Forex FOREX PRO WEEKLY, September 06 - 10, 2021

Sive Morten

Special Consultant to the FPA
Messages
15,139
Fundamentals

This week market society mostly was watching for NFP data as it should have to clarify what to expect from the Fed on September meeting. And data has given the answer. But the one thing was mostly missed and passed unsigned that is also important - spike of inflation in EU. This topic now is taking the first place as we're coming to ECB meeting on September, 9.

Market overview

The euro inched back towards the previous session's one-month high on Wednesday as a higher-than-expected inflation reading pumped up bond yields, forcing investors to cover their bearish bets on the single currency. Strong institutional demand at bond auctions from Greece and Germany also underpinned the euro's gains.

Euro zone inflation surged to a 10-year-high in August with further rises likely, challenging the European Central Bank's benign view on price growth and its commitment to look past what it deems a temporary increase.

Data on Tuesday showed that consumer inflation in the 19 countries sharing the single currency accelerated to 3% year-on-year in August, the highest in a decade, above the European Central Bank's 2% target and a 2.7% forecast in a Reuters poll.

The reading sent yields on German benchmark debt to their highest levels since late July. The increase was fuelled by energy costs, but food prices also surged, while there were unusually large increases in the prices of industrial goods too, according to Eurostat, the EU's statistics agency.

The jump in bond yields forced traders to halt their multi-month streak of U.S. dollar purchases versus the euro. Net short bets against the greenback versus the single currency have fallen to their lowest levels since March 2020, according to the latest positioning data.

Implied volatility gauges on the single currency also flickered to life, with one-month maturities rising to their highest levels since early July as expectations grew that the ECB might signal a policy shift at a meeting next week.

Markets mostly shrugged off the data, with stocks rising and yields increasing just a basis point or two, suggesting the narrative of temporary inflation and ultra-easy central bank policy for years to come remains the central one. Still, the numbers are likely to make for uncomfortable reading at the ECB.

The central bank has repeatedly raised its inflation projection this year only for the actual numbers to beat its forecasts, and price growth now seems likely to peak only in November. With inflation in Germany, the euro zone's largest economy and the ECB's biggest critic, expected to approach 5% in coming months, the bank is likely to come under increasing public pressure to address price developments that are reviving long-dormant memories of runaway prices.

Robert Holzmann, governor of Austria's central bank, said the ECB was in a situation where it could think about reducing emergency bond purchases, and that he expected the issue to be discussed at the meeting.

Analysts believe the lack of sustained euro strength is based on current ECB forward guidance that suggests asset purchases will continue until rate hikes are necessary, indicating the stimulus program might be expanded next year.

The ECB argues that a slew of one-off factors including production bottlenecks related to the economy's reopening after the COVID-19 pandemic account for the bulk of the inflation surge, and that price growth will quickly moderate early next year.

"The effects of re-opening and supply problems could intensify in the next few months. But we suspect that they will begin to fade next year as global consumption and trade patterns return to something like their pre-pandemic norms," Capital Economics said in a note. We think the headline rate will drop to about 2% in January and trend down throughout 2022 to end next year at around 1%," it added.

"Unless euro area economic data post consistent upside surprises in coming months, it is hard to get excited about the idea of persistently rising euro area rates, and by extension a strong upward trend in euro/dollar," Credit Suisse strategists said in a daily note, sticking to their year-end forecast of $1.16.

Longer-term market based inflation expectations are also holding well below 2%, even if they have moved steadily higher this year. ECB policymakers agree and predict that inflation will languish well below the bank's target for years to come, so they even reinforced their commitment last month to keeping monetary policy exceptionally loose to generate price pressures.

Speaking to Reuters last week, ECB chief economist Philip Lane argued that these inflation surprises still did not challenge his views about the temporary nature of price pressures as wage growth, a necessary component of durable inflation, remained muted.

While ECB policymakers are acknowledging that they underestimated price pressures in the near term, they continue to point to weak underlying inflation readings as supporting evidence for loose policy.

Core inflation, however, also surged in August with inflation excluding volatile food and fuel prices accelerating to 1.6% from 0.9%, while an even narrower measure that also excludes alcohol and tobacco, rose to 1.6% from 0.7%.

The ECB will next meet on Sept. 9 and must decide on the pace of its bond purchases over the coming quarter. While some adjustment is possible, Lane argued that it would be at the margins as the ECB is committed to maintaining "favourable financing conditions". After Tuesday's reading, not all observers are quite so sanguine.

"This is not to say that there is no upside risk to the inflation outlook," ING economist Bert Colijn said. "So hold tight: inflation has the potential to go higher from here."

"We have seen numbers that argue against keeping policy so low for so long and that has been helping the euro... it is certainly going to heighten the focus on the QE debates next week when we hear from the ECB," said Manimbo, senior market analyst at Western Union Business Solutions in Washington DC.

German Bundesbank President Jens Weidmann said euro zone inflation risks overshooting ECB projections and the central bank should prepare for the end of its 1.85 trillion euro Pandemic Emergency Purchase Program (PEPP).

Euro zone business activity remained strong last month, IHS Markit’s survey showed, suggesting the bloc’s economy could be back to pre-COVID-19 levels by year-end despite fears about the Delta variant of the coronavirus and widespread supply chain issue.

The European Central Bank will meet next week amid calls from several hawkish members to slow down its pandemic-era purchases programme. A Reuters poll sees the bank announcing a cut to its asset purchases, given a recent spike in inflation.

The dollar fell against a basket of major currencies on Wednesday after a report on the U.S. labor market missed expectations by a wide margin, while the euro climbed to a one-month high on inflation worries.

The greenback fell after the ADP National Employment Report showed private payrolls rose by 374,000 in August, up from 326,000 in July but well short of the 613,000 forecast.

"Certainly the recovery has been uneven but if nonfarm payrolls should also disappoint, that would seemingly close the door to an imminent taper and keep the dollar in a bit of a funk," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington DC.

The dollar has been under pressure since Friday, when Fed Chair Jerome Powell said at the Jackson Hole conference that while tapering could begin this year, the central bank was in no hurry to raise interest rates.

Concerns about rising COVID-19 cases denting the economic rebound could also serve to keep the central bank from scaling back stimulus.

Other data showed U.S. manufacturing activity increased more than anticipated in August, but a measure of employment in factories fell to a nine-month low, likely due to a shortage of workers.

The euro held near a one-month high versus the dollar on Thursday and a six-week peak against the pound, supported by hawkish comments from ECB policymakers after data showed inflation at a decade high and on signs the Fed is not hurrying to tighten policy.

The dollar has been on the defensive over the past couple of weeks as doubts have crept in about when the Federal Reserve will start unwinding its stimulus. Fed chair Jerome Powell said last Friday the jobs recovery would determine the timing of asset purchase tapering. Dovish comments from Powell and other Fed policymakers in addition to data misses have seen the greenback index lose around 1.4% versus a basket of currencies since hitting nine-month highs on Aug. 20.

The euro has in contrast witnessed supportive data flow, including strong manufacturing growth and inflationary pressure from supply-chain snarls. Fresh figures on Thursday showed factory gate prices in the 19-country euro bloc rose 2.3% month-on-month for a 12.1% year-on-year surge, well above what was forecast.

Investors say EUR could struggle to make headway, possibly because ECB guidance has suggested asset purchases will continue until rate hikes are necessary.

"Leveraged funds were short euro-dollar so since Jackson Hole we have seen some of those shorts being covered, but the move doesn't look violent and there are still decent numbers of people looking to go short again," said Stephen Gallo, European Head of FX strategy for BMO Capital Markets. As long as the dollar doesn't have a reason to weaken, I don't think the euro on its own will break out significantly to the top side."

The dollar fell for a fourth straight day against a basket of other major currencies on Friday after a much weaker than expected U.S. payrolls report that is likely to keep the Federal Reserve at bay in scaling back its massive stimulus measures.

Nonfarm payrolls increased by 235,000 in August, well short of the 728,000 forecast by economists in a Reuters poll, while the unemployment rate dipped to 5.2% from 5.4% in the prior month

Rising COVID-19 cases in recent weeks have brought on concerns the economic recovery could stall. The jobs data will likely keep the Fed on hold.

"It adds more concern or focus on the October number, because now we want to see if there is a trend," said JB Mackenzie, managing director for futures and forex at TD Ameritrade in Chicago. (The Fed) is trying to telegraph that if the economy continues to heat up and they need to take action, they will, and that transparency is important to the markets and that is one of the main reasons you continue to see not a huge reaction to the downside here because the market feels as though they have been given that clear direction. Mackenzie said the 92 level was an important support level for the greenback after having bounced back from that level in early August.

Separately, data from the Institute for Supply Management showed activity in the services sector grew at a moderate pace in August, with signs that rising prices and supply constraints were beginning to ease.

Economists have been sharply marking down their gross domestic product estimates for the third quarter. Reasons cited include the resurgence in infections, driven by the Delta variant of the coronavirus, and relentless shortages of raw materials, which are depressing automobile sales and restocking.

Surging COVID-19 cases could also have kept some unemployed people home, frustrating efforts by employers to boost hiring.

"The Delta variant is like a sandstorm in an otherwise sunny economy," said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. "If it weren't for that, employment in August would have been even higher."

Jim O'Sullivan, chief U.S. Macro Strategist at TD Securities in New York, who was forecasting a 400,000 rise in payrolls in August, does not believe this would be weak enough for the Fed to back away from their "this year" signal.

"But it would probably increase the probability of a formal announcement coming at the December rather than the November meeting," said O'Sullivan. "We certainly don't expect an announcement at this month's meeting, even if the August data are stronger than expected."

"At some point production should pick up, allowing for the restocking of inventories and supporting sales, but it is unclear exactly when this will occur," said Daniel Silver, an economist at JPMorgan in New York. "The recent spread of the Delta variant and persistence of broader supply chain issues has generated some downside risk to the near-term outlook."

Analysts at Morgan Stanley in the past week cut their view on third-quarter U.S. gross domestic product to a gain of 2.9%, from a 6.5% increase.

The pandemic has upended labor market dynamics, creating worker shortages even as 8.7 million people are officially unemployed. There were a record 10.1 million job openings at the end of June. Lack of affordable childcare, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government as well as pandemic-related retirements and career changes have been blamed.

There is cautious optimism the labor pool will increase because of schools reopening and government-funded benefits expiring on Monday. But the Delta variant likely delayed the return to the labor force for some.

"While we believe the trend in labor force participation is higher due to reopening and mass vaccination, we expect a pause in August due to concerns around the Delta variant," said Spencer Hill, an economist at Goldman Sachs in New York.

Other details of the Labor Department's closely watched employment report on Friday were fairly strong, with the unemployment rate falling to a 17-month low of 5.2% and July job growth revised sharply higher. Wages increased a solid 0.6% and fewer people were experiencing long spells of unemployment.

This points to underlying strength in the economy even as growth appears to be slowing significantly in the third quarter because of the soaring infections, driven by the Delta variant of the coronavirus, and relentless shortages of raw materials, which are depressing automobile sales and restocking.

"It is important to keep the right perspective," said Brian Bethune, professor of practice at Boston College. "Given the supply chain constraints and the ongoing battle to lasso COVID-19 to the ground, the economy is performing exceptionally well."

The initial August payrolls print has undershot expectations over the last several years, including in 2020. Payrolls have been subsequently revised higher in 11 of the last 12 years.

"The August payroll figures have historically been revised higher in the years since the Great Recession, sometimes significantly, and there's a good chance this effect will occur again this time," said David Berson, chief economist at Nationwide in Ohio.

That, together with raw materials shortages, which are making it harder for businesses to replenish inventories, prompted economists at Goldman Sachs and JPMorgan to slash third-quarter GDP growth estimates to as low as a 3.5% annualized rate from as high as a 8.25% pace. The economy grew at a 6.6% pace in the second quarter.

Economists did not believe the pullback in hiring was enough for the Federal Reserve to back away from its "this year" signal for the announcement of the scaling back of its massive monthly bond buying program, given strong wage growth.

"For the Fed a taper announcement is still likely coming in either November or December," said Michael Feroli, chief U.S. economist at JPMorgan in New York.

How Delta has darkened the economic outlook
(By Fathom consulting)

At the beginning of the year there was widespread optimism for the outlook for 2021. Vaccine rollouts were starting to accelerate across most western economies. However, the combination of a more transmissible variant of the COVID-19 virus (Delta), and the fact that the vaccines, while efficacious against illness, do not entirely prevent infection or halt transmission, mean that even highly vaccinated countries such as the UK continue to face elevated infection and fatality rates for the time of year. Meanwhile, countries in the Asia-Pacific region which had previously succeeded in near-eliminating COVID have now imposed tight restrictions and are struggling to contain cases. Risks to the economic outlook thus remain higher than was hoped.

As the vaccines have weakened the link between cases and severe illness, we continue to assume that countries with high vaccination rates will not return to lockdowns, despite Delta. Countries like the US and the UK do however continue to face downside risks due to the potential for voluntary changes to behaviour. Indeed, the recent increase in cases stateside appears to have had this effect, with consumer confidence slumping in August and high-frequency data pointing to reduced spending on high-contact activities such as dining. However, it is too early to draw firm conclusions.

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If Delta poses danger to highly vaccinated countries, it risks much worse in countries with large susceptible populations. Indeed, some star performers during the first part of the pandemic have struggled this year. Successful strategies in 2020 tended to involve imposing non-pharmaceutical interventions early in order to drive cases to zero or near zero, coupled with border restrictions in order to ensure new waves were not seeded. Many countries in the Asia-Pacific regions followed this playbook, with positive results: in Australia, China, New Zealand, Korea and Taiwan, early intervention prevented sustained negative health outcomes, which in turn allowed economies to reopen earlier and for longer.

But things have changed. The Delta variant has proved capable of piercing previously formidable defenses. So far, China is the only country that has been able to successfully contain a Delta outbreak back to zero. By contrast, Australia and Vietnam are both facing sustained case increases despite stringent restrictions. The presence of large susceptible populations, due to slow vaccine rollouts and low natural immunity, means that these countries are ripe breeding grounds. Meanwhile, both have calibrated their response to be highly sensitive to rising cases, meeting relatively low caseloads (by international standards) with extremely stringent restrictions. The direct effects of these policies risk being exacerbated by indirect effects from continued pressure on supply chains, that cause global shortages in key components and put upward pressure on prices.
1630742958401.png


As a result of the Delta variant, there are downside risks to both demand and supply, raising the specter of slightly weaker growth but relatively firm prices — an unfortunate and unwelcome trade-off for policymakers. However, these risks are likely to prove temporary. Public health experts continue to believe that COVID-19 will eventually reach a point of endemicity, with some winter waves larger than others, but most likely to be small enough for us to cope with without significant disruption. Until that point arrives, the virus will continue to influence demand and supply, making the jobs of investors and policymakers trickier than usual.

COT Report

Numbers of this week look a bit surprising as we were expecting to see rising of net long position on EUR due Wyoming statement. But, data shows the opposite picture - net long position has decreased more. Although open interest barely has changed and hedgers activity was low. The fact that dollar weakness doesn't support the rivals makes us think that we see market reaction on other global problems. It is reasonable to suggest overall slowdown and fears of Delta spreading that it could impact on economy:
1630745084727.png

Net long position is keep going down, despite J. Powell recent comments. It means that we high degree of certainty we get no changes in dynamic despite weak NFP report.

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source: cftc.gov, charting by Investing.com

To be continued...
 

Sive Morten

Special Consultant to the FPA
Messages
15,139
Next week to watch

#1 ECB meeting

The European Central Bank meeting ends on Thursday, and a deluge of recent comments from policy hawks suggest it is set for a lively debate.

Euro area inflation has surged to a 10-year high at 3%. Markets may be willing to overlook noise around price pressures, generally viewed as temporary, but the hawkish chatter from German, Dutch and Austrian officials is reason for unease.

Economists reckon it’s still too early for the ECB to call time on emergency stimulus, but it could on Thursday agree to slow the pace of its bond buys. If markets interpret such a step as hawkish, the euro and bond yields will likely rise. ECB chief Christine Lagarde has a communication challenge on her hands.

#2 US PPI Release

Just how sticky is the latest bout of inflation? Friday’s U.S. August producer price index data could provide some clues after July showed the largest annual increase in over a decade as inflation pressures undercut the Fed’s view that higher prices will likely prove transitory.

The big jump in PPI came as the swift economic recovery caused a mismatch between supply and demand, leaving producers grappling with low inventories, higher commodity prices, a global shipping container crisis and increased labour costs.

Some worry that persistent signals of rising inflation could push the Fed to roll back easy money faster than expected. Fed chair Jerome Powell has repeatedly said the current inflation burst is temporary and assured markets that policymakers would take a measured approach to tapering monthly bond purchases.

# 3 China trade data

While the Fed lays the groundwork for tapering, talk of easing has cushioned the disappointment from poor economic data in China, where the recovery momentum has all but run dry.

Trade data on Tuesday is likely to cap a run of weak releases, most recently showing manufacturing growth at a standstill last month while services contracted - all of which is beginning to make the yuan’s strength look stretched.

Economists, bouncing stocks and rallying bond markets suggest easing before the year is out, probably via cuts to banks’ reserve requirement ratio.

Beijing’s policymakers may need to pay special attention to property developers if they want to see growth and lending flowing again follow a crackdown on indebtedness that has set them and their lenders reeling.


So, it seems we could recognize some new shape of global markets' behavior. It stands just in the starting point but first signs are already visible. Recall that once we've said long term Dollar Index target at 87.40 the concern on how DXY could reach it doesn't leave us. It was a big riddle as no suitable background was on the market that could make the achieving of this target possible. Now we could approximately tell or better to say suggest how it could happen.
First is, US situation. Last week we said that not NFP report is a decisive moment, and if even we would get good numbers - anyway it doesn't mean that we get tapering announcement in September. The broader picture is important. And broader picture shows slowdown in China and massive fear of Delta spreading. It takes more significant role as an economy factor and even J. Powell talked about it in Wyoming.

What are the key moments of passed week? Lower NFP is the first one. Now everybody will keep an eye on whether this is new tendency or not. What if NFP is turning on downside trend? We suggest that September numbers will be better because of seasonal factor. Anyway if NFP slowing down it could mean that pre-pandemic level employment gap closing postpones on unknown time, and Fed ratio of participated people longer remains under 80-85%. Now we could suggest that Fed tapering announcement happens not earlier than in November and tapering starts only in 2022. Here you could read Investors' reaction on NFP data.

Second is US GDP forecast. The "Big Three" (GS, MS and JPM) together decreased the forecast for 3rd Q GDP drastically, almost twice. We've , mentioned it above. With decrease of GDP, inflation theoretically also should ceil.

Finally is Delta. Fathom suggests that it hits global economy anyway:

"As a result of the Delta variant, there are downside risks to both demand and supply, raising the specter of slightly weaker growth but relatively firm prices — an unfortunate and unwelcome trade-off for policymakers. However, these risks are likely to prove temporary. Until endemicity arrives, the virus will continue to influence demand and supply, making the jobs of investors and policymakers trickier than usual.

With this environment and wobbling US statistics month by month, it is difficult to justify rate change for the Fed. Especially when they pay lower attention to inflation, thinking that it is temporal (and maybe they are right), paying more attention to employment that could remain depressed longer than it was seemed just few months ago. Now investors worry that NFP can't support the pace of 600K per month on average and scare of further drop in numbers on next month.

These things make us suppose that US stands even in more dovish environment than market society thinks. And as tapering announcement as policy change could start significantly later, not in 2023 as it is expected, based on CME Fed Watch tool (Fed Fund rate futures curve). Probabilities of rate change on Feb, 2023 has dropped, although they are still stand in favor of 0.25% rate hike.
Probability has increased for ~10% that rate remains unchanged (35.2% last week vs 43% this week).

EU now meets the same problem and fascinating of investors that US met few months ago - inflation. As it was said above -inflation could peak in November. With inflation in Germany, the euro zone's largest economy and the ECB's biggest critic, expected to approach 5% in coming months. Reuters poll suggests that ECB should start contraction of its PEPP Programme. Political risks in Germany have no direct impact on situation but still could play some role later (Germans head to the polls in what could be a momentous Sept. 26 election as Chancellor Angela Merkel steps down after 16 years in power).

As a bottom line with these two factors watching together - fading of US hawkish mood and rising inspiration around EU inflation could let markets to complete long-term targets, including DXY 87.40. The new twist in fundamental background seems to be supportive for risky assets and dollar rivals, including cryptocurrencies for longer term than it was suggested initially. Currently this twist is not visible yet and looks fragile as investors do not believe in EUR and its net position is dropping. If we're correct in our conclusion, we should see the change of this trend soon.

Technicals

Monthly


From technical point of view, we're stepping in most interesting stage. Formally trend is bearish as MACD looks down, but price was able to stay above YPP and formed fake triangle breakout. Monthly technical patterns always reflect fundamental picture because this is long-term chart and coming few months might be decisive. With Fed tapering postponing and deteriorating US statistics and rising EU inflation with possible PEPP contraction could trigger upward reversal. And it could happen as soon as September 9.

Now, technically a least, EUR gets that chance to move inside the triangle. It means way is open at least to 1.2150-1.22 area of upper border of the pattern.

In general technical vital points provide big range to act for bullish context. While market stands above 1.06 low it keeps chances for bullish action. Drop below 1.09 YPS1 will be the strong sign, but right now, a bit deeper retracement doesn't mean yet that everything is over.
eur_m_06_09_21.png


Weekly

On Friday we said that it might be very important session for EUR because of weekly chart setup. But EUR has not quite reached the price level and grabber here has not been formed. Still, with coming ECB meeting and price flirting with MACD around major Fib resistance level could bring some surprises, especially if ECB position again will be flat.
We could say that everything is great if we wouldn't have uncompleted downside OP target. Here, on weekly - price action is absolutely reasonable - it tests K-area and now shows upward bounce with the "222" shape. Could OP be ignored? Sometimes yes, if fundamental background takes drastic shift. So this is the major concern right now and hopefully on 9th of September we should get a little bit more clarity.
Next vital point for EUR here is 1.20 area. In a case of upward breakout we clearly could talk about upward continuation and set new upward targets on monthly chart.
eur_w_06_09_21.png


Daily

Here is the major pattern that should clarify everything - reverse H&S. Failure of it leads us back to OP, but if it starts to work, OP probably will be ignored as upward action happens on a back of fundamental changes. Currently price stands at major 3/8 resistance and near daily Obought area so, it is not very comfortable to consider long entry around it. To do it we need wait for the pullback, preferably to an area of supposed bottom of the right arm:

eur_d_06_09_21.png


Intraday

So, on a way up all targets are completed right around strong resistance area that we've specified on Friday - hourly XOP and 1.618 extension of XA swing. So, it would be perfect to get drop right to 1.1760 Fib level where the right arm's bottom should be. Another strong support we have at 1.18 where X-top stands as well. Theoretically, if very strong data or information appears - EUR could turn up earlier, but initially we aim on classic scenario.

On intraday charts theoretically is possible to take short position as well - but a bit later when it becomes clear the reversal process. Now EUR just has hit the top and has not formed yet any bearish reversal patterns.

eur_4h_06_09_21.png
 

Sive Morten

Special Consultant to the FPA
Messages
15,139
Morning everybody,

So, yesterday market was relatively quiet and it means either investors worry of ECB sessions result or indicates bullish sentiment when retracement stands lazy and very slow. Currently I'm more tending to the first idea as COT report shows that investors are leaving EUR. As we've said Reuters poll tells that ECB should announce or even start PEPP contraction this time as inflation is peaked in EU and could reach 5% by November. As we know EU bonzas like to save money and do not like to spend (recall how difficult was adoption of 1.8 Trln PEPP) - so, maybe indeed we hear something about it.

Meantime market stands tight under resistance and we see nothing to do on long side. We've agreed to wait for pullback, preferably if it takes the shape of reverse H&S. But, as price has not reached yet even nearest Fib support - it is not time for action yet:
eur_d_07_09_21.png


On 4H chart downside action develops slowly, and we have very small AB-CD pattern that suggests OP around 1.1830 area, while XOP hopefully stands around K-area of 1.18 - this is at least something. Let's see what the next step will be, but right now it is early to think about long entry here as well.
Maybe only some scalp bearish setups on 15-min chart could be found.
eur_4h_07_09_21.png
 

Sive Morten

Special Consultant to the FPA
Messages
15,139
Morning everybody,

As you can see - EUR keeps downside retracement. Actually there is nothing new on the market, supposedly delta fears and speeches from Fed governors on tapering announcement have provided additional impulse here. Anyway, it makes no big change to daily chart that we've discussed already. Here we're watching for reverse H&S.
Meantime, we could get shorter-term setup, which is B&B "Buy". Upward action looks shy here, but this is only relative to previous big swings. In fact - we have 10 bars in thrust and all of them above 3x3 DMA. So, scalp B&B is possible here:
eur_d_08_09_21.png


OP target on 4H chart is completed already, now let's keep watching for XOP. Once it will be hit, price appears to be at Agreement and K-support area, matching to previous top support as well. So, this is an area to consider entry with daily B&B setup. Target is as usual - 5/8 upward bounce.
eur_4h_08_09_21.png
 

Sive Morten

Special Consultant to the FPA
Messages
15,139
Morning everybody,

So, actually today we have only two major subjects. First is potential action to 1.1620 - recall the OP and on Dollar Index, our 3-Drive pattern keeps perfect ratios, so it still could work if ECB totally ignore PEPP contraction topic and recent inflation spike. EUR could drop:
1631175717135.png


So, do not hurry up to buy EUR right now, if you trade on daily and higher time frames. Second is - our B&B "Buy" short-term trade on 4H chart. Everything is ready to start - at least XOP is completed and price right at K-support area. Thus, if you like it - you could try. Hopefully it hits the 5/8 pullback target before ECB...
eur_4h_09_09_21.png
 

Sive Morten

Special Consultant to the FPA
Messages
15,139
Morning everybody,

So, ECB is appeared to be useless once again. I've been watching the press conference and C. Lagarde has given no answer whether this PEPP tapering becomes a tendency and when PEPP will be closed. This provides no information for the medium-term perspective, but single tapering was mostly priced-in. This explains why we've got no reaction again on ECB.

As a result not too many objects we could discuss today. First is, H&S on daily remains the same - we just watch whether it will be formed or not. Second is, our B&B on intraday charts. Take a look - today we could get a grabber that is supportive to B&B setup. But - later in the session we get US PPI report. It could bring volatility as inflation statistics now stands in focus...
eur_d_10_09_21.png


Here market is bouncing up from the support are but not too active. So be aware of PPI release later in the session:
eur_4h_10_09_21.png


Unfortunately on 1H chart we also have no bullish reversal patterns around 4H K-support that's worry me a bit. And, in general price action is looking like bearish flag by far. But, maybe weaker PPI lets EUR to creep to 1.1868 area:
eur_1h_10_09_21.png


So, decide - if you have B&B long position, whether to close it, or move stop to b/e or just do nothing, waiting PPI and maybe daily bullish grabber...
 
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