FX Indices Review for 19/08/13

USDX

Monthly: Trend ranging / upwards. The current August candle is bearish and testing the major support trend line. The monthly 200 EMA and the 84 area continue to be resistance.

Weekly: Trend up overall. The weekly support trend line has been tested again this week.  This is a major support level that has been in play since Aug 2011. 

The weekly candle closed as an ‘inverted hammer’ candle sitting right on top of this weekly support level. ‘Inverted hammer’ candles represent a potential trend reversal or possible support levels at a point of indecision.

Daily: Trend choppy/ranging. Price has been up and down this week but it struggled to get up over the daily 200 EMA. Price finished the week just above the support trend line and at the weekly pivot.

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

4hr: Trend down overall. Price bounced off the weekly support trend line to start the week but ran into resistance in the form of the daily 200 EMA and the previously strong S/R level of 81.70. Price then fell back to the support trend line and managed to hold above this key level to see out the week.

4hr Ichimoku Cloud chart: Price rallied up towards the Cloud during the week but didn't manage to break up and free from this resistance zone. Price finished the week in the bottom edge of 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 current August candle is still printing a bearish coloured, indecision style, ‘inside candle’. Price action is becoming increasingly squeezed between the monthly 200 EMA and the weekly support trend line.

Weekly: Trend up, overall. Price failed to move above the monthly 200 EMA back in January. Price is back struggling at this area again now. 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 20 weeks. 

The weekly candle closed as a Doji candle. The Doji suggests that supply and demand are fairly balanced. Price action is becoming increasingly wedged between the resistance of the monthly 200 EMA (above price) and the weekly support trend line (below price).

Daily: Trend up. Price has drifted downwards since it approached the resistance of the monthly 200 EMA 2 weeks ago. Price has traded in a triangle pattern since then as it edged down closer to the support of the major weekly support trend line.

Daily Ichimoku Cloud chart: Price chopped downwards for the week but is still above the Cloud. There has been a bearish Tenkan/Kijun cross though which I’m keeping my eye on!

4 hr: Trend ranging/choppy:  Price chopped around sideways this week within the confines of the symmetrical triangle pattern. Price finished the week sitting near the safety of the monthly and weekly pivot.

4hr Ichimoku Cloud chart: Price chopped under the Cloud all week but drifted up to test the bottom edge of the Cloud on Friday. It finished the week below the Cloud. This is divergent from the daily chart and suggests choppiness.

Thoughts: Both indices are hovering near major S/R levels. Based on these observations, and the direction that they both ultimately move from this point, I would not be surprised to see a major momentum directional move develop soon. A number of traders are betting on a major 'risk off' move with stocks and 'risk appetite' instruments falling. I am keeping an open mind for the time being and I will wait for a clear sign of the next trend to form up.

USDX: The USD index still looks to be in the driver’s seat. It bounced off the major weekly support trend line two weeks ago and it did so again last week. The question is whether price will continue to rally from here or is it just paused before the next leg down? I’m still hoping to see this index either clear the 84 level or break below the weekly support trend line.

The EURX: The EURX is testing the major weekly support trend line and is only about 20 pips above this level. Price is becoming wedged between this support level and the resistance of the monthly 200 EMA.  I’m still waiting for a break out either way, up or down!

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.