Yet another choppy month!

Last week: We've had two months now of  Cloud divergence, choppy markets, few TS signals yet some good 30 min chart trades during the US session.  There were only a few TS signals: E/U= 90, EUR/AUD=65, EUR/GBP = currently max of 50 and E/J=-100. 

This week: The Ichimoku Index Charts are aligned for ‘risk off’ BUT there is significant support below the current level of the EURX; a daily trend line and a monthly trend line. I’m watching to see if these levels are able to hold up price action, thereby stalling ‘risk off’ momentum.

I’m also watching to see if stocks and currencies fall back into an aligned trading rhythm. Stocks have been trading ‘risk on’ of late whilst currencies have been more skewed to ‘risk off’. I am expecting them to fall back into alignment but I have no idea which way they will then head. I will follow the trend once it emerges though.

Stocks:
I'm not seeing any divergence on the S&P500 monthly charts BUT I do see some on the daily chart. This suggests that there could possibly be some short term pause or pull back in store: 

Easter: There is always something happening on Bondi Beach but the following images show some clever and creative Easter work that I caught sight of whilst walking the other morning...using milk crates no less! The same image was also 'swept' into the sand.

Some key events to watch out for include:

• New monthly pivot values.
• Monday 1^stApril: Easter Monday Holiday: EUR/UK/NZD/AUD AND Chinese PMI
• Tuesday 2^nd April: AUD interest rate.
• Friday 5^th April: NFP
• Oil: this is forming a triangle pattern on the weekly charts. (charts below; under the metals)

Pairs I’m leaving for the time being: I am leaving out the USD/SGD as there has been a lot of noted and documented anomalies with this pair. I’m also leaving the USD/CHF too whilst there is pegging of the CHF to the Euro. I’m leaving the Loonie out too. I’m realising it is better to watch fewer pairs, the ones that are delivering trends, and to watch them well.

E/U: Price made a huge move down on Monday following on from Cyprus comments by the Dutch Finance Minister. This pushed price below the 1.29 level and it stayed below this all week. Price is still trading within a bullish descending wedge pattern. Price is still trading below the Cloud on the daily and the 4hr Ichimoku chart which is bearish. The weekly candle closed as a bearish candle. The monthly candle also closed as a bearish candle.

• I’m watching for a new TS signal and the boundaries of the descending wedge pattern.

E/J: Price also fell on this pair due to the Cyprus comments. It has managed to hold above the 120 S/R level and is still supported by a daily bull trend line. Price is still trading in the Cloud on the daily chart but below the Cloud on the 4hr time frame which is divergent so price may continue to be choppy. The weekly candle closed as a bearish candle. The monthly candle closed as an 'indecision' style Doji with a long upper shadow.

• I‘m watching the 120 level and daily support trend line.

A/U: Price traded up to just under the 1.05 level but then drifted down within a trading channel to finish the week just above the 1.04 S/R level. It is trading above the Cloud on the daily but in the Cloud on the 4hr chart so might be choppy. The weekly candle closed above the whole number, psychological 1.04 level but as a small bearish ‘inside’ candle. The monthly candle closed as a bullish engulfing candle though.

• I’m watching the 1.04 level and the boundaries of the trading channel on the 4hr chart.

A/J: Price is ranging in a flag pattern just under the key 100 S/R and psychological level. Price is trading above the Cloud on the daily but below the Cloud on the 4hr chart which is suggesting further choppiness. The weekly candle closed as a small bearish ‘inside’ candle.  The monthly candle closed as a bullish engulfing candle.

• I’m watching the 100 level and the boundaries of the flag pattern.

G/U: Price is still trading in an ascending wedge pattern and above the key 1.5 level all week. These are bearish patterns. It is still trading below the Cloud on the daily but above the Cloud on the 4hr chart so might continue to be choppy. The weekly candle closed as a ‘hanging man’ candle. This is a bearish pattern as it appears here following an uptrend. There is a conflicting pattern here  on the monthly chart though. The March candle closed as a pin bar reversal or ‘hammer’ style candle. This suggest a reversal to the upside....just to confuse us! So, we have bearish signals on the daily and weekly charts but a bullish signal on the monthly chart.

NB: Go Market charts have an error for my weekly 200 EMA with the G/U. I have advised them about this.

• I’m still watching the boundaries of the trading channel.

Kiwi: NZD/USD: Price chopped sideways for most of the week. Price is trading in the top of the Cloud on the daily but is above the Cloud on the 4hr chart which is divergent so might continue to be a bit choppy. The weekly candle closed as bullish candle but with a reversal style ‘shooting star’ look to it. The monthly candle closed as a bullish coloured ‘inside’ candle.

• I’m just watching for a new TS signal.

EUR/AUD: Price trended down for most of this week. It is trading below the Cloud on the daily and 4hr chart which is bearish. The weekly candle closed as a large bearish candle. The monthly candle closed as a large bearish candle.

• I’m just watching this pair at the moment.

The Yen: U/J: Price chopped sideways all of last week and is still trading in a ‘flag’ like pattern. Price is still trading above the Cloud on the daily but is below the Cloud on the 4hr chart which is divergent so price action might be choppy. The weekly candle closed as a ‘spinning top’ candle reflecting indecision. The monthly candle closed as a bullish candle BUT it does have a bit of a ‘shooting star’ look to it that suggests possible bearish reversal.

• I’m still watching the 95 level and the boundaries of the flag pattern.

EUR/GBP: Price continued to trade down this week. Price is now trading below the Cloud on the daily and below the Cloud on the 4hr chart which is bearish. The weekly candle closed as a bearish candle. The monthly candle closed as a large bearish engulfing candle. This came after the ‘shooting star’ reversal candle of February.

• There is a current TS signal SHORT on this pair.

Silver: Silver has broken below the long term monthly support trend line and has managed to hold above the $28 level. Price chopped down for most of the week. The weekly candle closed as a small bearish candle. The monthly candle closed as an indecision style ‘spinning top’ candle.

Gold: Gold has also broken down through major monthly support that dates back to early 2008. This is a major break down for the metal. The next major support level seems to be at $1,525. Price chopped up and down all week just under the monthly pivot. The weekly candle closed as a bearish engulfing candle and below the monthly pivot. The monthly candle closed as a small bullish candle, but also as an ‘inside candle’. This suggests indecision, or consolidation, before the next big move OR...maybe both!

Oil: The chart pattern setting up on Oil caught my eye this week. A possible triangle breakout might be looming. I'm no expert on Oil and realise that there are geopolitical influences here, as well as sensitivity to the USD. A falling USD might trigger a further up move here though. The 4hr chart shows what a great trend trade this would have been last week for those who do trade Oil!

FX Indices Review for 02/04/13

USDX

Monthly: Ranging upwards. The March candle closed as a bullish candle.

Weekly: Trend up overall. The weekly support trend line is still supporting price. The weekly candle closed as a bullish engulfing candle after two bearish weeks.

Daily: Trend Up. Price rallied for all of February but had chopped sideways and up for most of March. Price had been trading in a flag pattern but broke out and up from this midweek.

Daily Ichimoku Cloud chart: Price is still trading above the daily Cloud and is now back above the Tenkan-sen line.

4hr: Trend ranging/up. Price trended up for most of the week, broke up and out of the flag, but pulled back on Thursday.

4hr Ichimoku Cloud chart: Price finished last week below the Cloud but moved back above the Cloud on Monday. Price then traded just above the Cloud all week.  This is in alignment with the daily chart and supportive of bullish for USD or, more recently, ‘risk off’. Price would not have to fall very far though to move back below the Cloud.

EURX

Monthly: Trend down overall but 6 of the last 8 months were bullish.  March has closed as a bearish candle and back down near the support trend line of the monthly chart triangle pattern. Price has failed to move up above the monthly 200 EMA and this level continues to be resistance for the index.

 

Weekly: Trend up but has stalled. Price has failed to move above the monthly 200 EMA. This has been major resistance so it is no surprise that price has paused under this level. Price action had been quite parabolic for ‘risk on’ until recently and has now pulled back to the mean of the support  trend line;  something that is not out of order as part of any continued longer term bullish price action. The weekly candle closed as a large bearish engulfing candle. The current weekly chart print could still be considered as a ‘bull flag’ pattern though.

Daily: Trend ranging. Price seems to have been consolidating under the monthly 200 EMA for February and March in a descending flag pattern. These are bullish patterns and give this index a ‘bull flag’ appearance.  Price trended down for most of the week but has bounced off the bottom trend line of the potential flag pattern. The major monthly bull support trend line is not far below current price.

Daily Ichimoku Cloud chart: Price moved out and down from the Daily Cloud on Monday and is still trading below the Cloud. Whilst this is bearish for further price action it is still within the confines of the flag pattern.

4 hr: Trend ranging down. Price trended down at the start of the week but then levelled out for the final two days of the short trading week.

4hr Ichimoku Cloud chart: Price traded below the Cloud all week. This is in alignment with the daily chart and supportive of bearish for EUR and favouring ‘risk off’.

Thoughts:

Technical trading has been very difficult over recent weeks in the face of so much significant news. I am actually surprised that the EURX has held up as well as it has given the dire Euro news and events that have plagued the global economy over recent weeks.

The Ichimoku charts are now aligned on the EURX and USDX index charts for ‘risk off’. That is, bullish for USD and bearish for EUR. There has been a reluctance for many currency pairs to trade ‘risk off’ though. This is most likely due to current US Fed monetary policy and the constant slow drip of reasonably encouraging global economic data.

The EURX has been a proxy measure of the mood for ‘risk appetite’ over recent months. The EURX has now pulled back down to be very near the support of the major monthly trend line. This region could prove to be a significant level for the EURX in the coming days/weeks and could prove to be a turning point for the EURX back to ‘risk on’.  Price action still has some possible room to fall to test this major support level. This level will be of key interest to me to see whether it: 

• holds and supports price and, then, reverts price action back to ‘risk on’ OR
• fails to support price and is breached, thereby, allowing for continued ‘risk off’.

Whilst we don’t have divergence between the main FX index charts, what does bother me is the divergence between the currency (FX) markets and the broader stock markets. These usually trade in tandem, more often than not, and currencies have been trading more towards 'risk off' for some time now.

I do see a bit of divergence creeping in on the daily stock charts but not on the longer term monthly charts (charts below). I have noted before that this current 'top' in the stock markets does not 'look' like previous 'tops' to me. Well, that is, just at the moment at least; this may well change though.

S&P500 monthly chart: no divergence now as there was for last two market tops:

S&P500 daily chart: a bit of divergence creeping in:

So, I'm not sure whether FX might flip to join stocks in further 'risk on' momentum or, whether, stocks might flip to join currencies. I do think they will converge again soon though and I'll be keen to see which path they do indeed follow.

I would really like to see the trend channel on the EURX daily chart broken before being confident of further 'risk off' momentum BUT, then, the major bull monthly support trend line is not far below that and this would also need to be breached to allow for further 'risk off' moves. Basically, there is still a fair bit of support under the EURX.

Note: 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.