Saturday, November 10, 2012

FX Indices Review for week of 12/11/12 (palindrome!)

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. This candle pattern did accurately point to a return to the main uptrend. The current November candle is bullish and is engulfing the October candle.

Weekly: Trend up overall. The H&S pattern is still setting up on the weekly chart. Interestingly, the previous resistance level of 81.70 would form the next possible 'shoulder'. Price is currently just under this ‘shoulder’ level.

Daily: Ranging.  Price broke out and up from the wedge pattern and is still rising. Price might continue up to former S/R in the 81.70 level which would form the ‘shoulder’ of the H&S pattern. The next resistance level after this is the 82.59 level. The 82.59 represents the 61.8% retrace from the last weekly chart swing high back in mid 2010.

Daily Ichimoku Cloud chart: Price has continued to retrace upwards and has ploughed its way up through the Cloud all week. Price is very close to emerging up and out from the daily Cloud. 

4hr: Trend up. The weekly pivot and daily 200 EMA helped form a floor for price this week. Price is trading within an upwards trend channel:

4hr Ichimoku Cloud chart: Price has traded above the Cloud on the 4hr chart all week. This is currently still 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 still bearish. The ‘Bear Flag’ pattern might just have formed here as noted last week.

Weekly: Trend down to ranging. Price was trading within the smaller of 2 symmetrical triangle patterns but broke down through the lower supporting bull trend line last week. Last week’s candle was quite bearish. Whilst the bearish ‘double top’ pattern has played out I also see a bullish ‘inverse Head & Shoulder’ pattern possibly setting up. This would dovetail in with the bearish H&S pattern I see forming on the USDX.

Daily: Trend up but has turned. Price is trading within a downward trend channel. Price finished the week just above the previous S/R level and psychological value of 100. Friday’s candle was an indecision spinning top candle though.

Daily Ichimoku Cloud chart: Price has passed below the Tenkan and Kijun –sen lines and is now trading within the Daily Cloud.

4 hr: Trend down. Price is trading within a downward trend channel. 

4hr Ichimoku Cloud chart: Price has trended below the Cloud on the 4hr chart all week. This is divergent from the daily chart though.

Thoughts: The USDX has rallied along this week, albeit in a somewhat bumpy fashion. The fall, following the Obama victory, was soon replaced with a rally amid ‘Fiscal Cliff’ concerns. It is still looking quite bullish though and has escaped above the key 80.70 resistance level and now seems to be marching up towards the 81.70. The 81.70 is a strong level of previous S/R. This bullish USD momentum is set in the context of a counter, bearish signal though in the formation of a possible H&S on the weekly chart. I suspect that the 81.70 level with be the critical level to watch for this week as this forms the 'shoulder' on the possible H&S pattern. There continues to be a constant drip feed of positive US and Chinese economic data which might temper bullish moves on the USD but uncertainty continues around the looming 'Fiscal Cliff' and Euro zone worries. I would not be surprised to see a period of 'risk off' during the time that 'Fiscal Cliff' issues are thrashed out by Congress. Chinese Data has just been released though stating that they've had a significant jump in their GDP which will be viewed as very positive. This muddies the water somewhat even further and would encourage 'risk on', especially for the Aussie pairs!

Ichimoku thoughts: I am looking towards the situation of possible convergence developing on the Ichimoku Indices' charts this coming week and this may produce some excellent trading opportunities. I have also had another Epiphany with the Ichimoku Cloud following the excellent trading results of this week. I will be writing this Epiphany up in more detail and posting this on my new blog site once this site is finalised. 

I will look for 'risk on' trades if:
  • the USDX returns to bearish AND if
  • the EURX returns to being bullish and breaks up and out of the downward trend channel.

I will look for 'risk off' trades if:
  • the USDX remains bullish and also breaks above the 81.70 level AND if
  • the EURX remains being bearish and breaks, closes and holds below the downward trend 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.

BTW: I have updated my 'Stocks: Nov' page.

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