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FOREX PRO WEEKLY, October 08-12, 2018

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Oct 6, 2018.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    NFP should become big event of last week, but in reality price action was mild. Report was mixed as employment was two times below expectation but unemployment rate dropped and wage growth was the same 2.8%. Low employment numbers become normal now and should not confuse us because employment stands near high capacity. Low numbers is not a sign of weakness but just result of saturation of employment market. Besides, results of previous two months were revised up.

    Anyway, as Reuters reports - dollar weakened on Friday after data for September showed jobs gains that fell short of expectations while wages increases slowed on an annualized basis during the month, easing concerns about a large run-up in inflation.

    Nonfarm payrolls increased by 134,000 jobs last month, the fewest in a year, though data for July and August was revised to show 87,000 more jobs added than previously reported.

    Average hourly earnings increased eight cents, or 0.3 percent, in September after rising 0.3 percent in the prior month. With September’s increase below the 0.5 percent gain notched during the same period last year, that lowered the annual increase in wages to 2.8 percent from 2.9 percent in August, which was the biggest rise in more than nine years.


    “Wage inflation is creeping higher, but it has not accelerated as the market was fearing,” said Russell Price, senior economist at Ameriprise Financial Services in Troy, Michigan.

    Investors have been watching for indications that wages may rise at a faster pace as companies, including Amazon, raise minimum wages.

    Still, the data was seen as solid and supportive of the Federal Reserve continuing to tighten monetary policy.

    “There is no material slowdown in the U.S. economy. These numbers will confirm the Fed remains on track for steady rate hikes,” said Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Asset Management in Boston.

    Hawkish Fed speakers and strong U.S. economic growth have supported the greenback in recent weeks. A dramatic surge in Treasury yields this week that may attract investors seeking higher returns is also seen as positive for the U.S. currency.

    “Certainly these higher yields are giving a better bid to the U.S. dollar across the board,” said Dean Popplewell, chief currency strategist at Oanda in Toronto.

    Given recent strength, investors are also likely to be cautious about being short the U.S. currency before a long weekend, Popplewell said, adding that “there is good demand for U.S. dollars definitely on pullbacks.”


    It seems that recent report is treated more as positive rather than negative by markets. Take a look at 10-year US bonds yield. Week has closed at top and is coming to our 3.35% target gradually.
    UST.

    CME Fed Watch tool shows that probability of 4th rate action in December has increased from 74,43% week ago to 76,94%.
    Besides, if you take a look at Asia Pacific currencies, such as AUD, NZD - they show opposite dynamic to EUR and GBP. Yes, they stand under tariffs impact and strongly relate to China, still these currencies dropped on a background of NFP numbers.

    At the same time, since reaction was mostly neutral, this brings almost nothing to help us understand what could happen next week.

    Today we do not have big long-term events that could somehow make impact on our long-term view. The one thing that we mention here is Fathom consulting update on US companies that work in China. Now they start to get advantages dropping renminbi and imposing of US tariffs. That could make impact on terms of global crisis that Fathom expects around 2020:

    US-listed firms that derive a significant share of their revenue in China have significantly underperformed their peers in 2018. Fathom’s China Exposure Index (CEI) peaked at 117.3 on 22 March, the day that the US first announced that it would impose tariffs on imports from China; it has now dropped to 100.1, meaning that firms in the CEI have underperformed their US-listed peers by 15% since then. Sino-US trade tensions, a weakening renminbi and China’s slowing economy explain the underperformance.
    An easing of such trade tensions, and a firm commitment by China to open its markets to US firms, would be beneficial for firms in the CEI; we ultimately expect such an outcome to prevail, although a further escalation in trade tensions is a risk. Perversely, an escalation of the Sino-US trade war could delay the global recession that we expect to occur in 2020.

    [​IMG]

    COT Report

    Last week we said that it would be interesting to see, how position has changed due Fed statement. Indeed, it has dropped, but decrease was not strong. Now net speculative position stands short for 7K contracts which is in the range of recent 2 months.
    upload_2018-10-6_13-40-7.
    Source: CFTC.gov
    Charting by Investing.com

    Open interest has increased for ~11,2K contracts. Bearish dynamic in position changing was as among speculators as among hedgers. It means that it is not simple question concerning upward action on daily chart, that we still keep on the table. Although recent sentiment changes are minimal, they stand against EUR.

    upload_2018-10-6_13-43-9.


    Technicals
    Monthly


    Guys, as you understand, we do not have big changes on technical side this week. Trading range was narrow - August range holds action of September and October. Mostly we stand in the same position as on Friday, before NFP release.

    On monthly chart 1.14-1.15 area is strong and very important support, because it includes YPP. Since our fundamental background supports dollar strength within a year or so - downside breakout should happen sooner or later. The fact that EUR has turned down precisely from YPR1 area tells that recent 1.05-1.26 action was an upside retracement within long-term bear trend. And YPP break could become another vital confirmation of this scenario.

    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.
    eur_m_08_10_18.

    Weekly

    Here is on weekly, we correctly suggested drop to major support area last week:
    Here, guys we come closer to next week trading plan. Last week's action significantly simplifies our task on coming week. We've got bearish engulfing pattern and bearish reversal week. This combination gives good chances on downside continuation to 1.1450 area.

    But, despite good trading setup, market leaves our major question without answer. What we should expect - downside continuation or keep our trading plan and count on upside action. Action that we see now stands more in favor of upside leg. May be it will not reach 1.19 as it is shown on the chart, but - downside action was held by MPS1. It means that this is retracement, but not continuation of longer-term bear trend yet. Besides, our crucial 1.1450 support still holds the market.

    It means that weekly picture prevents us from taking any short position until 1.1450 support stands valid. So our context is bullish and we're looking north.
    eur_w_08_10_18.

    Daily

    Daily chart shows a bit tricky picture. Downside action was straight forward, while we've expected AB-CD, more gradual action to 1.1450. Next is - reaction on support and NFP release rather week, at least now. Take a look - Thu and Fri action stands in the range of Wed bearish candle. This was the day of ADP report release and J. Powell comments. And market still stands inside it.

    Finally, take a look that drop was so strong that daily EUR hit oversold level. In fact, here we've got bullish "Stretch" pattern - combination of Fib support and OS. But Stretch is always retracement pattern. What I'm trying to say that maybe 1.1450 is survived not because of real investors demand but because of technical oversold? This is the major concern that we have around weekly/daily setup. Take a look that by DOSC indicator - Stretch is almost done, as its target is zero DOSC level.

    Still all doubts lead us to the same 1.1450 level as a cornerstone of short-term analysis. It's breakout will turn context to bearish. We need to be careful to any bearish signs in the beginning of the week.
    eur_d_08_10_18.

    Intraday

    Here we have two major areas to keep an eye on. First is our Friday's 3-Drive "Buy" pattern, which theoretically should start to work right at 1.1450. Since daily Stretch is mostly worked out already, this could be second test of 1.1450 area, but no daily oversold will be this time. And this will be real test, that will answer on our question concerning this level. If it was due OS - then EUR will drop through it. If not - this will tell us that bullish context is still valid. Anyway, 3-Drive entry point provides best risk/reward ratio for long position.

    Second is an area of WPR1 and 3/8 major Fib level. Breaking above 1.16 will be important bullish sign. So, it should be two chances to go long - either on 3-Drive, or after 1.16 breakout. For bears task is more simple - downside breakout of 1.1450.

    eur_4h_08_10_18.

    Conclusion:

    Narrow action within last 2 weeks barely impacts on long-term scenario. On coming week we hope to get a final direction. The border stands at 1.1450 level.


    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. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    So, our suggestion that EUR probably will re-test again 1.1450 was correct, now we at the point. So today-tomorrow we sould get answer, whether first bounce was due oversold, or indeed there was some buying around it. If EUR will hold above it without OS support, then indeed, some support stands around it. Otherwise, EUR probably will drop down.
    For us it will be decisive moment. Standing above 1.1450 EUR will keep bullish sentiment and chances on upside continuation, otherwise we will be watching for 1.13 target.
    eur_d_09_10_18.

    On 4H chart 1.1450 is also WPS1 and 1.27 extension target of previous upside swing. Still, to be honest guys, previous bounce doesn't look like bullish activity, it's too choppy, short-term. Usually markets reverse differently. Thus, may be we will get upside reaction, but chances on drop are still significant
    eur_4h_09_10_18.

    Today we focus on our 3-Drive Buy pattern. It's minimum target stands at 1.1550, so 100 pips potentially, which is good for 1H pattern. Since market is coming to 1.1450 - this is a moment of decision making on long entry due placement. This is an area where potential loss will be minimal. If you will decide to go long - move stop to breakeven as soon as market will move up for 30-40 pips.
    eur_1h_09_10_18.
     
  3. Stag

    Stag Sergeant

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    The decline should find its bottom preferably around 1.1419, a level where wave circle C traveled ~2.000x green wave circle A and red wave B retraced ~78.6% of the red wave A rally. This would keep alive the red ABC scenario.

    A clear impulsive advance in five waves above 1.1550 would signal red wave B is complete and open the door to higher prices. Any subsequent decline should look corrective with a low above the extreme of red wave B.

    EU_181009_m30.
     
  4. Deltoid88

    Deltoid88 Corporal

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    Hello everyone,

    believe this is good long entry point on EUR/USD as soon as bearish momentum ends, and I think it will end very soon.

    EURUSDkH4.
     
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  5. Deltoid88

    Deltoid88 Corporal

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    Hello everyone,

    my short term and mid term view on EUR/USD. Charts say it all.

    EURUSDkDaily.
    EURUSDkH1.
     
  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    So EUR has passed our first test and was able to hold above 1.1450, which is good for bulls. Now we could think about upside targets. On daily chart price also stands above MPS1. It means that recent drop should be treated as retracement by far:
    eur_d_10_10_18.

    On 4H market stands above WPS1 as well and has shown bounce precisely at the area that we've discussed recently. Now we need some more confirmation from the market - breaking of widening consolidation and moving above WPP, in particular.
    eur_4h_10_10_18.

    EUR now provides a lot of chances for trading. Thus, our 3-Drive has started. It's minimal target is 1.1550 - hence this is our nearest target as well. If you have missed/ignored 1.1450 entry point - watch for retracement to 1.1470 and appearing of H&S or "222" Buy" pattern. This will be second chance for long entry and the deep to buy into.
    eur_1h_10_10_18.
     
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  7. Deltoid88

    Deltoid88 Corporal

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    Hello everybody,

    my short term view on GBP/USD.

    GBPUSDkH4.
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning, guys

    Let's proceed with our EUR analysis. (although now I'm more fascinating with monthly DRPO "Sell" on DJIA :)))
    Anyway, our first 1.1550 target is completed recently, let's discuss what is next.

    On daily, I suppose we have B&B "Sell" LAL. Yes, its not sufficient number of bars in thrust, but candles are rather solid and tail closed, we have W&R on the bottom, so, I would say that B&B has not bad chances to happen today tomorrow:
    eur_d_11_10_18.

    It should start from 1.16 area - 3/8 Fib resistance and WPR1:
    eur_4h_11_10_18.

    As 1H shows - it also will be an Agreement with XOP target of 1.1613. Meantime EUR has completed 3-Drive target and AB=CD OP destination. In few hours we should get technical bounce either to 3/8 or to K-support area. Since upside action has the signs of thrust and we see acceleration right to OP, chances on upside continuation to XOP are good. As soon as XOP will be completed - we will turn to B&B setup:
    eur_1h_11_10_18.
     
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  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    EUR has completed our setup for this week, our XOP target that we've specified almost has been reached. It means that the only setup that we have for today trading is B&B LAL on daily chart. So if you're not tired too much this week, you could try to trade it.

    On daily we have good B&B situation, except one thing - not enough candles in thrust. If we would get 1-2 more - this would be perfect situation. Still candles that we have are extended and overall thrust is not bad, somehow I think that B&B really could work here. EUR right now stands at resistance and rally was good, so profit taking could start today as well:
    eur_d_12_10_18.

    4H chart shows that EUR has done everything well - price stands at major 3/8 resistance area and WPR1.
    eur_4h_12_10_18.

    This is also our XOP (almost), @1.1613. So potentially this is the point where B&B should start. The one thing that we still need is bearish pattern. It could be small H&S, Double Top (if XOP still will be hit and EUR will form W&R), may be "222" Sell. Since we have weaker type of B&B, 1.15 final target could be too far, we'll see. Anyway, even drop to K-support area and ability to place b/e stop will be good result...
    eur_1h_12_10_18.
     
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  10. Stag

    Stag Sergeant

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    The Euro confirmed the expected scenario, the rally from 1.1432 looks impulsive, and it might have ended at 1.1599 as the first wave of a larger recovery. The new top at 1.1610 seems to be corrective in nature suggesting a correction has already been started and it should end after three waves. The pullback may end above 1.1541 but the usual Fibonacci retracement targets rest at 1.1536 and 1.1496. A second impulsive rally would follow.

    A dip below 1.1586 and a move down through the lower boundary of the base channel will signal more downside potential.

    EU_181012_h1.
     
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