USDX
Monthly: Trend ranging upwards. The monthly candle is currently
printing a bearish ‘inside’ candle. The monthly 200 EMA is above current price,
at around the 84 level, and might help to keep a lid on this!
Weekly: Trend up overall. The weekly support trend line is
still supporting price. The weekly candle closed as a bearish candle though. The
current chart also looks to have formed a bearish ‘double top’. You can see
from the weekly chart just how choppy the last 6 weeks now have been. I noted
during the week that there was also a bearish ‘Dark Cloud Cover’ pattern forming.
The bearish close this week has now confirmed this pattern.
Daily: Trend up. Price rallied for all of February but
chopped sideways and up for all of March. Price has chopped downwards now for
much of the last 2 weeks. A daily support trend line has been in place for all
of March and has now been broken.
Daily Ichimoku Cloud chart: Price is still trading above the
daily Cloud but is below the Tenkan-sen line and the Kijun-sen lines. That
isn’t looking too healthy. Price is also getting down close to the Cloud.
4hr: Trend choppy. Price chopped downwards for most of the
week. Price rallied back above the 82.59 level briefly at the start of the week but, then, fell back
down through this and traded below this key level for the rest of the week. The
82.59 level represents the 61.8% fib retrace level from the last major swing
high back in mid 2010 and is still proving to be very significant.
4hr Ichimoku Cloud
chart: Price has chopped below the 4hr Cloud for much of the week. This is divergent from the daily chart and
suggests further choppy action.
EURX
Monthly: Trend down overall but 6 of the last 8 months were
bullish. The current print of the monthly candle is a still a bullish engulfing
candle.
Weekly: Trend up. Price had earlier failed to move above the
monthly 200 EMA. This had been major resistance so it was no surprise that
price had paused under this level. Price action had been quite parabolic for
‘risk on’ until recently and subsequently 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. This pullback has actually
played out in text-book fashion! Price bounced up and off the major support
trend line last week and continued to rally this week. Thus, the ‘retracement
to the mean’ period might have come to an end. The weekly candle closed as a
bullish candle. The current weekly chart print seems to have evolved as a ‘bull
flag’ pattern. Price has now broken up and out from this flag pattern
suggesting that perhaps the retracement period might be over and that the
bullish movement might continue. Price is currently sitting above this breakout
level but under the 108.5 S/R level. The significance of this 108.5 level can
be seen if you cast your eyes across the weekly chart.
Daily: Trend ranging/downwards. Price seems to have been
consolidating under the monthly 200 EMA for February and March, and now into
April, in a descending flag pattern. These are bullish patterns and give this
index a ‘bull flag’ appearance. Price has
now broken up and out of this flag pattern though but is sitting under another
S/R level in the 108.5 level.
Daily Ichimoku Cloud chart: Price broke out and up from the
Cloud on Thursday. Price pulled back a bit on Friday though and is now back to
sitting in the upper edge of the Cloud.
4 hr: Trend ranging / up. Price rallied to start the week
but then stalled at the 108.5 level towards the end of the week. The chart is
looking a bit ‘Bull Flag’ like.
4hr Ichimoku Cloud chart: Price traded above the Cloud all
week. This is divergent from the daily chart and suggests further choppy
action.
Thoughts:
Choppy markets + Ichimoku: The Ichimoku charts are back to being
divergent and this suggests some further choppiness ahead. I do suspect this
extended period of choppiness is connected to the current market top action
that is being seen across many global stock markets. Stocks and currencies seem
to be at a major junction and are experiencing choppy action ahead of the next
major new momentum move. To me, this feels like the thunder building before a
major storm. I just don’t know whether the storm will be ‘risk on’ or ‘risk
off’. I mentioned mid week that the saying is that 'the best trends come out of choppy markets'. If that is the case then I expect some fantastic trends when they do re-emerge. I have no idea what that directional move will be but, when it
appears, I will trade it.
Whilst it might sound like an oxymoron, the consistent pattern with
Ichimoku divergence continues. That is; choppy 4hr chart trading with
better trend trades found off 30 min charts during the US session. I would
expect this pattern to continue until such time as the Ichimoku charts align again.
The EURX as ‘risk’ barometer: The EURX has been a proxy measure for
the mood for ‘risk appetite’ over recent months. The EURX has now pulled back
down and tested the support of the major monthly trend line. Price has now bounced
off this major support level and rallied for the last two weeks. This is no
guarantee that this trend will continue though. The next major hurdle for the
EURX is the 108.5 level. However, a break and close above this 108.5 level
would suggest that there might be some follow through with this bullish
reversal and a swing back towards ‘risk on’. This will be a key level to watch
in the coming week. I don't make predictions as I'm a trend follower BUT if the EURX can break up above the 108.5 level I think this will spark a significant 'risk on' movement. I don't see valid fundamental reasons for such a move but then, as the saying goes, 'trade what you see and not what you think'.
Divergence: I am still bothered by the divergence
between the currency (FX) markets and the broader stock markets. These
generally trade in tandem, more often than not. I do suspect that they will
converge again soon though and I'll be keen to see which path they follow.
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.
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