Saturday, November 24, 2012

FX Indices Review for 26/11/12

Monthly: Ranging upwards. A bull support trend line is in place. The October candle was an ‘indecision’ style Doji, or almost a reversal style hammer pattern. The current November candle might still be seen as bullish though as it prints what looks like an inverted hammer pattern. These are considered bullish reversal signals when they appear in a downtrend. The bull supporting trend line will be the key level to watch in the coming week.

Weekly: Trend up overall. The H&S pattern still looks to be printing on the weekly chart. The ‘neck line’ of this pattern looks to be at about 78.81 which is equivalent to the 38.2% fib retrace level from the last major swing high back in mid 2010! Price would have to break through the weekly 200 EMA though first.

Daily: Ranging. Price has broken down from trading within the upwards trend channel. There is some work to do for this pair if it is to keep falling. It will have to break down through the weekly 200 EMA and the monthly pivot, even before it gets to the monthly bull support trend line!

Daily Ichimoku Cloud chart: Price is moving down through the daily Cloud.

4hr: Trend up but has turned. The strong trend channel has been broken.

4hr Ichimoku Cloud chart: Price is trading below the 4hr Cloud. 

Monthly: Trend down overall. August, September & October candles were bullish though. The November candle has now turned bullish.  I have relaxed the previous bull trend line to show recent support. I extended the previous lower bear trend line and this has now been broken.

Weekly: Trend down to ranging. The bullish ‘inverse Head & Shoulder’ pattern seems to be setting up. This dovetails in nicely with the bearish H&S pattern I see forming on the USDX. Price has actually closed above the ‘neck line’ of this inverse H&S pattern now which is a rather bullish sign. Price has also closed above the bear trend line from the symmetrical triangle pattern that has been in play since mid 2011. This is also another bullish signal.

Daily: Trend up / ranging. 

Daily Ichimoku Cloud chart: Price is trading above the Daily Cloud.

4 hr: Trend down but has turned. Price has been bullish since last week when it broke out and up from trading within the downward trend channel. It has continued to be rather bullish this week and has now closed up and out of the triangle pattern and above the neckline of the bullish ‘inverse H&S’ pattern.

4hr Ichimoku Cloud chart: Price is trading above the Cloud on the 4hr chart which is congruent with the daily chart.

Thoughts: The bearish move on the USDX with the 'H&S' pattern and the bullish move on the EURX with its ‘inverse H&S’ pattern seem to be unfolding. All of this is set against a backdrop of such potentially dire global economic news too. This is a clear example of how one must trade what they see and not what they think. The only signal that is contrary to all of these combined signals is the current print of a bullish reversal ‘inverted hammer candle’ on the USDX.

Ichimoku thoughts: The Ichimoku Cloud charts for both indices now look like they are starting to set up for optimum conditions for ‘risk on’ trading. It will be interesting to see if this momentum continues and these conditions are met.

I will look for 'risk on' trades if:
  • the USDX remains bearish  AND if
  • the EURX remains bullish and holds above the weekly charts ‘inverse H & S’ pattern.

I will look for 'risk off' trades if:
  • the USDX returns to being 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.

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