Both FX Indices closed with small bearish candles reflecting ‘indecision’ which isn’t too surprising given the concern about a US Government shutdown. This remains a risk event heading into next week.
Wednesday, Thursday and Friday were bearish days for the US$ but Friday was the worst, despite decent Core Retail Sales data. Euros strength, amid talk of the ECB tapering their bond buying, has resulted in a Yin and Yang style reaction for the FX Indices. The US$ index closed with a bearish weekly candle and, more significantly, has closed below a recent low setting up for a potential Bear Flag move.
The FX indices have paused at their respective next major S/R levels with NFP failing to help trigger any breakout move. Jobs data was weaker than expected but wages improved since the last report such that the US$ index closed the week with an indecision-style Doji candle. Both Indices look poised for potential follow-through activity though so keep an eye on the looming S/R zones on each.
I mentioned last weekend that the FX Indices had slipped back into alignment for ‘risk on‘ and to watch for any follow-through activity with respective pairs. Since that warning about US$ weakness there has been a 300 pip rally with Gold, 200 pips with Oil, 130 pips with EUR/USD, 85 pips just recently with the Cable and even the Aussie has joined the party! The FX Index Flags look to have triggered so watch for any more of the same in coming sessions. Continue reading
The US$ index has closed the week lower despite the US rate hike announced in the previous week. Both FX Indices remains in their respective Flag patterns so the wait for a decisive breakout continues.