Saturday, October 22, 2011

Indices for week 24/10/11


monthly: Last month’s bullish candle was up almost 500 pips. The candle this month, so far, has retraced almost 50% of that move. This is not surprising after such a previous big move.

weekly: The weekly candle is an inverted hammer candle formation, having formed in a downtrend on the weekly chart. This is traditionally viewed as a potential reversal candle, especially when seen around support levels in a downtrend. The 76 level is certainly a significant support/resistance level for the USDX.

Daily: A large bearish candle formed after 3 days of spinning top ‘indecision’ candles. Price finally broke through the 200 EMA which has been support for the last 2 weeks. Price has retraced down to the 61.8% fib level on the daily chart, which also coincides with the strong support and resistance level of 76.

4hr: Price bounced around for most of last week in a narrow range bounded by 77.5 and 76.5 levels. It struggled to break and hold above the 200 EMA on the 4hr chart. This level is also near the daily, weekly and monthly pivots! Price fell out of being range bound and down through the daily 200 EMA late on Friday. It has since re-tested up to this this level and finished moving down from this point but has stayed above the key 76 level. There is also a descending wedge formation evident on this 4 hr chart. Descending wedge patterns are usually viewed as bearish continuation patterns in a downtrend.

Thoughts: The EU summit this week will probably impact on price action so, any predictions may end up being quite mute! As far as the technical evidence goes though, I will wait and see if the 76 level holds at all. This is a significant level of support and resistance and also the 61.8% daily fib re-trace level and, as such, could hold price up. If price holds up, I would look to long the USD in pairs. A break, close and hold below this 76 level though would be a signal to short the USD.


Monthly: Last month’s bearish candle was almost 500 pips. The candle this month, so far, has retraced to almost 50 % of that move. This is the reverse of the USDX chart.

Weekly: A symmetrical wedge pattern is evident and is still containing price.

Daily: Price struggled to keep moving up past the 61.8% retrace level, 108 level, of last month’s down move. Since bouncing down off that 108 level, price has traded in a narrow range. The last daily candle was a hammer candle after 3 days of indecision candles. Hammers are usually viewed as bullish signals.

4 hr: Price has bounced around between the monthly pivot R1 level of 108 and the main monthly pivot level of 106.6 since mid last week. Price finished the week just resting above the weekly pivot level of 107.4. The 107 level has been a significant support/resistance level in the past.

Thoughts: The EU summit will probably impact this index this week so caution will be needed until outcomes from the meeting are released. I will also wait for price to break out of the current trading range ( 108 – 106.6) before being confident with the direction that this pair will take.

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