Monthly: The November candle is still printing a large bullish candle but remains under the key 100 level. The monthly chart below shows that whilst there has been a Bull Flag breakout the 100 level is proving to be some resistance.
There is another point of interest on this chart though. The height of the Flag pole of the recent Bull Flag is about 20 units (100-80 = 20). Extrapolating up 20 from the Bull Flag, as per Bull Flag breakout technical theory, puts price up in the vicinity of the 117 ~ 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 above 100 could be expected to target this region for these multiple of reasons.
Monthly Ichimoku: The November candle is trading above the Cloud.
Weekly: Last week’s candle closed as a bullish coloured ‘Spinning Top’ candle and still reflecting some indecision despite the bullish close and holding up and out from the long-term Bull Flag pattern. It is worth noting that this candle was bearish prior to Friday’s ECB Draghi speech. The 100 level remains in focus but not without some obvious ‘Double Top’ jitters. Any bearish breakdown and move back below 92.50 would bring the 61.8% fib level into focus as this is down near 87, the weekly 200 EMA and the previously broken triangle trend line.
Weekly Ichimoku: The weekly candle closed above the weekly Cloud and the bullish Tenkan/Kijun cross still remains open.
Daily: It was a three up and two down week.
Daily Ichimoku Cloud chart: Price traded well above the Cloud all week.
4hr: Price chopped up and down under the 100 level last week.
4hr Ichimoku Cloud chart: Price traded above the 4hr Cloud for most of the week but there has been a recent bearish Tenkan/Kijun cross here worth keeping an eye on. This chart is still aligned with the daily chart and suggests LONG US$.
Monthly: The November candle is printing a large bearish candle and is still below the previous ‘Double Bottom’ 96 level. This is bringing the recent low at 94 back into focus with the potential for another ‘Double Bottom’ region to test.
Monthly Ichimoku: The November candle is trading below the Cloud.
Weekly: The weekly candle closed as a bearish coloured ‘Spinning Top’ candle suggesting indecision BUT it is still below the broken Bear Flag trend line and still below 96 support. There have been two conflicting weekly-based technical patterns competing over recent months; a basing-style bullish ‘Double Bottom’ and a ‘Bear Flag’ but there isn’t any clear winner just yet.
Weekly Ichimoku: Price is trading below the weekly Cloud. The bearish Tenkan/Kijun cross remains:
Daily: Price chopped lower last week which is bringing the 94 level back into focus.
Daily Ichimoku Cloud chart: Price traded well below the daily Cloud all week.
4 hr: Price chopped lower last week.
4 hr Ichimoku Cloud chart: Price traded below the 4hr Cloud all week. There has been a very new bullish Tenkan/Kijun cross but the angles are wrong for the moment. This chart is still aligned with the daily chart and suggests SHORT EUR$.
- Both indices continue to hold out from long-term Flag patterns that had persisted for over 8 months and I will be on the lookout for any follow-through action.
- The USDX and EURX remain ALIGNED for the same directional move on their Ichimoku charts.
USDX: The US$ closed higher last week but only did so following comments on Friday from ECB President Draghi about the potential for further ECB stimulus. The continuing belief that a US interest rate hike will be announced at the December FOMC has not been able to launch the US$ index above 100 thus far and I still can’t help but think that a December rate hike has already been priced into current US$ action. If so, then the index might just find it a bit harder to get over the 100 psychological hurdle.
As I’ve mentioned over many weeks though, despite this recent Bull Flag breakout, I still consider the US$ to be in no-man’s land whilst it trades above 92.50 and below 100. I continue to wait 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 over eight months now. Thus, the levels to keep watching on the USDX are:
- The weekly chart Flag trend lines: the breakout continues here.
- The psychological 100 level above current price. This is the top of the recent trading range.
- The 92.50 level below current price. This is the bottom of the recent trading range.
EURX: The EURX closed lower for the week following Friday’s dovish ECB comments and the second weekly close below 96 is bringing the previous low, near 94, back into focus. The 94 looks like it might be the ‘line in the sand’ level to watch in coming sessions. Despite the US$ index stalling at the 100 level, the fact remains that the Eurozone is trading within a monetary easing cycle and the US is trying to emerge from one.
The levels to watch on the EURX continue to be:
- The weekly chart Flag trend lines: the breakout continues here!
- The 105.5 level: The weekly chart reveals that a 61.8% fib retracement of the recent lengthy bear move is back up near the 105.50 level and weekly 200 EMA. Any hold back above 96 and continued recovery effort might see the index target this region.
- The 96 level:This is a major support level for the EURX and a possible bullish ‘Double Bottom’ region which was clearly broken this week.
- The 94 level: Any hold below 96 might suggest bearish continuation as it represents a break of the monthly charts ‘Double Bottom’. If so, the recent low printed near 94 will come back into focus.
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.