USDX
Monthly: Ranging upwards. The February candle closed as a
large bullish engulfing candle. January’s ‘inverted hammer’ candle was right on
with pointing to possible bullish reversal!
Weekly: Trend up overall. The weekly support trend line is
still supporting price. The H&S pattern is still printing on the weekly
chart. 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! The
USDX has retraced back up towards the 81.70 level. This has added some balance
and symmetry to the left hand side of this pattern. The 81.70 level was key
this week. Price has now broken, closed and held above this level and this suggests
continued bullish momentum and might undermine the developing H&S pattern. I would think a break, and long term hold, above
the 82.59 (61.8% fib level) would void the H&S pattern. The weekly candle
closed as a bullish candle.
Daily: Up. Price has essentially rallied all of February.
Daily Ichimoku Cloud chart: Price has held up above the
daily Cloud and broken away quite strongly.
4hr: Up. Price chopped up and down around the key 81.70 S/R
level for much of the week in a ‘bull flag’ like pattern. Price broke up and
rallied from this flag to stall just under the next resistance level of 82.59. The
82.59 level is the 61.8% fib retrace from the last swing high back in March 2010
so, it is significant. Price finished
the week just under this key level.
4hr Ichimoku Cloud chart: Price has traded above the Cloud
all week. This is in alignment with the daily chart and supportive of ‘risk
off’ momentum.
EURX
Monthly: Trend down overall but the previous 6 months were
bullish candles. The most recent
February candle closed as bearish and as an ‘inside candle’. This reflects
indecision or consolidation. This is the first bearish monthly candle in 7
months. Price has failed to move up above the monthly 200 EMA and this level
continues to be resistance for the index.
A bull support trend line is still in place and I have extrapolated this
out as part of a new monthly triangle pattern to show the support level.
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 has been quite parabolic
for ‘risk on’ until recently and the current pause, with the possibility of
further reversion to the mean or the trend line, would not be out of order as
part of any continued longer term bullish price action for. The weekly candle
closed as a large bearish candle. The current chart print could almost be
considered as a ‘bull flag’ pattern though.
Daily: Trend ranging upwards. Price seems to have been
consolidating under the monthly 200 EMA for most of February in a descending
broadening flag pattern. These are bullish patterns and give this index a ‘bull
flag’ appearance. There is support under current price in the form of the weekly
200 EMA.
Daily Ichimoku Cloud chart: Price is still trading just above
the Daily Cloud but has been consolidating in a narrow range for the last 3
weeks. It is edging closer towards the Cloud though.
4 hr: Trend ranging down. Price fell at the start of the
week and has been trading in an upward trend channel for most of the time since
then. This channel is set within the larger 'flag' like pattern from the
daily/weekly chart. The weekly 200 EMA has been a key level here all week and
offered a fair bit of support. Price closed for the week just above this
support level.
4hr Ichimoku Cloud chart: Price has traded under the Cloud for
most of this week. This is divergent from the daily chart so price action may
be choppy.
Thoughts:
Ichimoku divergence has been with us for the whole of February making for
choppy trading and few TS signals.
The Cloud charts: Both USDX Cloud
charts, the daily and 4hr, are currently aligned to support ‘risk off’
momentum. The EURX charts are divergent which suggests possible further
choppiness, at a minimum. The only chart still aligned for ‘risk on’ is the daily
EURX Cloud chart BUT it is edging closer to its Cloud. I will be looking to see
if that alignment changes to ‘risk off’ at all. I’ll also be watching the USDX
charts to see if they remain aligned for ‘risk off’.
EURX Daily Chart: The main signal
that is contrary to possible reversal to ‘risk off’ is the look of the EURX on
the daily chart. It still looks a bit ‘bull flag’ like, as if it is just
pausing before making another attempt at the weekly 200 EMA just above current
levels. So, I will be watching the trend lines I have here to see if they might
be breached.
I will look for 'risk on' trades if:
- the USDX turns bearish and closes below the 81.70 level AND if
- the EURX turns bullish and breaks back above the bear trend line on the daily chart.
I will look for 'risk off' trades if:
- the USDX turns bullish and holds above the 81.70 level AND if
- the EURX turns bearish and holds back down below the weekly 200 EMA level.
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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