FX Indices Review for 02/09/13

USDX

Monthly: Trend ranging / upwards. The August candle closed as what looks closest to being an indecision style ‘spinning top’ candle. The monthly 200 EMA and the 84 area continue to be resistance.

Weekly: Trend up overall. Price chopped upwards above the weekly support trend line this week.  This is a major support level that has been in play since Aug 2011. The weekly candle closed as a large bullish candle.

Daily: Trend choppy/ranging. Price chopped sideways and then up this week. Price finished the week above the previous S/R level of 81.70.

Daily Ichimoku Cloud chart: Price traded below the Cloud all week but is edging up higher towards the Cloud.

4hr: Trend chopping/ranging. Price chopped sideways until Thursday. It then rallied and broke up through the resistance of the daily and 4hr 200 EMAs and 81.70 level. Price parked for the w/e at the whole number 82 level.

4hr Ichimoku Cloud chart: Price chopped in and out of the Cloud until Thursday. It then rallied up and out from the Cloud and finished the week above the Cloud.  This is divergent from the daily chart and suggests choppiness.

EURX

Monthly: Trend down overall but 9 of the last 13 months have been bullish. The August candle closed as a bearish coloured ‘inside candle’. These candles reflect indecision. The monthly candle has also closed below the weekly support trend line and this is a bearish signal. This is the first candle in 13 months to close below this support level.

Weekly: Trend up, overall. Price failed to move above the monthly 200 EMA back in January. It has failed there again thus far. 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. This support level has held up for the last 22 weeks but has failed to hold price this week. Price has closed out for the week below this support trend line and this is a bearish signal. The weekly candle closed as, essentially, a bearish engulfing candle.

Daily: Trend up overall. Price trended down this week though and broke through the weekly support trend line. The bearish ‘double top’ formation might just be the pattern to dominate here now.

Daily Ichimoku Cloud chart: Price chopped sideways above the Cloud to start the week but then drifted down to end in the top edge of the Cloud.  This is another bearish signal. The bearish Tenkan/Kijun cross has held and I’m keeping my eye on it!

4 hr: Trend ranging/choppy:  Price drifted down all week and broke through the weekly support trend line, monthly pivot and 4hr 200 EMA.

4hr Ichimoku Cloud chart: Price started above the Cloud but drifted down through the week to finish below the Cloud. This is divergent from the daily chart and suggests choppiness.

Thoughts: What a difference a week makes! The USDX has bounced off its weekly support trend line and the EURX has broken down through its weekly support trend line. These are moves that suggest a possible shift to ‘risk off’ and I’ll be watching for any follow through and signals that point that way. I say only ‘possible’ shift to ‘risk off’ because there is also the potential for the USD to rally on the back of good data and improved US market sentiment. There have been periods of this recently where the USD and stocks have rallied together on such buoyant sentiment. A ‘fear driven USD rally’ though would most likely feed into a ‘risk off’ move whereas an ‘improved US sentiment driven USD rally’ might see stocks rally but other risk instruments suffer.

Warning: The tension across the Middle East with the Syrian conflict has the potential to shift market sentiment and undermine all technical analysis.

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 or Middle East 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.