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Forex FOREX PRO WEEKLY, November 26 - 30, 2018

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Nov 24, 2018.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    This week was relatively quiet as US celebrates Thanksgiving and markets are mostly thin across the board. Still, on Friday we've got solid action on Forex. Since we already have trading plan, we need to check how recent action suits to our expectations.

    As Reuters reports - The dollar rose on Friday, posting its biggest weekly percentage increase in a month, as risk appetite declined and investors sought the currency’s safety following a steep drop in oil prices that suggested global growth is slowing.

    The drop in oil prices fuelled a risk-off wave across the board. U.S. crude futures were last down nearly 8 percent on the day.

    “Risk aversion has been the main driver all week, with oil prices driving market sentiment,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto. “The dollar is better overall for the week because of the risk-off stance, despite a fairly significant pricing out of 2019 rate hike expectations,” he added.

    The dollar’s near-term outlook, however, has dimmed a little bit as some of the recent U.S. economic numbers have come in weaker than expected and several Federal Reserve officials have struck a cautious tone on the economy. All told, investors increasingly believe the Fed may be nearing the end of its tightening cycle.

    That said, Jane Foley, senior FX strategist at Rabobank in London, believes the dollar will still find decent support as investors are likely to remain cautious on emerging market assets.

    “The huge liquidity associated with the greenback, the fact that there is no real default risk on U.S. Treasuries, and the credibility of the U.S. legal system are enough to endow the U.S. dollar with sufficient safe-haven appeal for many investors,” Foley added.

    The euro, on the other, fell to a one-week low on signs economic growth could be slowing across the euro zone, with worries about Brexit and Italy’s budget negotiations also weighing on the single currency.

    Business growth in the euro zone slowed much more quickly than expected this month, a Purchasing Managers Index survey showed. After German private-sector growth slowed to its lowest level in nearly four years, the euro dropped into negative territory and was last down 0.7 percent at $1.1329 .

    There is no fresh CFTC data for this week, so, it is unclear what short-term sentiment we have and how speculative positions have changed. But Fed watch tool shows that dollar-supportive sentiment has improved this week as probability of rate increase in December moved higher to 72-75% (of 23rd of November), while last week it was ~68%:
    upload_2018-11-24_12-49-14.

    As we've talked above on Germany economy contraction, Fathom consulting suggests that changing of the test procedure, which demands adoption of all major car and truck producers:
    The German economy contracted by 0.2% in the third quarter of 2018, the first negative print since 2015. The contraction was largely foreseen (the consensus of economists polled by Reuters had expected a 0.1% contraction). The primary cause appears to be bottlenecks in the auto industry following the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). However, this is appears to be a predominantly supply-side problem with the fall in new orders data far less pronounced. Whether the German economy rebounds in Q4 will therefore depend upon how soon firms are able to adapt to the new regulatory standard and how quickly they can increase output.

    [​IMG]

    That's being said, this week doesn't show big shifts in fundamental background, so not drastic reversals should happen, theoretically. This let's us proceed with the trading plan that we have.

    Technical analysis
    Monthly


    As we talked in our previous reports, monthly picture is the one about 1.13 lows. They have very important technical meaning for monthly chart. Now we see that despite recent break of these lows, EUR doesn't move lower but turned up again. Logical question that we have to ask here - could it be W&R. In this case situation could change at 180 degree. Although monthly chart is rather long-term, it needs more time to get confirmation of this idea - EUR needs to move above 1.15 top, but if now we see real upside reversal, it will have extreme importance for long-term perspective.

    Because, in general, EUR doesn't look strong in recent months. As we've mentioned, EUR - hangs upon 1.14-1.15 support area. After strong drop and spike down - no meaningful upside action has followed. This is not good sign for bulls. It's already 5 months of laying upon this area. As longer EUR will stand here as greater chances on downside breakout will be.
    This is indirect sign of weakness, when market can't jump out from strong support area. It means that strong level could support price from collapse but its effort is not sufficient to start bullish action. Day by day buyers will be washed out around this level and EUR could break it, if nothing will change. So, let's keep this issue in mind. It is not vital by far, but still first warning signs already exist. And now this hypothesis will be checked.

    In general 1.14-1.15 is important not just because of YPP. Take a look - this is upper border of former 1.05-1.14 consolidation. If price will drop back inside it - it will open road to the bottom of 1.05 area. Also this is monthly 50% support area. Price has problems with breaking borders of any consolidation, but it has no barriers inside and could freely move from up to bottom.

    Now - take a look what progress we have around it. 1.14 lows is the first test of rectangle and monthly support. After small bounce price returns back to it. So, this is the crucial border and if it will be broken - free space to YPS1 around 1.08 will be opened. It will mean return back in rectangle. Next our target here will be 1.03 AB-CD COP extension right around major lows, if nothing will change now.
    eur_m_26_11_18.

    Weekly

    Weekly chart brings bad surprise, guys and it doesn't match to our trading plan. This is bearish grabber. Two weeks ago we already had one either. As soon as minimal upside harmonic retracement was done - we have another one and it suggests drop below recent lows. This time it will be right to 1.1185 Fib support and MPS1. Of course, any pattern could fail, situation could change etc. But now it makes risky any attempt to go long on daily chart. Other words, it puts under question the reverse H&S pattern that we have on daily chart and significantly increase chances on its failure.
    eur_w_26_11_18.

    Daily

    So, here is the pattern that we're watching now, guys - reverse H&S. Downside reversal from K-resistance was pretty nice, with Reversal (R) session on board. But we're mostly interested in upside reversal around 1.13 area. As you understand, appearing of bearish grabber works opposite to this scenario and diminishes chances on success. Market is not at oversold till the 1.12 area, so failure indeed could happen.

    Still, as usual - on first touch of 1.13 support minor intraday technical bounce has good chances to happen. We will try to use and move stop to breakeven.

    Here we make following adjustment to trading plan. We could try to take look position as we've talked initially, but use technical upside bounce for stop moving to breakeven. Later, if our trade will close and market drop below 1.13, we could try to go short with weekly grabber, since it will be clear sign of H&S failure.

    eur_d_26_11_18.

    Intraday

    Our suggestion on 2-leg downside action due daily Reversal session was correct. Indeed, on Friday we've got second leg down. "222" Sell pattern also has been formed, or better to say we've got two of them of different time scale.
    Thus we have perfect bullish setup - "222" Buy shape as a part of reverse H&S pattern. Bottom of right shoulder will be Agreement support. The one flaw that we could find here, guys - fast downside action. The nature of reverse H&S suggests that this part of pattern should be under control of bulls. It means that upside action should be stronger than downside. But we see the opposite picture. Whether it will lead to H&S failure - we will see. But all other things stand rather good. As we said, if even H&S will fail later - first touch of 1.13-1.1320 area should lead to upside bounce and we intend to use it.
    eur_4h_26_11_18.

    For purity sake, we also could watch for bullish reversal patterns on15-30m charts. For example, it could be reverse H&S as well, or, say 3-Drive "Buy" because market has not hit OP yet on 4H chart and should drop a bit more.
    eur_15m_26_11_18.

    Conclusion:

    We do not have any changes in market sentiment this week. It means EUR progress will be driven by technical factors. As we've got weekly grabber - it put the shadow on bullish scenario and we should be careful enough with any long position that we take.


    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 guys,

    Let's take a look at EUR again. So, in weekend we talked about tricky situation and two contradictive patterns that we have there - weekly bearish grabber and daily reverse H&S pattern. Although weekly grabber could work, but we've decided try to take long position on the bottom of potential right arm with the hope that at least minor techncial response should follow due Agreements support area.

    Indeed first upside bounce has happened yesterday and it was a chance to move stops to breakeven. But today market has returned right back down. And we have the same situation. Until market stands above 1.13 area - it keeps valid possible H&S pattern. It means that if you're bearish - you need to wait 1.13 breakout. For bulls - they could take long positions until market holds above 1.13 major support:
    eur_d_27_11_18.

    But here we have one nuance, you can see on 4H chart. Although everything stands good and potentially we have "222" Buy pattern. But take a look at our AB-CD pattern. It's OP has not been reached yet. So, if you plan to go long - keep initial stop below 5/8 support area and OP. Because EUR could make occasional spike to complete OP. Besides, bullish setup will be destroyed only real breakout of 1.13 area:
    eur_4h_27_11_18.
     
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  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    EUR has failed to meet our conditions. Although on daily chart our reverse H&S pattern still looks nice and "possible", detailed analysis of price action tells that upside reversal hardly will happen. Daily trend has turned bearish, price action is too fast for right arm where bulls should control situation but yesterday we've got tail close. Parallel analysis of GBP and Gold market also put the shadow on upside perspectives here. In two words - equilibrium shifts to our bearish scenario of weekly grabber with potential target around 1.1185:
    eur_d_28_11_18.

    On 4 H chart market easily has passed as through major 5/8 support as through OP target. Minor reaction has followed, while bullish market should behave differently. Next target here, is XOP at 1240, but it will be just minor pit-stop on a way to 1.1185. Failure of H&S pattern is a serious thing and in most cases ends with head downside breakout:
    eur_4h_28_11_18.

    Take a look how market reponse on major 5/8 support and how it behaves now. This was just minor and gradual pullback. Everytime we see signs of bearish dynamic pressure, including now. This is definitely not a reversal. All this stuff makes us think that downside action will continue and situation is not good for any long position.
    eur_30m_28_11_18.
     
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  4. Deltoid88

    Deltoid88 Corporal

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    Update on EUR.

    Everything develops according to the plan. It looks like wave 3 is finished, expecting minor retracement to upside in zone 1.1306-1.1350 and then continuation of downtrend in wave 5 of bearish red wave C, or 3 maybe.

    EURUSDkH4.

    How to trade this?

    Main goal is to open short position in zone 1.1306-1.1350, SL=1.1435, TP zone = 1.1154-1.120.
    Scalp long entry position before upside action happens in zone 1.1270-1.1290, SL=1.1260, TP zone =1.1320-1.1350.
     
  5. gwynfor

    gwynfor Private

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    Thanks Deltoid,

    Until yesterday I agreed entirely with your view on this.

    Indeed on Monday I was short, risk free and counting what I would get when price hit 1.1180.

    ( But see Kenny Rogers' song - The Gambler - "you never count your money while your sitting at the table")

    Anyway what I realised yestarday was that the channel you draw for the move down from 1.1470 corresponds to a Kennedy base channel. Which suggests the current motive is not impulsive as a 5 wave move should be.

    So I've talked myself out of another trade (but made 2:1) .

    I know Stag is into the Kennedy Channels and am sure I could learn something from him if he has the time.:confused:
     
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  6. Deltoid88

    Deltoid88 Corporal

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    Hey Gwynfor,

    Yes, it is base channel, and your observation was correct. Wave 3 was impulsive, 5 wave structured, longer then wave 1, but not powerful as usual like you noticed. I chose to ignore that fact, but now I can not ignore it anymore after this spike. It was cheap talk from Powell, so we will see what next 2 days bring. I am not going to make any conclusions yet, but bearish scenario is in problem. This now looks like reversal to upside.

    Will post my primary analyze tomorrow what I expect to happen.
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    So, yesterday most smart trader and analyst was mister PJ, just take a look what he said:

    "The dollar weakened against its peers on Thursday after Federal Reserve Chairman Jerome Powell said U.S. interest rates were just below neutral, taken by many investors as a tip that the rate hike cycle was nearing its end."


    Powell’s dovish remarks took the currency markets by surprise as he noted that the policy rate, at 2-2.25 percent, is now “just below” the broad range of estimates of neutral, which in September was 2.5-3.5 percent.

    This view represents a significant departure from comments in October, when Powell said rates were a “long way from neutral at this point”.

    It was really the shock for markets across the board, guys. To be honest, I suspect that this intruding was not occasional. The point is the end of November and first two weeks of December is the end of financial year, when big hedge funds and other institutional investors close balance sheet, calculate profit and distribute bonuses before Christmas holidays. As you understand, mister PJ thrust stock market up as well. Currently we need to monitor, how long these verbal intervension will drive markets, but definitely it totally changes our short-term context.

    And second - here is another statement from BoE that is worthy of our attention and that could be long-played:
    The Bank of England warned on Wednesday that Britain risks a bigger hit to its economy than it suffered from the global financial crisis a decade ago if it leaves the European Union in a “disorderly” manner, which would include a 25 percent crash in the value of the pound.

    Now, lets go to technicals. Although yesterday we mostly have denied our upside scenario, but right now we have to turn back to it again. In result of Powell's intervension our H&S pattern stands on the table again and we've got huge upside reversal session. Also guys, here we have a price action that I usually treat as 2-days grabber. It doesn't match to any DiNapoli pattern, but it's nature is the same as on simple grabber.
    This makes us think that EUR could climb to 1.15 area and take out recent top:
    eur_d_29_11_18.

    Recent action let's us talk again about second stage of our plan - upside AB=CD action, as first H&S target. It stands around 1.1520:
    eur_4h_29_11_18.

    It means that on hourly chart we could watch for pullback to 38.2-50% Fib levels and re-testing of the trend line. If we will get "222" - much better.
    eur_1h_29_11_18.
     
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  8. Deltoid88

    Deltoid88 Corporal

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    Update on EUR. My new vision and expectation is to upside. Interested only in long entries.

    WEEKLY CHART: Believe we found the bottom in red wave C which also completed blue wave B. Now I expect high at 1.1810, blue wave A to be broken to complete 5 waves in blue wave C. Blue waves ABC would complete red wave B which would have structure 335 and would be expanded flat.

    EURUSDkWeekly.

    How to trade this?

    Long entry in zone 1.1213-1.140, SL=1.1212, TP zone = 1.1725-1.2040


    DAILY CHART: Red wave C was ending diagonal which makes bullish scenario stronger. As I have said, I expect blue wave C to have 5 waves. Here I want to show you potential targets for each wave.

    EURUSDkDaily.

    How to trade this?

    Long entry in zone = 1.1266-1.140, SL=1.1265, TP zone = 1.1680-1.2040


    4H CHART: Little closer look to what is happening. Higher SL if this wave count holds.

    EURUSDkH4.

    How to trade this?

    Long entry in zone 1.1350-1.140, SL=1.1348, TP zone =1.1514-1.1585


    15 MIN chart: More close look what is going on. Higher SL if this wave count holds.

    EURUSDkM15.

    How to trade this?

    Long entry in zone 1.1363-1.140, SL=1.1360, TP zone = 1.1420-1.1585


    Conclusion: Low at 1.1213 is key, and if higher supports get broken, that does not invalidate bullish scenario, just it would be different wave count. I expect 1.1266 support to hold with high probability. Maybe even 1.1348 support. Would be surprised to see these supports to get broken, good SL levels.
     
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  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning everybody,

    Market has moved slightly higher since our discussion yesterday in the morning. So, as our reverse H&S scenario on daily chart survived, thanks to Powells comments, we continue to work with it. If you're bearish and search chances to go short - you need to get clear signs of this pattern's failure. For example, if market somehow stops upside action, turns flat, starts dropping back to the lows - this will be irrational action for H&S.
    But currently we do not have yet any of this kind.

    On daily chart we should get sooner or later some pullback after reversal session. As it has happened when we've got downside reversal session recently, the same should happen here, after we've got upside reversal session. Because on intraday charts it should be AB-CD shape. And today we will keep an eye on some moments that could clarify this.
    eur_d_30_11_18.

    Here, on 4H chart we have our major AB-CD pattern. At the same time market stands in consolidation after high wave pattern has been formed. If EUR fails to proceed higher, deeper retracement after reversal session could start today:
    eur_4h_30_11_18.

    Our yesterday plan has worked perfectly. Market turns up right at 3/8 Fib level and after re-testing of broken trendline. But take a look - right now market is forming rising wedge pattern. This pattern has interesting feature. Although commonly it treats as bearish reversal pattern, because it indicates exhausting of bullish power, inability of the market to keep upside pace. But, sometimes it becomes continuation pattern. And upside breakout always takes the shape of strong thrusting action.
    That's being said - if you have long position according to our yesterday's plan - move stops to breakeven.
    If EUR will not be able to move higher - deeper retracement will happen. Otherwise we should get strong upside breakout:
    eur_1h_30_11_18.
     
  10. Deltoid88

    Deltoid88 Corporal

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    Update on EUR. Here is most probable wave count in my view on 15 min chart. Expecting 1.1310-1.1340 to be bouncing zone for EUR.

    EURUSDkM15.

    How to trade this?

    Long entry in zone = 1.1310-1.1340, SL=1.1265, TP zone = 1.1580-1.190
     
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