US$ has 1st bullish week in 5: a pause or reversal?

USDX

Monthly: The May candle is currently printing a bullish coloured ‘inside’ candle.

DXYmonthly

USDXmonthly

Monthly Ichimoku: The May candle is trading above the Cloud.

USDXmonthlyCloud

Weekly: Last week’s candle closed as a large, essentially, bullish engulfing candle. It closed just below the Double Top ‘neck line’ of 96.50 but above the other key S/R region of 95.50 which marks a decent recovery. The choppiness around the 95.50 level is still helping to form up a bearish H&S pattern on this weekly time frame perspective. It is worth remembering that a 61.8% fib pull back of this lengthy US$ rally would bring price down to near the previous monthly triangle breakout region.

USDXweekly

Weekly Ichimoku: The weekly candle closed ABOVE the weekly Cloud.

USDXweeklyCloud

Daily: Price chopped higher last week with four bullish days out of the five but the 100 level remains as resistance above current price.

USDXdaily

Daily Ichimoku Cloud chart: Price remains below the Cloud and the bearish Tenkan/Kijun cross remains open.

USDXdailyCloud

4hr: Price chopped higher last week but struggled to break back above 95.50 until Friday’s CPI data gave it the boost it needed. The index closed below the other S/R region of 96.50 and the monthly pivot.

USDX4

4hr Ichimoku Cloud chart: Price moved back above the 4 hr Cloud last week. This chart is divergent from the daily chart and suggests choppiness.

USDX4hrCloud

EURX

Monthly: The May candle is currently printing a bearish coloured ‘inside’ candle.

EURXmonthly

Monthly Ichimoku: The May candle is trading below the Cloud.

EURXmonthlyCloud

Weekly: The weekly candle closed as a large, essentially, bearish engulfing candle but above the key 96 level. There is a bit of a bullish ‘inverse H&S’ pattern visible here to complement that on the weekly USDX chart. The weekly chart shows that a 61.8% fib retracement of the recent lengthy bear move is back up near the 105.50 level and the weekly 200 EMA. Any hold above 96 and continued recovery effort might see the index target this region.

EURXweekly

Weekly Ichimoku: Price is still trading well below the weekly Cloud.

EURXweeklyCloud

Daily: Price chopped lower last week with all five days being bearish.

EURXdaily

Daily Ichimoku Cloud chart: Price traded back towards the daily Cloud last week and ended the week within the Cloud. However, the recent bullish Tenkan/Kijun cross remains open for now.

EURXdailyCloud

4 hr: Price chopped lower last week. Applying Fibs to this time frame chart shows that the 50% Fib, near 97, and the monthly pivot offered some support midweek. Price closed the week just above the 61.8% fib and key 96 level. A break and hold below these levels next week would suggest a resumption of the bearish trend.

EURX4

4 hr Ichimoku Cloud chart: The EURX moved back below the 4hr Cloud last week. This chart is divergent from the daily chart and suggests choppiness.

EURX4hrCloud

Comments:

USDX: the USDX closed higher last week with upbeat US CPI data on Friday giving the index the boost it needed to get back above the broken 95.50 S/R level. The Double Top ‘neck line of 96.50 remains above current price and will need to be taken out for the index to attempt its march back up to the major psychological 100 level. The close back above 95.50 is certainly a bullish signal BUT the choppiness around this level is also helping to develop a weekly-chart bearish H&S pattern.

This was the first bullish week for the US$ and follows on from five bearish weeks but, as the saying goes, one swallow does not a summer make so next week may prove crucial to determine whether this US$ recovery effort will continue.

The levels to watch on the USDX include:

  • The 95.50 will be the next bullish target to monitor on the index.
  • Success at 95.50 would bring the 100 level back into focus.

EURX:  The EURX closed lower last week due to the recovery with the US$; a recovery assisted by ECB news about expanding QE and, then, Friday’s upbeat US CPI data. However, the EURX has still managed to hold out the week above 96 support and the 61.8% fib of this recent bull-run. These two levels would need to be broken to be confident of a failure with this recent EURX recovery attempt. It is worth remembering too that the hold above 96 is also helping to shape a monthly-chart bullish ‘Double Bottom’ pattern. The reality is, though, that divergence between the EZ and US economies continues to be a dominant theme with the Eurozone entering a monetary easing cycle and the US emerging from one.

The levels to watch on the EURX include:

  • 105: 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 move back above 96 and continued recovery effort might see the index target this region.
  • 97: this happens to be near the 50% fib retracement level of the recent swing high move on the 4hr chart, as well as near the monthly pivot and 4hr 200 EMA. This support was broken after Friday’s upbeat US CPI data.
  • 96: this happens to be near the 61.8% fib retracement level of the recent swing high move on the 4hr chart. Price closed the week just above this key support region.
  • 94: Any break and hold back below 96 might suggest bearish continuation as it represents a break of a monthly chart ‘Double Top’. If so, the recent low printed near 94 will come back into focus.

FX Index Ichimoku Divergence: the FX index Ichimoku charts are currently divergent and these periods are often characterised by choppy trading conditions on the 4hr charts but with better opportunities presenting off 30 min charts during the US session or off cross-pair charts. The E/U and GBP/USD 30 min charts below gives a clear example of this:

E/U 30 min:

EU30min

GBP/USD 30 min:

GU30min

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, Ebola, 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.

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