Saturday, June 15, 2013

FX Indices review for 17/06/13

Monthly: Trend ranging / upwards. The current monthly candle is still printing a bearish engulfing candle. The monthly 200 EMA, at the 84 area, has been resistance.

Weekly: Trend up overall. The weekly support trend line is still supporting price but price but, only just. Price is down very close to this support level and closed the week just above this support. The weekly candle closed as a large bearish candle. The bearish ‘double top’ evolved. Price closed the week at the 80.70 area which is the 50% fib pull back level from the last major swing high back in mid 2010.

Daily: Trend ranging/down. The bearish ‘ascending broadening wedge’ pattern evolved. Price trended down all week.

Daily Ichimoku Cloud chart: Price traded below the Cloud all week.

4hr: Trend down. Price chopped downwards for most of the week. Price stalled as it reached the weekly support trend line.

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

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

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 11 weeks. The weekly candle closed as a bearish engulfing candle. Price is sitting above the previous flag breakout area but is back below 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 above this 108.5 level, after several 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 though. 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 just above 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. Friday’s action was bearish and engulfing though and meant that price closed the week back in this channel and below the key 108.5 level. This is the 10th 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 but below the 108.5 level. The point to note here now is how the Cloud below price is broadening and this might add more support to future price action.

4 hr: Trend choppy & ranging. Price action chopped around above the 108.5 level for most of the week with dips below on Thursday and Friday.  Price closed the week below the 108.5.

4hr Ichimoku Cloud chart: Price chopped in and out of the Cloud all week but ended the week below the Cloud. This is divergent from the daily chart and suggests choppiness.

Choppy markets + Ichimoku: The Ichimoku charts chopped in and out of alignment during the week. They have finished the week divergent though. Previous alignment has often resulted in extended trending periods. I’ll be watching closely to see if any alignment returns, for ‘risk on’ or ‘risk off’, and if this is able to develop more fully.

The EURX: The EURX has failed to hold above the 108.5 level despite the continued falls on the USD this week. The 108.5 has been proving to be a significant challenge though and has managed to contain price for much of the last 10 weeks. Any break and continued hold above this 108.5 level would suggest that there might be some follow through with a 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 still remain the two key levels to watch on the EURX.

USDX: The USDX has closed bearish again for the week under the ‘double top’ pattern. The USD is sitting at a critical level now; with price being just above a major weekly support trend line. I think future trading sentiment will be dictated by the path that the USD takes from here. I suspect that any bounce and rally off this support would turn the markets to ‘risk off’ whereas a breach and fall below the trend line might trigger ‘risk on’. Some other trading commentary suggests that the future direction of the USD might be better determined after Wednesday’s FOMC press statement.

Note: I am travelling for 3 weeks as of next Friday 21st June. Trading commentary will be brief and irregular during this period.

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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