US$ gets a boost but NFP now in focus.

The US$ received a boost from hawkish Fed rhetoric at Friday’s Jackson Hole event but it still couldn’t close the week back above the key psychological 95.50 S/R level. ‘Jobs data’ was mentioned as being pivotal to any potential Fed rate-hike decision and so the markets might remain choppy until next week’s NFP. The Jackson Hole Symposium continues until Sunday so watch out for any further commentary to potentially impact market sentiment.

NB: I am away from Thursday next week for a long w/e break and so updates will be brief and few during that period.

USDX

Monthly: The August candle is printing a bearish coloured Long-Legged Doji candle reflecting the indecision that has been evident this month. For the time being though, the monthly chart still shows a Bull Flag forming and, if it evolves, the target would be the 120 region. This has been calculated as follows: the height of the Flag pole of the Bull Flag is about 20 units (100 – 80 = 20). Extrapolating up 20 from the top of the Bull Flag, as per Bull Flag breakout technical theory, puts price up in the vicinity of the 120 area. This happens to be a key region for two reasons: Firstly, this is the 50% fib of the 1985-2008 major swing low move and, secondly, this is a previous S/R region with price action reacting here for over a two year period from mid-2000 to mid-2002. Thus, any break and hold back above 100 might be expected to target this region.

DXYmonthly

Monthly Ichimoku: The August candle is trading well above the monthly Cloud BUT note the Bollinger bands continuing to clamp down.

USDXmonthlyCloud

Weekly: The weekly candle closed as a bullish coloured, essentially ‘Inside’ candle, also reflecting indecision and just below the key psychological S/R level of 95.50. Overall though, price action still remains range-bound between 100 and 92.50 and ­has been stuck within this channel for over 19 months. Any break and hold below 92.50 would have me looking for a potential move down to test the congested area containing the monthly 200 EMA, weekly 61.8% fib and previously broken trend line region (highlighted on the chart below). Note how any move down to this broken trend line region would be a move of similar order magnitude to the height of the current trading channel.

USDXweekly

Weekly Ichimoku: The weekly candle closed below the weekly Cloud which is still a bearish signal for now:

USDXweeklyCloud

Daily: Price action was pretty much just sideways chop until Fed comments on Friday underpinned a US$ rally. Last week I was watching for any 61.8% retrace of the 4hr chart’s swing low move but next week I’ll be watching for any 61.8% retrace of the daily chart’s swing low, to near 96.25, and note how this is also near the current monthly pivot.

USDXdaily

Daily Ichimoku Cloud chart: Price traded below the daily Cloud last week until Friday when it rallied to close back up in the bottom of the daily Cloud.

USDXdailyCloud

4hr: Price chopped along sideways last week until it rallied on Friday. I had been expecting a test of 95.50 last week as this key S/R level was near the 4hr chart’s 61.8% fib retracement of the most recent swing low. This test eventually triggered on Friday with hawkish US$ sentiment but I note that price action could not manage to close the week above the key 95.50 level.

USDX4

4hr Ichimoku Cloud chart: Price traded up towards the 4hr Cloud last week and Friday’s bullish action resulted in a close above the Cloud. This chart is back to being divergent from the daily chart suggesting US$ choppiness.

USDX4hrCloud

EURX

Monthly: The August candle is trading as a small bullish coloured ‘Spinning Top’ candle with just a few days until it closes but it is still well above the 94 level giving the monthly chart a ‘Double Bottom’ appearance.

EURXmonthly

Monthly Ichimoku: The August candle is still trading below the Cloud though and note how it has run into the Bollinger bands that remain clamping down here.

EURXmonthlyCloud

Weekly: The weekly candle closed as a bearish coloured, almost ‘Engulfing’, candle but still within the weekly chart’s trading channel. There have been two conflicting weekly-based technical patterns competing over many months; a basing-style bullish ‘Double Bottom’ and a trading channel with a ‘Bear Flag’ look to it but there still isn’t a clear winner just yet. Any bullish continuation might eventually target the 50% and 61.8% fib levels of this two-year swing low move.

EURXweekly

Weekly Ichimoku: Price action remains above thin weekly Cloud for the time being though. This is the seventh, full weekly-candle to clear the weekly Cloud which continues to be a bullish signal.

EURXweeklyCloud

Daily: Price chopped lower last week with Thursday being the only bullish day but note how the key 100 level held out for the week, for now that is!

EURXdaily

Daily Ichimoku Cloud chart: Price remained above the Cloud last week.

EURXdailyCloud

4 hr: Price chopped lower last week and pulled back to test the 50% fib of the recent swing high move which also happened to align with the key 100 level. Any close below this 50% fib and 100 S/R level will have me looking for potential support from the 61.8% fib near 99.8. A break and hold below 99.8 would suggest further bearish follow-through.

EURX4

4 hr Ichimoku Cloud chart: Price chopped down through the Cloud last week and closed the week below the Cloud. This chart is back to being divergent from the daily chart suggesting EUR$ choppiness.

EURX4hrCloud

General:

  • Both indices continue to hold within long-term broad Flag patterns that have persisted for over 19 months.
  • The USDX and EURX indices are back to being divergent across their 4hr and daily charts suggesting further choppiness. 

USDX: The US$ closed higher last week following bullish action after Friday’s Jackson Hole event. The Fed speeches were hawkish, possibly more so than expected, and this helped to lift the US$. Jobs data was mentioned as being pivotal to any potential rate-hike decision so next week’s NFP event will be the next main calendar item in focus.

It is worth noting that the key 95.50 S/R level, which was previous support, remains as resistance above current price and I will be watching to see whether this level will be broken next week. If so, then the 96.25 region will be in focus as this is the daily chart’s 61.8% fib retrace level. Any US$ move back above 95.50 would have me looking for further bearish pullbacks on the EUR/USD, AUD/USD, NZD/USD and GBP/USD. Failure of the US$ to break up through 95.50 would support recovery on these pairs though.

However, I still consider the US$ to be in no-man’s land though whilst it trades above 92.50 but below 100. I am waiting for a decisive breakout from this region to signal the next major directional move on the index as this choppy and range-bound price action has gone on for 18 months. The levels to keep watching on the USDX are:

  • The 95.50 level; which is now resistance above current price and the 4hr chart’s 61.8% fib.
  • The 96.25 region which is the daily chart’s 61.8% fib.
  • The psychological 100 level above current price. This is the top of the trading range.
  • The 92.50 level below current price. This is the bottom of the trading range.

EURX:  The EURX closed lower last week in Yin and Yang fashion due to US$ bullish sentiment but it still held above the key 100 level. This level had previously been resistance but remains as support under current price and will be the level to watch for any make or break activity with next week’s data and especially Friday’s NFP. Any close below the 100 level will have me watching the 4hr chart’s 61.8% fib near 99.75 for any support but a break and hold below this level would suggest further bearish follow-through.

Traders need to remember that there is policy divergence between Europe and the US with the Eurozone trading within a monetary easing cycle and the US trying to emerge from one and this reality was brought back into focus with Friday’s Jackson Hole event.  For now, though, both FX Indices remain trading within long-term trading channels and so I continue to wait for any decisive breakout from these resistance zones.

The levels to watch on the EURX continue to be:

  • The 100 level; which is now support under current price and the 4hr chart’s 50% fib.
  • The 99.75 region which is the 4hr chart’s 61.8% fib.
  • The weekly chart trading channel trend lines.
  • The 103.5 level: The weekly chart reveals that a 50% fib retracement of the recent lengthy bear move is back up near the 103.50 level. Any bullish channel breakout might see the index target this region and the weekly 200 EMA is near this fib for added confluence.
  • The 105.5 level: this is near the weekly chart’s 61.8% fib.
  • The 96 level: This is a major support level for the EURX and has been a previous monthly chart ‘Double Bottom’ region.
  • The 94 level: This is a more recent ‘Double Bottom’ level as seen on the weekly/monthly charts.

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 terrorism-related, Eurozone or Middle East events and/or news announcements, continue to be unpredictable triggers for price movement on the indices.  These events always have the potential to undermine any technical analysis.