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.
USDX weekly: This bearish candle close below the Flag trend line and recent low has set up for a potential Bear Flag move.
The length of the ‘Flagpole’ is about 110 pips suggesting the depth of bearish movement could be as similar 110 pip move and this would place the index down near 80.
This Bear Flag target of 80 would not be out of order as this region is previous S/R; as the following chart reveals:
EURX weekly: no clear-cut Bull Flag breakout here just yet but…… it is brewing:
FX Index Alignment: the FX Indices are aligned for ‘risk on‘ so watch for follow-through action of FX pairs. I have also been warning about bullish impact on stock sectors related to metals, resources, commodities and mining and this continues. Retail has been an area of note as well.
Calendar: there is a Bank holiday in the US on Monday so it may be a slow start to the week but there isn’t much high impact data anyway: