Indices Analysis for week 30/1/12

TS continues to deliver pips!  Here's hoping it continues...something to listen to whilst you read...Aussie kids.....http://www.youtube.com/watch?v=WCcVU_GkqW8

USDX

Monthly: Trend up, overall, BUT the current candle, which has almost closed, is bearish.  BTW...the previous week’s print of a ‘shooting star’ here did point to a continued reversal.  Aren’t technical patterns wonderful...you don’t have to ‘think’ just ‘see’. 

Weekly:  Trend up / turning. The previous week’s bearish engulfing candle was spot on!  Last week was another bearish candle.

Daily:  Flat/down.  We have now had 10 down/flat days.  The previous bull trend line has been broken and there is a new bear trend line in place on this index.   I don’t understand this pullback and the ‘risk on’ rally but that is beside the point.  Trade what you see.  In thinking how far down could this index keep moving, I have applied a Fibonacci retrace.  It is entirely feasible that this index could retrace down to around the 61.8% level which would have it around 77.5.  Interestingly, this is near the daily 200 EMA.  Hmmm...I love it when everything comes together.  Sympatico, synchronicity...whatever...it happens!  Remember though, this is pure technical analysis and doesn’t take Euro zone bombshells into account.

4hr:  Trend down. The ‘Bear Flag’ pattern pointed out last week came through.  Again, this was a simple technical pattern there for anyone to spot! I have a TS signal to go SHORT on this index.

Thoughts:  I will start the week looking to SHORT the USD in pairs on valid TS signals.  I will not look to LONG the USD in pairs until price either breaks, closes and holds above the bear trend line or until there is a new TS signal to LONG.

I keep saying that I don't understand this 'risk on' rally.  I will keep trading what I see though.  I'll trade up on the rallies and down on the pullbacks.  This is the beauty of trend trading.  Identify the trend and, then, trade it.  The challenge for me at the moment is picking the best currency pairs to capitalise on these moves. I'm getting better in that department though!

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 BUT.....  The latest candle, with only 2 days to close, is forming a hammer pattern.  Hammer patterns, in a down trend, often point to a bullish reversal. Seeing this on the monthly chart, if it holds, is very interesting and, for me, surprising.  I just don’t get this ‘risk on’ rally......

Weekly:  Trend down, overall but last 3 weeks bullish.    The earlier ‘inverted hammer’ candle did, indeed, signal the reversal as discussed.  Last week’s candle was another bullish engulfing candle.

Daily: Trend up.  The previous bear trend line has been broken with this latest up move and rally on this index.  We now have a new, bull trend line in place.  In thinking how far up could this index keep moving, I have applied a Fibonacci retrace.  It is entirely feasible that this index could retrace back up to around the 61.8% level which would have it around 106.  Interestingly, as for the USDX, this is near the daily 200 EMA.

4 hr: Trend up.  Last week’s bull flag pattern came through.  Price was in an uptrend for most of the week and finished just below the key resistance level of the monthly pivot at 103.5.  I have a TS signal to LONG this index.

Thoughts:  I correctly spotted the reversal signal for this index 2 weeks ago week with the inverted hammer on the weekly chart.  I will continue to look to LONG the Eur in pairs on valid TS signals. I will only look to SHORT the Eur in pairs if the EURX breaks down, closes and holds below the daily bull trend line.