FX Indices Review for 03/02/14

USDX

Monthly: Trend ranging / upwards. I’m still seeing a possible bearish ‘double top’ formation though. The January candle ended up closing as a bullish candle after only last week printing a bearish ‘spinning top’ type candle.

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

Weekly: Trend chopping/sideways. The weekly candle closed as a large bullish candle and above the weekly 200 EMA. I do note the lack of trend as indicated by the ADX though! Check it out.

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

Daily: Trend choppy/sideways. The daily chart shows how price has basically chopped around between the boundaries formed up by the daily and weekly 200 EMAs for all of January. This was the case for much of November too. Price is now trading above the daily 200 EMA and I’ll be watching to see if it can hold above this key S/R level. A clear hold and break away from this S/R level would be a bullish signal.

Daily Ichimoku Cloud chart: The daily Ichimoku chart shows how price, for most of January, has chopped around just above the Cloud.  The index spent most of November and December embedded in the Cloud. Price has not managed to break upwards and free from the daily Ichimoku Cloud since last July and, then, that was only briefly. I’m still 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 further failure would be a rather bearish signal.

4hr: Trend choppy/up. Price chopped sideways along the top of the weekly 200 EMA until Wednesday when FOMC news gave it a boost.

4hr Ichimoku Cloud chart: Price traded below the Cloud until Thursday but rallied to end the week above the Cloud.  This is aligned with the daily chart and suggests long USD.

EURX

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, though, has closed as a bearish candle and below the major support of both the monthly 200 EMA and the monthly triangle trend line.

Monthly Ichimoku: Price had been held back by the monthly Cloud for most of 2013 and had been attempting to push up through this resistance zone. It is now back to trading below the bottom edge of the monthly Cloud.

Weekly: Trend up, overall.  This week’s candle was, essentially, a bearish engulfing candle and this has closed below the major support trend line. I noted on Thursday how this chart has the start of what looks like a possible bearish Head and Shoulder pattern forming. I’ll keep an eye on this.

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

Daily: Trend choppy. Price traded lower for most of the week and tested the critical intersection of the major support trend line and the monthly 200 EMA. Wednesday’s FOMC brought USD strength and, then, further bad news by way of emerging market news eventually saw the EURX fall below these two major levels. 

Daily Ichimoku Cloud chart: Price traded in the Cloud until Wednesday but then fell with FOMC to finish the week below the Cloud.

4 hr: Trend choppy/down:  Price chopped lower all week as it struggled to hold above the support of both the monthly 200 EMA and the major support trend line. Emerging market fear developed later in the week and this, combined with USD strength, proved too much and price eventually fell through these two major support levels on Thursday.

4 hr Ichimoku Cloud chart: Price traded within the Cloud until Wednesday but then fell to close the week below the Cloud.  This is aligned with the daily chart and suggests short EUR.

Comments:

USDX: the USDX closed higher for the week. Wednesday’s FOMC brought QE taper news and this helped to boost the USDX and it rallied to close above the key support of the weekly 200 EMA and, also, above the daily 200 EMA. I continue to watch the weekly 200 EMA for guidance though as I believe that a sustained hold above this level would support bullish continuation but a further breach might be rather bearish. I will be watching to see if this latest batch of USD strength holds and develops. This latest USD strength has been mostly due to QE taper news but I'll also be watching to see if any weak economic data or continuing emerging market news starts to feed fear and some 'flight to safety' into this rally as well.

EURX: the EURX closed lower for the week due to USD strength and, also, due to concern with the state of emerging markets. Price has now closed back below the major S/R levels of the monthly 200 EMA and the weekly support trend line and this represents a significant bearish shift. The November monthly candle close above the monthly 200 EMA was the first in 2 ½ years and the December candle closed above this key level too! This new bearish monthly close below support might be the start of a pull back though.

Ichimoku Alignment: I noted mid-week how the index charts are now aligned for ‘risk off’, or long USD & short EUR. I’ll be watching to see if this alignment develops at all. Some previous periods of alignment have resulted in great trending moves and, thus, this current alignment is worth monitoring.

NB: I have to travel on Monday and may not post an update until later in the day.

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.