Indices for the week 14/11/11

USDX

Monthly: Trend down. The current candle is forming an inverted hammer pattern. These patterns are viewed as bullish reversal signals when they appear in a downtrend. The candle has some time to go before it closes though.

Weekly: Trend down. Last week’s candle was a long legged Doji which reflects the indecision that is in the market at the moment. Price opened and closed the week at much the same level.

Daily: Trend flat. Price has been bound up in the narrow trading range of 77.5 – 76.5 for most of last week, escaping only briefly from this on Wednesday and Thursday. In fact, these levels have contained price for much of the last 2 months!

4hr: Trend flat. Price finished the week, yet again, at the 77 strong psychological level which also still happens to be the monthly pivot and 4hr 200 EMA level and just above the weekly pivot level. The daily 200 EMA is just a bit lower too at 76.5.

Thoughts: We continue to see fundamentals, by way of Euro zone news announcements etc, rocking price action on the indices and FX pairs in sharp and alternate directions. This volatility is making it difficult to trade, from a technical perspective, on the longer time frames (4hr + charts). There is currently a positive, ‘risk on’ sentiment approach to FX based on some recent good news out of Europe, especially news from Italy. This good news sent the USDX tumbling and boosted the EURX over the last 2 days of trading. It is anyone’s guess though as to how long this positive bias will last so, caution continues to be needed with trading this coming week. Attention to risk and trade management is paramount at all times but especially so during volatile times like these.

I will be watching, yet again, to see the impact of further news and whether this can move price out of the narrow trading range of 77.5-76.5. A break and close above 77.5 would have me looking to Long the USD in pairs. A break and close below the 76.5 would see me looking to short the USD in pairs.

EURX

Monthly: Trend down. The newish candle for this month is still bearish and fairly small. Price action is still being held within the larger of the symmetrical wedge patterns.

Weekly: Trend down. Last week’s candle was almost a hammer. The long tail revealing just how sellers dominated much of the week. Hammers are often viewed as reversal signals when they appear in downtrends like this one. To contradict this potential bullish sign though, the smaller symmetrical wedge pattern has been broken which could be viewed as a bearish sign! Hmmmm....curiouser and curiouser!

Daily: Trend flat. The 106.5 – 107.5 levels have held price action on this index for much of the last few weeks. The bottom trend line of the smaller symmetrical triangle was broken during last week and is currently being re-tested.

4 hr: Trend flat. Price finished the week back at the bottom edge of the recent narrow trading range of 107.5 - 106.5. Price finished off at the monthly pivot level and just under the 4hr 200 EMA. The last 4 hr candle was an indecision Doji candle.

Thoughts: I will be watching to see the impact of further news and whether the ‘risk on’ approach continues into next week’s trading. I continue to want to see price move out of the narrow trading range of 107.5-106.5. A break and close above 107.5 would have me looking for further reasons to Long the EUR in pairs. A break, close and hold below the 106.5 would see me looking to short the EUR in pairs.