Sive Morten
Special Consultant to the FPA
- Messages
- 18,564
Monthly
According to Reuters news the euro rose to a four-year peak against the yen and gained for a second straight day against the dollar on Friday as unexpectedly robust German business sentiment data raised the appeal of the euro zone common currency. Comments from Federal Reserve officials saying a reduction in stimulus would be discussed at next month's monetary policy meeting failed to boost the dollar. Analysts said the market has already priced in talk of Fed tapering asset purchases in December, limiting its impact on the greenback.
Germany's Ifo survey of business sentiment rose far more than forecast in November, reaching its highest since April 2012. That added to positive sentiment about growth in Germany, the engine of the euro zone economy. A ZEW survey this week also showed German investor sentiment at its highest in four years, while a purchasing managers index suggested the private sector's expansion was gaining traction. "The enthusiastic IFO report has investors comfortable increasing exposure to the euro this morning, pushing euro/dollar back above $1.3500," said Scott Smith, senior corporate FX trader at Cambridge Mercantile Group in Calgary. He added that the confidence displayed in Germany during November is positive overall, but noted that recovery in the euro zone's largest economy has failed to bolster the rest of the region, especially the peripheral nations.
Currency speculators raised their bets in favor of the U.S. dollar to the highest in more than two months in the latest week, according to data from the Commodity Futures Trading Commission released on Friday. The value of the dollar's net long position rose to $17.10 billion in the week ended Nov. 19, the largest since the week ended Sept. 10. Long dollar bets stood at $14.46 billion the previous week.
The euro was also supported by comments from European Central Bank President Mario Draghi, who played down the possibility of the bank implementing negative deposit rates. Reports that the ECB would start charging banks to park cash with it overnight had pressured the euro on Wednesday, extending its losses after the release of Federal Reserve minutes later that day suggesting that U.S. stimulus could be scaled back earlier than expected. After months of misfires, the Federal Reserve's message is finally getting through to Wall Street: to taper is not to tighten. Traders now do not see the Fed raising short-term borrowing costs until at least July 2015, if not later, based on trading in CME Group's fed funds futures. The euro zone's shared currency also shrugged off comments from ECB Chief Economist Peter Praet that the zone faces deflationary pressures. The dollar showed little reaction to comments from Kansas City Fed President Esther George and Atlanta Fed chief Dennis Lockhart, who both said that the U.S. central bank will discuss scaling back its asset purchases at its December meeting.
Technical
On past week market has shown solid upward reconvery that even could be seen here, on monthly chart. Previously we’ve discussed situation on big quarterly picture trying to understand whether current bearish signs are just retracement or this is starting point of downward trend. Here is our previous conclusions:
As we’ve said at first glance and by looking just at monthly chart we can say – “well, market has hit resistance and Agreement, minor bounce is possible in this case”. Indeed, market has touched 0.618 AB=CD target right at Fib resistance. In this case retracement to 1.32-1.33 area will not be look as curious. And now take a look – market has hit this level, that we could accept as ultimate depth of pullback due respect to target and resistance. Thus, it turns out that price stands at some sort of an edge. If it will move lower, then we will not be able to treat this move as retracement anymore. This riddle probably will be resolved within 1-2 weeks. On passed week, market has not broken it and bounce up. Hence, standing at the edge will continue.
Second scenario, that is closer to my point of view, we could get “222” Sell pattern right from rock hard resistance – major 5/8 Fib level+Agreement and Yearly Pivot resistance 1. Take a look at AB-CD itself. CD leg is rather weak, especially it has become slow down even prior minor 0.618 target. This tells that upward momentum is not strong. CD leg itself is rather choppy with a lot of pullbacks. Currently we have October “Shooting star” pattern that simulteniously looks like W&R on previous swing high. This pattern suggests too deep retracement down that will be not acceptable for breakout of previous tops. In perspective, if November will become long black candle we could get Evening star pattern. And finally, we know that Pivot Resistance 1 holds retracement up if downward trend is still valid, right? That is what we see now. Finally, if you will draw trend lines, you’ll see that in fact, price action since April 2012 looks like rising wedge pattern. If we’re correct with our view, appearing of “222” Sell will lead price at minimum to 1.1950-1.20 area, it’s minor 0.618 extension. Now you can imagine where we could get if this will be Butterfly “Buy”, that we’ve discussed in previous research, dedicated to EUR. That’s right – 1.10. May be this is too pessimistic issue for EUR, and too far view, but anyway, right now I do not see valuable signs of EUR strength.
So, what do we see now? Market has not erased first scenario yet. Our 1.32-1.33 edge has held the price action on the way down, and we are bound to say that this still could be treated as retracement after hitting of minor 0.618 target of large AB-CD up. Whether market will continue to 100% target – that’s another question, but to start speaking about absolute bearish trend here, we need to see more extended downward action on monthly chart. I suppose that till the end of the month our focus will be on lower charts – weekly and daily mostly, where we will try to understand will this bounce up be either small retracement on daily chart or real big upward continuation here, on monthly.
Weekly
Trend is bearish on weekly chart. Two weeks ago we’ve got this bullish engulfing as respect of weekly K-support area and our major concern was whether this pattern will be cancelled by price or it still will reach its target. Currently price behaves so, that it mostly assumes continuation to its target, because market has failed to erase this pattern on past week. And now take a look - all action is absolutely reasonable here. First is – upward big AB=CD. Market has hit its target and now stands with reasonable retracement. Theoretically it even could be greater and still will be reasonable. From that standpoint – recall our monthly analysis. Current action in general not has cancelled yet possibility of upward continuation either to 1.618 of initial AB-CD or forming more recent AB-CD that coincides with butterfly “Sell” target.
Second moment is engulfing itself. Here price again, shows perfect action – after appearing of engulfing price has shown retracement inside it’s body and now starts move to it’s target. As we know, engulfing pattern assumes minimum target that equals to it’s length, so this is around 1.3670-1.37 area. That is our first object to watch for. Because any other pattern are more extended in time and we will focus on them later.
Daily
On coming week our major task is to understand – will engulfing pattern just complete its target and that will be just retracement on daily chart or it will become the starting point of solid upward trend.
Here I’m gravitating to conclusion that market is more bullish rather than bearish. Recall how it has started – erasing of B&B “Sell” setup, no bearish grabber has been formed. On passed week market has moved through all major resistances on intraday chart. It’s a bit curious for bearish market, especially right after retracement and bearish breakout. Within CD leg of possible AB-CD we see acceleration – the starting candles are much faster than AB leg. Interestingly that market has not tested yet MPP that agrees with major 5/8 Fib resistance around 1.3627. Theoretically some small chances still exist that butterfly “buy” still could appear here, but they are outside one probably. Market has come too close to the top of BC leg already and it has happened too fast. So, looks like we have completed the task of previous week – understand the direction. It seems that direction has more upward chances.
4-hour
And here, guys, what we will do on Monday. Minor 0.618 target of our daily AB-CD stands very close to current market, but it still lower than previous highs. It means that market should not touch stops above this high and has chances to show retracement down, as respect of minor target prior upward breakout. So, we need to use some of support levels to take long position. As market should move slightly higher to 0.618 AB-CD target, hence, levels that I’ve drawn here will also drift a bit higher, thus, major 3/8 support probably will coincide with WPP. That’s our primary level to watch for.
As you probably understand already – we will base our trade here on potential B&B “Buy”, since thrust up is acceptable and we count that B&B will not just complete its mininum target (that should let us move stops to breakeven) but will become the trigger of upward continuation.
Conclusion:
On big picture market stands in an area that keeps door open as for solid bullish development as for bearish one. Thus, until market will not pass through key levels, we will focus on smaller targets and minor setups on lower time frames. Particular speaking – daily AB-CD and will try to join with upward action using possible B&B “Buy” on 4-hour chart.
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.
According to Reuters news the euro rose to a four-year peak against the yen and gained for a second straight day against the dollar on Friday as unexpectedly robust German business sentiment data raised the appeal of the euro zone common currency. Comments from Federal Reserve officials saying a reduction in stimulus would be discussed at next month's monetary policy meeting failed to boost the dollar. Analysts said the market has already priced in talk of Fed tapering asset purchases in December, limiting its impact on the greenback.
Germany's Ifo survey of business sentiment rose far more than forecast in November, reaching its highest since April 2012. That added to positive sentiment about growth in Germany, the engine of the euro zone economy. A ZEW survey this week also showed German investor sentiment at its highest in four years, while a purchasing managers index suggested the private sector's expansion was gaining traction. "The enthusiastic IFO report has investors comfortable increasing exposure to the euro this morning, pushing euro/dollar back above $1.3500," said Scott Smith, senior corporate FX trader at Cambridge Mercantile Group in Calgary. He added that the confidence displayed in Germany during November is positive overall, but noted that recovery in the euro zone's largest economy has failed to bolster the rest of the region, especially the peripheral nations.
Currency speculators raised their bets in favor of the U.S. dollar to the highest in more than two months in the latest week, according to data from the Commodity Futures Trading Commission released on Friday. The value of the dollar's net long position rose to $17.10 billion in the week ended Nov. 19, the largest since the week ended Sept. 10. Long dollar bets stood at $14.46 billion the previous week.
The euro was also supported by comments from European Central Bank President Mario Draghi, who played down the possibility of the bank implementing negative deposit rates. Reports that the ECB would start charging banks to park cash with it overnight had pressured the euro on Wednesday, extending its losses after the release of Federal Reserve minutes later that day suggesting that U.S. stimulus could be scaled back earlier than expected. After months of misfires, the Federal Reserve's message is finally getting through to Wall Street: to taper is not to tighten. Traders now do not see the Fed raising short-term borrowing costs until at least July 2015, if not later, based on trading in CME Group's fed funds futures. The euro zone's shared currency also shrugged off comments from ECB Chief Economist Peter Praet that the zone faces deflationary pressures. The dollar showed little reaction to comments from Kansas City Fed President Esther George and Atlanta Fed chief Dennis Lockhart, who both said that the U.S. central bank will discuss scaling back its asset purchases at its December meeting.
Technical
On past week market has shown solid upward reconvery that even could be seen here, on monthly chart. Previously we’ve discussed situation on big quarterly picture trying to understand whether current bearish signs are just retracement or this is starting point of downward trend. Here is our previous conclusions:
As we’ve said at first glance and by looking just at monthly chart we can say – “well, market has hit resistance and Agreement, minor bounce is possible in this case”. Indeed, market has touched 0.618 AB=CD target right at Fib resistance. In this case retracement to 1.32-1.33 area will not be look as curious. And now take a look – market has hit this level, that we could accept as ultimate depth of pullback due respect to target and resistance. Thus, it turns out that price stands at some sort of an edge. If it will move lower, then we will not be able to treat this move as retracement anymore. This riddle probably will be resolved within 1-2 weeks. On passed week, market has not broken it and bounce up. Hence, standing at the edge will continue.
Second scenario, that is closer to my point of view, we could get “222” Sell pattern right from rock hard resistance – major 5/8 Fib level+Agreement and Yearly Pivot resistance 1. Take a look at AB-CD itself. CD leg is rather weak, especially it has become slow down even prior minor 0.618 target. This tells that upward momentum is not strong. CD leg itself is rather choppy with a lot of pullbacks. Currently we have October “Shooting star” pattern that simulteniously looks like W&R on previous swing high. This pattern suggests too deep retracement down that will be not acceptable for breakout of previous tops. In perspective, if November will become long black candle we could get Evening star pattern. And finally, we know that Pivot Resistance 1 holds retracement up if downward trend is still valid, right? That is what we see now. Finally, if you will draw trend lines, you’ll see that in fact, price action since April 2012 looks like rising wedge pattern. If we’re correct with our view, appearing of “222” Sell will lead price at minimum to 1.1950-1.20 area, it’s minor 0.618 extension. Now you can imagine where we could get if this will be Butterfly “Buy”, that we’ve discussed in previous research, dedicated to EUR. That’s right – 1.10. May be this is too pessimistic issue for EUR, and too far view, but anyway, right now I do not see valuable signs of EUR strength.
So, what do we see now? Market has not erased first scenario yet. Our 1.32-1.33 edge has held the price action on the way down, and we are bound to say that this still could be treated as retracement after hitting of minor 0.618 target of large AB-CD up. Whether market will continue to 100% target – that’s another question, but to start speaking about absolute bearish trend here, we need to see more extended downward action on monthly chart. I suppose that till the end of the month our focus will be on lower charts – weekly and daily mostly, where we will try to understand will this bounce up be either small retracement on daily chart or real big upward continuation here, on monthly.
Weekly
Trend is bearish on weekly chart. Two weeks ago we’ve got this bullish engulfing as respect of weekly K-support area and our major concern was whether this pattern will be cancelled by price or it still will reach its target. Currently price behaves so, that it mostly assumes continuation to its target, because market has failed to erase this pattern on past week. And now take a look - all action is absolutely reasonable here. First is – upward big AB=CD. Market has hit its target and now stands with reasonable retracement. Theoretically it even could be greater and still will be reasonable. From that standpoint – recall our monthly analysis. Current action in general not has cancelled yet possibility of upward continuation either to 1.618 of initial AB-CD or forming more recent AB-CD that coincides with butterfly “Sell” target.
Second moment is engulfing itself. Here price again, shows perfect action – after appearing of engulfing price has shown retracement inside it’s body and now starts move to it’s target. As we know, engulfing pattern assumes minimum target that equals to it’s length, so this is around 1.3670-1.37 area. That is our first object to watch for. Because any other pattern are more extended in time and we will focus on them later.
Daily
On coming week our major task is to understand – will engulfing pattern just complete its target and that will be just retracement on daily chart or it will become the starting point of solid upward trend.
Here I’m gravitating to conclusion that market is more bullish rather than bearish. Recall how it has started – erasing of B&B “Sell” setup, no bearish grabber has been formed. On passed week market has moved through all major resistances on intraday chart. It’s a bit curious for bearish market, especially right after retracement and bearish breakout. Within CD leg of possible AB-CD we see acceleration – the starting candles are much faster than AB leg. Interestingly that market has not tested yet MPP that agrees with major 5/8 Fib resistance around 1.3627. Theoretically some small chances still exist that butterfly “buy” still could appear here, but they are outside one probably. Market has come too close to the top of BC leg already and it has happened too fast. So, looks like we have completed the task of previous week – understand the direction. It seems that direction has more upward chances.
4-hour
And here, guys, what we will do on Monday. Minor 0.618 target of our daily AB-CD stands very close to current market, but it still lower than previous highs. It means that market should not touch stops above this high and has chances to show retracement down, as respect of minor target prior upward breakout. So, we need to use some of support levels to take long position. As market should move slightly higher to 0.618 AB-CD target, hence, levels that I’ve drawn here will also drift a bit higher, thus, major 3/8 support probably will coincide with WPP. That’s our primary level to watch for.
As you probably understand already – we will base our trade here on potential B&B “Buy”, since thrust up is acceptable and we count that B&B will not just complete its mininum target (that should let us move stops to breakeven) but will become the trigger of upward continuation.
Conclusion:
On big picture market stands in an area that keeps door open as for solid bullish development as for bearish one. Thus, until market will not pass through key levels, we will focus on smaller targets and minor setups on lower time frames. Particular speaking – daily AB-CD and will try to join with upward action using possible B&B “Buy” on 4-hour chart.
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.