WARNING: Fundamental news events will most likely undermine all technical analysis for the coming week. There is the US Presidential Election on Tuesday 6th and the Chinese Leadership change on Thurs 8th. There are persistent rumours about further Chinese and Japanese monetary easing to throw into the mix as well. Next week is not one of the better weeks to be relying on technical analysis for trading ideas on longer time frame charts. Continued Ichimoku divergence on both the EURX and USDX supports this warning call.
Monthly: Ranging. 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 new November candle is bullish and is engulfing the October candle.
Weekly: Trend up overall. My previous 4hr H&S pattern failed but I see a similar pattern potentially setting up on the weekly chart. The previous resistance level of 81.7 would form the next possible shoulder. Current price is just near the 50% fib retrace level from the last weekly chart swing high back in June 2010.
Daily: Down overall but price has broken out and up from a wedge pattern. Price might continue up to former S/R in the 81.70 level or even up on to the 82.59 level. The 82.59 represents the 61.8% retrace from the last daily chart swing high back in July this year.
Daily Ichimoku Cloud chart: Price has retraced upwards and is now trading within the Cloud.
4hr: Trend up. Price bounced around for much of the week in the same range bound pattern as for the previous week. Friday, though, saw price break out and up from a wedge pattern and it also broke up above the daily 200 EMA.
4hr Ichimoku Cloud chart: Price has retraced and is now trading above the Cloud on the 4hr chart. This is divergent from the daily Cloud chart.
Monthly: Trend down but has turned back up. August, September & October candles were bullish. The new November candle is bearish. Price could still also be forming a ‘Bear Flag’ pattern though??
Weekly: Trend down but turning back up. Price is trading within the smaller of 2 symmetrical triangle patterns.
Daily: Trend up overall. Price seems to have conformed to the bearish ‘double top’ pattern. Trend line breaks will need to be watched here now.
Daily Ichimoku Cloud chart: Price has been out of the Ichimoku daily cloud now some weeks but is back to trading within the Tenkan and Kijun –sen lines. Price is only just above the Ichimoku Cloud though now.
4 hr: Trend down. Price is trading just above the bottom bull trend line of the smaller symmetrical triangle pattern. Price has broken through the support of the daily 200 EMA, 4hr 200 EMA and monthly pivot.
4hr Ichimoku Cloud chart: Price is currently below the Cloud on the 4hr chart. This is divergent from the daily chart though.
Thoughts: The USDX has rallied this week, breaking out and up from a wedge pattern and closing above some important resistance levels. It is looking quite bullish now. It has also made that clear and decisive break away from the key 80 resistance level. There has been a fair bit of positive economic data but uncertainty continues around the US Elections and Euro zone worries.
I MIGHT look for 'risk on' trades if:
- the USDX returns to bearish and closes below the daily 200 EMA (@ around 80.39) AND if
- the EURX returns to being bullish and holds above the bull support trend line on the daily chart.
I MIGHT look for 'risk off' trades if:
- the USDX remains bullish and holds above the daily 200 EMA (@around 80.39) AND if
- the EURX remains being bearish and breaks, closes and holds below the bull support trend line on the daily chart.
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.