FX Indices Review 22/10/2012

USDX

Monthly: Ranging but currently down.

  

Weekly: Trend up overall. Price is trading within a symmetrical triangle. Price also looks like it could be forming a ‘Bear Flag’ pattern on the weekly chart. Last week’s candle was a spinning top with a long lower shadow indicating that sellers dominated the week.

Daily: Down overall.  Price is now range trading within a smaller symmetrical triangle pattern and getting closer to the apex. Price is currently just under the bear trend line of the triangle.

Daily Ichimoku Cloud chart: Price is trading below the Cloud but is woven between the Tenkan –sen and Kijun-Sen lines. Price is continuing to edge closer to the Cloud though.

4hr: Ranging within the triangle pattern. Price bounced off the bottom trend line of the triangle late last week. Price could re-trace to the 61.8 % fib level from the last swing high. This is a significant level as this region is also the weekly pivot, the weekly 200 EMA and near the psychological 80 level. Price is currently just under this level and, also, just under the bear trend line of the symmetrical triangle.

4hr Ichimoku Cloud chart: Price has retraced and is now trading just under the Cloud on the 4hr chart. This is in agreement with the daily USDX Ichimoku chart though.

EURX

Monthly: Trend down but has turned back up. August and September candles were bullish. October is also still a bullish candle and has broken out and up from the smaller of two symmetrical triangles. Price could also be forming a ‘Bear Flag’ pattern though.

Weekly: Trend down but turning back up. Price has now broken above the smaller of the two symmetrical triangle patterns. Last week’s candle was a bullish engulfing candle.

Daily: Trend up overall. Price has broken out of the smaller triangle but might be forming a bearish ‘double top’.

Daily Ichimoku Cloud chart: Price has been out of the Ichimoku daily cloud now for 4 weeks and has crossed back above both the Tenkan and Kijun –sen lines. The Cloud is still edging up closer to current price though.

4 hr: Price seems to be forming a ‘Bull Flag’ pattern. A break up, and out, would support continued bullish momentum but a break back down would support the bearish ‘double top’ pattern from the daily chart. The trend line breaks here will be critical to determine the next new momentum move.

4hr Ichimoku Cloud chart: Price has rallied back above the Cloud on the 4hr chart this week but is woven between the Tenkan –sen and Kijun-Sen lines. This position is in alignment with the orientation of the EURX on the Daily Ichimoku chart though.

Thoughts:  The USDX is trading within a symmetrical triangle and currently testing the upper bear trend line. The EURX is trading within a trading channel that could be part a bull flag movement or a bearish 'double top' pattern. So, trend line breaks will be important here to determine clues about the next major trend. 

I will look for 'risk on' trades if:

• the USDX returns to bearish and trends down within the triangle pattern.
•  the EURX remains bullish, breaks out and up from the trading channel and can also close above the 102 level.

I will look for 'risk off' trades if:

• the USDX returns to being bullish, closes above the bear trend line, weekly pivot, weekly 200 EMA and psychological 80 level AND if
• the EURX returns to being bearish and breaks down and out from trading within the trading channel. 

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.