The US$ broke out of a recent triangle pattern earlier in the week but Friday’s weaker than expected NFP jobs report triggered a pullback to within this consolidation zone. There are mixed interpretations of NFP data however and so this uncertainty, along with weekly Ichimoku Cloud resistance that is right above current price action, has me on the lookout for any potential US$ weakness or pause into next week. Of more significance though is that the EURX has quietly forged on, in ‘tortoise and hare’ fashion, to make a weekly chart breakout from the 22-month trading channel!
NB: this is just a brief update as I am away at the moment.
USDX monthly: a bullish engulfing monthly candle for now but still range-bound between 100 and 92.50.
USDX weekly: a large bullish candle but closed back within the recent triangle:
USDX weekly Cloud: price has not managed to break up through this resistance just yet. Success here would suggest continuation though and so this is the region to watch next week for any make or break reaction:
USDX daily: a triangle breakout but, then, a pullback after Friday’s NFP.
EURX weekly: price has broken out from the 22-month trading channel. Some might argue that this breakout is somewhat artificial due to the ‘unusual’ GBP flow that occurred during the week. That may well be so and I’ll be watching to see if price retraces here at all:
EURX weekly Cloud: price is still above the Cloud but note the weekly 200 EMA and how price reacted at this resistance. This will be the region to watch next week for any make or break activity:
EURX daily: has made a breakout but, as always, trends don’t travel in straight line forever so watch for any pullback. If so, the second chart shows the key 100 level is down near the 50% fib so that is the where I’d look for any potential support:
Summary: The EURX and USDX either are or have:
- above their 4hr and daily Ichimoku Clouds.
- printing bullish monthly candles.
- printed bullish weekly candles.
- resistance above current price action: the weekly 200 EMA for the EURX and the weekly Cloud for the USDX.
Where the EURX and USDX differ:
- The EURX is above the weekly Cloud but the USDX is below its weekly Cloud.
Some are reporting the NFP result is to be expected given the country is near full employment and so continued large increases in ‘jobs added’ are difficult. Others suggest this result is a sign of economic weakness. Either way, both FX indices are running up into technical resistance and so some pause or hesitation with both should be expected. This has implications for USD and EUR based FX pairs and, unfortunately, this implication suggests choppiness could be in store for both. As if we haven’t had enough of that!
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 over 20 months. The levels to keep watching on the USDX are:
- The 95.50 level.
- The psychological 100 level above current price. This is the top of the longer-term trading range.
- The 92.50 level below current price. This is the bottom of the longer-term trading range.
The levels to watch on the EURX continue to be:
- The 100 level; which is now support under current price.
- The weekly chart trading channel trend lines: now broken.
- 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.
Data: Keep an eye on the Calendar next week as there are a few Fed speeches, FOMC Minutes and Consumer sentiment data to impact the US$ but the USD and CAD holiday Monday might result in a slow start to the week. There is EUR German ZEW Economic Sentiment on Tuesday to impact the EUR$ and IMF meetings on Sunday have the potential to impact both currencies.