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FOREX PRO WEEKLY, September 17 - 21, 2018

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Sep 15, 2018.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    Today in fundamental part of our research we will take a look at perspectives of US recession in 2020, which also, as usual could impact on the global market. There are some interesting coincidences in markets on EU and US, that could increase effect.

    In short-term, we see dollar reversal again. As Reuters reports this has happened due to upbeat U.S. economic data and safe-haven demand on reports U.S. President Donald Trump wants to slap duties on $200 billion of Chinese goods. Higher Treasury yields also lifted the dollar with the 10-year yield touching 3 percent for the first time in six weeks.

    Reports that Trump told aides to proceed with tariffs on Chinese goods came after Chinese officials welcomed an invitation from Treasury Secretary Steven Mnuchin for new talks to resolve the Sino-U.S. trade conflict. The reports pushed China’s offshore yuan even lower after initially falling on mixed economic data.

    “Generally today’s data showed strong results, which are supporting the dollar,” said Brian Daingerfield, macro strategist at NatWest Securities in Stamford, Connecticut.

    U.S. domestic retail sales rose 0.1 percent in August, the smallest gain in six months, but July figures were revised higher, supporting the view of solid consumer spending in the third quarter.

    The University of Michigan’s U.S. consumer sentiment data in early September and last month’s industrial output gain also proved to be bright spots.

    “You’re just going to get a stronger dollar. It’s not going to be temporary,” said Alicia Levine, BNY Mellon Investment Management’s chief strategist in New York.

    Friday’s data offset this week’s disappointing inflation data, which caused traders to cut their bets inflation is accelerating but did not change their view the Federal Reserve would raise interest rates later this month, analysts said.

    Chicago Fed President Charles Evans on Friday cautioned the central bank’s rate hikes would take a toll on U.S. growth by 2019.

    The first of three Brexit summits are set in the coming week, where EU leaders hope to settle an agreement for departing Britain within the next two months.

    Now let's gradually turn to our major topic, probable US crisis in 2020. Now we get very positive data from US across the board - employment, inflation, consumption and sentiment are looks very strong. Rate is rising. GDP shows unbelievable pace for developed country - above 3%. Now the major question is - how long this party will last...

    We're not smart enough to take in consideration all fundamental and statistical issues, so let's see what professionals think about it.
    Thus, Fathom consulting supports idea of US and dollar domination during nearest 1-2 years probably, but crisis, as they think will happen due US economy overheating.
    The new article from Fathom, that dedicated to this issue explains everything in details. Here we bring some extractions from the article.

    The event began with a presentation of Fathom’s central, or most likely scenario, which sees the US economy begin to overheat after several years of above trend growth, triggering a recession in 2020. This is not a rerun of the global financial crisis, rather it is a story of good old-fashioned boom and bust. With most of the advanced economies unable to loosen materially either monetary or fiscal policy, the US takes much of the global economy down with it.
    [​IMG]
    The difficulty, as we see it, is that the US economy is growing and is set to continue to grow at a rate that is unsustainable. In our judgement, the trend rate of growth of the US economy is somewhere in the range 1.0%-1.5%
    If we are right, both about the starting point for the output gap at the end of last year, and about the pace of economic growth in the US relative to trend both this year and next, then output will move substantially above potential over the next year or two. Other things equal, that will cause US inflation to rise over the coming months. There are already signs in the New York Fed’s underlying inflation gauge, which tends to lead both core and headline CPI measures by a year or two, that pressures are building.

    [​IMG]
    We have developed our own model of recessions, not just in the US but across 17 advanced economies. It includes, in addition to the slope of the yield curve, a range of other macroeconomic and financial market indicators, such as the level of debt in the economy relative to GDP, and our own estimate of the output gap. Feeding in our forecasts for these indicator variables we find that, by the end of 2019, the chances of a US recession will be as high as they have been in the past 60 or more years. This empirical analysis supports the decision we took three months ago to make a US-led global recession in 2020 our central macroeconomic scenario.

    What other signs we see that could confirm or deny this issue. Well, last week we've talked about massive gold buying by emerging markets and repatriating of gold reserves by developed ones. Hardly this is just occasion.
    [​IMG]
    [​IMG]
    You do not read our gold reports guys ;), but last week we've talked about China and another report by Fathom, which forecasts China economy chill out to the pace around 3%, which is more typical for developed countries, due fall of consumption.

    If we take a look at statistics of money flow on equity funds and US government bonds funds, then we see real tendency of inflow to bond funds:
    Interestingly, fund investors have injected some $39.5 billion net YTD into government-Treasury funds (consisting of the Lipper classifications below), in line to be the largest one-year net inflows into this group on record. Despite learning that wage growth in the recently released nonfarm-payrolls report for August had accelerated (often considered to be a precursor to inflation and generally a drag on fixed income fund valuations), investors continued to pad the coffers of Lipper’s Short U.S. Treasury Funds (+$14.1 billion net), Inflation-Protected Securities Funds (+$11.6 billion), and General U.S. Treasury Funds (+$13.8 billion) classifications.
    So, despite the strong YTD returns for equities, we continue to see taxable bond funds (+$115.7 billion net) handily outdrawing equity funds (+$59.4 billion). Investors are taking a more cautious stance, with the most recent bull market’s advance being in its ninth year—the longest bull market since World War II.

    [​IMG]
    Italy will have to re-finance 30% of its national debt in 2020. This really could lead to big problems if problems with liquidity will come. Even now, Italian debt volatility is rising and this is warning sign.

    Finally, we could add some technical pictures here. Once I already have shown you German DAX and NASDAQ index, which have completed all time long-term targets.

    Here is NASDAQ:
    [​IMG]

    German DAX - completed all time XOP and forming huge H&S pattern, with small H&S on weekly chart at the top of the head.
    [​IMG]

    Finally, my favorite DJIA chart, which I'm looking right now:
    DRPO "Sell" right at top of large AB=CD pattern, which could be finalized by weekly butterfly "Sell" pattern:
    [​IMG]
    All these thoughts are just a hypothesis, of course, but since we have a lot of issues of different kind, it is definitely worthy to keep on eye on this scenario.

    COT Report

    Recent CFTC data shows increasing of positive view on EUR perspectives. At least net position turns positive again for 11K contracts, but open interest has dropped for 9K. Again, as last week, growth is achieved by short covering of speculative positions, rather than new money inflow in long EUR positions.
    Technicals
    Monthly


    Monthly chart brings nothing new to technical picture yet, as September is started as inside month.

    So price still stands at yearly Pivot and we said that this is more the range rather than precise number. Now we see that price feels some gravitation around it and it will be particular interesting and important what reaction price will show on it. This is major 50% Support area as well.

    In general reaction that we see within recent 1-2 weeks was not bad and it seems that our expectations are started to realize by price action. This level 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. Price has problems with breaking borders of any consolidation, but it has no barriers inside and could freely move from up to bottom.

    Another important moment here - our pennant. In fact, EUR shows right now failure breakout, "bearish trap". Usually it least to opposite breakout, which corresponds to our view on weekly chart.

    On Friday EUR has got solid hit, and now we need to estimate either this was a knockdown or it will become a knockout .
    eur_m_17_09_18.

    Weekly

    As we've mentioned last week, EUR shows pullback inside "Morning star" pattern body. This is common practice that happens in 80% cases, when morning star or engulfing pattern been formed. We have mixed result of two weeks action. EUR still can't break through 1.1750 resistance, but, at the same time, it doesn't show deeper pullback and stands around 3/8 Fib support area, which is good.

    As we've mentioned previously once bearish reversal swing has been formed - market turned to reasonable upside bounce from major 50% Fib support, weekly Oversold. Last week we recognized here morning star pattern, which suggests upside continuation in a shape of AB-CD pattern on lower time frames. Our approximate target of this action is at least to 1.19 area.
    eur_w_17_09_18.

    Daily

    So, drop on Friday was not a surprise for us. In our Friday update we've said that market has reached multiple intraday targets and could show a pullback on profit taking. At the same time, the speed of drop is a bit greater than we've expected and it doesn't look purely like retracement.

    On daily we almost have got reversal session. This drop is too fast for common reaction on intraday targets, which could mean that something else stands behind it.

    Particular this doubts make us think that we could get deeper drop and AB=CD action down, which in result could give us "222" Buy pattern.

    eur_d_17_09_18.

    Intraday

    We could accept this reaction if EUR, say, would reach COP target, or at least wash out previous top, but nothing of this kind has happened. On 4H chart we need to keep an eye on triangle trend line. If market will break it down again - this will be important sign that confirms "222" daily idea.
    eur_4h_17_09_18.

    Hourly chart shows more bearish signs. Market as broken our K-support, and, what is more important, natural support/resistance area around 1.1650. Action is straight down, that totally erase previous upside candle. Now market stands at 50% support (not shown) and trendline, it also will open right at WPP - this could lead to minor upside bounce for 30 pips probably. But taking it all together, I suspect that chances on drop back to 1.15 or even lower, to 1.1465 major 5/8 area are extremely high.
    eur_1h_17_09_18.

    Conclusion:


    Long situation has not changed much. Our monthly and weekly trading plan stands without big changes by far.
    In shorter-term, although EUR keeps bullish context valid, we expect deeper pullback and appearing of different pattern on daily chart now.


    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. Butcherfx

    Butcherfx Corporal

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    in cable we've got the quarterly in a buy. It is the third bar after trend change and we dont see strong dynamic pressure recently. We have two more weeks to the close of the quarterly bar. On the other side a new ABC developing and if the market can move higher there is massive resistance ( OP agreement + confluence zone) up at around the 1.50 area

    ad.PNG


    The monthly is in a sell and the 0.618 support holding for now.

    GBPUSDMonthly.


    Looking at your weekly; trend turned into a buy with very good initial follow through on this buy signal. First good resistance stands at 1.3160-65ish which is agreement of 0.618 fib resistance + 1.00 fib expansion and more resistance higher up 1.3317 and 1.34 respectively.


    GBPUSDWeeklyre.

    On the daily as you see market couldnt reach the 1.3165 level yet so it is probably gonna be buying opportunity on the lower timeframes for a move up to that level.


    GBPUSDDailyres.

    You can see the perfect 0.618+ 0.382 confluence support levels on the 4hour to long the market for short term..

    GBPUSDH4.

    So cable looks strong on the short term but it s bearish on the long term. We have weak dynamic pressure on quarterly buy; monthly trend is in a sell and weekly buy signal can be faded by monthly traders at strong fibonacci resistance levels.
     
    #2 Butcherfx, Sep 16, 2018
    Last edited: Sep 16, 2018
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  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Excellent insight. Thanx Rodge.
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    Yesterday's action has changed situation drastically again. Just on Friday we said that drop is irrational and could trigger deeper retracement, even maybe to 1.1465, and now situation again could change for 180 degrees.
    At the same time we have to say that it was early notice given by market that our weekend scenario probably will not be realized, but we will talk about it a bit later, on 1H chart.

    On daily, guys, we've got bullish grabber, which suggests upside breakout of 1.1730 area. While it stands valid, taking of short position is dangerous. There are some stops somewhere about 1.1730 area, thus, they could help market to reach next resistance area of 1.1780-1.1820:
    eur_d_18_09_18.

    On 4H chart EUR has not completed our bearish condition as well - price didn't return back inside triangle, and keeps it valid. It means that we still could use our AB=CD pattern and butterfly. Both of them have target at 1.1790 - inside daily K-resistance and create Agreement.
    eur_4h_18_09_18.

    Now on 1H chart. Right on Monday morning, we've got powerful hint from the market that bearish action will not follow. Take a look that EUR has formed not B&B "Sell", but DRPO "Buy" and keep valid our trend line support. This was strong hint, and we didn't get any bearish setup for trading.

    Now market has completed minor ab-cd COP target. In fact, we have "222" Sell, so EUR could show some pullback. Since "a" point is daily grabber's lows, it is possible to watch for bullish continuation patterns here, say, "222" Buy, as usual. Next target is ~1.18 daily resistance. Invalidation point for this setup, as we've said is yesterday's 1.1617 lows.
    eur_1h_18_09_18.
     
  5. Butcherfx

    Butcherfx Corporal

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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Great analysis Rodge, thanks.
    I'm rare watch on Yen, and your insight is more than welcome.
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    Yesterday action was mostly positive as EUR has completed minimal target of the grabber. Later price droped a bit. At first glance it could be treated as bearish W&R, but now price stands tight under the top and this is not typical behavior after W&R. So, it seems that EUR still keeps bullish context here.
    eur_d_19_09_18.

    Still, on intraday charts we have enough short-term bearish setups. Thus, on 4H chart, although our AB-CD pattern and butterfly are still valid, and they will be valid if even EUR will show some deeper retracement, but we have bearish divergence here and reversal candle.
    eur_4h_19_09_18.

    On hourly chart we also have double divergence of different tops and inability of the market to reach opposite border of the channel. It could mean that deeper retracement could follow. Now market stands at trend line support and K-area, showing reasonable bounce up.
    If this area will be broken, next support is 1.11625.
    eur_1h_19_09_18.

    In general we do not exclude that EUR could re-establish upward action right from here, it is possible. But we have a lack of bullish signs right now. While bearish signs are enough to trigger another minor leg down.

    So, personally I need a bit more bullish signs for taking long position - either rally up, moving to the top, or appearing some clear bullish continuation pattern.
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Today we just can't ignore situation on GBP, guys. Brexit negotiations keep strong potential for FX market due EU/UK future border. Once, in April we've put detailed analysis on this question. If you haven't read it or just forgot why this question is a cornerstone - here it is:

    https://www.forexpeacearmy.com/comm...ro-weekly-april-23-27-2018.55168/#post-312960

    Now, political rating of T. May is quite low in Britain right now and probably she already know whether she will leave its post or not. Anyway, based on process that we see in Brussels today, I could make three conclusions:
    1. UK will try to postpone border decision as long as possible;
    2. Border problems stands mostly for UK rather than for EU, because whatever decision will be made - UK will hurt. Hardly T. May would like to stay in history as prime minister who splited Ireland or GB economic space in two parts...
    3. Hence any decision on border will be negative for UK.

    Technically, market has completed our target that we've put two weeks ago. Our "222" Sell pattern is completed. Cable stands right under strong daily K-resistance:

    gbp_d_20_09_18.

    On 4H chart "CD" leg of our AB=CD pattern is a butterfly "Sell", which also has been completed. Now price stands at WPR1 + MPR1 area, and this is very important. We know that once PR1 holds the retracement - bearish trend is valid and upside action is treated as retracement. It means that if GBP will fail to break MPR1 here and drop - this could lead to re-establishing of long-term monthly/weekly bearish trend...
    gbp_4h_20_09_18.

    But, as usual, we will start with minor things and targets. On 1H we see some rounding action inside the channel, which could be a sign of exhausting of bullish power. Broadening top includes bearish engulfing pattern. All this stuff creates not bad context for short entry. Since we have 4H butterfly pullback should be at least to 1.3050 K-support area. May be we will get even a kind a diamond top here.
    Anyway, watch for "222" Sell pattern, which could provide good oportunity for first bearish trade here. What to do next we will see later.
    Daily traders could think about taking short position with stops above daily K-resistance.
    gbp_1h_20_09_18.
     
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    Our yesterday GBP setup was vanished by market as price has jumped above existed resistance. No political factors were involved yet in recent Brussels meeting. Still, on daily price stands at K-resistance and we need to pay attention to this moment.

    Today we will take a look at EUR. In general, it has completed our task for the week. Daily K-resistance is reached, grabber is completed:
    eur_d_21_09_18.

    On 4H chart you can see our major AB-CD pattern and its COP target. Butterfly 1.27 extension has been completed as well. Both targets agrees with daily K-resistance area. This combination creates good background for temporal pullback.
    eur_4h_21_09_18.

    Hourly chart shows arrox. the same situation. Here is we have butterfly look-alike shape and 1.618 extension also has been achieved.
    The one thing that could bring surprises is OP target of AB=CD pattern. Currently we definitely could say that its not the time for long position, but, if you plan to go short, try to get two things on your back - hourly bearish reversal pattern and place stop above OP. EUR could show occasional spike to complete it, but it could keep reversal scenario at the same time. Just to not be washed out occasionally - take this moment in consideration:
    eur_1h_21_09_18.
     
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