Saturday, January 4, 2014

FX Indices Review for 06/01/14

Monthly: Trend ranging / upwards. I’m still seeing a possible bearish ‘double top’ formation. The December monthly candle closed as a bearish candle.

Monthly Ichimoku: The December candle closed just within the Cloud but the new January candle is trading just above the monthly Cloud.

Weekly: Trend up/sideways. The weekly candle closed as a bullish, almost engulfing, candle. It also closed back above the weekly 200 EMA.

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

Daily: Trend choppy/sideways. Price chopped sideways just above the weekly 200 EMA for most of November and just below for most of December. I'd like a clean break here!

Daily Ichimoku Cloud chart: Price has chopped within the Cloud, or just nearby, for most of November and December.  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 still on the lookout to see which way the USDX will head following this latest patch of being Cloud bound. A bullish break might signal continued upwards momentum but further failure would be a rather bearish signal. The New Year has seen price rally to above the Cloud and I’ll be watching to see if this bullish break out holds.

4hr: Trend choppy/down. Price traded below the weekly 200 EMA to finish the year but rallied in the New Year to close above this key S/R level. It also closed above the 50% pull back fib of the 2010-2011 down move.

4hr Ichimoku Cloud chart: Price is back above the Cloud.  This is aligned with the daily chart and suggests a higher USD.

Monthly: Trend down overall. The most significant point to remember here is that price closed for November and December with bullish candles above the monthly 200 EMA. November was the first monthly close above this huge S/R level for 2 ½ years! Price is also getting up close to the bear trend line of the major, monthly triangle pattern. I would expect choppiness as price approaches this major resistance but a break above this level would be very bullish. The new January candle is bearish at the moment but still trading above the monthly 200 EMA.

Monthly Ichimoku: Price had been held back by the monthly Cloud for most of 2013 but is now attempting to push up through this resistance zone. It is still about half way up through the monthly Cloud. I would expect further choppiness as price approaches the top edge of the Cloud but a break above this level would be very bullish.

Weekly: Trend up, overall.  This week’s candle was bearish and almost engulfing but has still held above the monthly 200 EMA and the weekly support trend line.

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

Daily: Trend choppy. Price gapped lower for the New Year.

Daily Ichimoku Cloud chart: Price is still trading above the Cloud. The Cloud has flipped to bullish as well.

4 hr: Trend choppy/up:  Price gapped lower in the New Year bus has still closed 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.

4 hr Ichimoku Cloud chart: Price gapped to fall below the Cloud this week and a new bearish Tenkan/Kijun cross was noted.  This chart is divergent from the daily chart and suggests choppiness.

USDX: the USDX gapped higher to start the New Year and one has to wonder if this is a sign of things to come. The winding back of QE might be enough to keep the USD higher for now.  The USDX closed the week back above the key support of the weekly 200 EMA and I’ll continue watching this level for guidance. A hold above the weekly 200 EMA would support bullish continuation but a further breach might be rather bearish. Price still hasn't strayed too far, either way, from this key level just yet.

EURX: the EURX gapped lower to greet the New Year but has continued to hold above the major S/R level of the monthly 200 EMA for the time being. The November monthly candle close above this major S/R level was the first in 2 ½ years and not something to ignore and now the December candle has closed above this key level too! I see the EURX as a kind of ‘risk barometer’ and these bullish monthly candle closes above the monthly 200 EMA as quite significant. I have been saying that I would not be surprised to see this major level tested again though even if there is to be bullish continuation. Price is back down close to this level again now and I’ll be watching to see if price can hold above this support. I believe that a continued hold above this S/R level might help to support continued ‘risk appetite’ but a breach, along with continued USD strength and any break of the EURX support trend line, could spell the end to this bullish run.

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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