Indices Review for week 16/01/2012

USDX

Monthly: Trend up with the current candle bullish. 

Weekly:  Trend up. The previous week’s bullish candle closed above the significant 81 level.  Last week’s candle was an ‘indecision’ Doji with long shadows.  This pause and indecision is not surprising given the current price level.

Daily:  Trend up.  Price has hovered around the strong psychological resistance level of 81 for most of the week.  It touched up at the monthly R1 level again and closed there at 81.43 on Friday.  Price has been supported by a bull trend line on the daily chart now since last October.

4hr:  Trend flat. Price has just hovered around the 81 level.  It closed at around the monthly R1 pivot level.  It is as if it is pausing and trying to make up its mind about whether it wants to keep rallying or to take a tumble. Both DMI indicators are below the 20 level and the ADX is trending down.

Thoughts:  The 81 level is proving to be a strong support and resistance level, all in one.  Price did re-test this level during this past week as suspected.  I will use the ADX to determine the next trend for this index.  I will look to long the USD in pairs if price holds above 81 and a ‘long’ trend is viewed on the ADX.  There does not seem to be too much blocking price from further upward movement past the 81 level. 

I would need to see the USD move back down, close and hold below the daily trend line before I would consider a Short on the USD.

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.  Price has fallen and closed below the bottom trend line of the large symmetrical triangle dating back to May last year, 2010. The current monthly candle is also bearish.

Weekly:  Trend down.  Last week’s candle was an ‘inverted hammer’ though after 5 bearish candles and a triangle breakdown.  Inverted hammer candles, in a downtrend, represent a potential trend reversal or a strong support level.  This is not surprising given the lows to which the EURX has recently reached.

Daily: Trend down.  Price bounced around between the 100.5 and 101.5 level for most of last week though.  The 100 level, just below, is a significant support level. 

4 hr: Trend down. Price bounced up from the daily S2 level late in the week and finished near the monthly S1 level.  Pivots continue to be key levels for both indices. Like for the USDX, both DMI indicators are below the 20 level with the ADX trending down.

Thoughts:  The Euro is still at an extreme low point.  Price did indeed pause this week above the 100 level as suspected.  Although it's only one bullish signal, the weekly inverted hammer candle has me cautious.  I will watch to see if the bearish move on the EURX continues.    I will use the ADX to help determine the next trend for this index.  I will look to short the EURX in pairs if a ‘short’ trend is viewed on the ADX.  I previously stated that I would not look to ‘long’ the EUR though unless it breaks up, closes and holds above the previous trend line, or the current bear trend line but, these are both a fair distance away.  Thus, I will be guided by the ADX to determine if there is a new ‘long’ trend on the EURX as well.