US$: Friday a revealing last session?

The US$ failed to gain on Friday despite better than expected US CPI data. I keep wondering if, or when, we will be able to look back and say whether one particular event marked the tide when the US$ turned, either to the upside or downside, and now I’m wondering if Friday’s CPI divergence will be the signal for ‘that event’?

USDX monthly:  The February candle is printing a large bearish candle and is still below the key 100 level. The monthly chart below shows a Bull Flag forming up but, given that the 100 level is proving to be some resistance, there is also 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. (NB: this chart does not have Friday’s data)

DXYmonthly

USDX weekly: the weekly candle closed a bullish coloured ‘Spinning Top’ and also as an ‘Inside’ candle suggesting some indecision. Price remains range-bound between 100 and 92.50 and has been within this channel for over 12 months but continues to hold above the, almost, mid-way point of 95.50 for the time being. Any bearish break and hold below 95.50 would have me looking to the bottom of this Flag at 92.50 for the next main layer of support. Any break and hold below 92.50 would have me looking for a potential move down to test the congested area containing the weekly 200 EMA, 61.8% fib and previously broken trend line region (highlighted on the chart below). Note how any move down to this broken trend line region would be a move of similar order magnitude to the height of the current trading channel. Confluence! USDXweekly

USDX weekly Cloud: price action is down knocking on the weekly Cloud for a second time. The US$ bounced back up again last time but I’ll be watching to see how successfully is navigates the support zone this time around. Any failure would be quite telling.

USDXweeklyCloud

USDX 4hr: price bounced up off the 95.50 level but couldn’t get over the daily 200 EMa (green line):

USDX4

USDX 4hr Cloud: the US$ index remains in the 4hr Cloud:

USDX4hrCloud

EURX:

EURX weekly: The weekly candle closed as a bearish candle but is still above the key 96 support level. There have been two conflicting weekly-based technical patterns competing over recent months; a basing-style bullish ‘Double Bottom’ and a ‘Bear Flag’ but there still isn’t a clear winner just yet. Any bullish continuation might eventually target the 50% fib of this two-year swing low move as this is near the weekly 200 EMA for added confluence and there is the 61.8% fib near 105.5 above that:

EURXweekly

EURX weekly Cloud: the most recent attempt to break up through the weekly Cloud failed and price, subsequently, bounced back down. The index is trying once again though to break up through this resistance and any success would be quite revealing:

EURXweeklyCloud

Ichimoku: the FX Indices are divergent from each other suggesting general choppiness.

  • the USDX is trading in the 4hr Cloud but below the daily Cloud suggesting choppy US$ trading.
  • the EURX is trading below the 4hr Cloud but above the daily Cloud suggesting choppy EUR$ trading. .

Summary: the US$ remains range bound between the 100 and 92.50 level and can’t seem to make a break out of, or even a decisive move within, this region. It is also trading within the 4hr Cloud for the time being making for choppy trading. A few new TC signals last week failed and I continue to observe this pattern of lower probability TC signals when the FX indices, especially the US$, are trading within the 4hr or daily Cloud. Thus, I’ll be wary next week until both indices are trading free of their Ichimoku Cloud on the 4hr and daily charts and, preferably, until thay are aligned.

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