FX Indices Review for 10/06/13

USDX

Monthly: Trend ranging / upwards. The current new monthly candle is printing a bearish engulfing candle. The monthly 200 EMA, at the 84 area, has proven to be some resistance.

Weekly: Trend up overall. The weekly support trend line is still supporting price. The weekly candle closed as a large bearish candle. The possible bearish ‘double top’ seems to have evolved given that price has closed below the 84 S/R level. Price closed the week just below the 81.70 level. A look across the weekly chart shows how significant the 81.70 support/resistance level has been.

Daily: Trend ranging/up. The bearish ‘ascending broadening wedge’ pattern evolved. Price trended down all week. Price closed below the key 81.70 level but above the daily 200 EMA and monthly support S1 pivot. The Friday candle closed as a long legged, indecision style Doji candle. This candle could signal that a reversal might be in store though.

Daily Ichimoku Cloud chart: Price edged down closer to the Cloud all week and finally broke below this on Thursday. Price closed for the week below the Ichimoku Cloud.

4hr: Trend choppy/down. Price chopped downwards for most of the week. Price tried to close back above the 81.70 late on Friday but failed to do so.

4hr Ichimoku Cloud chart: Price traded below the Cloud all week. This is now aligned with the daily chart and supportive of ‘risk on’ or short USD.

EURX

Monthly: Trend down overall but 8 of the last 10 months were bullish. The current new monthly candle is printing an indecision style ‘spinning top’ candle.

Weekly: Trend up, overall. A weekly support trend line is still in place. 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 10 weeks. The weekly candle closed as an indecision style ‘spinning top’ candle. 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 and is back to sitting just above 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. Price really needs to make a clear break away from this area, either up or down, to enable a new momentum move to evolve. The failure to break away 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 9th week of such choppy, range bound action. Price has still struggled to make a clean and decisive break up and out from this channel.

Daily Ichimoku Cloud chart: Price chopped sideways above the Cloud all week.  It has finished the week, yet again, above the daily Cloud and just above the 108.5 level.

4 hr: Trend ranging. Price action chopped around either side of the 108.5 level all week and this action was set within a symmetrical triangle pattern within the larger trading channel.

4hr Ichimoku Cloud chart: Price chopped in and out of the Cloud all week but ended up just above the Cloud. This is not the most convincing break above the Cloud though and I’ll be interested to see if this holds out next week. Price finished the week trading just above the Cloud. This is now aligned with the daily chart and supportive of ‘risk on’ or long EUR.

Thoughts:

Ichimoku Alignment: The Ichimoku charts have just ticked over into a new alignment. Previous alignment has often resulted in extended periods of trending markets. I’ll be watching closely to see if this alignment holds into next week. The NFP and US employment data was mixed so it remains to be seen how this will impact the USD. There was some weaker than expected Chinese Trade Balance data released on Saturday and this might help to keep the USD down. Sustained Ichimoku alignment here would suggest an extended period of 'risk on' with a bullish bias for stocks, E/U and G/U etc. I'm not sure how the battered A/U and Kiwi will react though this time if, indeed, this alignment does hold.

The EURX: The EURX has only just managed to hold above the 108.5 level despite the huge falls on the USD this week. It just doesn't seem to give up trying to get up and over this hurdle level though. The 108.5 has been proving to be a significant challenge and has managed to contain price for much of the last 9 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 AND the support zone represented by the Daily Cloud. These still remain as the two key levels to watch on the EURX.

USDX: The USDX has closed bearish again for the week. The ‘double top’ seems to have formed up here. The mixed employment data from Friday might help to keep a lid on the USD and sustain the current ‘risk on’ alignment. Friday's Doji candle might be a signal that some reversal could be in store though so I'll be watching for any signs of this possibility as well.

Final word:

The Ichimoku charts have just ticked over into Ichimoku Cloud alignment. I will be watching to see if this alignment holds and, if so, I will look for new TS signals in line with this alignment.

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.