The US$ index has printed an impressive bullish weekly candle that has punched up through a long-term Bull Flag pattern. However, the psychological 100 level is still ahead and will need to be taken out to prove this Bull Flag breakout has legs.
Monthly: The new November candle is currently printing a large bullish candle but is still under the key 100 level. This will be the level to focus on in coming sessions.
Monthly Ichimoku: The November candle is trading above the Cloud.
Weekly: Last week’s candle closed as a large bullish, essentially ‘engulfing’, candle and it broke up and out from the long-term Bull Flag pattern. Any bullish continuation from here will bring the 100 level back into focus with some possible ‘Double Top’ jitters. However, any bearish breakdown 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! The recent bullish Tenkan/Kijun cross remains open. The weekly Cloud proved to be decent support!
Daily: Price traded higher each day last week on the back of Fed rhetoric about the possibility of a December rate hike and, then, even more so after upbeat NFP. The 100 level remains as overall resistance above current price.
Daily Ichimoku Cloud chart: Price traded above the Cloud all week.
4hr: Price moved higher last week.
4hr Ichimoku Cloud chart: Price traded above the 4hr Cloud all week. This chart is still aligned with the daily chart and suggests LONG US$.
Monthly: The new November candle is currently printing a bearish candle but is still just above the key 96 ‘Double Bottom’ level.
Monthly Ichimoku: The November candle is trading below the Cloud.
Weekly: The weekly candle closed as a bearish candle and has broken below the Bear Flag trend line. There have been two conflicting weekly-based technical patterns competing over recent months; a basing-style bullish ‘Double Bottom’ and a ‘Bear Flag’ and it looks like the Bear Flag could be evolving. Any break and hold below 96 will bring the recent 94 low into focus:
Weekly Ichimoku: Price is trading below the weekly Cloud. The recent bearish Tenkan/Kijun cross remains open and so I will be watching for any continued bearish momentum.
Daily: Price action broke down through the Bear Flag support trend line on Wednesday, tested this on Thursday and fell away again on Friday. Note how the 96 level has been effective support for the time being though. Any weekly close and hold below this level would be rather bearish.
Daily Ichimoku Cloud chart: Price traded below the daily Cloud all week.
4 hr: Price chopped lower last week with a brief bounce on Thursday before falling again after NFP Friday.
4 hr Ichimoku Cloud chart: Price traded below the 4hr Cloud all week. This chart is aligned with the daily chart and suggests SHORT EUR$.
- Both indices have now broken out from long-term Flag patterns that had persisted for the last 7 months and, so, 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. This latest Ichimoku alignment kicked in on October 22nd and, since then, the EUR/USD has fallen 600 pips!
USDX: The US$ closed higher last week and broke up and out from the long-term Bull Flag pattern. Farther hawkish midweek commentary from the Fed Chair, Janet Yellen, supported last week’s FOMC statement and was then underpinned, in rather stellar fashion, by the better than expected NFP data on Friday. Fed commentary has continually stated that strong wages and jobs data would need to be seen to support any possible US rate rise and, with NFP revealing an increase in average hourly wages and a decrease in the unemployment rate, this will no doubt be helping to force the Fed’s hand at the December FOMC. How comfortably this all sits with the Federal Reserve remains to be seen though as it is against a back drop of mixed international economic data and easing environments being adopted by many other Central Banks. I’m wondering, therefore, if this NFP data was somewhat of a bitter-sweet result for Janet Yellen?
As I’ve mentioned over many weeks though, despite this Bull Flag breakout, I still consider the US$ to be in no-man’s land whilst it trades above 92.50 and below 100. The 100 level remains as strong, psychological, whole-number resistance above current price and, whilst the Bull Flag breakout was some achievement, the heavy lifting is still ahead!
I continue to wait for a decisive breakout from this 100 – 92.50 region to signal the next major directional move on the index as this choppy and range-bound price action has gone on for over seven months now. Thus, the levels to keep watching on the USDX are:
- The weekly chart Flag trend lines: there has been a recent breakout 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 closed lower for the week in capitulation style reaction to the stronger US$. Further hawkish Fed commentary and NFP punished the EUR last week. The fact remains that the Eurozone is trading within a monetary easing cycle and the US is trying to emerge from one.
The levels to watch on the EURX continue to be:
- The weekly chart Flag trend lines: there has been a recent breakout here too!
- 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.
- 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 Ukraine, 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.