USDX
Monthly: Ranging upwards. The bull support trend line was breached momentarily but is still in place. The October candle was an ‘indecision’ style Doji, or almost a reversal style hammer pattern. The November bullish candle was an inverted hammer pattern. The new December candle is forming a sort of indecision style ‘spinning top’, albeit a bullish green in colour. There is some clear indecision here with these mixed signals.
Weekly: Trend up overall. The H&S pattern still looks to be printing on the weekly chart though. The ‘neck line’ of this pattern is at 78.81 which is equivalent to the 38.2% fib retrace level from the last major swing high back in mid 2010! This neck line has not been reached yet. Price would still have to break through the weekly 200 EMA again. The weekly candle closed as bullish and engulfing in a 'hammer' style candle though.
Daily: Ranging/upwards. Price broke down through the weekly 200 EMA and the monthly bull support trend line briefly but has since reversed. Friday’s bullish candle had a bit of an ‘inverted hammer’ reversal look to it though. I seem to be seeing H&S patterns everywhere lately. I do believe I see one now on the daily chart too. I haven’t labelled it but can you see it too? This would go along with the H&S patterns I see here on the weekly chart and saw earlier on the 4hr chart!
Daily Ichimoku Cloud chart: Price is back now trading upwards and near the top edge of the daily Cloud.
4hr: Down to ranging. Price bounced off the bull trend line and raced back up to the 4hr 200 EMA. Price has broken through the 4hr 200 EMA but is struggling at the daily 200 EMA and the monthly pivot. Price was not able to close out the week above the latter two. This region is also forming a potential double top on the 4hr chart.
4hr Ichimoku Cloud chart: Price is back to trading upwards within the 4hr Cloud.
EURX
Monthly: Trend down overall. The last 4 months have been bullish candles. The current new December candle is forming an indecision style, bearish, inside 'spinning top’ candle at the moment. Price is now trading within just the one symmetrical triangle pattern and this is on the monthly chart. The upper bear trend line of this triangle dates back to 2009. A bull support trend line is still in place.
Weekly: Trend down but now ranging. The bullish ‘inverse Head & Shoulder’ pattern still seems to be holding up. This dovetails in nicely with the bearish H&S pattern I see forming on the USDX. Price has actually closed back just below the ‘neck line’ of this inverse H&S pattern now which is a bearish sign though. The weekly candle was bearish too and sort of ‘inverted hammer’ in style.
Daily: Trend ranging upwards. Price has closed above the monthly pivot.
Daily Ichimoku Cloud chart: Price is trading downwards but is still above the Daily Cloud.
4 hr: Trend ranging upwards. Price has been bullish for much of the last 4 weeks since it broke out and up from trading within the downward trend channel. Price broke out and up from last week’s ‘Bull Flag’ pattern. Price then retraced later in the week to end up back below the neckline of the bullish ‘inverse H&S’ pattern. There are support barriers to further falls in the form of the 4hr and daily 200 EMA and the monthly pivot.
4hr Ichimoku Cloud chart: Price is now trading down through the Cloud and close to the bottom edge on the 4hr chart which is divergent from the daily Cloud chart.
Thoughts: It was the ‘Fiscal Cliff’ driving market moves, or non moves, last week but we've had a return to European woes and Mr Draghi this week. A Euro zone downbeat message on Thursday sent the Euro and GBP tumbling and the USD soaring. Technical trading through these times is difficult, to say the least. There is a lot of divergence at the moment with most stocks holding up and the Aussie and Kiwi ‘risk on’ pairs holding up too. The other ‘risk on’ currencies like the Euro and the GBP have tumbled though. We have also seen a rising dollar with rising Gold and Silver but, falling Fear and the VIX trading back below 16. All of this divergence spells ‘warning’ to me. I refer back to my ‘train ride’ analogy here: these choppy markets remind me of the bumpy journey one experiences as a train switches across multiple tracks before taking up its eventual new direction. The new direction for the markets still remains to be seen but, I suspect that the ‘Fiscal Cliff’ outcome will be the ‘Signal Man’ heralding this new journey!
Ichimoku thoughts: The Ichimoku Cloud charts for both indices were very close to setting up for optimum conditions for ‘risk on’ trading but the Draghi comments put an end to this run. There is divergence now between the indices and on both time frames and this suggest further choppy market conditions will be ahead.
I will look for 'risk on' trades if:
- the USDX returns to bearish and holds below the monthly pivot AND if
- the EURX returns to bullish and breaks and holds back above the weekly chart’s ‘inverse H & S’ pattern neck line.
I will look for 'risk off' trades if:
- the USDX remains being bullish and breaks, closes and holds above the monthly pivot AND if
- the EURX remains being bearish and breaks, closes and holds below the monthly pivot area.
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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