1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

FOREX PRO WEEKLY, November 08-12, 2010

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Nov 6, 2010.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    11,259
    Likes Received:
    14,221
    Fundamentals
    During the recent week on the surface there are a couple of events – FOMC statement and NFP data. Concerning the NFP – there is nothing really to add, because numbers are talk for themselves. NFP increased for 151K, compares to expectations of 60K. Besides, previous number was revised to upside from -95K to -41K. The conclusion about the FOMC statement is not so obvious and positive. All of you know that Fed intends to buy from the market 600 Bln. of bonds during the couple of quarters and hold rate low for the long time. There is a rule exists that buying of 100 Bln. of bonds is equivalent the reducing of Fed Fund rate for 0.1%. This method is used when rate at the lowest level and it’s impossible to stimulate an economy any other way. The main question however still stands – does money really flow in the real sector of economy, loans and credits, or they just return back to Fed? Because results of QE I program were shallow, Fed was not very successive in stimulating of credit and loan activity. Liquidity that was provided by Fed just stays on banks sheets.
    At the same time, September Consumer Credit surges for 2.1 Bln. This was the first rise since January. Now we’ve seen impressive NFP. There are a lot of talks about strong contradiction between Republicans and Democrats that can negatively influence on economy, because it demands fast and strong decisions to be made fast and in time currently. But the majority of Republicans in Congress after the elections can let us hope that President Obama will have to extend Bush’s tax cut program. Buy purchasing US Treasuries Fed tries to keep rates low and make unattractive for US bank investing in government bonds. It should stimulate them to send money in loans and real sector of economy. So, may be US economy is ready to slowly turn back on the engine of growth that is credit.
    Now let’s shift to EU. I suppose that in nearest future their problems will get more attention. Yields on Irish 10-year bonds are up for 1.2% in last two weeks as investors start to fear peripheral debt. The Russian sovereign wealth fund has declared Irish and Spanish debt ineligible for purchase and a UK clearing house stated that it may require clients to put up extra margin on Irish bonds. Portugal struggled and Ireland appears to be on the same path. Germany continues to push for a permanent crisis mechanism but ECB President Trichet has warned that such a tool would unnerve bonds markets. Moreover, Polish PM Tusk stated that changes to the treaty must be designed to benefit the needs of all members of the Euro-Zone not just to protect the interests of a few. “Neither a borrower nor lender be, for loan oft loses both itself and friend.” Europe is learning Shakespeare’s lesson the hard way.
    Conclusion: Although we can see some improvements in macro US data, the question is how stable these improvements will be. FOMC policy will leave USD under pressure. At the same time, the problems in EU are escalating, so the domination EUR over USD due to difference in policy will gradually fade out. EUR starts to loose their positions against USD. As I’ve said a month ago, GBP has much more strong positions and more attractive against USD in long-term perspective.

    Monthly
    Although we didn’t talk about EUR currency for couple of weeks, there are no much changes on monthly chart. Trend shifting to bullish has confirmed now. For the second month market stays at monthly overbought level that is for November at 1.4057. It means that it’s not a time for establishing new long-term “Long” positions. The next resistance just above the market – 5/8 Fib resistance at 1.4416
    #1
    [​IMG]

    Weekly

    On this time frame however, there are some important changes. Look at initial price action – market has accelerated from 61.8% expansion directly to 100% expansion and hit weekly overbought (the first circle). Market absolutely disrespected 61.8% target and didn’t even a bounce. Also note, that CD leg is faster than AB. Usually this kind of price action leads to 1.618% Fib expansion target that is at 1.4948, but after meaningful retracement. As a rule the depth of retracement is 5/8 Fib support from the latest swing up. This is at 1.3232-1.3558 area that includes weekly Confluence support, monthly pivot support 2 and previous highs at 1.3333.
    And the first bell for starting of this retracement has rung already. Market has tried to move higher there was no overbought and any resistances above the market, but failed and shown wash and rinse of a previous highs. I believe that this is a sign that market is ready to move lower. I don’t confirm that it definitely will reach 1.33-1.35 area, but some move to the downside should happen.
    The first level of support is monthly pivot point at 1.3885. If market will move below it, it will mean than bears take control of the market and we can count on deeper retracement, at least till next support level 1.3614-1.3631 – the combination Fib support and monthly pivot support 1.
    Next support area is one that we’ve talked about already – 1.3232-1.3558. And the last gasp for the bulls – last 5/8 Fib support at 1.2792.
    Also take a note that trend, based on MACDP (red line on the chart) will remain bullish even till 1.3232-1.3558 area. Personally, I think that either 1.3630 or 1.33 area should hold the market. IF not – then the further up move will be under question.
    [​IMG]

    Daily
    Before start talking about entry points, supports and resistance, let take a look at recent price action and I show you how you can get very important information if you’re attentive enough to nuances. For the first look on #1 there is not much interesting here. So, here is you home task – try to analyze this chart, before reading my analysis of this fragment, and then compare them. Here is your chart for analyzing, what can you say based on it?
    #1
    [​IMG]
    Here is my view. During couple of previous weeks market is forming a butterfly Sell pattern, with a 1.27 target around 1.4280 area. Until the moment of a last move in right wing of butterfly, market has been in the range. Now, market has shown upper breakout of the range, accomplished the butterfly, hit daily overbought and returned back in the range. Simultaneously, as we’ve talked in weekly time frame, market demonstrated a W&R of previous highs. What it can tells us about the targets to the downside? First, of all, as we’ve seen on example of USD/CHF trade – the target of the Butterfly is 1.618 expansion of a whole move to the upside – this is around 1.33 area (you can confirm it by yourself). Second, market has shown upper breakout failure of the range, so it should reach at least lower border of it. Furthermore, if market will break this trading range (lime lines) to the downside, then, according the rule, it should move to the downside at least the width of this range – this is also around 1.33 area.
    And the last one. Look at the red line – this is MACD Predictor indicator. You can see, that trend has turned bullish – but price action is bearish. This is an excellent example of negative dynamic pressure that leads continuation of a down move.
    #2
    [​IMG]

    Ok, now let’s shift to particular levels. 1.4051 is not more the support level – it was penetrated by the price already. The next area of support – monthly pivot point and daily Confluence support at 1.3885-1.3913. And the next area – monthly pivot support 1, daily confluence support and daily oversold at 1.3614-1.3663. This is the last logical support area for nearest couple of days, because other support levels are beyond of daily oversold, so we will not speak about them currently.
    By the way, you can see nice bearish divergence with MACD indicator…
    #3
    [​IMG]

    4-Hour
    MACD gives perfect “sell” signal, very good angle of piercing lines. Nice thrust to the downside. Weekly pivot is very close to the market. If market will show continuation of a down move right after the opening, then, we can wait for some retracement up to weekly pivot for enter short. If market will open above it – then better wait some retracement to one of the levels that I show on the chart. The problem is that there are no definite swings currently for estimation ABC’s and Agreement areas to definitely speak about suitable areas for entering. But I suppose that 1.4150 is a not bad area, if market will show this retracement up.

    [​IMG]

    Conclusion:
    Long-term.
    EUR has bullish bias but it overbought at monthly time frame. It’s not the time to establish long-term bullish position. Wait for retracement lower.
    Short term
    I have bearish view on EUR currency. The weakness on weekly time frame (Wash and Rinse) and failure to continue move to upside after normalizing overbought level makes me think that market is ready to retrace lower. I think that there are 2 possible targets for that – 1.36 or 1.33 areas.


    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.
     
  2. dpowen

    dpowen Private

    Joined:
    Jul 31, 2010
    Messages:
    22
    Likes Received:
    0
    Thanks and 2 Macro Questions

    That is really great analysis Sive.

    Couple of questions for you regarding your perspective on US positive data though:

    This site is often ridiculously bearish however I am interested on your thoughts as to whether the surface credit increase will be enough for the market to believe it or will they slowly read between the lines?
    Surge In Non-Revolving Loans And Government Lending Pushes Consumer Credit Higher, Even As Revolving Loans Drop Most Since January 2010 | zero hedge

    Also regarding NFP, I found this info regarding the actual participation rate in the employment market having materially reduced interesting. Seems that the numbers are covering up a darker situation. Do you think that the market will over looks this and is everyone just going to continue believing the headline numbers on these releases?
    Labor Force Participation Rate Drops To 25 Year Low, At 64.5% | zero hedge

    Thanks again for your analysis it's really great.

    D.
     
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    11,259
    Likes Received:
    14,221
    For any macro data - stability is a key for wind of change. If we will see positive numbers again and again, then we will see changes in price action.
    Current positive numbers are just a splash, but positive splash. I think that it was just positive short-term reaction on good numbers. We should not overvalue them.
     
  4. TraderBob

    TraderBob Private, 1st Class

    Joined:
    Oct 4, 2007
    Messages:
    34
    Likes Received:
    0
    Butterfly

    Great analysis on the Eur/Usd for the butterfly. There was also a pennant that formed on the 1 to 4 hour TF that was a classic examble (just before last wing of butterfly), broke out to the upside around 1.4, did a retest and went all the way to 1.4275. Thanks for your analysis Sive, I look forward to them every week.
     
  5. TraderBob

    TraderBob Private, 1st Class

    Joined:
    Oct 4, 2007
    Messages:
    34
    Likes Received:
    0
    Quote

    Sorry, hit the quote button on that last reply.
     
  6. evroom1

    evroom1 Private

    Joined:
    Nov 18, 2009
    Messages:
    20
    Likes Received:
    0
    [
    I thank you for this good review. I do not always agree with you but you are one of the best to follow.
    Today I agree with you, great work
     
  7. Adyur Yakubov

    Adyur Yakubov Recruit

    Joined:
    Jun 11, 2010
    Messages:
    1
    Likes Received:
    0
    USD/JPY trade

    Hi everyone, I have a very important question about previous USDJPY trade, that I thing went just a half way before close on FRIDAY, it was closed by me due to small position size, but since the "BUTTERFLY" is still valid I'm intending to SHORT again, any considerations, sincerely A.Y.:D
     
  8. Sumeet Malik

    Sumeet Malik Recruit

    Joined:
    Jul 22, 2010
    Messages:
    8
    Likes Received:
    0
    Hi Sive,
    Thanks for including fundamentals again in your analysis. I wanted to ask you about USD/CHF. Since last trade on it was achieved, do you find anything interesting there. Since USD/JPY trade is still valid, any chances of a pull back on USD/CHF? Does getting out of a trade once it is achieved means that the market will change direction or we wait for further technical confirmations?

    Thanks in advance!
     
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    11,259
    Likes Received:
    14,221
    Surely, not. You may enter again on the short side. But get confidence first, that this is suitable area to enter. I have a bearish bias on USD/CHF. I think I will return to this pair during the week, because it's really tradable right now.
     
  10. forexclues

    forexclues Private

    Joined:
    Sep 3, 2010
    Messages:
    27
    Likes Received:
    0
    Hi Sive Morten

    Good morning Sir

    Thanks for the analysis as always....

    The market (Eur Usd) opened at 1.4056, went up a few pips to 1.4087, then went straight to make a low at 1.3918.

    From your analysis, you said if the market starts by opening lower then we have to wait for it to retrace back to the weekly pivot before entering short.

    But considering the situation here, market did not reach any of the predicted level on its way up after it openened.

    My question here Sir is that...should we still wait for market to go back to around the weekly pivot of 1.4056 or we should enter short from here...1.3965......because market seems to range trade at this point.

    Thanks.
     

Share This Page