FX Indices Review for 26/08/13

USDX

Monthly: Trend ranging / upwards. The current August candle is still 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 a ‘long legged Doji’ candle sitting right on top of this weekly support level. ‘Long Legged Doji’ candles reflect a great amount of indecision.

Daily: Trend choppy/ranging. Price has chopped up and down this week and it struggled to hold above the major weekly support trend line. Price finished the week, again, just above this support trend line and near the weekly pivot.

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

4hr: Trend down overall. Price fell through the weekly support trend line early in the week but then bounced off a lower support level of 80.70. Price rallied until it then hit an upper resistance level of 81.70. The strength and importance of these two levels, as well as that of the weekly support trend line, can be best seen from the weekly chart. Price then fell back to the support trend line and managed, again, to hold above this level to see out the week.

4hr Ichimoku Cloud chart: Price has chopped in and out of the Cloud all week. Price finished the week in the bottom edge of very thin 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, still with a week to go though, is now printing a reversal style ‘hanging man candle’. Price action is still 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 21 weeks. The weekly candle closed as a bullish engulfing candle. Price action is becoming increasingly wedged between the resistance of the monthly 200 EMA (above price) and the weekly support trend line (below price). This does have a 'bullish ascending triangle' pattern look to it though! These patterns are bullish continuation patterns.

Daily: Trend up. Price bounced down off the resistance of the monthly 200 EMA 3 weeks ago. It then trended down until it reached the weekly support trend line. Price bounced of this support and has traded higher since though. Price is still trading in what likes a bullish ascending triangle pattern. Price is becoming wedged between the support of the weekly support trend line and the resistance of the monthly 200 EMA.  There is always the potential of a bearish ‘double top’ formation if the resistance of the monthly 200 EA proves, again, to be just too strong. Trend line breaks will be important here to give clues as to the possible future direction and trend.

Daily Ichimoku Cloud chart: Price chopped above the Cloud all week.  The bearish Tenkan/Kijun cross is still evident and I’m keeping my eye on it!

4 hr: Trend ranging/choppy:  Price chopped upwards this week above the weekly support trend. It also broke out and up from a triangle pattern on the 4hr chart.  

4hr Ichimoku Cloud chart: Price rallied up through the Cloud this week. This is in alignment with the daily chart and supportive of ‘risk on’.

Thoughts: Both indices started the week hovering near major S/R levels. The USDX is still there, whereas, the EURX has rallied somewhat. 

USDX: The USDX has hovered above major support for three weeks now. The last two encounters with this support trend line resulted in quick bounces but, not so this time. The question, of course, is whether price will eventually rally from here or is it just paused before the next leg down? The length of time the USDX is spending hanging near support seems to be a rather bearish signal to me.  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 has bounced off the major weekly support trend line and seems to be heading back to test the resistance of the monthly 200 EMA again. Price is becoming increasingly wedged between the weekly trend line 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.