US$ next stop: the 100 level?

The US$ had a great week and has finished back above recent resistance from its weekly Ichimoku Cloud. So, this begs the question, is the next stop for the index up at the key 100 level?

USDX

Monthly: The October candle is currently printing a bullish ‘engulfing’ candle. The monthly chart also still shows a Bull Flag forming and, if it evolves, the target would be the 120 region. This 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 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 might be expected to target this region.

dxymonthly

Monthly Ichimoku: The October candle is trading well above the monthly Cloud. Keep an eye on the 98.50 level though as we head towards the October close. There is the look of a possible bearish-reversal H&S setting up here and this will be the next resistance level for the index to negotiate before it tackles the 100 level.

usdxmonthlycloud

Weekly: The weekly candle closed as a very large bullish candle and the index looks like it is headed for another test of the key 100 level. Whilst the index has just made a bullish triangle breakout, overall, price action remains range-bound between 100 and 92.50 and ­has been stuck within this channel for over 22 months. I do note though how the weekly chart’s +DMI has ticked up over the 20 threshold level and so I’ll be watching to see if the ADX follows.

usdxweekly

Weekly Ichimoku: The weekly candle has moved back above the weekly Cloud which is a significant bullish shift. Note that the 98.50 potential monthly ‘Shoulder’ is next in line before the key 100 level.

usdxweeklycloud

Daily:  Price action broke up and out from the triangle pattern again early last week. There was only one bearish day last week.

usdxdaily

Daily Ichimoku Cloud chart: Price traded above the daily Cloud last week.

usdxdailycloud

4hr: Price chopped higher last week but note how it did not break through the earlier high and this will be the first resistamce level to watch into next week. Any pulllback on the index will have me looking down to the 61.8% fib of the recent swing high move as this is also near the previously broken trend line, weekly pivot and 4hr 200 EMA

usdx4

4hr Ichimoku Cloud chart: Price traded above the 4hr Cloud last week. The US$ is above the Cloud on the 4hr and daily chart time frames suggesting LONG US$.

usdx4hrcloud

EURX

Monthly: The October candle is trading as a small bullish candle but still well above the 94 level supporting the monthly chart’s ‘Double Bottom’ pattern.

eurxmonthly

Monthly Ichimoku: The October candle is still trading below the Cloud.

eurxmonthlycloud

Weekly: The weekly candle closed as a bearish coloured ‘Inside’ candle and back within the weekly chart’s long term trading channel. The weekly 200 EMA continues to keep a lid on price action here. There have been two conflicting weekly-based technical patterns competing over many months; a basing-style bullish ‘Double Bottom’ and a trading channel with a ‘Bear Flag’ look to it but there still isn’t a clear winner just yet. Any bullish continuation might eventually target the 50% and 61.8% fib levels of this two-year swing low move.

eurxweekly

Weekly Ichimoku: Price action continues to hold above thin weekly Cloud.

eurxweeklycloud

Daily: Price chopped lower last week and pulled back to trade within the long-term trading channel. Note how this index continues to print higher Highs and higher Lows though. There is a support trend line still intact here and this will be the region to watch next week if US$ bullish momentum continues.

eurxdaily

Daily Ichimoku Cloud chart: Price held above the daily Cloud last week.

eurxdailycloud

4 hr: Price chopped lower last week. Any deeper pullback on the index will have me watching the support trend line and, if that is broken, I will be looking down to the 50% and 61.8% fib region of this recent swing high move as a potential target area. This region is near the key 100 level and the daily 200 EMA (green line).

eurx4

4 hr Ichimoku Cloud chart: Price chopped down through the Cloud last week and closed the week below the 4hr Cloud. The EUR$ is divergent on the 4hr and daily charts suggesting choppy EUR$.

eurx4hrcloud

General:

  • Both indices continue to hold within long-term broad Flag patterns that have persisted for over 22 months.
  • The US$ index is aligned on the 4hr and daily chart time frame for LONG US$. 
  • There is CPI data on Tuesday as the main US data item to impact both indices but Thursday’s ECB rate decision will also factor here. Fallout from Wednesday’s final Presidential Debate and the continuing US Earnings season should be monitored too. 

USDX: The US$ closed higher last week. Friday’s upbeat US Retail Sales and PPI data helped to close out the week with sentiment supporting an imminent US rate hike. The index finally made a decisive bullish breakout from the triangle pattern that had constrained price action for the last 2 ½ months and now looks to be on a path to test the key 100 level. The monthly chart reveals a potential H&S brewing and so the 98.50 level, or ‘Shoulder’, of this pattern may offer some resistance en route to 100.

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 22 months. The levels to keep watching on the USDX are:

  • The 95.50 level.
  • The 98.50 level: Shoulder of the H&S.
  • 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.

EURX:  The EURX closed lower last week and has been kept in technical check by the weekly chart’s 200 EMA. The index has not broken the pattern of higher Highs and higher Lows yet though and this support will be the region to watch in coming sessions. Any break and hold below this trend line will bring the 100 level back into focus.

Traders need to remember that there is policy divergence between Europe and the US with the Eurozone trading within a monetary easing cycle and the US trying to emerge from one.  For the time being, though, both FX Indices remain trading within longer-term trading channels and so I continue to wait for any decisive breakout from these resistance zones.

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:
  • 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.

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 terrorism-related, 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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