US$ recovers a bit after NFP but, still, an ugly week

The US$ recovered a bit of lost ground after NFP but remains much lower for the week and even Friday’s bullish candle could only manage to print an indecision-style ‘Inside’ candle. The miss with US Employment numbers was offset by the improved wages and Unemployment rate making for a bit of a mixed bag and, hence, the indecision daily candle. The 100 level continues to be overhead resistance for the US$ index and it essentially remains range-bound within the 12 month+ channel whilst trading between 100 and 92.50. Thus, the wait for any decisive breakout continues.

USDX monthly: the new monthly candle is large and bearish ‘Engulfing’ for now. The monthly chart below shows a potential Bull Flag forming up but, given the 100 level is proving to be some resistance, there is a possible ‘Double Top’ developing as well. The Bull Flag pattern, if it evolves, might target the 120 region and 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

USDX weekly: Last week’s candle closed as a large bearish coloured, almost ‘Engulfing’, candle and it also broke down from the recent triangle pattern. The 100 level above continues to be a challenge with some obvious ‘Double Top’ jitters. Keep in mind that price action is still range bound between the 92.50 and 100 levels but any bearish break and hold back below 92.50 would bring the 61.8% fib level into focus as this is down near 87, the weekly 200 EMA and the previously broken triangle trend line.

USDXweekly

USDX daily: Friday’s candle was bullish coloured but closed as an indecision style ‘Inside’ candle.

USDXdaily

EURX weekly: the weekly candle was bullish and broke up and out from the recent triangle pattern. Price action here though, in mirror image from the US$ index, remains range bound in a Flag pattern above the 94 level. Any bullish continuation here, up and out of the Flag pattern, might find resistance from the weekly 200 EMA near the 50% fib and then the 61.8% fib near 105.50:

EURXweekly

EURX daily: note the indecision-style ‘Inside’ candle here too for Friday:

EURXdaily

Thoughts:

Ichimoku Alignment: The FX Indices remain aligned on their 4hr and daily charts for LONG EUR$ and SHORT US$.

USDX:

The US$ made a daily/4hr chart bearish triangle breakdown last week but, as I’ve mentioned over many weeks, I still consider the US$ to be in no-man’s land whilst it trades above 92.50 and below 100. Mixed US economic data, volatile Oil pricing and concern about global growth continue to raise doubts for traders about the projected timeline for raising US interest rates and this is keeping the US$ choppy under the key 100 level. 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 a year now. Thus, the levels to keep watching on the USDX are:

  • The weekly chart’s Flag trend lines.
  • The psychological 100 level above current price. This is the top of the trading range.
  • The 92.50 level below current price. This is the bottom of the trading range.

EURX:

The EURX closed higher for the week and staged a bullish daily/4hr chart triangle breakout and is making gains at the expense of the weaker US$. However, despite the US$ stalling at the 100 resistance level, the fact remains that there is clear policy divergence with the Eurozone trading within a monetary easing cycle and the US trying to emerge from one and, so, this recent reversal could just prove to be temporary. I am keeping an open mind here and will be watching the Flag trend lines for further guidance.  

The levels to watch on the EURX continue to be:

  • The weekly chart Flag trend lines. 
  • 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. 
  • The 103.5 region: this is the region of the weekly 200 EMA and 50% 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 the more recent ‘Double Bottom’ level.

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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