FX Indices Review for 14/10/13

USDX

Monthly: Trend ranging / upwards. The new October candle is currently printing a bullish reversal ‘hammer’ candle.

Weekly: Trend up overall. Price closed higher for the week BUT still below the major support trend line and, also importantly, below the weekly 200 EMA, albeit only just. Last week’s bullish reversal style ‘hammer’ candle was an accurate predictor of price for this week though. The weekly candle this week closed as a bullish engulfing candle. It is worth noting that this is the third weekly candle to close below the weekly 200 EMA and price had not previously closed below this key S/R level since January this year. So, some mixed signals here.

Daily: Trend choppy/down. Price chopped higher this week.

Daily Ichimoku Cloud chart: Price traded below the Cloud all week but did edge up above the Tenkan-sen line.

4hr: Trend choppy/down. Price drifted higher this week but couldn’t hold and close out the week above the weekly 200 EMA.

4hr Ichimoku Cloud chart: Price drifted higher to close up through the Cloud for the week. This is not aligned with the daily chart and suggests choppiness.

EURX

Monthly: Trend down overall. The new October candle is currently printing a small but bullish candle.

Weekly: Trend up, overall.  Price had failed to move above the monthly 200 EMA after several previous attempts but seems to be trying to have another go. This level has been major resistance to price movement. The weekly candle closed as a bullish candle just slightly below the monthly 200 EMA.

Daily: Trend up overall. Price chopped higher again this week as it continued bouncing along just under the key resistance of the monthly 200 EMA. You can see from the daily chart that price was printing what looked like a possible bearish ‘triple top’ pattern. This seems to have been avoided though for now now given that price closed above the 110 level. There is also a competing bullish ‘inverted Head & Shoulder’ pattern still printing here as well. The neck line of this pattern looks to be at around 110 which is just below the monthly 200 EMA level. The daily candle close above the 110 level seems to have voided the ‘triple top’ and left the path open for a possible bullish inverted H&S to evolve. Failure of price to close above the monthly 200 EMA though might lead to a 'quadruple top'!

Daily Ichimoku Cloud chart: Price traded above the Cloud all week.

4 hr: Trend ranging/choppy:  Price continued to chop sideways for the first half of this week under the major resistance of the monthly 200 EMA. Price rallied on Thursday though and eventually made it up to the monthly 200 EMA. Whilst price punched up through this S/R level a couple of times there was not a 4hr candle close above this key level.

4hr Ichimoku Cloud chart: Price traded above the Cloud all week. This is in alignment with the daily chart and supports long EUR or ‘risk on’.

Thoughts:

USDX: The USDX closed higher for the week although price is still trading under the weekly support trend line and the weekly 200 EMA. The weekly candle has again closed with a bullish look to it and these weekly candles have been quite accurate lately. The weekly 200 EMA looks to be quite significant here.

EURX: the EURX again traded higher this week and is now just under a major S/R level of the monthly 200 EMA. I still believe that this level will prove to be a demarcation line for risk appetite: a break and hold above this for ‘risk on’ and a respect/rejection for ‘risk off’.

Final Thoughts: The USD rallied a bit this week but this enthusiasm seemed to fade as speculation grew that US QE tapering might not be starting anytime soon. The Euro has again risen more due to this USD weakness rather than due to any Euro-based enthusiasm.

The US Government shutdown remains a variable that could significantly swing momentum here either way.

There has just been some Chinese Trade Balance data released that was much weaker than expected. This may upset 'risk appetite' enthusiasm to start the week. There is a bit more 'red flag' Chinese data scheduled for release throughout the week though as well.

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.