USD index closes above the key 100 level by Mary McNamara

USDX

Monthly: The March candle is printing a large bullish candle AND is trading ABOVE the psychological 100 level. This monthly chart shows the recent triangle breakout suggesting bullish continuation and the recent break above 100 supports this view. The 50% Fib retracement on the monthly chart is up near 120 and, given that this has been a previous reaction zone, one might assume price would target this level if bullish momentum continues. After that, the 61.8% Fib near 130 would seem to be the next obvious port of call.

DXYmonthly

Monthly Ichimoku: The March candle is trading well above the monthly Cloud.

USDXmonthlyCloud

Weekly: Last week’s candle closed as a large bullish candle AND above the key 100 level.

DXYweekly

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

USDXweeklyCloud

Daily: Price rallied last week and close above major 100 resistance.

USDXdaily

Daily Ichimoku Cloud chart: Price traded above the Cloud all week and the bullish Tenkan/Kijun crossover signal remains open.

USDXdailyCloud

4hr: Price eventually rallied up through the key 100 level last week.

USDX4

4hr Ichimoku Cloud chart: Price traded above the Cloud all week. This chart is aligned with the daily chart and suggests long USD.

USDX4hrCloud

EURX

Monthly: The March candle is printing a large bearish candle and has pierced below the ‘Double Bottom’ support level at 96.

EURXmonthly

Monthly Ichimoku: The March candle is trading below the monthly Cloud.

EURXmonthlyCloud

Weekly: The weekly candle closed as a large bearish candle.

EURXweekly

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

EURXweeklyCloud

Daily: Price action continued lower last week. The ‘Bear Flag’ seems to have evolved and the ‘Flag pole’ is about 1,000 pips in length suggesting that bearish follow through might move by the same order of magnitude. Thus, the Flag break at around 99 would suggest a move down to 89. This move has already given 500 pips though!

EURXdaily

Daily Ichimoku Cloud chart: Price is still trading below the daily Cloud. The bearish Tenkan/Kijun cross remains open.

EURXdailyCloud

4 hr: Price chopped lower last week despite a bit of a bounce on Thursday.

EURX4

4 hr Ichimoku Cloud chart: The EURX traded below the Cloud all week.  This chart is aligned with the daily chart and suggests short EUR.

EURX4hrCloud

Comments:

USDX: the USDX closed higher again last week following on from the ‘Bull Flag’ breakout of two weeks ago. Despite weaker than expected US Consumer Sales and PPI data, the US$ rallied up through the resistance of the 100 level ahead of next week’s FOMC meeting. The focus for this meeting seems to be on whether the word ‘patient’ will be dropped or maintained. If dropped, expect this US$ rally to continue but any dovish tone could help to put a cap on this rally, even if only temporarily. 

The 100 level is a critical technical level for the USD index. This is near the important 61.8% Fib retracement level on the weekly chart and is a long term S/R level on the monthly chart. Wednesday’s FOMC is the main risk event for the US$ next week and might determine whether the index continues or retreats from this 100 level.

EURX: the EURX closed lower last week and below the support of the 96 level potential ‘Double Bottom’. Divergence between the EZ and US economies continues to be a dominant theme with the Eurozone entering a monetary easing cycle with the US emerging from one. Any continued hold below 96 would suggest a trip down to 89 as this is the target of the daily chart’s Bear Flag move. The fate of the EURX continues to be more in the hands of USDX flows than of any Euro-related data for the time being and, as such, FOMC will be important here too. 

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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