FX Indices Review 06/02/12

Last week was a period of consolidation and much sideways movement on both the EURX and USDX.  This is what I see developing on the indices for this week from a technical perspective.  Some music to read this by for you...http://www.youtube.com/watch?v=VEZ-m61dBKY&ob=av2n

USDX

Monthly: Trend up, overall, BUT the current new candle, is bearish.  Last month’s candle was bearish as well.

Weekly:  Trend up, overall / turning. We had two bearish weeks and last week was a ‘spinning top’ candle which represents indecision.

Daily:  Down/flat.  Last week there was mostly sideways movement after 10 down/flat days. I mentioned last week that, although I don’t understand the pull back on the USD relative to the euro, it looks technically possible that price could continue down to the 78 level.  This represents almost a 61.8% fib pullback from the last swing high, is the daily 200 EMA, a huge psychological level and previous support/resistance. I still think this is possible.  The pause in price this week actually makes the daily chart pattern look like a bear flag which suggests further down movement.  This suggests a move that would be equal in length to the previous down movement.

4hr:  Trend down/sideways. Price is trading within a narrow range between 79.5-78.5 but still under a bear trend line and the weekly pivot.

Thoughts:  There are further Greek debt talks to come before the markets open again which could trigger some movement and even gaps at market open.  I will wait for price to move out of this narrow trading range before being confident of the next major trend. 

I will look to LONG the USD in pairs on valid TS signals if price breaks, closes and holds above the bear trend line or until there is a new TS signal to go LONG.

I will look to SHORT the USD in pairs on valid TS signals if price breaks, closes and holds below the 78.5 level  or until there is a new TS signal to go SHORT.

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 overall BUT turning.  Last month’s candle ended up forming a long legged Doji which represent indecision.  The newest candle is a small bodied green candle with barely any shadow.

Weekly:  Trend down, but has turned.    Last week was bearish though after 3 bullish weeks.

Daily: Trend up.  I still see that 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.  The current daily chart pattern looks like it’s forming a bull flag pattern.  That is, a pause last week before the next major up move.

4 hr: Trend up, overall.  Price traded downwards this week but in an ever increasingly narrow range.  It is currently trading within a symmetrical wedge/triangle pattern.  These are viewed as continuation patterns when they appear in an uptrend.  They suggest a period of pause, or consolidation, before the next further move upwards.

Thoughts:  I will look to LONG the Eur in pairs on valid TS signals if price breaks, closes and holds above the symmetrical wedge pattern.

I will look to SHORT the Eur in pairs on valid TS signals if price breaks, closes and holds below the symmetrical wedge pattern.