FX Indices Review for 29/04/13


Monthly: Trend ranging upwards. The monthly candle is close to closing and currently printing a bearish, almost, ‘inside’ candle. The monthly 200 EMA is above current price, at around the 84 level, and helping to keep a lid on this!
Weekly: Trend up overall. The weekly support trend line is still supporting price. The weekly candle closed as an indecision style, bearish, ‘inside’ candle. The current chart still looks to be forming a bearish ‘double top’. You can see from the weekly chart just how choppy the last 8 weeks now have been.
Daily: Trend up/ranging. Price traded above the key 82.59 level, and monthly pivot, for most of the week. The 82.59 level represents the 61.8% fib retrace level from the last major swing high back in mid 2010 and is still proving to be very significant. Price broke through, and closed below, these significant levels on Friday though.

Daily Ichimoku Cloud chart: Price has traded above the Cloud all week. Price is edging down and closer towards the daily Cloud but it is rather thick in this region and suggests that it may offer reasonable support for price.
4hr: Trend choppy. Price continued to chop up and down this week. Price looked to be trading in a bearish ascending wedge pattern and broke down from this during the week. The current chart print also looks a bit like a bearish ‘Head and Shoulders’ pattern. Price broke down through the monthly pivot and 108.5 level but closed above the 4hr 200 EMA and right on the weekly pivot.

4hr Ichimoku Cloud chart: Price opened the week in the 4hr Cloud but moved back up above this during the week. It finished the week trading just above the Cloud.  This is in alignment with the daily chart and supports ‘risk off’ momentum.
Monthly: Trend down overall but 7 of the last 9 months have been bullish. The current print of the April monthly candle is a still a bullish engulfing candle.
Weekly: Trend up. Price had earlier failed to move above the monthly 200 EMA. This had been major resistance so it was no surprise that price had paused under this level. Price action had been quite parabolic for ‘risk on’ until recently and subsequently pulled back to the mean of the support  trend line; something that is not out of order as part of any continued longer term bullish price action. This pullback has actually played out in text-book fashion! The weekly candle closed as a bearish engulfing candle though. The current weekly chart print still looks to have evolved as a ‘bull flag’ pattern. Price has now broken up and out from this flag pattern suggesting that perhaps the retracement period might be over and that the bullish movement might continue. Price is still sitting above this breakout level but under the key 108.5 S/R level. The significance of this 108.5 level can be seen if you cast your eyes across the weekly chart.
Daily: Trend ranging. Price has chopped around this week between the 107.5 and 108.5 levels. Price finished the week at the bottom edge of this trading range.
Daily Ichimoku Cloud chart: Price has chopped around, just above the Cloud but below the 108.5 level, all week. Price really needed to break above the 108.5 level to motivate any broad based ‘risk on’ momentum. Price struggled to hold above the Cloud as the week progressed and finished off the week trading just above the Cloud. The Cloud below the current price action is very thin and suggests that any support might be rather minimal. This is the only Index chart currently aligned towards ‘risk on’. A small fall in price here would tip all of the index charts back into an alignment for ‘risk off’.
4 hr: Trend ranging. Price has chopped around between the 107.5 and 108.5 levels for the last 3 weeks.
4hr Ichimoku Cloud chart: Price has chopped around in and out of the Cloud all week. Price finished the week below the Cloud.  This is divergent from the daily chart and suggests further choppiness.

Choppy markets + Ichimoku: The Ichimoku charts are still divergent and this suggests some further choppiness ahead. I do suspect this extended period of choppiness is connected to the current market top action that is being seen across many global stock markets. Stocks and currencies seem to be at a major junction and are experiencing choppy action ahead of the next major new momentum move. To me, this feels like the thunder building before a major storm. I just don’t know whether the storm will be ‘risk on’ or ‘risk off’. So even though I have no idea what that directional move will be, when it appears, I will trade it.
The consistent pattern with Ichimoku divergence continues though. That is; choppy 4hr chart trading with better trend trades found off 30 min charts during the US session. I would expect that pattern to continue until such time as the charts do align again.
I am waiting for Ichimoku Cloud alignment. I see this as being somewhat similar to any other seasonal business. You just have to wait patiently and, as the saying goes, ‘make hay when the sun shines’. Three of the four index charts are aligned to favour ‘risk off’ momentum BUT all four of them are trading very close to their respective Clouds. Thus, momentum could swing either way, rather quickly and easily, form this point. The EURX does not have to fall far to enable all charts to be aligned for ‘risk off’. Such a move would be consistent with some signals I’m seeing across US stocks. Whilst, like most folk, I have opinions about which way future market momentum should be heading, I am trying to keep an open mind and wait for clear signals.
The EURX as ‘risk’ barometer: The EURX has been a proxy measure for the mood for ‘risk appetite’ over recent months. The EURX has now pulled back down and tested the support of the major monthly trend line. Price has now bounced off this major support level and rallied for 3 of the last four weeks. This is no guarantee that this trend will continue though. The next major hurdle for the EURX is the 108.5 level. This level is proving to be a significant challenge though and has managed to contain price for much of the last three weeks. However, any break and close above this 108.5 level would suggest that there might be some follow through with this bullish reversal and a swing back towards ‘risk on’. This will be a key level to watch in the coming weeks.
Note: As always, Fundamentals, by way of Euro zone dramas and news announcements, continue to be triggers for price movement on the indices.  These events can always have the potential to undermine all Technical analysis.