FX Indices Review for 28/07/14

USDX

Monthly: Trend ranging. I’m still seeing a possible bearish ‘double top’ formation but the July candle is still printing a bullish engulfing candle.

USDXmonthly

Monthly Ichimoku: The top of the July candle is still trading up and out from the monthly Cloud. The Cloud band continues as rather narrow, bearish in nature and spanning horizontally. Many traders have expressed their frustration with the extended market choppiness we have been experiencing. Check out the monthly Cloud chart here again though. The USD index has spent a substantial part of the last 6 months mired within the monthly Ichimoku Cloud. Decent tending markets may not return until this index is free of the monthly Cloud. The day may be approaching soon though!

USDXmonthlyCloud

Weekly: Trend chopping/sideways. The weekly candle closed as a bullish candle AND has held back above the weekly 200 EMA. It closed for the week just above the psychological whole number level of 81.

USDXweekly

Weekly Ichimoku: Price is now trading attempting to move up through the weekly Cloud and closed above the bottom of this Cloud.

USDXweeklyCloud

Daily: Trend choppy/sideways. Price rallied this week with five bullish days to close above the 50 % fib from the 2010-2011 bear move. The daily chart continues to show how price has essentially chopped sideways since last September in a range bound by the 79 and 81.50 levels. The index is edging up closer to the upper boundary of this channel though.

USDXdaily

Daily Ichimoku Cloud chart: Price chopped above the Cloud for most of the week. The daily Ichimoku chart continues to show how price has chopped within, or near, the Cloud since last November. The index has still not managed to make a clean and decisive break away from this zone, either up or down! I remain on the lookout to see which way the USDX will head following this period of being ‘Cloud bound’. A bullish break and hold above the Cloud might signal continued upwards momentum but a sustained failure would be a rather bearish signal.

USDXdailyCloud

4hr: Trend choppy. Price chopped higher for most of last week. 

USDX4

4hr Ichimoku Cloud chart: Price traded above the Cloud all week. This chart is aligned with the daily chart and suggests long USD.

USDX4hrCloud

EURX

Monthly: Trend down overall. The July candle is still printing a large bearish candle.

EURXmonthly

Monthly Ichimoku: The July candle continues trading within the middle of rather broad monthly Cloud. This index, in a similar pattern to the USD index, has spent much of the last 8 months mired in the monthly Cloud. There may need to be a clear breakout here, too, before decent trending markets return.

EURXmonthlyCloud

Weekly: Trend up, overall. The weekly candle closed as a bearish candle AND still below the weekly support trend line of the triangle pattern. Price has now also closed at 108.28 and below the weekly 200 EMA which is another significant bearish development.

EURXweekly

Weekly Ichimoku: Price is trading below the weekly Cloud and has now printed a full candle below the weekly Cloud.

EURXweeklyCloud

Daily: Trend choppy. Price chopped lower last week.

EURXdaily

Daily Ichimoku Cloud chart: Price traded below the Cloud all week.

EURXdailyCloud

4 hr: Trend choppy:  Price chopped lower to start the week, recovered some of this ground midweek but gave those gains back by the end of the week.

EURX4

4 hr Ichimoku Cloud chart: The EURX traded below the Cloud all week. This chart is aligned with the daily chart and suggests short EUR.

EURX4hrCloud

Comments:

General:  I have been watching two key levels on both indices over recent weeks:

  • USDX: the weekly 200 EMA resistance level. The index has held above this broken resistance zone.
  • EURX: the 108.5 support area: this is the region of the weekly support trend line, the bottom of the weekly Cloud and the weekly 200 EMA. The index has now broken down through all three support levels in this 108.5 area which is a significant bearish development.

Index Alignment: The indices are still aligned for long USD and short EUR. I noted last week how previously, this would have been noted as supporting ‘risk off’ but this correlation, like so many others, is not evident at the present time. Next week will be an interesting one for the USD as there is a lot of US data and the index is approaching significant resistance at the 81.50 level. Continued index alignment and a break and hold above the 81.50 for the USD index would clearly be supporting long USD FX trades. The Loonie is currently one pair however that looks to already have started its bullish march!

USDX: the USDX closed higher for the week AND has held above the previously broken resistance of the weekly 200 EMA. The index has now also closed above the 50% fib level from the 2010-2011 bear move. This is another bullish development for the index and suggests continuation. I continue to watch the weekly 200 EMA for clues here as I believe that any sustained hold above this key S/R level would support bullish continuation but a breach would be rather bearish. The USDX has not been able to make a clean break out of the 81.50 – 79 trading channel though and has essentially traded in this range for the last 10 months! Price is edging up towards the top of this channel now and so the 81.50 will be the key level to watch for next week. I am not sure how concerned the US Federal Reserve will be with the strengthening USD but, if they are concerned, FOMC this coming week may be an opportunity for them to address this, especially as the USD reached up towards the channel breakout zone.

EURX: the EURX also closed lower for the week again making this four bearish weeks in a row. The index has now made a weekly close below all three major levels of support in the 108.5 region. It has closed the week below the weekly Cloud, the weekly support trend line and now also below the weekly 200 EMA. The weekly 200 EMA was the last line of defence for the EURX and the break and hold below this level might signal the start of an extended bearish move for the index.

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 Ukraine, Euro zone or Middle East events 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.

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