I correctly 'spotted' the trend change last week and discussed this in my post on the FX indices for last week. The suspected USDX 'double top' did indeed play out. Will it continue though? Here's hoping my technical analysis is as accurate for this week!
USDX
Monthly: Trend still down. The November candle pulled back and closed within the symmetrical triangle. The new December candle, only a couple of trading days old, is also still contained within the symmetrical triangle, albeit only just contained.
Weekly: Trend flat. Price was bearish last week after gapping down on market open. Price returned to the boundaries of the symmetrical triangle.
Daily: Trend flat. Price trended down for most of last week but had been on the up for most of November. You can see from the daily chart that price did form the double top up near the 80 level with a peak from back in early October this year. (The double top was mentioned last week). It remains to be seen whether the trend will continue down or if it will re-test the double top 80 level. The bottom, bull, daily trend line has not been broken yet.
4hr: Trend flat/down. Price trended down for most of last week but had trended up for the previous 2 weeks. Price hung around the daily pivot area of 78.3 for much of the last 2 days of trading where there was clearly a lot of indecision. Price finished the week at 78.61; near a daily and weekly pivot level and just above a psychological level in 78, the main daily and monthly pivots, a trend line and the 4Hr 200 EMA.
Thoughts: I’d like to remind you of my thoughts from last week: “The USDX is approaching a hugely significant resistance area in the 80 level. ....This week could be a turning point. I’m not making trend predictions here at all, I’m simply identifying an important psychological and, thus, significant level for the USDX....” We did in fact get a change in trend last week following almost a full month of bullish action. The question is, will this bearish trend continue or is this just a retreat before another upward onslaught?
I will be watching closely, yet again, to see the impact of further news and whether this can move price above or below the 78 level. Continued up move from the current 78.6 level would have me looking to Long the USD in pairs. A break, close and hold below 78, near the current monthly pivot, would see me looking to short the USD in pairs. I’d be mindful of the 200 EMA on the 4hr though at 77.9.
As always, Fundamentals, by way of Euro zone dramas and news announcements, continue to be triggers for price movement on the indices. These events can always have the potential to undermine all Technical analysis.
EURX
Monthly: Trend down. The November candle formed an ‘inside bar’ candle. Inside candle are often viewed as indecision candles and can also often be an indication of a reversal in trend. Thus, the newish December candle, although only small, is indeed bullish at the moment and may be heralding a reversal in trend to bullish!
Weekly: Trend down/flat. Last week’s candle was also an ‘inside bar’ candle, as with the November monthly candle. This bullish candle follows on from 4 consecutive weeks of bearish candle. Price is also supported by a bottom bull trend line.
Daily: Trend flat/down. Another ‘inside candle’ for Friday but this is probably more an indication of ‘indecision’than anything else. Price trended ‘flat’ to ‘up’ for much of last week compared to ‘down’ for most of November. Price has struggled to break, close and hold above the big psychological 106 level.
4 hr: Trend flat/up. Price bounced up off the bottom bull trend line and traded up for much of the week. Price failed to break up through the 106 level. This level is a huge psychological level, near the daily, monthly pivot and weekly R1 pivot and just below the 4hr 200 EMA.
Thoughts: A break up, close and hold above 106 would have me looking for further reasons to long the EUR in pairs. A break, close and hold below 105.3 weekly pivot area, would see me looking to short the EUR in pairs.
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