FX Indices Analysis for Week 17/09/12

USDX

Monthly: Trend turning down.  The August bearish engulfing candle did, indeed, accurately forecast lower prices on this index.

Weekly:  Trend up but has turned. The last 5 weekly candles have been bearish. The bull weekly trend line and the weekly 200 EMA have been broken. Support, in the form of the 38.2 % fib retrace @78.89, has also been broken. This seems very bearish indeed!

Daily:  Trend down.  Tom Petty is still singing!   For the Daily Ichimoku Cloud chart: Price is still trading well below the ‘cloud’ and, thus, away from congestion.

4hr: Trend down. Like last week .....there ain’t much more to it than that!

EURX

Monthly:  Trend turning back up. August candle was bullish. It really seems like price has bottomed and now turned. You can see from the chart how price is near a strong level of previous S/R though.

Weekly:  Trend turning up. Price has closed above the weekly bear trend line that has been in play since May last year. There is a Bollinger band pointing down toward price that might give continued up move some grief but, other than that, I think I can now hear Willie Nelson singing.....a real blast from the past! http://www.youtube.com/watch?v=GC_KtQ76Bhk. BTW: This is my favourite chart this week.

Daily: Trend up. Price action has been bullish since late July and has now broken out from trading within a symmetrical triangle, where the upper trend line was in play since May last year. Price has also broken through the daily 200 EMA. For the Daily Ichimoku Cloud chart: Price has been out of the Ichimoku daily cloud now for 2 weeks and has given us some great trend trades!

4 hr: Trend up. Price is at the 102 level which is a psychological, whole number and previous level of strong S/R. Other than that.....Willie just keeps on singing......

Thoughts:  Price closed completely out of the Ichimoku clouds on both the EURX and USDX daily charts 2 weeks ago and has given us great ‘risk on’ trading since then! The USD still has more resistance in its path to reverse back to ‘risk off’ than it has with continued falling in ‘risk on’ momentum. This resistance includes the weekly and monthly pivot, the 4hr, weekly and daily 200 EMA, the recently broken weekly bull trend line and the 81.70 S/R level. Added to this, the EURX has a pretty clear path for further ‘risk on’. 

This Fed fuelled rally might have more room to run yet. I am also conscious of the fact that we are moving towards the 4th quarter of a Presidential Election year. These periods tend to be bullish more often than not.  I would not be surprised, though, to see a bit of a re-trace even if ‘risk on’ continues overall. The USDX might re-visit the broken weekly 200 EMA and the EURX might re-visit the broken trend line/ daily 200 EMA level.

I will look for 'risk on' trades if:

• the USDX remains bearish and holds below the weekly 200 EMA AND IF
• the EURX remains bullish and holds above the 200 EMA/broken bear trend line area. 

I will look for 'risk off' trades if:

• the USDX returns to being bullish and closes & holds back above the weekly 200 EMA AND if
• the EURX returns to being bearish and closes & holds back below the daily 200 EMA/broken bear trend line area.