FX Indices Analysis for 03/09/12

USDX

Monthly: Ranging but currently in uptrend.  Price is still stuck under the monthly 200 EMA @ 84.16. The August candle has just closed and was a bearish engulfing candle. I consider this to  be pretty significant. There hasn't been a bearish engulfing monthly candle for some time and these candles usually, but not always though, spell bearish action.

Weekly:  Trend up. The last two weekly candles have been bearish engulfing candles.

Daily: Trend up overall but ranging for the last few weeks. Price has closed below the weekly bull trend line. This is a significant break as this trend line has been in place for 12 months. There is the daily 200 EMA below price at the 80.71 level. For the Daily Ichimoku Cloud chart: Price is still trading below the ‘cloud’.

4hr: Ranging/down/turning? Price has broken down through the weekly bull trend line that forms the symmetrical triangle pattern. 

EURX

Monthly:  Trend down. August candle has closed and was bullish.

Weekly:  Trend down. As for last 2 weeks: Price action could either be simply consolidating, after a major low, and about to turn back up OR forming a bear flag! Most confusing!

Daily: Trend overall is down but turning. Price action has been bullish since late July and is supported by a bull trend line. For the Daily Ichimoku Cloud chart:  Price has closed just up above the cloud, ever so slightly. 

4 hr: Trend ranging upwards. Price has moved up slightly and is trading above the bull supporting daily trend line, the weekly and monthly pivot and 4hr 200 EMA.

Thoughts:  There are 3 bullish signs that are evident after this week; at least as far as I am concerned:

1. The monthly bearish engulfing candle on the USDX.
2. The break of the supporting bull trend line on the daily USDX chart and
3. Price action on the Ichimoku Indices charts: below the Cloud for the USDX and emerging just out of the Cloud for the EURX.

Price has closed out of the Ichimoku clouds on both the EURX and USDX daily charts suggesting a possible clear path for ‘risk on’ trading. The USD has a lot of resistance in its path if it is to reverse back to ‘risk off’. This resistance includes the weekly and monthly pivot, 4hr 200 EMA, the recently broken weekly bull trend line and the 81.70 S/R level. Although, the daily 200 EMA is just below current price. All of this might be moot though as technical events, and patterns, may be subsumed by fundamental events with a significant ECB meeting scheduled for later this week. BTW: There is a public holiday in the US and Canada on Monday.

I will look for 'risk on' trades if:

• the USDX holds below the weekly bull trend line AND if it can hold below the daily Ichimoku USDX Cloud AND IF
•  the EURX remains bullish and emerges fully from the daily Ichimoku Cloud. 

I will look for 'risk off' trades if:

• the USDX returns to being bullish and breaks back above the weekly bull trend line AND if
• the EURX returns to being bearish. There are barriers to further down movement on the EURX in the form of the 4hr 200 EMA, monthly and weekly pivot 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.