FX Indices Review for 11/06/12

USDX

Monthly: Ranging but currently in uptrend.  Price moved last month to close above the 82.6 level. 82.6 is the 61.7% fib re-trace from the most recent low to the previous high. Price is currently just below but re-testing this break out level.

Weekly:  Trend up. The long upper shadow on last week’s candle correctly pointed to some hesitation. Last week’s candle was bearish.

Daily:  Trend Up.  Price broke through the bull trend line during the week which gave some ‘risk on’ trading. Dean Malone, from Compass FX, pointed out to me during correspondence this week that he noted this price action as looking like a bullish flag pattern. (see extra chart) The pin bar reversal candle on Thursday pointed to a new uptrend which happened on Friday. Friday’s candle looks to be an ‘inverted hammer’ which, in a down trend like this, can point to a reversal back up.

4hr: Trend Up/Ranging. Dean Malone also pointed out to me that my thoughts on a potential H & S pattern here were problematic as the neckline was inclined upwards. H&S patterns are more valid when the neckline slopes downwards. Makes good sense to me, thanks Dean! Price has held above the 81.7 level and has ranged around the significant 61.8%fib level of 82.65 and near the weekly pivot.

Thoughts:  Hopes of QE3 fuelled ‘risk on’ trade early in the week but were dashed on Thurs which sent the USD back up. General positive sentiment though on Friday sent the USD back down. There seems to be little logic as to how, or why, the markets react to various news items and then how this will impact the USD. This makes technical trading rather difficult of late.

I will look to LONG the USD in pairs on valid TS signals if price on the USDX breaks, closes and holds up out of the bull flag pattern, 82.6 and weekly pivot level.

I will look to SHORT the USD in pairs on valid TS signals and if price on the USDX breaks, closes and holds below the bull flag pattern and 81.7 trend line and monthly pivot.

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 re-tested the previously broken 100.5 level. The current new monthly candle is bullish.

Weekly:  Trend down/ranging. The long lower shadow on last week’s candle did indeed point to some reversal! Last week’s candle was bullish and has formed a ‘rail road’ track pattern. Not quite a bullish engulfing pattern but almost.

Daily: Trend down. This chart is almost the inverse of the USDX and, as such, might be forming a Bear Flag pattern. (see extra chart) Thursday’s ‘spinning top’ candle pointed to some indecision and possible reversal which was seen on Friday. 

4 hr: Trend ranging. Price rallied early in the week but failed to break back above the 100.5 area which is also now the monthly pivot. 

Thoughts:  I will look to SHORT the Eur in pairs on new valid TS signals, if the EURX breaks, closes and holds out of the bear flag pattern.

I will look to LONG the Eur in pairs on any new TS signal, if ‘risk on’ sentiment returns and if price can break, close and hold out above the bear flag pattern and above the 100.5 and monthly pivot level.