FX Indices Review for 16/09/13

USDX

Monthly: Trend ranging / upwards. The September candle is currently printing a bearish engulfing candle. The monthly 200 EMA and the 84 area continue to be effective resistance.

Weekly: Trend up overall. Last week’s bearish, reversal-style, ‘shooting star’ candle was right on the money. These weekly candle patterns continue to be quite accurate! Price continued to slide this week after reacting and bouncing down last week from the S/R level of 82.59. The 82.59 represents the 61.8% fib pull back level from the last major swing high back in mid 2010 and, as such, is significant resistance.  This level is best seen on the monthly chart. The weekly candle closed as a bearish engulfing candle.

Daily: Trend choppy/ranging. Drifted down this week through other key S/R levels of the monthly pivot and 81.70 level.

Daily Ichimoku Cloud chart: Price drifted down from under the Cloud this week to close below the Kumo.

4hr: Trend choppy/sideways. Price drifted down from the 82.59 S/R region this week. It fell through the 4hr and daily 200 EMAs, the monthly pivot and key S/R level of 81.70.  It rallied a little on Friday but could not break back up through the 81.70 and ended the week trading below this key level. Some poor data on Friday may have eased some concern over any early tapering of QE, thereby helping to keep pressure on the USD. The other major support level of the weekly bull trend line is not too far below current price now either. This may come back into significance next week. BTW: I do see a bit of a bearish ‘Head & Shoulder ‘ pattern setting up here now too!

4hr Ichimoku Cloud chart: Price traded above the Cloud to start the week but eventually fell down through the Kumo to finish the week trading below the Cloud. This is in alignment with the daily chart and supports short USD or ‘risk on’.

EURX

Monthly: Trend down overall. The current September candle is now printing a bullish coloured ‘spinning top’, as opposed to the bearish spinning top print of last week, BUT it is still trading below support.

Weekly: Trend up, overall.  Price had failed to move above the monthly 200 EMA back in January and has failed there again thus far. This level had been major resistance so it was no surprise that price had paused here. Price action had been quite parabolic for ‘risk on’ and subsequently pulled back to the mean of the support trend line. This support level had held up for 22 weeks but has failed to hold price, yet again, this week. Price has closed out, for the third week now, below this support trend line. The weekly candle closed as a small, but bullish, candle.
The 108.5 level continued to support price action again this week. This is a major S/R level and if you cast your eyes across the weekly chart you can see how significant this level has been. The weekly candle closed above this key support level.

Daily: Trend up overall. Price broke up and out of the flag pattern to start the week on the back of some positive data. To that end, last Friday’s long legged Doji pointed to such a possible reversal! Price rallied this week until it reached the monthly pivot but then struggled to close higher and ended the week below the monthly pivot but above the 108.5.

Daily Ichimoku Cloud chart: Price rallied from below the Cloud on Monday to end up trading within the Kumo for the rest of the week. The previous bearish Tenkan/Kijun cross has held and I’m continuing to watch these BUT I do note that both of these levels are trading horizontally now and this reflects a lack of any clear trend. 

4 hr: Trend ranging/choppy:  Price rallied up and out on Monday from trading within a broadening descending wedge pattern. The monthly pivot was strong resistance though and kept price in check for the rest of the week. Price had a bit of a dip on Friday but recovered most of this loss, possibly on the back of the weaker than expected USD data.

4hr Ichimoku Cloud chart: Price rallied from below the Cloud on Monday to end up trading within the Kumo for the rest of the week. This is in alignment with the Daily Ichimoku chart but suggests choppiness.

Thoughts:
USDX: The USDX closed lower for the week as it failed to rally past the 82.59 level. The 82.59 is the 61.8% fib retrace from the last swing high and, as such, is a significant S/R level. The bearish candle patterns from last week’s prints of the monthly, weekly and daily time frames played out this week. So, price struggled as predicted! Price is now back down to being near a major weekly support trend line and this needs to be monitored. A fall below the weekly support trend line would be a very bearish signal for this index.
The fall in the USD this week was accompanied by a rally across most stocks, the E/U, A/U and Kiwi and a fall in Gold and Silver in what looked like a return to more of a typical ‘risk on’ correlation. I continue to watch for any continuation of these typical ‘risk on’ or ‘risk off’ types of moves.
 The ‘elephant in the room’ continues to be the simmering Syrian situation and this has the potential to impact rather quickly. Next week’s FOMC meeting might also deliver news that could shift USD sentiment and this release needs to be monitored as well. The weaker than expected US retail sales data and consumer sentiment on Friday kept pressure on the USD and may just result in some reduced sentiment for the early tapering of QE.
EURX: the EURX traded higher this week but is still well below the previous weekly support trend line. It is now also trading in the Ichimoku Cloud on the daily and 4hr time frame and this suggests more choppiness ahead. The rally with the Euro this week was more due to USD weakness than Euro strength though and this needs to be acknowledged. The 108.5 level needs to be watched this coming week; a fall below this support would be a bearish signal for this index.
Final Thoughts: FOMC might be behind any new driving force this week.
I’m continuing to watch levels on the indices for any sign of a return to conventional ‘risk on’ or ‘risk off’:
  • Risk on: EURX holding above 108.5 and USDX holding below 82.59/81.70. The weekly support trend line needs watching here now too.
  • Risk off: EURX falling below 108.5 and USDX rallying above 81.70/82.59

Warning: The tension across the Middle East with the Syrian conflict has the potential to shift market sentiment and undermine all technical analysis.

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 based dramas 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.