I have to admit I always thought the US$ might retrace a bit. However, following last Friday’s US GDP data beat and weekend news about support for a Brexit, it seems we could be in for a perfect storm that whips up LONG US$ and SHORT EUR$ support. Especially if Alex Polizzi is running on the front pages in support of a Brexit!
NB: this is just a brief update on the FX Indices and a biref Forex analysis will be posted on Monday.
USDX monthly: The monthly chart below shows that the 100 level is proving to be some resistance but that either a ‘Double Top’ or Bull Flag could be forming. The Bull Flag pattern, if it evolves, might target the 120 region and 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 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 back above 100 could be expected to target this region.
USDX weekly: The weekly candle closed as a bullish engulfing candle BUT I’m still waiting for a breakout from the long term trading range of 100-92.50:
USDX daily: the 97 level could offer some grief as this is the daily 200 EMA and a recent 61.8% fib zone:
FX Index Ichimoku Cloud Alignment: there is no alignment across the FX Indices at present.
USDX daily Cloud: below the Cloud:
USDX 4hr Cloud: in the Cloud:
EURX daily Cloud: above the Cloud for now…just:
EURX 4hr Cloud: above the Cloud for now…just here too:
Summary: watch for any continued US$ strength following the strong US GDP print and growing Brexit rumblings. The US$ index 97 level will be the next main level to watch above current price and the 95.50 and 92.50 are the lower levels to monitor.