FOREX PRO WEEKLY November 04-08, 2013

[minimax]

Hello!

Analyzing Big time frames, such as Yearly, is very close to science fiction or at least to art and for trading is for most of retail traders also useless but it is important to have a picture what to expect in (near) future.

I start my Yearly count with low in 1985 @0,6382 when pictures for spot and futures have same lowest level, before this low they have different pictures. I find as most possible Zig Zag pattern with Triple sideways corrective B wave developing. I think that two of corrections, both Flats, are ended at 2008 peak @1,6038 and I believe we are in third correction now. If it is to believe Elliott wave masters then we expect either Flat either Triangle as third correction and we can also expect low of this third corrective wave in price area of blue Yearly A, below 1,3119, where it will really move stop is currently impossible to say and even predict until second leg/wave high of this third correction will take place. Just for intermezzo I would like to say that I expect lowest low around parity.

Picture1: EURUSD Yearly chart




I would skip discussion about both of corrections I treat as finished and would like to concentrate to third correction which is developing. As said we should expect Flat or Triangle as last, third correction in Yearly wave B. For analyzing purposes I prepared two charts, 6 Months and Quarterly to check constructions in waves/legs.
First I intend to check option if Flat as third correction is developing from 1,6038 high, labeled blue cFY. Flat is 3-3-5 waves correction and as seen in charts 6M has hidden first 3 waves in leg/move down to 1,1877 but Q shows 3 waves nicely and 1,1877 low is also Yearly low swing fractal, labeled with red aFY. Then follows move up to 1,4940, from these both charts I can just assume as Zig Zag (3 waves leg) because of long wicks. Move down to 1,2042 also looks like Zig Zag because of enormous wick and overlapping candles in second half of move. So, based on clear shapes on Quarterly I assume that last, third leg is in progress and I expect it will be motive wave with shape of Ending Diagonal or less probable Impulse, all three legs together compose Flat correction into red Yearly bFY. Target of this move is at least 50% of red aFY, this means price level 1,3958 minimum, but maximum height is muchmuch more, above 1,6038, so much, I think it is unreal to expect to be reached. What I like in this assumption is also timing, because we are closing to new year and with peak in next year we do not get only Yearly swing high fractal, which I somehow expect, but it is very possible also regarding all pressures on USA politics regarding money printing & value of USD. The other possible development of this leg from 1,1877 low is Double Zig Zag shape, limited with higher high from 2008 @1,6038, which I do not consider impossible but not acceptable from timing stand point of view – it would take too much time to develop properly and especially regarding stock market balloon. Of course I can be wrong but I think the only possibility that USD falls of a cliff is that whole world will turn back to it and not consider it as safe heaven!

Picture2: EURUSD 6Months & Quarterly charts




Now I will pay my whole attention to last move up from 1,2042 low and try to find the most probable pattern to match my overall picture. For this purpose I change the chartist because of ProRealTime limitations and switched to FXCM.
What I expect most is Motive wave, either Ending diagonal, either Impulse so let´s check possibility for Ending diagonal for now, and if necessary I will check other possibilities. I just want to say that even if there Leading diagonal is developed as first wave of an Impulse, price action will not be different in first stages.
Monthly chart shows three legs/waves and let´s assume that whole Ending diagonal pattern will develop as one single wave up on 6M, and maybe even Q, chart. I think first wave up could be 1 of Ending diagonal, seen on both weekly charts. First weekly chart is made under assumption that wave 3 and temporary top is in place, and with a possible twisted idea of Triple ZZ for 3ED (pink labeled). This option I do not like a lot because it has too much phony waves although is nicely finished with 100% abc wave. Task and goal is to establish swing low fractal and Monthly target level is 1,31037 minimum BUT must not even touch lower channel line around 1,2850.
Second weekly option I find much more attractive and possible. Here not so many legs/waves are under question, just from 1ED to 2ED and last wave a has strange construction and was misleading till the low established yesterday! Target of current wave b down is at least to touch c=w peak @1,34156 or/and to enter below in the territory between w&x BUT not to exceed x @1,31037. Weekly candle is big, huge, more than 300 pips and a retrace would be really nice and to expect but the primary target is extremely close to current price level, just 50-60 pips and very close is also 61,8 retracement! Currently the price is sitting on 50% retracement and I think that touching at least 1,34156 peak is veryvery possible before higher so watching for harmonic pattern such as crab, developing on H1 at the moment, is not bad decision. Such move would not change a thing before Thursday as ECB´s D Day and from which so much is expected, especially to the downside.

Picture3: EURUSD Monthly&Weekly Ending Diagonal



Conclusion: I think we will get a retrace, and if the price hits 1,34156 or 62% retracement @1,3380 first, it could develop into more than just retrace.

Good trading!

 

[minimax]

Will the U.S. Dollar Lose its Reserve Status?
THIS is Why Gold Still Matters

By Geoffrey Pike
Monday, November 4th, 2013

The U.S. dollar has been considered the world’s reserve currency since the end of World War II.
This could be attributed to the economic and military strength of the United States and the relative stability of the dollar in comparison to other major currencies.
As usual, oil plays a major role in this issue.
Countries that export a lot of oil, particularly those in the Middle East, will usually sell their oil for U.S. dollars.
So if a group in Japan wants to buy oil from Saudi Arabia, it will convert Japanese yen into U.S. dollars to pay Saudi Arabia for the oil. The seller of the oil (more often than not, the government of Saudi Arabia) accepts U.S. dollars; they will then use these dollars to buy goods and services from the U.S., or they'll convert dollars back their own currency.
Another option is to invest the dollars, particularly in U.S. Treasuries.
Having the dollar serve as the world’s reserve currency has been a major subsidy to both the U.S. government and to Americans. Foreign governments and central banks are more likely to buy U.S. government debt, which allows the U.S. government to spend more money and run up deficits with a lower interest rate. The two biggest foreign buyers of U.S. government debt come from the governments of Japan and China.
This has also been a major subsidy to Americans.
In addition to foreign governments using dollars and buying up U.S. government debt, many immigrants in the U.S. will take dollars in the form of cash and send the currency to relatives in other countries. This actually serves as a deflationary effect, as it makes consumer prices cheaper for Americans in the U.S.
In the last few years, there has been more talk about the U.S. dollar losing it status as the reserve currency.
This talk is certainly justified, given what we have seen. The Federal Reserve has more than quadrupled the adjusted monetary base in the last five years, and the government is running trillion dollar deficits with a national debt now over $17 trillion... and we don’t see any sign of this slowing down.
The first question we have to ask is: What, if anything, would replace the dollar as the world's reserve currency?
Is there another currency that might take its place?
The Euro
Ten years ago, it would have seemed likely that the euro could compete with the dollar — and possibly even replace it as the world’s reserve currency.
But times can change quickly...
Today we see countries in the European Union struggling with major debt, sky-high unemployment, and economies in shambles. In some places, like Greece, things are really bad. People are literally struggling just to put food on the table.
The only plan that anyone seems to have is to inflate the euro to make the debt less burdensome. And since countries like Greece, Italy, and Spain can’t do their own inflating, it is a real possibility at this point that they may simply leave the European Union.
We don’t even know if there will be a European Union ten years from now. And if that's the case, the euro could vanish with it.
Regardless of whether all of this happens, the chances of seeing the euro serve as a reserve currency are remote at best right now.
The Yen
The Japanese yen would have seemed like a good candidate to compete with the dollar.
Again, things change quickly.
Japan now has a debt-to-GDP ratio of about 250%. This is absolutely unheard of, and the only reason it hasn’t all blown up yet is because the Japanese people themselves continue to buy their government’s debt. Now, I don’t know if this is some kind of patriotism or national honor thing, or if it is just plain foolishness on the part of investors — but it isn’t going to end well.
While the Bank of Japan was relatively tame in the past, we have seen a major policy change just in the last year. The Japanese government is determined to get its price inflation rate up and is directing the central bank to engage in major monetary inflation.
With an aging population and massive debt, I don’t see how the Japanese yen can be taken seriously, let alone possibly act as the world’s reserve currency...
The Yuan
The Chinese yuan (sometimes known as the renminbi) is frequently thrown around now as a possible replacement of the dollar.
There is certainly no question that China has come a long way in the last three decades.... In fact, China might be the best example of the greatest number of people escaping poverty in the shortest period of time.
With that said, the country is still ruled by communists, even if in name only. At the very least, they are mercantilists. They believe they need to continually devalue their own currency so that it doesn’t appreciate against the dollar. They do this for their exporting sector. This provides cheaper prices for Americans by keeping the value of the yuan down. It is a subsidy to Americans at the expense of the Chinese people.
While it does help the exporters in China, it also hurts the hundreds of millions of Chinese who would otherwise have cheaper consumer goods in their own country.
In addition to all of this, it is important to realize that the Chinese currency is still not a free-floating currency; it cannot be traded on the open market like other major currencies.
For this reason alone, the yuan cannot serve as a reserve currency.
Other Currencies
There are a handful of other countries that may have more attractive currencies than the United States...
The Swiss franc, for example, has typically been strong — but even that has been tainted in the last few years.
Regardless of whether we are talking about Switzerland, Singapore, or some other small country, they are simply too small to have their currency serve as a major currency of the world. Their overall economies just aren't large enough.
You can also forget about currencies from countries such as Canada, New Zealand, Australia, and even Britain: All of these countries and their currencies have similar problems, and the economies are much smaller in size when compared to the U.S.
And of course, you can forget about any other major countries like India or Brazil, where the economies are still living in the third world and the historical record of their currencies is completely unstable.
Other Possibilities
You might be wondering in the first place: Why do we need a reserve currency of the world?
We live in a digital age, and most of the major currencies are freely floating. If Japan wants to buy oil from Saudi Arabia, why do they need U.S. dollars for their transaction? They can simply convert from one currency to another without using the dollar as a middleman. If Saudi Arabia doesn’t want Japanese yen, they can quickly convert it back into their own currency, or whatever other currency they prefer to use.
There is a possibility of having a basket of currencies, but you still have all of the problems mentioned above.
So again, why does everyone need a middleman?
Another possibility is that countries start using some kind of commodity or basket of commodities. The most likely candidate would be gold, which has a historical record of being used as money for thousands of years.
I believe that if a major country started backing its currency with gold, the rest of the world would quickly start using that currency more and more for trade and investment. Unfortunately, that seems unlikely — at least in the near future.
What to Expect
It's important to understand that you won't just wake up one day to find the U.S. dollar has lost its status as reserve currency.
This isn’t an official designation. In today’s world, it's not as if a committee meets and decides on what is going to be used by everyone else...
If anything, the dollar will lose its status subtly over time. It is already starting to happen in many cases, where countries realize they don’t need to use the dollar as a middleman.
Over time, Americans will lose their subsidy for inexpensive consumer goods. This will be good for people in foreign countries trying to escape poverty.
Right now, though, there is still a widespread mercantilist mindset. Virtually every country or region is trying to devalue its currency. It's a race to the bottom.
I would not recommend investing on the basis of the dollar losing it reserve currency status, at least to another fiat currency...
What other currency are you going to invest in? Every major currency seems like a terrible choice right now.
For that reason, if you are trying to hedge against a depreciating dollar (or any other fiat currency, for that matter), you shouldn’t invest in another depreciating currency.
While there's certainly nothing wrong with speculating in foreign currencies for short-term profits, for a long-term hedge against the dollar, you should stick with hard assets — such as investments in gold, silver, real estate, and oil.
At least these things cannot be created out of thin air with the push of a button.

Until next time,
Geoffrey Pike for Wealth Daily

 

[Lolly Tripathy]

Minimax,Great article ...
thanks my dear friend..

 

[minimax]

Up or down, this is the question now!

H4: I find move down as most probable Zig Zag pattern with extended 5 waves c leg in progress and currently in 4th wave; question is if top is in place or not.
If not and price comes above last high @1,35233 my count could come under question (if price does not come below last LL today) and move up can unfold and there in the middle it could form right shoulder. Whipsaw would not surprise me.
If move down will develop, it would be 5th wave with targets 1,3435, 1,3383 and 1,3298. On the way down move would hit my mentioned target (1,34156 peak) and would form Butterfly Buy with most distance target around 1,3395.

Good trading!

 

[Lolly Tripathy]

reverse hns 1hr

 

[minimax]

Hello

Daily: development of price action is messy and foggy, is not telling me what is most probable direction, I am forced to speculate on lower time frames.
H4: I remain bearish as long as to me most probable top of wave 4 @1,35466 is in place; possible targets: 1,34516 area (most probable) and 1,3324
H1: price action in first wave down is messy, M15 shows it as corrective wave (on H4 is nice but relatively short wave what could predict short 5th wave) so makes me thinking that ending diagonal could form as predicted 5th wave with 162 extension @1,3387.

Good trading!



ps: not exceeding 162 extension @ 1,3375 on daily chart could form Shark low (and later possible 5-0 pattern) what would mean fast pull back above 1,35466, I expect tomorrow latest

 

[minimax]

Hi

Thank you Sive, great thoughts again, as usual!

I agree with you regarding kiwi but have some observations which would like to share.
H4: wave from 0,8543 HH from Oct 22nd I see as ZZ but as 5th of a also c is much too much weak and too short; I think that was start of 5-0 and possible Shark; price hit 62 retracement and 162 expansion but at the same time also the most distant level of 5-0 and retrace started; target of D of 5-0 is lenght of AB and 50% of BC is critical level; IF 5-0 will develop then move up will continue; IF 50% will be broken then real down move starts.
If Shark is also in play then target is between 89 retracement and 113 extension.

Good trading!

 

[Sive Morten]

Hi

Thank you Sive, great thoughts again, as usual!

I agree with you regarding kiwi but have some observations which would like to share.
H4: wave from 0,8543 HH from Oct 22nd I see as ZZ but as 5th of a also c is much too much weak and too short; I think that was start of 5-0 and possible Shark; price hit 62 retracement and 162 expansion but at the same time also the most distant level of 5-0 and retrace started; target of D of 5-0 is lenght of AB and 50% of BC is critical level; IF 5-0 will develop then move up will continue; IF 50% will be broken then real down move starts.
If Shark is also in play then target is between 89 retracement and 113 extension.

Good trading!

Hi Minimax. That has some common issues with EUR possible upward splash, that you've talked about previously. IF your 50% will hold, then, probably mine grabber will fail. In this case it will be quite another tune.

 

[minimax]

Yes, Sive; I just wanted to warn all kiwi sellers that this level around 0,8320 is crucial for further development; if price action stops there and consolidates then is big chance that D of 5-0 will be forming..

ps:
but kiwi is very strong on one side and euro has double pressure on the other (ECB + USA GDP) so kiwi can take it less painful, IF AT ALL ??!!

 

[minimax]

FAST!!! Could not remove tp!!

KIWI peacful, now GDP & Draghi !!