Monthly: The November candle is currently printing a large bullish candle but is still holding under the key 100 level in a rather limbo-like maneuver.
The monthly chart below shows that, although there has been a Bull Flag breakout, the 100 level is certainly proving to be some resistance. There is another point of interest on this chart however. The height of the Flag Pole of the Bull Flag pattern is about 20 units (100 – 80 = 20). Extrapolating up a similar order of magnitude, ie 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 possibly target this region for a multiple of reasons:
Monthly Ichimoku: The November candle is trading above the Cloud.
Weekly: Last week’s candle closed as both a bearish coloured ‘Inside’ and ‘Hanging Man’ candle but still up and out from the long-term Bull Flag pattern, however, the candle formation does suggest some indecision. The bullish continuation is bringing the 100 level back into focus although with some obvious ‘Double Top’ jitters. However, any failure at 100 and bearish breakdown back below 92.50 will bring the 61.8% fib level, down near 87, the weekly 200 EMA and the previously broken triangle trend line, into focus.
Weekly Ichimoku: The weekly candle closed above the weekly Cloud and the bullish Tenkan/Kijun cross remains open.
Daily: Price chopped lower to start last week but put in a good move for Friday on the back of upbeat Consumer Confidence, and, in spite of a Retail Sales data miss. The 100 level remains as overall resistance above current price.
Daily Ichimoku Cloud chart: Price traded above the Cloud all week.
4hr: Price chopped a bit lower last week.
4hr Ichimoku Cloud chart: Price traded above the 4hr Cloud all week but there has been a recent bearish Tenkan/Kijun cross here worth keeping an eye on. For now, though, this chart remains aligned with the daily chart and suggests LONG US$.
Monthly: The November candle is currently printing a bearish candle and is now below the key 96 ‘Double Bottom’ level.
Monthly Ichimoku: The November candle is trading below the Cloud.
Weekly: The weekly candle closed as a bearish coloured ‘Spinning Top’ candle, suggesting indecision, BUT it is still below the broken Bear Flag trend line and now also clearly below 96 support. There have been two conflicting weekly-based technical patterns competing over recent months; a basing-style bullish ‘Double Bottom’ and a ‘Bear Flag’ and the Bear Flag may end up winning here.
Weekly Ichimoku: Price is trading below the weekly Cloud. The bearish Tenkan/Kijun cross remains open but has not picked up much momentum just yet.
Daily: Price chopped lower last week and below the broken the Bear Flag trend line and either side of the 96 level. Bullish US$ activity on Friday meant this index closed lower for the week and below the 96 support which is now bringing the 94 level back into focus.
Daily Ichimoku Cloud chart: Price traded 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 recent bullish Tenkan/Kijun cross here that will be worth monitoring. For now, though, this chart is still aligned with the daily chart and suggests SHORT EUR$.
- Both indices continue to hold out from long-term Flag patterns that had persisted for over 8 months and I will be on the lookout for any follow through action.
- The USDX and EURX remain ALIGNED for the same directional move on their Ichimoku charts and this phenomenon has been an accurate predictor of price action, especially with the EUR/USD pair.
USDX: The US$ closed lower last week despite further hawkish mid-week commentary from various US Federal Reserve members. The rebound on Friday, despite disappointing Retail Sales, was a bit of surprise given that wages and spending are key metrics the Fed are watching with respect to any decision making about a potential rate hike. I mentioned during the week that this falling US$, in spite of upbeat Fed rhetoric, has me wondering if a rate hike has already price into current US$ 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 Bull Flag breakout, I 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 was in the green for the week until Friday at which point bullish US$ activity, on the back of upbeat US Consumer Sentiment, ended up pushing the index into the red and, also, back below the key 96 ‘Double Bottom’ support level. The weekly close below 96 brings the previous low near 94 back into focus again.
Keep in mind that the Eurozone is trading within a monetary easing cycle and the US is trying to emerge from one. However, any failure to increase US interest rates in December could undermine this differential but we obviously have a bit of a wait until then.
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 break and hold back 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 ISIS related developments, 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.