Saturday, May 3, 2014

FX Indices Review for 05/05/14

Monthly: Trend ranging. I’m still seeing a possible bearish ‘double top’ formation. The April monthly candle closed as a bearish, almost engulfing, candle. The new May candle is currently printing a barely visible 'Doji'.

Monthly Ichimoku: The April candle closed trading within the monthly Cloud.

Weekly: Trend chopping/sideways. The weekly candle closed as a bearish candle AND below the weekly 200 EMA.

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

Daily: Trend choppy/sideways.Price chopped downwards last week. The daily chart continues to show how price has essentially chopped sideways since last September in a range bound by the 79 and 81.50 levels. Check out Friday’s ‘Long Legged Doji’, almost ‘Gravestone Doji’ candle, following NFP.

Daily Ichimoku Cloud chart: Price traded below the Cloud for most of the week. The daily Ichimoku chart shows how price has chopped within or near the Cloud since last November. The index has still not managed to make a clean and decisive break away from this zone, either up or down! I remain on the lookout to see which way the USDX will head following this period of being ‘Cloud bound’. A bullish break and hold above the Cloud might signal continued upwards momentum but a sustained failure would be a rather bearish signal.

4hr: Trend choppy. Price chopped up and down for most of last week. The 4 hr 200 EMA and the monthly pivot continued to be too much resistance for this index. NFP data gave the index a boost on Friday but this gain quickly evaporated. Price action reversed once the monthly pivot and 4hr 200 EMA were again reached.

4hr Ichimoku Cloud chart: Price chopped up and down and within the Cloud for much of the week but the USDX closed the week below the 4 hr Cloud. This chart is aligned with the daily chart and suggests short USD.

Monthly: Trend down overall. 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! The January candle closed as a bearish candle and below this level but the February and March monthly candles closed as a bullish candles above this key support. The April candle closed as a bullish coloured, indecision style, ‘spinning top’ candle BUT above the monthly 200 EMA. The new May candle is currently printing an even smaller bullish coloured ‘Doji’ candle.

Monthly Ichimoku: Price had been held back by the monthly Cloud for most of 2013 but has been attempting to push up through this resistance zone for the past few months. The April candle closed within the Cloud.

Weekly: Trend up, overall. The weekly candle closed as a bullish coloured ‘Doji’ candle. This reflects ‘indecision’ BUT the index is still trading above the monthly 200 EMA and the support trend line, although it is only trading just above the support trend line.

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

Daily: Trend choppy. The EURX chopped sideways and towards the apex of the triangle pattern all of last week. I’m still watching for any breakout here; either up or down.

Daily Ichimoku Cloud chart: Price chopped sideways in the top edge of the Cloud for most of the week. It closed the week sitting just above the daily Cloud.

4 hr: Trend choppy:  Price chopped up and down last week and only closed slightly higher than where it opened. I had though last week might be interesting as the index traded closer towards the apex of this triangle but no breakout move has evolved as yet. Perhaps next week may offer some development here. The index closed the week, again, sitting just above the monthly pivot and above the support of the monthly 200 EMA and right on top of the monthly support tend line.

4 hr Ichimoku Cloud chart: A narrow band of horizontal Cloud continued to form a backdrop for the sideways action of the index last week. Price closed the week just above the Cloud. This chart is aligned with the daily chart and, whilst not terribly convincing, suggests long EUR.

For yet another week, not a lot has changed on either index and, as noted over the last few weeks, not much has changed now for a number of weeks. The USDX keeps chopping along between the 81.50 and 79 boundary and has done so since last September. Although it is getting a bit more interesting as it tests the lower region of this range. The EURX is still coiling along within a triangle that is now of 8 weeks duration! Hence, the technical descriptions remain much the same! I still consider that a big move is brewing and the behaviour of the indices still contributes to this thinking.

USDX: the USDX again closed lower for the week AND still below the weekly 200 EMA key S/R level. Positive NFP data gave the USD a big boost but this enthusiasm was short lived though. Friday’s ‘long legged Doji’, which was almost a ‘Gravestone Doji’, bears witness to this reversal. Whilst NFP was a big surprise the even bigger surprise was this reversal with the USD. I see others have noted reasons for the USD slump as being due to reduced labor force participation and that this has undermined the value of this supposedly strong NFP print.

However, I continue to watch this weekly 200 EMA level for guidance as I believe that any hold above this would support bullish continuation but that a sustained breach would be rather bearish. The USDX can’t seem to make a clean break away from this zone though and has essentially traded in a range between the 81.50 and 79 levels since last September!

EURX: the EURX again closed slightly higher for the week. Price temporarily breached the support of the bull triangle trend line from the monthly chart but this was short lived. A sustained breach of this support trend line, and of the monthly 200 EMA, could trigger the start of a significant bearish move. A continued hold above these levels is bullish though. I’ll continue watching these levels closely in the coming weeks. The Ukraine situation has the potential to topple this index from this vulnerable position; a position where it has been teetering now for some weeks.

Ichimoku Alignment:The USDX is trading slightly below the Cloud on the 4hr and daily time frame charts. The EURX is trading slightly above the Cloud on the 4hr and daily charts. This is a technical alignment of the index charts towards 'risk on' but it is hardly convincing. I'll be watching to see if this alignment holds and develops though.

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 Ukraine, 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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