Flag patterns have been brewing on the FX Indices for over three months but both are now coming under pressure. Momentum is building on both Flag patterns so any watch for any sustained breakout as this will have follow-through impact for FX trading. There isn’t a lot of scheduled data for next week and the US Thanksgiving holiday might keep things a bit quiet but watch out for ongoing US tax reform debate to impact here as well.
Both FX indices remain trapped in Flag patterns and they’ve been like this for around three months now. So, if you’ve been struggling to find some decent trends with your FX pairs then that is probably why. FWIW: I don’t see the return of any decent trending FX markets until one or both indices breakout from their Flags.
Both FX indices have closed with small bullish candles but the story might be more in their ‘shadows’. The USDX candle closed with a long lower shadow giving this a somewhat bearish tinge and the EURX printed a long upper shadow giving this a bullish-reversal ‘Inverted Hammer’ appearance. Either way, both remain in their respective Flag patterns so breakouts from these need to be seen, IMHO that is, before and decent trending FX markets will return.
The US$ index closed higher for the week but so, too, did the EUR index. The US$ remains trapped in a recent trading channel and I still consider we need to see a decisive breakout before decent trending FX markets will return.