FX Indices Review for 23/12/13

USDX

Monthly: Trend ranging / upwards. I’m still seeing a possible bearish ‘double top’ formation. The monthly candle is printing a bearish Doji candle, still suggesting some indecision.

Monthly Ichimoku: Price is still trading just above the monthly Cloud.

Weekly: Trend up/sideways. Last week’s ‘hammer’ style reversal candle knew what to expect this week. The USDX had the first bullish close for 6 weeks.  The weekly candle closed as an, almost, bullish engulfing candle.

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

Daily: Trend choppy/down. Price chopped down until FOMC on Wednesday.  Price closed back above the weekly 200 EMA but stalled at the region of the monthly pivot and 50% fib pull back level of the2010-2011 down move.

Daily Ichimoku Cloud chart: The boost with FOMC lifted price but put it back up in the Cloud. Price has not managed to break up and free from the daily Ichimoku Cloud since last July and, then, that was only brief. I’m on the lookout to see which way the USDX will head following this latest patch of being back in the Cloud. A bullish break might signal continued upwards momentum but further failure would be a rather bearish signal.

4hr: Trend choppy/down. Price chopped sideways until FOMC on Wednesday. It has rallied after that but stalled on Friday at the monthly pivot.

4hr Ichimoku Cloud chart: FOMC sent price up from below the Cloud to finish the week above the Cloud.  This is divergent from the daily chart and suggests further choppiness.

EURX

Monthly: Trend down overall. The most significant point to remember here is that price closed for November above the monthly 200 EMA. This was the first monthly close above this huge S/R level for 2 ½ years! The December candle is still bullish as well and trading above this key level.

Monthly Ichimoku: Price had been held back by the monthly Cloud for most of this year but is now attempting to push up through this resistance zone. It is still about half way up through the monthly Cloud.

Weekly: Trend up, overall.  This week’s candle was the first bearish candle in six weeks but it has still held above the monthly 200 EMA and weekly support trend line. I’m on the lookout for further bearish follow through and a possible test of the weekly support trend line. 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 five consecutive weekly candles close above this significant level.

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

Daily: Trend choppy. Price chopped lower this week due to USD strength following FOMC.

Daily Ichimoku Cloud chart: Price is still trading above the Cloud.

4 hr: Trend choppy/up:  Price chopped lower after FOMC but is still above the support of the monthly 200 EMA. I would not be surprised to see price at least test this key level before any bullish continuation. The slide slowed on Friday though so I’ll be keen to see how it trades next week.

4hr Ichimoku Cloud chart: Price fell to trade within the Cloud this week and a new bearish Tenkan/Kijun cross was triggered. This chart is divergent from the daily chart and suggests further choppiness.

Comments:

USDX: the USDX rallied this week following FOMC. Stocks joined the USD with this rally to the surprise of many who thought taper talk would spark a sharp fall with stocks. The USDX closed for the week above the key support of the weekly 200 EMA and I’ll be watching this level next week for guidance. A hold above the weekly 200 EMA would support bullish continuation but a breach might be rather bearish. I'm also watching the daily Ichimoku Cloud and to see which way price eventually breaks from there. Bullish continuation for the USDX would obviously put pressure on the E/U, A/U and G/U etc.

EURX: the EURX traded lower this week due to USD strength but it has continued to hold above the major S/R level of the monthly 200 EMA. The November monthly candle close above this major S/R level was the first in 2 ½ years and not something to ignore! I see the EURX as a kind of ‘risk barometer’ and this bullish monthly candle close above the monthly 200 EMA as quite significant. I believe that a continued hold above this S/R level might help to support continued ‘risk appetite’. I would not be surprised to see this major level tested again though even if there is to be bullish continuation.

Final thoughts: The USDX is in the Cloud on the daily chart and the EURX on the 4hr chart so I am expecting some choppiness this week. This, and the fact that there will be lighter trading with the Christmas week, will keep me cautious with any trading signals.

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