FX Indices Review for 24/06/13

USDX

Monthly: Trend ranging / upwards. The current monthly candle is printing a bearish coloured inside candle BUT with a long lower shadow. The monthly 200 EMA, at the 84 area, has been resistance.

Weekly: Trend up overall. The weekly support trend line is still supporting price. Price bounced off this support level after FOMC this week. The weekly candle closed as a bullish engulfing candle.

Daily: Trend ranging. Price traded above the weekly support level earlier in the week but rallied off this level following FOMC.

Daily Ichimoku Cloud chart: Price is still trading below the Cloud BUT only just. The Cloud above price is thin so won’t offer too much resistance if tested.

4hr: Trend down. Price traded sideways until FOMC at which point it rallied. Price has now broken above a strong previous S/R level of 81.70. The significance of this level can be seen on the weekly chart. It finished the week just below another key S/R level of 82.59. The 82.59 level is the 61.8% fib retrace level from the last major swing high back in mid 2010!

4hr Ichimoku Cloud chart: Price rallied up through the Cloud after FOMC. It closed the week trading above the Cloud. This is divergent from the daily chart and suggests choppiness.

EURX

Monthly: Trend down overall but 8 of the last 10 months were bullish. The current monthly candle is printing a bearish coloured inside candle BUT with a long lower shadow candle, similar to the USDX!

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 12 weeks. The weekly candle closed as a reversal style ‘shooting star’ candle. Price is sitting 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 meant that price closed the week back in this channel and below the key 108.5 level. This is the 11th week of such choppy, range bound action. Price has still struggled to make a clean and decisive break up and out from this channel. I note that the daily chart looks to be forming up into a bullish ‘ascending triangle’ pattern.

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 reasonably broad and might add support to future price action.

4 hr: Trend choppy & ranging. Price action chopped around above the 108.5 level for most of the week and between the 108.2 and 109.2 levels.  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.

Thoughts:

Choppy markets + Ichimoku: The Ichimoku charts are back to being divergent. 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 held above the 108.5 for much of the week but failed to close the week out above this key S/R level. The 108.5 has been proving to be a significant challenge though and has managed to contain price for much of the last 11 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. There are two bullish ‘risk on’ type patterns on the EURX: a weekly inverse H&S pattern and a daily chart ascending wedge. Current price action across the USDX and EURX looks anything but ‘risk on’ though and I’m watching for a momentum break either way.

USDX: The USD has rallied off a major weekly support trend line after FOMC.

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.