Saturday, November 30, 2013

FX Indices Review for 02/12/13

Monthly: Trend ranging / upwards. I’m still seeing a possible bearish ‘double top’ formation here but the monthly candle closed as an ‘inverted hammer’ suggesting some bullish reversal potential.

Monthly Ichimoku: The November candle closed above the monthly Cloud.

Weekly: Trend up/sideways. Price traded lower this week following on from last week’s bearish ‘Dark Cloud Cover’ pattern. The weekly candle closed as a bearish coloured ‘spinning top’ candle.

Weekly Ichimoku: Price is still trading below the weekly Cloud.

Daily: Trend choppy/down. Price chopped sideways/down for most of this week and failed to close above the daily 200 EMA.

Daily Ichimoku Cloud chart: Price has again traded within the Ichimoku Cloud for the entire week.

4hr: Trend choppy. Price chopped lower this week but found some support from the weekly 200 EMA. It still hasn’t strayed too far away from the half way mark of the last major down move (mid 2010-mid 2011). It closed the week sitting just under this 50% fib level and just above the weekly 200 EMA. Thus, whilst trending down at the moment, it’s still got some strong support.

4hr Ichimoku Cloud chart: Price spent most of the week below the Cloud and that is where it finished for the week. There was a new bearish Tenkan/Kijun cross on the 4hr chart this week. This chart is not aligned with the daily chart though and suggests further choppiness for the USD.

Monthly: Trend down overall. The monthly candle closed as a bullish coloured candle BUT with some bearish reversal -style ‘Hanging Man’ look to it. It also closed just below the previous monthly triangle pattern trend line. I am going to redraw this support trend line now to reflect the latest S/R levels. The most significant point to note here though is that price has closed for the month above the monthly 200 EMA. This is the first monthly close above this huge S/R level for almost 2 ½ years!

Monthly Ichimoku: The November monthly candle closed below the Cloud. You can see how the monthly Cloud has offered resistance to the index.

Weekly: Trend up, overall.  This week’s candle was another bullish candle that has closed above the monthly 200 EMA. Price had failed to move above the monthly 200 EMA after several previous attempts earlier throughout the year. There were two weekly candle closes above this key S/R level recently followed by three closes below. We have now had two consecutive weekly candles close above this significant level.

Weekly Ichimoku: Price is still trading above the weekly Cloud and above the Tenkan line.

Daily: Trend choppy. Price drifted higher this week. The first four days were bullish but Friday saw a bearish candle close.

Daily Ichimoku Cloud chart: Price traded above the Cloud all week. There was a new bullish Tenkan/Kijun cross here this week. This cross evolved just above the Cloud and is therefore deemed a ‘strong’ signal.

4 hr: Trend choppy/up:  Price chopped higher this week and was supported by the monthly 200 EMA.

4hr Ichimoku Cloud chart: Price held above the Cloud all week. This chart is aligned with the daily chart and suggests long Euro. There was new bullish Tenkan/Kijun cross late last week. This cross evolved above the Cloud and is therefore deemed a ‘strong’ signal.

USDX: the USDX traded lower for the week following the bearish ‘Dark Cloud Cover’ pattern but the monthly candle suggests some possible bullish reversal potential. The weekly 200 EMA seems to be strong support for this index and I’ll be watching next week to see how price behaves around this level.

EURX: the EURX traded higher this week and for the month. There have been recent bullish crosses on both the 4hr and daily Ichimoku charts. More significantly, though, this index has closed back above the major S/R level of the monthly 200 EMA for the first time in almost 2 ½ years! I see the EURX as a kind of ‘risk barometer’ and this bullish monthly candle close above the monthly 200 EMA is quite significant. I believe that a continued hold above this S/R level might help to support continued ‘risk appetite’.

Could we see a pull back? For sure, even if there is no major reversal, this index could pull back whilst it contemplates the atmosphere up at this new major level. This would actually tie in with possible pull back potential that I'm seeing across stock indices and some currency pairs.

You have to admire the fighting spirit of this Euro index. This bullish monthly close may fall into the realm of ‘the weird and the wonderful’ or ‘strange but true’ BUT I am a trend trader and I’ll follow the trend. 

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 events 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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