FX Indices Review for 13/01/14

USDX

Monthly: Trend ranging / upwards. I’m still seeing a possible bearish ‘double top’ formation. The new January candle is hard to see but is printing a bullish coloured ‘Gravestone Doji’ style candle.

Monthly Ichimoku: The new January candle is trading just above the monthly Cloud.

Weekly: Trend chopping/sideways. The weekly candle closed as a bearish coloured ‘inside’ candle with a long upper shadow BUT still just above the weekly 200 EMA. This candle style suggests 'indecision'.

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

Daily: Trend choppy/sideways. Price chopped up and down but above the weekly 200 EMA for the week.

Daily Ichimoku Cloud chart: Price 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 and hold might signal continued upwards momentum but further failure would be a rather bearish signal. The New Year has seen price rally to trade above the Cloud and this has now held into the second week of January, albeit only just. Friday’s NFP brought bearish action for the USDX and the index has now closed on the top edge of the daily Cloud. So, a clear escape, either up or down from the Cloud, might still be some way off.  

4hr: Trend choppy/up. Price chopped higher this week but stalled at the 81 level and daily 200 EMA on Thursday. Friday’s bearish action brought price back down to near the weekly 200 EMA and weekly pivot.

4hr Ichimoku Cloud chart: Price continued to trade above the Cloud.  This is aligned with the daily chart, for the time being, and suggests a bullish USD. This alignment may not last too long though if the USD continues its slide into next week.

EURX

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 a bullish coloured Doji and 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 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 a bullish coloured ‘inside’ candle, suggesting some indecision’, but it has still held above the weekly support trend line.

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

Daily: Trend choppy. Price has chopped sideways this week.

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

4 hr: Trend choppy/up: Price has been chopping sideways since opening lower in the New Year. The index has still closed out the week above the support of the monthly 200 EMA and above the monthly/weekly support trend line. I had said I would not be surprised to see price at least test these key levels before any bullish continuation and this is what we have been seeing recently. The question now is whether these two major support structures will continue to hold the EURX. 

4 hr Ichimoku Cloud chart: Price traded below the Cloud all week.  This chart is divergent from the daily chart and suggests choppiness.

Comments:

USDX: the USDX closed lower for the week after Friday’s NFP. Continued ‘taper’ thoughts had been helping to keep the USD higher but the weaker NFP data seems to have put these ‘taper’ thoughts into some doubt and this undermined the USD strength that had been building. The USDX still managed to close above the key support of the weekly 200 EMA, albeit only just, 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 has basically chopped sideways since opening lower to start the New Year. It has continued to hold above the major S/R level of the monthly 200 EMA and the weekly support trend line for the time being though. The November monthly candle close above this major S/R level was the first in 2 ½ years and not something to ignore and the December candle closed above this key level too! I see the EURX as a kind of ‘risk barometer’ and these bullish monthly candles closing 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. The index is still down close to this level and I’ll be watching to see if price can continue to hold above this support and that of the monthly/weekly support trend line. 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 monthly/weekly 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.