US$: its crunch time! by Mary McNamara

The US$ has slipped further following yet more weaker than expected US economic data and with some nerves ahead of Wednesday’s FOMC announcement. This shift in US$ sentiment is close to tipping the the FX indices into a ‘Risk On‘ alignment, something I had pointed to over the w/e. This FOMC statement will be keenly watched for any dovish shift and, if so, this could trigger the Double Top breakdown and shift the indices to ‘Risk On’.

USDX daily: the Double Top neck line at 96.50 looks set to be broken with today’s candle close. The next major support level is at 95.50 and this is the one I am watching for any reaction. I believe a break and hold below this level will confirm the Double Top breakdown and help shift the indices to ‘Risk On’. However, any hold above 95.50 with a hawkish FOMC could see this level act as support for the index. This pattern could then even develop into a Bull Flag continuation pattern!  Thus, tonight’s FOMC may prove critical for determining the next directional move on the US$ index:


USDX daily Cloud: price looks set to close below the daily Cloud. This will be the first close below the Cloud in almost 10 months. This will mean the US$ charts are aligned for SHORT US$ trades as the 4hr chart shows price below the Cloud as well:


USDX 4hr Cloud: price is below the 4hr Cloud:


USDX weekly: any break and hold below 95.50 will bring the 61.8% fib down near 87 into focus as a possible target for bearish continuation. For added confluence, this also happens to be near the region of the previous monthly chart triangle breakout:


EURX daily: The index may be carving out a base here with the help of US$ weakness. Note how the Bear Market Truncation pattern can be seen playing out on this chart. Thus, watch for any further US$ weakness to support bullish continuation here:


Steve Burns Bear Market Truncation Pattern:


EURX daily Cloud: Price is still below the daily Cloud for now but it is close to making an attempt to move up through this resistance. Any close and hold above the daily Cloud would put the EURX index into alignment for LONG EUR trades as price is above the 4hr Cloud:


EURX 4hr Cloud: price is already above the 4hr Cloud:


Summary: the 95.50 will be the level to watch with Wednesday’s FOMC announcement:

  • A break and hold below 95.50 will support the bearish ‘Double Top’ breakdown move. If so, watch for any continuation move down to towards the 61.8% fib near 87.
  • A close and hold above 95.50 will support a continuation pattern and, possibly, a developing Bull Flag.

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