FX Indices Review for 15/10/12

USDX

Monthly: Ranging but currently down.  

Weekly: Trend up overall. Last week’s candle was an ‘inside bar’ candle formation. These patterns reflect consolidation or indecision. This is not surprising after the large bearish engulfing candle of the week before.

Daily:  Down overall.  Price is now trading within a symmetrical triangle pattern. I have relaxed the upper bear trend line here a bit to reflect the most recent resistance levels. Friday's candle was a reversal style 'hammer' candle so it will be interesting to see if this signals a return to bullishness.

Daily Ichimoku Cloud chart: Price is still trading below the Cloud but is woven between the Tenkan –sen and Kijun-Sen lines. Note that price is still moving closer to the Cloud.

4hr: Ranging. Price has been trading bearish since the double top earlier last week. Price camped for the w/e at the weekly 200 EMA.

4hr Ichimoku Cloud chart: Price is just above the Cloud on the 4hr chart. Note how the Cloud has supported price over the recent candles. This is divergent 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.

Weekly: Trend down but turning back up. Price is now trading within a symmetrical triangle. There is also an ‘inside bar’ pattern on this weekly chart, as for the USDX. Again, this is not surprising after the large bullish engulfing candle of the week before. This weekly candle, as well as being an 'inside bar' candle, has a bit of 'hanging man' nature to it though too. These patterns spell 'bearish reversal' when they appear at the top of a bullish move. Something to watch for this week. 

Daily: Trend up overall. Price is moving towards the apex of the triangle.

Daily Ichimoku Cloud chart: Price has been out of the Ichimoku daily cloud now for a few weeks and has crossed back above both the Tenkan and Kijun –sen lines. Note though how the Cloud is rising and getting closer to price.

4 hr: Trend up overall but bouncing a bit. Price bounced around a bit this week and has ended the week at the daily 200 EMA.

4hr Ichimoku Cloud chart: Price is still trading back above the Cloud on the 4hr chart, but only just! Note how the Cloud supported price over recent candles. This is in alignment with the orientation of the EURX on the Daily Ichimoku chart.

Thoughts:  The USDX made a double top on the 4hr charts last week and has fallen since then. I will be looking to see if the USD continues to fall. A further rally and, then, a close and hold above the bear trend line, monthly pivot and psychological 80 level would be considered to be quite bullish though. The potentially bearish 'hanging man' candle on the weekly EURX is of concern though.

There is important Chinese data due out on Monday and there are a lot of Earnings announcements this week as well as a significant Euro zone meeting on Thurs/Fri so, as always, caution will be needed. 

I will look for 'risk on' trades if:

• the USDX remains below the bear trend line and can close below the 4hr Cloud AND IF
•  the EURX remains bullish and can also close above the bear trend line.

I will look for 'risk off' trades if:

• the USDX returns to being bullish & closes above the bear trend line, monthly pivot and psychological 80 level AND if
• the EURX returns to being bearish. 

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.