Forex FOREX PRO WEEKLY, October 28 - 01, 2019

Sive Morten

Special Consultant to the FPA
Messages
12,733
Fundamentals

As news background has shown some relief this week - it makes impact on markets as well. As EUR as GBP spent time in gradual downside retracement which we've discussed in our daily updates through the week.

The major driving factors mostly stand the same - Brexit, ECB on this week and Fed meeting next week. As we've talked about ECB - it has not brought big surprises, M. Draghi speech mostly was predictable and neutral.

The euro erased its earlier gains on Thursday after business surveys pointed to stagnating economic momentum in the euro zone. The weakness of the region was reaffirmed on Thursday when IHS Markit’s flash composite PMI for October, seen as a good guide to economic health, remained perilously close to the 50 mark that separates growth from contraction and below forecasts.

Despite some optimism from Mario Draghi’s final news conference as president of the European Central Bank, the euro fell against the dollar on Thursday, pulled down by business surveys which point to stagnating economic momentum in the euro zone.

At its policy-making meeting Thursday, the ECB kept interest rates on hold and left its ultra-easy monetary policy unchanged. Weak growth across the euro zone notwithstanding, Draghi said the benefits of loose policy far outweighed the risks and rejected the suggestion that a public split with policy hawks in the bank had tainted his legacy.

Much of Thursday’s focus was on his decision to push through the open-ended bond-buying scheme that will tie his successor Christine Lagarde’s hands for years to come, despite opposition from a third of policymakers. Draghi played down the dissent, pointing out that all moves made in September were backed by majorities and were once again confirmed by the outcome of this month’s meeting.

“We came into the morning thinking that there would be a bit more optimism than usual from Draghi as it is his last meeting, and we didn’t think he would want to end his tenure on a downbeat note,” said Thierry Wizman, global interest rates and currencies strategist at Macquarie Group.

At the same time, there was a mixed data in US as well. New orders for key U.S.-made capital goods fell more than expected in September and shipments also declined, a sign that business investment remains weak amid the continuing fallout from the U.S.-China trade war.

However, another report on Thursday showed the number of Americans filing applications for unemployment benefits unexpectedly fell last week, pointing to a tight jobs market even as hiring and economic growth has slowed.

The major driving factor was Brexit of course. The British pound fell against the U.S. dollar on Thursday following Prime Minister Boris Johnson’s call for a national election.

Johnson said he was asking parliament to approve a national election on Dec. 12 in an effort to break the political deadlock over Brexit and ensure the UK leaves the European Union.

“Is the election positive for GBP? I argue no. The campaign will see polling swings, and investor inflows may slow whilst they wait for the result. It’s why we are long EUR/GBP,” Nomura analysts told clients.

With the Brexit end game more uncertain than traders thought last week, the pound was set up for another rocky period.

Sterling edged down again on Friday as the European Union failed to set a date for Britain’s departure from the bloc while the UK parliament squabbled over Prime Minister Boris Johnson’s call for an election to break the deadlock.

EU ambassadors agreed in principle to a delay beyond the Oct. 31 deadline, but will not decide the length of the extension until Monday or Tuesday, an official said.

A source close to French President Emmanuel Macron said an extension was not justified at this stage.

“France wants a justified and proportionate extension. However, we have nothing of the sort so far. We must show the British that it is up to them to clarify the situation and that an extension is not a given,” the source told Reuters.

Johnson’s spokesman said the government would push ahead with Brexit if lawmakers did not agree to an election.

Labour leader Jeremy Corbyn says he will only support an election if a no-deal Brexit is taken off the table.

“It seems like (there is) this weird feedback loop of uncertainty from the UK parliament leading to the EU not making a decision, leading to the uncertainty in the UK parliament,” said Jordan Rochester, FX strategist at Nomura.

Thu Lan Nguyen, FX strategist at Commerzbank, noted the risk of “running round in circles”.

“We will see more volatility if we have more elections in December - as soon as the date’s set and decided I would expect implied volatility in the one- to two-month horizon to rise again,” she said.

Sterling-dollar implied volatility - expectations of future price swings - on a one-month maturity were down to 9.4% on Friday, the lowest in more than five weeks . But the three-month contract touched a four-day high at 10.2%, as election jitters and fear of prolonged Brexit uncertainty crept in.

“There’s still a focus on the UK and sterling, but that’s going to be a feature for a long time,” said Shahab Jalinoos, global head of foreign exchange strategy at Credit Suisse.

Apart from the ongoing Brexit saga, Jalinoos said the currency market on Friday was relatively quiet.

“At the moment the market is taking a breather on most fronts. The next event that’s a major focus is the APEC summit in the middle of November when the market will want to see what transpires from Phase 1 negotiations between the U.S. and China. That’s far enough in the future that it’s eliminating some reasons to aggressively trade.”

The low volatility environment, he said, is encouraging flows into certain higher-yielding assets like emerging markets and out of the funding currencies such as the Swiss franc and the euro. The single currency was last down 0.14% against the dollar to $1.109.

Some focus will shift next week to the U.S. Federal Reserve’s two-day policy meeting. The central bank is expected to announce on Oct. 30 the third interest rate cut of the year. Money markets have largely priced in a quarter-percentage-point reduction, according to Refinitiv data.

According to recent CFTC data and Reuters calculation speculators cut their net long dollar position in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data
released on Friday.

The value of the dollar's net long position, derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars, fell to $15.31 billion in the week ending Oct. 22, from $20.79 billion the previous week. It is the smallest long dollar position since Sept. 17. In a wider measure of dollar positioning that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real and Russian ruble, the U.S. dollar posted a net long position valued at $15.10 billion, down from $20.38 billion a week earlier.

As on EUR as on GBP we see contraction of net short positions, suggesting of some short covering. On both currencies net short position has decreased for ~ 25K contracts.

upload_2019-10-26_13-13-30.png

Source cftc.gov
Charting by Investing.com


Finally, as we're coming to Fed decision - we need to take a look beyond the horizon a bit, because now nobody is interested in rate cut, but think about far-going perspective. We need to understand what is going on in US economy, as current situation differs significantly from what we saw in the first half of 2019. This is important for us, because our long-term view mostly depends on EU/US economy balance and now we see signs that US component starts floundering, which provides advantage to EUR.

Fathom consulting in their recent report tells that indeed - there are some points of concern.

Fathom Consulting’s latest Global Economic and Markets Outlook (GEMO) central scenario envisages a continued pause in global trade growth, resulting from the ongoing uncertainty around the US and China’s trading relationship. Though this will — and has — been a drag on GDP, we see investors’ fears of a global recession as overblown.

Our estimates point to a sharp reversal in trade growth, from 2% above trend in the middle of last year to 2% below trend now. While this fall is significant, it pales in comparison to the Global Financial Crisis, which was the deepest global recession in decades. The effects of the slowdown have not been distributed evenly. Countries more exposed to trade and those with larger manufacturing shares have been the worst affected, as the tendency for manufactured goods to be traded across borders leaves the sector especially susceptible to swings in international trade. It is therefore hardly surprising that industry has slipped into recession across the OECD economies. By contrast, the services sector has (thus far) remained relatively cocooned from this shock.

To study the distribution further, we constructed a model using bilateral goods exports flows between 171 countries. It showed that, of the major advanced economies, Germany is the most susceptible to a slowdown in global trade, and its vulnerability has doubled since 2000. This is partially captured by the higher share of GDP now accounted for by goods exports, as demonstrated in the chart below. The model predicts that a 1 percentage point reduction in world trade would knock nearly 1.2% off the level of German GDP in the long run.


In comparison, the US would emerge relatively unscathed. The US’s closed economy is also marginally less vulnerable than it was in 2000. As seen in the chart below, a divergence has emerged between the growth rates of the US and Germany. Though this also reflects the fiscal stimulus package, in the form of corporate tax cuts, delivered by the US government towards the end of 2017, the hard data coming out of the US has been more stable. In GEMO, we forecast 2019 growth of 2.3% and 0.4% in the US and Germany respectively. The IMF has recently revised down its projections closer to our view, cutting forecasts of both economies by 0.2 percentage points to 2.4% and 0.5%.



Our risk scenario entails things deteriorating further, causing productivity and investment to fall and ultimately leading to a global recession. We estimate that the 15-percentage-point rise in trade’s share of global GDP since 2001 increased total factor productivity by 9%. If firms, who can see the long-term impacts of the trade slowdown on productivity, believe the trade slowdown will get worse from here, they will cut investment immediately due to lower marginal product of capital. This could lead to a reduction sharp enough to push the global economy into a recession.



There are indeed signs that investors are getting nervous. The S&P 500 regularly changes track in line with trade news. Fathom’s US Economic Sentiment Indicator (ESI), which uses a variety of surveys to create a composite measure of confidence, has dropped sharply in recent months. As mentioned above, this is partly due to the boost of fiscal stimulus coming to an end but is exacerbated by trade tensions. Governments are aware. The Trump administration has negotiated so-called ‘mini deals’ with China and Japan to reassure businesses that it does want an eventual end to the trade war that it started. These deals are not long-term solutions however and must be followed with substantial agreements to truly rule out our risk scenario. If not, these tensions could herald new era of beggar-thy-neighbour policies and trigger a sharp fall in globalisation. This is not our central case, but its likelihood is increasing.

Technicals
Monthly


As we're coming to the end of the month - we keep an eye on technical issue here, on monthly chart, which could be important for November performance. Briefly we've mentioned it in one of our videos last week. This is bullish reversal month.

To make it confirmed EUR has to close above September top. In October price already has formed greater top but now it still stands below September high. At the same time, next week is Fed meeting and statement. Something tells me that its comments will be more dovish which keeps chances on upside action. Reversal month could become the first step in long-term direction changes but its short-term effect - continuation of upside action in November. That's what is important for us right now.

All other things stand equal by far. As we've mentioned earlier - market right now stands at crucial area from technical point of view. This is the middle of the range and YPS1. Once EUR will break it - road to the bottom of the range around 1.03 area will be opened. Conversely, if EUR, by the end of the year will be able to hold above YPS1 - 2019 action could be treated as retracement of 2016 - 2017 rally. And EUR will keep chances on extension in 2020.

Neither big support nor oversold levels stand around and it is free space till 1.03 lows. The only support is YPS1 and middle of the range. That's major technical support here.

Now the major intrigue stands around fundamental background - it is changing. It is interesting whether its change will be strong enough to make impact on monthly chart and long lasting tendency here. As economy in EU hardly will improve soon - the major driving factor depends on US - how better/worse situation will be there.

eur_m_28_10_19.png


Weekly

Trend stands bullish on weekly chart. The drop of this week stands due technical reasons on daily chart. In fact, we've talked about them through the whole week. Here is 1.1109 level - the top of September, which EUR has to exceed by the end of the month to form bullish reversal month.

Technically, the nearest barrier here is 1.12-1.1235 area. It includes Fib level ( actually this is daily K-resistance), and upper border of the channel. Market is not overbought here. Next level is stronger and it stands at K-resistance of 1.1450-1.1520 area, and accompanied by OB level.
eur_w_28_10_19.png


Daily

It seems that our suggestion on retracement was correct. Indeed, reversal candle has triggered downside continuation, and now as EUR as DXY stand at major 3/8 Fib levels. On DXY previous thrust looks better than on EUR and there we also have mentioned B&B "Sell" setup.

On Monday EUR should start flirting with MACDP line. Appearing of bullish grabber is welcome to us. Now we consider whether it makes sense to take long position here.

eur_d_28_10_19.png


Intraday

Short-term bullish scenario is based on "222" Buy pattern on 4H chart. Now the only thing is unclear - where the final reversal point will be. Based on AB-CD pattern - it should be around XOP of 1.1040 level, because OP target is passed already. At the same time XOP stands below K-support area and it is not the fact that it will be reached.

This combination of factors tells that we could consider position taking around 1.1065 K-support area, while stop anyway has to be placed below XOP. Appearing of daily grabber on Monday will be additional plus for us.
eur_4h_28_10_19.png


Our Friday setup has been completed as well - EUR has reached 1.618 butterfly target. Thus, on Monday our first step will be to watch how market will response on 1.1065 K-support. 1.1040 area is also WPS1. So, our area for possible long entry is 1.1040-1.1065.

eur_1h_28_10_19.png


Conclusion:

There are two major fundamental factors on the table that probably will set direction till the end of the year, or maybe on longer perspective. This is Fed statement and pool of events that stand around Brexit - date, December elections, Brexit agreement approvement in Parliament.

While there is some silence around Brexit by far and Fed is coming on first stage - we have expectations that Fed will provide supportive background to EUR. Technical picture on EUR is also positive.
 

sveckar22

Private, 1st Class
Messages
47
Hi guys, we are getting some clearer indication of the sentiment of Non-Commercial traders looking at this week’s report.


GOLD:


Not many changes in the GOLD report, little increase in Long positions and a little decrease in Short positions, overall Net Positions have increased.

27.10.19 GOLD.JPG



DXY and EURO:


On the DXY we see Long positions decreasing for the fourth week now, Short positions have increased slightly this week, but they still remain below 13 Periods Average but a further increase in Short positions in the following week could really add to a Bearish sentiment on DXY. The ratio between Long and Short positions is still bullish but have decreased from the previous week substantially, Net Positions have been decreasing as well.


On the EURO we see an increase in Longs and a decrease in Shorts, which is slowly shifting ratio between Longs and Shorts in neutral territory, but considering the DXY report, I would expect more strength for the EURO compared to the US DOLLAR in the near future, supporting Mr. Sives view.

27.10.19 DXY.JPG



27.10.19 EUR.JPG



AUD:


A small decrease in Longs and small decrease in Shorts, overall the Net Positions have been increasing, now that the OP target has been hit, I will be watching how deep this possible retracement will be, maybe we will get some bullish patterns on lower time frames for another possible long entry, I will also be closely watching what will happen if the price will come back to 0.68800 area.


27.10.19 AUD.JPG




27.10.19 AUD D.JPG



CAD:


The sentiment is turning Bearish again on USD/CAD as we see a decrease in Longs and a big increase in Shorts, the sentiment is turning from neutral to bearish and Net Short Positions are increasing.


This is what I am looking at on the Weekly and the Daily chart. On the daily chart, we see a collapse from 1.33500 area, with almost no retracement except from the 0,38 FIB retracement from B to C, and then market moved to the downside with numerous tail closings. XOP target on the daily coincides nicely with the bigger OP target on the weekly chart.

27.10.19 CAD W.JPG




27.10.19 CAD D.JPG




GBP:



Longs have increased and Short have decreased quite substantially, we can also see Shorts decreasing constantly for the last seven weeks. The ratio is still suggesting a Bearish sentiment, but with such volatility and Political mess I don’t feel comfortable trading GBP at the moment, but I am closely looking it and taking notes, I am very interested to see what will happen with Brexit eventually:D


27.10.19 GBP.JPG


JPY:


We can see now for the third consecutive weekly increase in Longs and decrease in Shorts, also Net Positions have been increasing and are now in ‘’positive’’ territory.


Looking at the price action around 108.500 where the market is coiling around the top without forming a retracement I would suggest some more upside action/continuation this week.



27.10.19 JPY.JPG



27.10.19 JPY D.JPG
 

Sive Morten

Special Consultant to the FPA
Messages
12,733
Hi guys, we are getting some clearer indication of the sentiment of Non-Commercial traders looking at this week’s report.
Hi buddy,
thanks for CFTC update, it is important for many our forumers. I forgot to say last time... Try to take a look at net position performance together with Open Interest and you will see a lot of interesting things...
 

sveckar22

Private, 1st Class
Messages
47
Hi buddy,
thanks for CFTC update, it is important for many our toforumers. I forgot to say last time... Try to take a look at net position performance together with Open Interest and you will see a lot of interesting things...

I am glad my analysis is useful for some people. I will keep posting it. Thank you, will take a look into it.
 

Sive Morten

Special Consultant to the FPA
Messages
12,733
Morning guys,

It's not big progress yesterday overall. As EUR has not formed our perfect scenario, i.e reaching of 1.1065 level and forming bullish grabber here - we follow to our basic view that we've talked about in weekly report:
eur_d_29_10_19.png


This scenario suggests reaching of 1.1040-1.1065 area, where we will consider long entry, if price action will be gradual. We are not sure that EUR definitely will hit XOP target, but it is necessary to us, because of stop placement. Despite we could consider entry above XOP, say, around K-area, our stop has to be below XOP anyway.
Yesterday EUR has formed bearish grabber here, overall price action stands slow, thus, currently we do not have any signs of reversal and still keep watching on downside continuation:
eur_4h_29_10_19.png


Hourly chart also shows an action that more suggests retracement. Market has turned down right around K-resistance area, and we should not surprise if some reversal pattern will be formed here, such as butterfly "Buy":
eur_1h_29_10_19.png


That's been said, we just follow our trading plan that we've discussed in weekly report.
 

sveckar22

Private, 1st Class
Messages
47
Morning guys,

It's not big progress yesterday overall. As EUR has not formed our perfect scenario, i.e reaching of 1.1065 level and forming bullish grabber here - we follow to our basic view that we've talked about in weekly report:
View attachment 45117

This scenario suggests reaching of 1.1040-1.1065 area, where we will consider long entry, if price action will be gradual. We are not sure that EUR definitely will hit XOP target, but it is necessary to us, because of stop placement. Despite we could consider entry above XOP, say, around K-area, our stop has to be below XOP anyway.
Yesterday EUR has formed bearish grabber here, overall price action stands slow, thus, currently we do not have any signs of reversal and still keep watching on downside continuation:
View attachment 45118

Hourly chart also shows an action that more suggests retracement. Market has turned down right around K-resistance area, and we should not surprise if some reversal pattern will be formed here, such as butterfly "Buy":
View attachment 45119

That's been said, we just follow our trading plan that we've discussed in weekly report.
Mr. Sive on a day like today, when market formed double bottom so close to FIB support K area, would you still consider a high probability of market moving down to that area? Of course, situation is tricky on this particular day since we have FED meeting tomorrow and some spikes could lead to market moving down to that area.

ED 29.10.JPG


Also, I would like to show everybody a thread on FF. https://www.forexfactory.com/showthread.php?t=216247&page=318 I don't visit FF anymore except for this thread, this thread is active for almost 10 years now, although the author doesn't go into deep analysis of his trades and CFTC report anymore, there is still a lot of useful information in his earlier posts in this thread, and he now shows his trades from time to time.
 

Sive Morten

Special Consultant to the FPA
Messages
12,733
Mr. Sive on a day like today, when market formed double bottom so close to FIB support K area, would you still consider a high probability of market moving down to that area? Of course, situation is tricky on this particular day since we have FED meeting tomorrow and some spikes could lead to market moving down to that area.
Hi mate, today's update is dedicated precisely to this subject. Shortly speaking - I prefer to wait for pullback and see what will happen. For details - keep reading.

So, our trading plan this week is dedicated to reversal process around 1.1065 area, at least this is how we initially expected this and discussed in weekly report. In fact, everything is in place, except the pattern that will trigger reversal. That's what we've discussed yesterday.

The result of previous trading session is reversal candle on daily chart. It means that maybe this is it, what we were looking for - reversal pattern. Appearing of reversal type of action in this place absolutely irrational for bearish setup. Market is not at any support. In fact, price stands in free space. But the way how price is moving right now absolutely doesn't correspond to normal bearish behavior. It means that indeed, market starts forming bullish reversal pattern:
EUR Daily chart
Unfortunately guys, here is some problem with FPA server - today I provide charts through google disk.

ON 4H chart action mostly reminds a kind of double bottom pattern or something:
EUR 4H Chart

Finally 1H gives us more information. Take a look at the price shape - it has started from strong collapse, then retracement stands and then market has tried to continue downward action but it couldn't not. This inability was replaced by strong rally. This is typical combination for reversal. And the pattern that we could get is reverse H&S, with double head.

Taking in consideration this pattern and its nice harmony - now we could wait for right arm's bottom around 1.11 area. This expectation will give us chance to check the bullish strength as well, because we need gradual, slow retracement, but not a collapse again. If everything will be OK and may be we even will get "222" Buy pattern - then it will be precisely the pattern that we're watching for.

1H EUR Chart
 

Robban68

Corporal
Messages
95
Hi mate, today's update is dedicated precisely to this subject. Shortly speaking - I prefer to wait for pullback and see what will happen. For details - keep reading.

So, our trading plan this week is dedicated to reversal process around 1.1065 area, at least this is how we initially expected this and discussed in weekly report. In fact, everything is in place, except the pattern that will trigger reversal. That's what we've discussed yesterday.

The result of previous trading session is reversal candle on daily chart. It means that maybe this is it, what we were looking for - reversal pattern. Appearing of reversal type of action in this place absolutely irrational for bearish setup. Market is not at any support. In fact, price stands in free space. But the way how price is moving right now absolutely doesn't correspond to normal bearish behavior. It means that indeed, market starts forming bullish reversal pattern:
EUR Daily chart
Unfortunately guys, here is some problem with FPA server - today I provide charts through google disk.

ON 4H chart action mostly reminds a kind of double bottom pattern or something:
EUR 4H Chart

Finally 1H gives us more information. Take a look at the price shape - it has started from strong collapse, then retracement stands and then market has tried to continue downward action but it couldn't not. This inability was replaced by strong rally. This is typical combination for reversal. And the pattern that we could get is reverse H&S, with double head.

Taking in consideration this pattern and its nice harmony - now we could wait for right arm's bottom around 1.11 area. This expectation will give us chance to check the bullish strength as well, because we need gradual, slow retracement, but not a collapse again. If everything will be OK and may be we even will get "222" Buy pattern - then it will be precisely the pattern that we're watching for.

1H EUR Chart
Since we were not able to get a Daily Bullish SG at the beginning of the week I suspect there will be another leg down to complete the XOP on the 4Hr. Can be tricky 3 days to trade. FED decision, Month-end and NFP in combination with a new fresh month.
 

RogerTC

Corporal
Messages
106
Guys,

Wanna share some of the new stuff that i use for easy money ))

Below is the thrust scanner dashboard. Basically scans for thrust pattern in all timeframes/pairs filtered.

Thrust Scanner Dashboard.PNG


And this one is macd predictor dashboard which shows the trend in all timeframes/pairs filtered.

TrendScanner Dashboard.PNG


Based on above informations we can quickly identify the pairs that we need to analysis.

AUD/CAD has decent thrust in 4hr timeframe and trend is up in higher timeframes (Daily/Weekly)

We can either wait for B&B trade or use Thrust Trade Plan by going 2 timeframes lower and fading the sell signal on good support.

AudCd 4hr Thrust.PNG


Regards,
 

Sive Morten

Special Consultant to the FPA
Messages
12,733
Below is the thrust scanner dashboard. Basically scans for thrust pattern in all timeframes/pairs filtered.
Roger, whether you buy scanner separately, or it is in our MT5 indi pocket?
And what's the price of all this stuff?
People could be interested with it.
 
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