Saturday, November 23, 2013

FX Indices Review for 25/11/13

Monthly: Trend ranging / upwards. I’m still seeing a possible ‘double top’ formation here.

Monthly Ichimoku: Price is holding above the monthly Cloud, albeit only just!

Weekly: Trend up/sideways. Price traded lower this week and the weekly candle closed as a bearish coloured ‘spinning top’ type of candle. I mentioned last week that there was a possible bearish ‘Dark Cloud’ pattern setting up on the USDX but that I needed to see this week’s candle as the ‘confirmation’ candle. The candle close for this week confirms the bearish ‘Dark Cloud Cover’ pattern on the USDX!

Magnified view of the last few weekly USDX candles:

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

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

Daily Ichimoku Cloud chart: Price traded in the Ichimoku Cloud all week and is still in the Cloud.

4hr: Trend choppy. Price chopped sideways this week between the daily and weekly 200 EMA. It didn’t stray too far away from the half way mark of the last major down move (mid 2010-mid 2011). It closed the week sitting right on top of this 50% fib level and just above the weekly 200 EMA again so, although trending down at the moment, it’s still got some support beneath.

4hr Ichimoku Cloud chart: Price spent much of the week within the Cloud but finished the week off trading below the Cloud.

Monthly: Trend down overall. The monthly candle has a week to go but price may close back up within the monthly triangle pattern. It closed the week trading just below this trend line. You can see the pressure that the monthly 200 EMA has put on price action. Note how this also the area of the 50% fib level of the down move from 2008 to 2011.

Monthly Ichimoku: The November monthly candle is now trading at the bottom edge of the Cloud. You can see how the monthly Cloud has offered resistance to the index.

Weekly: Trend up, overall.  The previous weekly bullish engulfing candle was clearly in the know here! This week’s candle was a 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 weekly closes below. It is still below the major triangle support trend line, albeit only just. This triangle trend line has been in play since July 2012 so this breach was significant but a close back above these levels would be even more so!

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

Daily: Trend choppy. Price was choppy this week and bounced between the monthly 200 EMA/ monthly pivot zone and the weekly pivot.

Daily Ichimoku Cloud chart: Price moved down to test the Cloud this week but finished trading above the Cloud.

4 hr: Trend choppy/down:  Price chopped higher to start the week and tested a key resistance region made up of the monthly 200 EMA, the 61.8% fib retrace level of the recent down move, the broken support triangle trend line and the monthly pivot. It fell during the week following ECB news but rallied after that to close the week back up in this congestion zone but, most significantly, above the monthly 200 EMA.

4hr Ichimoku Cloud chart: Price drifted lower to test the Cloud this week but finished the week above the Cloud! This chart is aligned with the daily chart and suggests long Euro.

Who’d have thought! The USDX traded lower and the EURX higher even with thoughts of early QE tapering in the US and negative interest rates in the Euro zone. The mind boggles but, as they stay, don’t jump in front of a moving bus. I am a trend trader and, whilst I’d like a short but sharp pull back, I need to trade with the current momentum. The S&P500 has just closed as I type this and it has finished the week above 1,800. I'm still trading in line with our local bush fire warning of 'Watch and Act' though!

USDX: the USDX traded lower for the week and a bearish ‘Dark Cloud Cover’ pattern has developed on the weekly chart.

EURX: the EURX traded higher this week and has closed back above the major S/R level of the monthly 200 EMA, although only by a few pips. It is only trading slightly below the major support trend line of the monthly chart triangle pattern. I still believe that a hold below these two key levels will prove to be a demarcation level for continuing risk appetite in FX. A move back above these resistance levels would be quite a bullish signal. I see the EURX as a kind of ‘risk barometer’ and so I’m watching these levels very closely. There is a week to go before the monthly candle closes and I’ll be watching to see where the index closes in relation to these two significant levels.

Ichimoku Alignment:
The USDX doesn't have too far to fall to put the EURX and USDX charts back into Ichimoku 'risk on' alignment. I'm watching out for that possibility.

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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