FX Indices Review for 24/09/12

Fundamentals might spell 'bearish' but the Technicals look bullish!

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. Last week was the first bullish week for some time. Price is still under the weekly 200 EMA and looking bearish though. This weekly candle has formed an 'Inside Bar' candle pattern. “Inside Bar’s” are consolidation candles and viewed as ‘flashing lights’ that something big is about to happen. They are considered to be bearish signs when they appear in a down trend such as this with the USDX. I've cut'n'pasted some info about these at the bottom of this post.

Daily: Trend down. Price still, at this stage, looks to be forming either a ‘bear flag’ or starting a new uptrend. Friday's candle was an indecision pin! For the Daily Ichimoku Cloud chart: Price is still trading well below the ‘Cloud’ and, thus, away from congestion but it is embedded in the cloud on the 4hr Ichimoku chart.

4hr: Trend down, but with a pause. Price is holding above the weekly pivot for the time being. Is this a ‘Bear Flag’ or the beginning of an uptrend though? I will be guided by trend line breaks out of the flag pattern, up or down.

EURX

Monthly:  Trend turning back up. August candle was bullish. The September candle is still bullish too. It really seems like price has bottomed and now turned.

Weekly:  Trend turning. Price has closed back below the significant weekly bear trend line that has been in play since May last year though. This week’s candle was an ‘Inside Bar’ candle too. They are viewed as bullish signs when they appear in an uptrend such as what we have on the EURX.

Daily: Trend up. Price looks to be forming a bull flag. Price has struggled to move up this week with the daily 200 EMA and weekly pivot getting in its way. For the Daily Ichimoku Cloud chart: Price has been out of the Ichimoku daily cloud now for 3 weeks but have a look at the 4 hr Cloud chart! Price is a bit tangled on this lower time frame Ichimoku.

4 hr: Trend up/ranging. Price is trading within a bullish looking trend channel but is still under the previous broken trend line from the weekly chart and is also still below the daily 200 EMA.

Thoughts:  Price is trading within trend channels on both the EURX and USDX. These are ‘risk on’ type signals as they appear at the moment. The weekly ‘Inside Bar’ pattern on both indices can be read as a bullish consolidation pattern for ‘risk on’ too. My trading this week will be guided by breaks, or otherwise, out of these trading channels. The release of bad news can quickly and easily undo all of these technical patterns though. Whilst the signs appear bullish for 'risk on' at this stage I will trade either way but only when there is clear direction and some confluence with TS signals.

I will look for 'risk on' trades if:

• the USDX breaks down from the bear flag pattern AND IF
•  the EURX breaks up from the bull flag pattern and closes above the daily 200 EMA. 

I will look for 'risk off' trades if:

• the USDX returns to being bullish and closes & holds above the weekly 200 EMA and up out of the bear flag pattern  AND if
• the EURX returns to being bearish and closes & holds out below the bull flag pattern.

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.

Info: Inside Bars

Source: http://www.learntotradethemarket.com/forex-trading-strategies/inside-bar-forex-strategy

What does an inside bar mean?
The inside bar forex trading strategy is a ‘flashing light’, a major signal to the trader that reversal or continuation is about to occur.

An inside bar indicates a time of indecision or consolidation. Inside bars typically occur as a market consolidates after making a large directional move, they can also occur at turning points in a market and at key decision points like major support/resistance levels.

They often provide a low-risk place to enter a trade or a logical exit point. Note in the image below we see an example of an inside bar that formed as a continuation signal and then one that formed as a turning point signal. While they can be used in both scenarios, inside bars as continuation signals are more reliable and easier for beginning traders to learn.