2023 contract -- essentially where markets see interest rates to be at that point -- is down some 80 basis points this month.


"What the market is doing now is focusing less on inflation and more on the risk of recession, that's why we are seeing this repricing," said Flavio Carpenzano, investment director at Capital Group. Markets also believe in the so-called Fed put, that when we get tighter financial conditions and equity markets fall 20% the Fed will step in."

He was referring to the long-held belief that the U.S. central bank will backstop falling stock markets by going easy on rate-tightening. :p:p:p

I would ask only one question - and why Fed is watching on slowing growth but not on 10% inflation, making decision on the pace of hike cycle and terminal rate?
Last time we said - we take the bet that Fed chickens to rise rate until necessary level and pushes the break at first signs of slowdown. And market expects the same now. If it happens - crisis worsens and the core problem will not be resolved.

Goldman Sachs now sees a 35% probability of a U.S. recession during the next two years but expects dividends to fall in any case -- an event that has never happened outside of a recession. Some Fed officials such as Raphael Bostic have urged caution on policy tightening.


Laura Cooper, a senior investment strategist at Blackrock, predicts "a dovish tilt" from the Fed by year-end, as "policymakers become more data-dependent beyond the two 50 bps rate hikes priced in by the market over the next two meetings."

Thomas Costerg, senior economist at Pictet Wealth, expects the Fed to pause after two 50 bps rate hikes, noting U.S. financial conditions are already at the tightest in two years. "You could actually argue that 75% of the job has been done already," Costerg said, adding that sub-2% U.S. GDP growth -- which he expects by year-end -- is usually disinflationary.

In Britain, where recession is more likely, the Bank of England may find it harder to back off.

A £15 billion government spending package announced this week means "the BoE will need to hike into contractionary territory," Goldman wrote, predicting 25 bps back-to-back rate rises through February 2023, taking the terminal rate to 2.5%.

Finally, for the European Central Bank, tightening bets have ramped up, with 160 bps of rate hikes expected in the coming year, from 123 bps in early-May. ECB boss Christine Lagarde has signalled rates, currently at -0.5%, will be at 0% or above by September. Lagarde's comments implied an increase of at least 50 basis points to the ECB deposit rate and fueled speculation of bigger hikes this summer to fight a surge in inflation tied to rising energy prices caused by the war in Ukraine and massive public-sector stimulus after the onset of the coronavirus pandemic.

"The ECB will use this as an opportunity to get rid of negative interest rates and any Fed pivot is unlikely to change that," Pictet's Costerg added.

Just this week World Bank President David Malpass feared the worst for global output. "It's hard right now to see how we avoid a recession," he said on Wednesday
Commercial banks such as Deutsche Bank and Wells Fargo now forecast a U.S. recession at some point over the next 12-18 months, while many houses see Europe there this year.

International Monetary Fund Managing Director Kristalina Georgieva on Wednesday said she worries less about the risk that the war in Ukraine and a further slowdown in China might trigger a global recession than she does about the strength of the trend toward economic and political fragmentation.

"What worries us more," she continued, "is the risk that we are going to walk into a world with more fragmentation, with trade blocs and currency blocs, separating what was up to now still an integrated world economy. The trend of fragmentation is strong," Georgieva said during a session titled "An Economic Iron Curtain: Scenarios and Their Implications."

The Guggenheim Partners talk correct things.

The U.S. Federal Reserve may be forced to rethink its hawkish stance as it hikes interest rates in the face of a slowing economy and deteriorating market fundamentals, Guggenheim Partners' Global Chief Investment Officer Scott Minerd said on Tuesday.

"The neutral rate is probably lower than where the Fed thinks it is ... by June when the Fed funds rate is expected to be about 1.75%, any tightening beyond that would be restrictive," Minerd said on the sidelines of the World Economic Forum meeting in Davos, Switzerland.

In their efforts to bring inflation under control, policymakers have underestimated the impacts of shrinking the central bank's balance sheet while simultaneously hiking rates, he told the Reuters Global Markets Forum, adding that market participants were also underestimating these risks. Guggenheim, which has over $325 billion in assets under management, is overweight corporate credit and prefers current valuations in the investment-grade space over riskier high-yield debt. Minerd sees worsening financial conditions as especially obvious in credit markets. Guggenheim has a bearish stance on equity markets, Minerd said, adding that reducing equity "beta," in his portfolios, or volatility compared to the overall stock market, has become a key priority.

To be continued...


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So, it seems that culmination starts somewhere in autumn. Although we should expect a catastrophe, but hardly it happens just because Fed has enough liquidity on the balance to provide support to the markets, and smooth multiple negative effects. While Fed keep burning liquidity, it could give it the gap to extend the timing of rate hike period.

From June 1 to August 31, the Fed is going to reduce the balance by $ 190.5 billion. What will happen next? The Fed itself does not know. Ok, but whether it is big or small? The reduction of the balance sheet in the summer implies the withdrawal of only 4.1% of the pumped liquidity (~ 4.5 Trln by different Covid programmes since 2020). As we've mentioned last week, the net sales by foreign investors stands for ~ $100 Bln per month. Finally, EU, Japan, and China probably can't help US to finance its deficit, because they have no free money to do this. Rising commodities nullifies their trading balances and current accounts.

Therefore, in addition to covering the budget deficit of 600-700 billion from May to September, the US Treasury and the US financial system will have to somehow balance sales from the Fed and non-residents. The US Treasury, has accumulated almost 900 billion dollars. Therefore, they will balance the gaps in liquidity by reducing the cash from the Fed's accounts. Therefore, the Fed's sales of $ 190 billion in 3 months will be fully covered by the management of the cash position of the US Treasury.

Thus, answering the question, what will happen when the Fed's balance sheet is reduced from June 1 to August 31? Nothing will happen, because the US Treasury has enough cash to finance the budget deficit and supply from Fed and Foreign investors. But, its balance should contract twice, to 400-500 Bln. But whether it helps somehow to the Fed?

Our conclusion is not very positive, guys. The recession is not "yet to come", it is already here, and probably for 3-6 months. The opinions, mentioned above, that Fed stop rate change at 1.75-2% and then see how it impacts on economy looks curious. What they intend to do with "-8%" bond yield? They already have all time high budget deficit, because nobody even thought to reduce consumption, and keep eating ravenously. 1 Trln of cash, belonging to the US Treasury will be burned fast, and what's next? It seems that everything that they would like to do now is to be stalling until November. Don't be deceived with the vision of reversal. It is achieved by technical tool - providing liquidity by the Fed, that's all. Very soon this party will be over, as we've explained above. I would be surprised if we know later that statistics is skewed to the upside to hide the real situation.

In the nearest 1-2 months we expect rising of unemployment. NFP data should become worse, if not in June but in July. Unemployment should reach at least 8-10% very soon. The drop on stock market should continue after 5-7% retracement overs. The next stage is massive defaults on junk bonds and bankruptcies of "zombie companies", which triggers another spiral of unemployment. It doesn't matter, whether Fed stop rising rate or not - inflation keeps going with 8-10% until dollar looses 50% of its value, or even more.

Situation stands really bad. The US strategic crude oil reserves hits critical levels.


US turns to the evident piracy, grabbing oil tankers in the Gulf:

Greek authorities last month impounded the Iranian-flagged Pegas, with 19 Russian crew members on board, near the coast of the southern island of Evia due to European Union sanctions. The United States later confiscated the Iranian oil cargo held onboard and plans to send it to the United States on another vessel, Reuters reported on Thursday.
Earlier on Friday, Nour News, which is affiliated to an Iranian state security body, said on Twitter: "Following the seizure of an Iranian tanker by the Greek government and the transfer of its oil to the Americans, Iran has decided to take punitive action against Greece."

Guys, this is pure madness. Greece is a puppet, it is clear, but stealing the oil from foreign tanker... this is very bad precedent, showing how bad things really stand. If Iran joins oil blockade - it could be absolute disaster.

That's being said, unfortunately we have nothing to make you happy. As investors massively stands too far in their minds from the "real deal" situation, they keep buying the US Treasuries for awhile, supporting existent trend. Besides, the utilizing of the US Treasury cash position hides the problems for some time. Thus, despite coming rate change from the ECB (which is mostly priced-in already), we do not expect trend changing on EUR/USD, suggesting that this is just temporal bounce currently. Besides, the EU economy conditions is the separate topic to talk, but situation there stands even worse, as crisis is managed from the US, which squeeze all juice out to support the US.


#1 NFP Release
Friday's U.S. jobs data could show whether the Federal Reserve's cumulative 75 basis points worth of rate hikes since March are being felt by a robust labour market.
Analysts polled by Reuters forecast the economy added 350,000 jobs in May, versus a solid 428,000 in April. Recession worries are now rising, with data showing weakness in areas such as housing. Some banks warn of an increased chance of an economic downturn. Yet any signs of a softening in the jobs market may not slow a Fed intent on raising rates as high as needed to squash inflation, a battle Fed chief Powell concedes will bring "pain".

#2 ECB Inflation
Euro area inflation likely rose to another record high of 7.6% in May, versus 7.4% in April, a "flash" estimate on Tuesday is forecast to show. This should seal the case for policy normalisation at the European Central Bank, which meets on June 9

#3 China growth
China has announced a broad package of economy-boosting policy steps, and Li promised detailed guidelines for their implementation soon. et many economists project a contraction this quarter after a raft of bleak data, including a soaring jobless rate. The health of factories will be on display with the release of the forward-looking PMIs Tuesday and Wednesday.


Here we just see first signs of OP reaction. Although it seems that we should be happy as 1.0430 target is hit - there are no reasons for celebrating. The technical picture mostly confirms our worry that we've shown above, in the fundamental part.

Market is not at oversold. Our major AB-CD pattern here shows clear acceleration of CD leg through the OP target, market already stands below YPS1 which is strongly bearish. This significantly increases chances on downside continuation. Although we have nearest target around 0.9750, which is the butterfly 1st extension, it is more probable that in the case of drop below the parity, EUR should tend to major target cluster of 0.90, including 1.618 butterfly target and two different XOP's, with all-time one.



The major intrigue of coming week relates to price action around K-resistance area, as price also starts flirting with the MACD. Bearish grabber appearing could set the final point in upside bounce. The minimum target of engulfing pattern is completed already:


Here market stands at some "crossroad". Harmonic swing up is completed, as well as some intraday targets and price is near K-area and 50% resistance level (not shown on the chart). If market keeps going higher, then another harmonic swing might be formed and lead price precisely to weekly K-resistance area, mentioned above. NFP could become the catalysts of this action, if numbers will be bad.
Still, before the rally, market could show the pullback, as some positions' re-grouping before NFP.


Although the swing structure and technical rules suggest that price should try to complete XOP and 50% resistance, we're not sure that this definitely happens. Anyway, as we're focused on long entry - our primary object is the depth of downside retracement. First, we intend to watch for 1.06 K-support area, and the fact of XOP reaching is not vital for this scenario.

I was in my early teens back in 2008 and 2009 during the financial crisis. It was presented to the general public, like people one day woke up and went to work, and all of a sudden the market crashed and the crisis started overnight. By reading and researching in my 20s I found out there were people trying to warn others about the coming crisis but very few listened. These days thanks to the internet and all the smart people like you Mr. Sive, we can see the dismantling of the financial system happening in front of our eyes, while the perception of the average "investor" is carefully managed for him to keep buying the dips and holding the bag. Even the people who should have their eyes wide open, look away from the iceberg we have already hit.
Morning guys,

So, EUR yesterday has climbed slightly higher, although on daily chart the change is not very significant. Mostly price stands in the same area of harmonic swing target and 50% Fib resistance:

On 4H chart Price has completed butterfly target but was not able to hit XOP. Since interest rates starts rising again, forming H&S pattern, probably EUR could miss XOP for now. But if you intend to go short, it would be better to place stop above XOP initially:


For the bulls its nothing to do by far, as we mostly wait for support area. But bears now should make decision how to step-in. There are two options - either jump now, at least partially or wait for larger pattern, say H&S and jump in on the right arm's top.


Very similar situation on the GBP. Actually we've talked about it on previous week and now GBP is also turning down. WE're mostly for H&S reversal pattern on 4H chart. But scalp bearish scenario exists here as well:
Morning everybody,

So, despite that our suggestion more or less was correct as EUR has shown downside action - deeper retracement now stands under question. In fact, on daily chart nothing has changed, while 10year yield is almost completed the H&S pattern. But we do not see the same action on EUR and GBP:

It makes me think that upside action could start earlier, somewhere around current levels. Of course, on 4H chart 1.0630 area looks very attractive and we should keep it in mind because it includes K-area and OP Agreement. Perfect level to consider the long entry:

At the same time, on 4H chart downside action looks slow and not typical for bearish performance. Thus, we could get "222" Sell pattern at least, or even direct upward continuation. Thus, if you intend to go long - keep an eye on 4H strong support area, but also think about using of Stop "Buy" order, somewhere near the top of 1.0780, just as option...

On GBP current action looks even less bearish than on EUR, suggesting the same conclusions, that reverse H&S on 4H chart might not be formed. Additional issue on GBP is upside barrier of 1.2730-1.2780 area on daily chart - K-resistance and overbought.
Morning guys,

Although with the help of statistics, but classic technical analysis tools has prevailed - EUR finally has reached predefined 1.0630 support area, and no early upward continuation has happened. As we're coming into important sessions - ADP and NFP reports, the major think to watch for here is potential bullish grabber, that could provide important support to the bullish context:

On intraday charts, market is ready for long entry but there are few nuances still exist. Yes, EUR stands at strong K-area and Agreement support, OP is done. But downside action has acceleration that increases chances on reaching of XOP as well around 1.0570 area. Since, situation depends from data that we will get, it is very difficult to say definitely, whether EUR hits XOP or not.

By the DiNapoli entry tactics, using Minesweeper "B", we could try to take long position on minor pullback. Daily trend stands bullish, 1H trend has turned up as well, market is bouncing out from strong support...

If market breaks down still, and 1H trend turns bearish - we just wait for XOP support. Alternatively we could split position into parts, that I recommend very often, and take here 30-40% for example. Choose the way that you like more.
Morning everybody,

So, ADP report hardly pleased market society, as now everybody wonder what we get on NFP... EUR shows nice upside performance, but unfortunately we haven't got 2nd chance to enter - upward action was almost without pauses.
On daily chart we've got engulfing pattern, and overall price shape keeps bullish context:

The only tricky moment stands on 4H EUR and GBP charts. You easily could identify H&S pattern here. On EUR it looks not very good, and I wouldn't rely on it by two reasons. First is - pattern's sentiment is not bearish, as EUR very fast has erased downside action, forming upside reversal swing recently. This is the challenge for H&S failure. Second - overall background now, including performance of interest rates stands more in favor of continuation of current tendency.

On GBP still, the pattern looks better than on EUR, as upside action was weaker recently. It is possible that maybe some domestic factors or statistics will make pressure on GBP. But anyway - if you intend to trade it, place stop as close as possible, better is just above the right arm. And be prepared to reverse position for 180 degrees, if you see thrusting upside action.

Although we haven't got 2nd chance to buy yesterday, maybe today... on 1H chart market could form DRPO "Sell", which also might be traded, but for us the primary object to watch for is K-support around 1.0712-1.0715 area. 1.0685-1.07 is also possible as it corresponds to the lows to the left on the chart (reverse H&S is possible), but initially it would be better to focus on K-area still...