USDX
Monthly: Trend ranging / upwards.
The previous monthly candle was a bearish engulfing and this month’s candle
closed as bullish engulfing! Price briefly punched up through the strong
resistance of the monthly 200 EMA and the 84 level but didn’t manage to close
above this.
Weekly: Trend up overall. The
weekly support trend line is still supporting price. The weekly candle closed
as a bearish candle. The possible bearish ‘double top’ seems like it could be
back in play now given that price has closed below the 84 S/R level.
Daily: Trend ranging/up. Price looked
to be printing either a ‘bull flag’ or bearish ‘ascending broadening wedge’ pattern
and, for now, it seems that the bearish pattern has evolved.
Daily Ichimoku Cloud chart: Price
traded above the Cloud all week BUT is now back below the Tenkan-sen line.
4hr: Trend choppy/ranging. Price chopped
sideways for most of the week above the wedge/flag bottom trend line. Price broke
down through this level on Thursday and closed below the trend line and below
the 84 level.
4hr Ichimoku Cloud chart: Price started
the week in the 4hr Cloud, then moved above but finished the week below the
Cloud. This is divergent from the daily chart and suggests further choppiness.
EURX
Monthly: Trend down overall but 8
of the last 10 months were bullish. The May candle closed as a bullish candle
but was small and with a ‘spinning top’ look to it.
Weekly: Trend up, overall. Price
failed to move above the monthly 200 EMA back in January. This level had been
major resistance so it was no surprise that price had paused here. Price action
had been quite parabolic for ‘risk on’ and subsequently pulled back to the mean
of the support trend line. Price bounced off this major support level and has
held up for the last 9 weeks. The weekly candle closed as a spinning top candle
and this reflects some indecision for the index. The current weekly chart print
still looks 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 still
sitting above this breakout area but is now back to sitting on 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. The failure to
break and hold up through this level, after a few recent attempts, might end up
proving to be bearish for the EURX. There is also still a possible bullish
inverse Head and Shoulder’ pattern brewing here. The neck line looks to be at
around the 108.5 level so there would need to be a decisive close and hold
above this level to enable it to fully evolve.
Daily: Trend ranging. Price
chopped around again for most of this week again at the top edge of the trading
channel formed by the 107.5 and 108.5 levels. This area is shaded in pink on
the charts. This is the 8th week of such choppy, range bound action. Like last
week, price broke out of this narrow zone on Thursday but failed to hold. Friday’s
candle closed as a bearish candle with price closing right on the 108.5 level.
Daily Ichimoku Cloud chart: Price
chopped sideways above the Cloud all week. It has finished the week above the daily Cloud
and right on the 108.5 level.
4 hr: Trend ranging. Price action
chopped around either side of the 108.5 level all week and formed up into a
smaller triangle pattern within the larger trading channel. Price made a false bullish break out of this triangle on Thursday but retreated to close
back within its boundaries.
4hr Ichimoku Cloud chart: Price started
the week above the Cloud but ended up chopping around within the Cloud for much
of the week. Price finished the week trading in the Cloud. This is divergent from
the daily chart and suggests further choppiness.
Thoughts:
Choppy markets + Ichimoku: The Ichimoku charts are still divergent
and this suggests continued choppiness. Such conditions are better suited to
shorter time-frame trading during the US session than to longer term (eg 4 hr)
chart trading.
The EURX: The EURX has held up surprisingly well again this week
and has managed to close up on the 108.5 level. It just doesn't seem to give up
trying to get up and over this hurdle level. The 108.5 has been proving to be a
significant challenge though and has managed to contain price for much of the
last 8 weeks. Any break and continued hold above this 108.5 level would suggest
that there might be some follow through with this bullish reversal and,
possibly, a swing back towards a more typical form of ‘risk on’. A move back down
below the Daily Ichimoku Cloud would be a very bearish signal though. I
continue to watch these two areas on the EURX: the 108.5 level above current price
AND the support zone represented by the Daily Cloud below current price. These remain
the two key levels to watch on the EURX.
USDX: The USDX has closed bearish for the week and I’m watching out
for any possible double top formation here. Employment data due out next week
might drive the direction of the USD though. Positive data might send price
back up on thoughts that the Fed might start tapering QE.
Final word:
Price on the USDX and EURX is trading very close to the Ichimoku Cloud on both their daily and 4hr chart time frames. Thus, momentum could shift quite easily to either a 'risk off' or 'risk on' alignment. I am waiting for Ichimoku Cloud
alignment. I see this as being somewhat similar to any other seasonal business.
You just have to wait patiently and, as the saying goes, ‘make hay when the sun
shines'.
Both stocks
and currencies have chopped around again this week. News and data releases seem
to have an increasing impact on price movements with both instruments.
The big stock sell off from late on Friday may be the start of a new bearish move here or it
could have been more due to month end activities. We need a little more time to
see if a new trend emerges on the stocks daily charts. As the saying goes, 'one swallow doesn't make a summer'. This pause/pullback could also evolve into a small bull flag pattern before the next move up. That is why it is important to wait to see what trend does eventually emerge. Yes, we've had a 3/7 and now a 7/21 EMA cross on the S&P500 BUT we've had a few of these before without major upset (see arrows on chart below) AND there is still a bull daily trend line intact:
So, I’m waiting to see how stocks
and currencies both emerge from this period and which path they might take. I
have no idea just now what this will be but I will be watching for clues and,
once a clear new trend emerges, I’ll try to grab some of it.
I do note that
both the A/U and Kiwi closed below key support levels so traders might now happily assume it is safe to take short positions on these two pairs. However, there was better than
expected data out of China on Saturday and this might impact on the
bearish sentiment for these pairs.
Note: The
analysis provided above is based purely on technical analysis of the current
chart set ups. As always, Fundamental style events, by way of any Euro zone
based dramas and/or news announcements, continue to be unpredictable triggers
for price movement on the indices. These events will always have the potential
to undermine any technical analysis.
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