US$ tumbles but where to from here? by Mary McNamara

The US$ has tumbled following FOMC but the big question now is….. ‘will this move continue’?  Many are saying to buy this US$ dip but what are the chances that we get a bit more of a pullback? Maybe looking out the window at various ‘Cloud’ patterns might help here!

 USDX 4hr: price has retreated from the 100 resistance level and the FOMC inspired dip took price down to test the 4hr 200 EMA.  The current 4 hr candle is printing a bullish reversal ‘Hammer’ pattern and may well signal that this is the full extent of the dip. However, price is well outside the Bollinger band and so a bit of a pause here isn’t too surprising, even if there is to be more bearish follow through:


USDX 4hr Cloud: The bottom of the 4hr Ichimoku Cloud is offering some support for now BUT a break of this level might allow for a deeper and more prolonged pullback. I would suggest watching how this current 4 hr candle closes and, also, whether the 4hr Cloud continues to support price action:


EURX 4hr: price rallied here in a capitulation move following FOMC and has made it back to the monthly chart’s 96 ‘Double Bottom’ region. Now, whether this level will support price or is just being tested before more bearish follow through remains open. The current candle is bullish coloured for the time being but printing a pin bar reversal-style pattern but, as with the USDX 4hr, this candle is well outside the Bollinger band and thus also likely to slow or pause, even if continuation is on the agenda:


EURX 4hr Cloud: it is worth noting that price has made a close back above the 4hr Cloud. A hold above this level would suggest that there could be more bullish follow though here. I suggest watching for any hold above the 96 level and 4hr Cloud to enable some possible bullish follow through:


Summary: there were large moves on both the USDX and EURX charts following FOMC but activity on both indices has come to a recent pause. Price action on both indices is well outside the 4hr Bollinger bands and so the slow down is not surprising. Traders would be well advised to watch the respective 4hr Ichimoku Clouds so as to help determine whether this price action marks a pause before reversal or continuation:


  • a new close below the 4hr Cloud might suggest further bearish follow through but;
  • a hold above would support a reversal of this latest dip and a return to longer-term bullish momentum.


  • a hold above the 4hr Cloud might suggest some continuation with this bounce but;
  • failure to hold above the Cloud, along with a retreat back below 96, would suggest that the bounce might be over.

NB: I will be writing up notes on a few of the FX pairs a bit later this morning.

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