Monthly: The February candle has closed as a bullish coloured candle with a long lower shadow but still between the key S/R levels of 92.50 and 95.50.
Monthly Ichimoku: The February candle closed well above the monthly Cloud.
Weekly: Last week’s candle closed as a bullish candle. It is still worth keeping note of the fact that a 61.8% pull back would bring price down to near the broken trend line of the monthly chart’s triangle pattern.
Weekly Ichimoku: The weekly candle is still trading well ABOVE the weekly Cloud.
Daily: Price continued to consolidate within a triangle until Thursday and this had been giving the daily chart a ‘Bull Flag’ appearance. Price broke up and out of this triangle on Thursday thereby supporting the Bull Flag but, with the close below 95.50, a bearish-reversal ‘Double Top’ still looms as a possibility.
Daily Ichimoku Cloud chart: Price traded above the Cloud all week BUT there has been a new bullish Tenkan/Kijun crossover. This cross evolved above the Cloud and thus is deemed a ‘strong’ signal which would hearten the USD Bulls! The Tenkan and Kijun lines remain flat at the moment though so the signal has not kick started properly yet.
4hr: Price chopped sideways within the triangle until Thursday and then made a breakout to the upside.
4hr Ichimoku Cloud chart: Price traded in and out of the Cloud until Thursday but then rallied to close the week above the Cloud. This chart is back to being aligned with the daily chart and suggests long USD.
Monthly: The February candle closed as a bearish candle with a long upper shadow and still below the support of the 78.6% fib from the 2012-2014 bull move. My ‘inverse H&S’ pattern is looking less likely here now but a potential ‘Double Bottom’ is forming up as price action heads down towards the 96 region.
Monthly Ichimoku: The February candle closed below the monthly Cloud.
Weekly: The weekly candle closed as a large bearish, almost ‘engulfing’ candle. This recent pullback could still just be a pause though, before further bearish follow-through, as much as an attempt at a possible reversal.
Weekly Ichimoku: Price is trading well below the weekly Cloud.
Daily: Price action is still below the 78.6% fib support and broke down from the triangle pattern on Thursday. This triangle had been giving the chart a ‘Bear Flag’ appearance and this seems to have evolved. The ‘Flag pole’ here is about 1,000 pips in length and, thus, any bearish follow through move could be expected to extend by the same order of magnitude. So the Flag breakdoen, at around 99, could suggest a move down to 89. There is major support at the 96 level below this Flag though and this forms up the ‘Double Bottom’ region. However, any break and hold below this 96 level would have to support continuation with the Bear Flag move:
Daily Ichimoku Cloud chart: Price is still trading below the daily Cloud. There has been a new bearish Tenkan/Kijun cross below the Cloud and, thus, this is deemed a ‘strong’ signal. This new signal, like that on the daily USDX char, has not really got going just yet though.
4 hr: Price chopped up and down last week within the triangle until Thursday when it made a bearish breakdown.
4 hr Ichimoku Cloud chart: The EURX started the week above the Cloud but finished the week below this support. This chart is back to being aligned with the daily chart and suggests short EUR.
USDX: the USDX closed higher last week and made a bullish triangle breakout on Thursday that supports a ‘Bull Flag’ breakout BUT it has not been able to break up through 95.50 to avoid a potential ‘Double Top’.
The index is still essentially range bound between two key S/R levels: it is trading below 95.50 resistance but above 92.50 support. A make or break of the two key S/R levels needs to be seen to help clarify this situation:
- A break and hold above 95.50 would support the ‘Bull Flag’.
- A break and hold below 92.50 would support the bearish ‘Double Top’.
Fibonacci levels on the weekly chart show that a 61.8% pull back of the recent bull run would bring price back down to test a previous breakout region from a monthly chart triangle pattern. This is something worth keeping in mind as this could be target for any potential pullback here.
Two technical points would cheer USD Bulls though:
- There has been a new bullish Tenkan/Kijun cross on the daily Cloud chart.
- The index is back to trading above the Cloud on both the 4hr and daily charts.
This latest USD rally seems to have been fueled by hawkish comments from a few Fed members but these views seem to be at odds with that of the Fed Chair, Janet Yellen. Thes coming week might help to determine the next directional move with the USD though as there is a lot of high impact data including US Manufacturing and Non-Manufacturing PMIs, a Fed Chair Yellen speech and, then, NFP wrapping this all up on Friday. With the index still trading just under the 95.50 level then perhaps one, or some, of these items will get the index reacting at this key level. The 95.50 is a huge resistance zone for the index as it is the 50% fib of the 2001-2008 bear move BUT any bullish breakout above this would suggest continuation to test the 61.8% fib near 101.5:
Weekly USDX showing the 95.50 as the 50% Fib level:
EURX: the EURX closed much lower last week following on from the USD rally on Thursday. 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. However, as the USD index struggles at a bearish ‘Double Top’, the EURX is fast approaching a potential bullish ‘Double Bottom’ region down at 96. This 96 level may help to stem the bearish fallout here and will be the level to watch in coming sessions.
There are a few ominous signs for any EUR Bulls though or, rather, positive signs for USD Bulls:
- The triangle breakdown on the daily chart suggests a Bear Flag worth 1,000 pips that would put price down near 89.
- There has been a new bearish Kijun/Tenkan cross on the daily chart.
- The index is back to trading below the daily and 4hr Cloud which is bearish.
EUR interest rates and an ECB Press Conference are key risk events for the EURX but, as always, the ‘Yin and Yang’ tug from the USDX means that US data, and how the USDX manages the 95.50 ‘Double Top’ level, will be just as important here.
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.