FX Index Alignment: Feb 2018

February 2018 offered two good examples of the application of FX Index alignment to Forex trading.

The first application came at the start of February where a clear example presented of the benefit of waiting for the FX indices to align so as to harness decent momentum trend moves. The second example came mid February when the indices were not aligned, that is they were divergent, and this offered some excellent 15 min chart TC signals off the cross pairs.

Example One: FX Index Alignment:

The week had opened with NO FX Index Alignment and this resulted in just one 4hr chart-based trend line breakout up until the Thursday and that was on the GBP/AUD cross pair. The FX Indices slipped back into alignment for ‘risk on‘ during Thursday’s US session and this translated into numerous new trend line breakouts and TC signals triggering during that session. 

USDX: the US$ index had been in SHORT US$ mode on both the daily and 4hr charts for over one month:

USDX daily: below the Cloud here for over a month now:

USDX 4hr: below the Cloud for most of the last 6 weeks:

EURXPrice has been above the daily Cloud for some time but slipped above the 4hr Cloud last session which helped to develop some new trend line breakouts and TC signals:

EURX daily: price has been above the Cloud here for over a month now:

EURX 4hr: back above the Cloud during the last trading session which helped to trigger FX Index Alignment:

Trend line breakouts and TC signals: the renewed FX Index Alignment for ‘risk on’ helped to trigger new trend line breakout and TC signals. During this period TC signals that were for LONG EUR$ or SHORT US$ would have been preferred:

EUR/JPY: EUR strength helped to trigger a new trend line breakout here with TC signals off the 15 and 5 minutes charts:

EUR/JPY 4hr: 80 pips for now:

EUR/JPY 15 min: a TC signal for 1.5 R here:

EUR/JPY 5 min: a TC signal for 6.5 R here:

Gold: US$ weakness helped to trigger a new trend line breakout here:

Gold 4hr: a new trend line breakout due to US$ weakness:

Gold 5 min: a TC signal for 2 R here:

EUR/USD: There was no 4hr chart breakout here just yet, however, EUR strength helped to trigger a decent TC signal here off the 15 min chart for 3 R:

EUR/USD 4hr: watch 1.260 for any new make or break:

EUR/USD 15 min: there was a SHORT signal here that was a loss BUT I would only have been looking for LONG signals given the Index Alignment. This TC signal gave 3 R:

GBP/AUD: this TC signal, noted yesterday, went on for up to 7 R:

GBP/AUD 4hr: This trend line breakout is now up 260 pips BUT watch the weekly 200 EMA for any new make or break here:

GBP/AUD 5 min: this TC signal has now given up to 7 R:

EUR/AUD: EUR strength helped to trigger a new trend line breakout here and a move above the major 1.55 level with a decent 15 min chart TC signals as well:

EUR/AUD 4hr: 120 pips:

EUR/AUD 15 min: a TC signal here for 2.5 R:

Oil: no 4hr chart breakout just yet but US$ weakness helped to trigger a decent TC LONG signal for 3 R off the 5 min chart during the US session:

Oil 4hr: watch for any new breakout:

Oil 5 min: a TC signal for 3 R here:

GBP/USD 4hr: US$ weakness helped to trigger a choppy trend line breakout for only 60 pips thus far. 

 Example Two: FX Index Divergence:

The second week of February was a period where the FX Indices were divergent. Such periods are often defined by having better trading coming off the shorter time frame charts and often off the cross pairs. Two of the better signals from the week came off the 15 min charts and both came from the GBP/AUD cross pair. 

I had warned about the 1.80 level in my analysis last weekend and the first TC signal was from a move up to test this level for up to 200 pips. Then, on Friday, there was another TC signal when this level was rejected for a move up to 230 pips. That is two TC trades for 3.5 R and 7.5 R respectively and up to 430 pips!

GBP/AUD 15 min: the first TC signal gave a 3.5 R trade:

GBP/AUD 15 min: the second TC signal gave a 7 R trade: