FX Indices: both indices closed with bearish weekly candles ahead of next week’s Brexit Referendum vote highlighting the challenges traders face trading during this contentious period.
USDX
Monthly: The June candle is currently printing a bearish coloured ‘Inside’ candle as it tries to hold above major 92.50 support. The monthly chart still shows a Bull Flag forming and, if it evolves, it might target the 120 region. This 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.
Monthly Ichimoku: The June candle is trading well above the Cloud.
Weekly: The weekly candle closed as a bearish coloured candle. Price action remains range-bound between 100 and 92.50 and has been stuck within this channel for over 16 months. Any break and hold below 92.50 would have me looking for a potential move down to test the congested area containing the monthly 200 EMA, weekly 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.
Weekly Ichimoku: The weekly candle closed BELOW the weekly Cloud which is a bearish shift. There have now been three weekly candles close below the Cloud’s S/R region and this is the first such bearish period in over two years and so is noteworthy.
Daily: Price action remains in a descending trading channel.
Daily Ichimoku Cloud chart: Price chopped around just above the daily Cloud last week.
4hr: Price chopped up and down last week.
4hr Ichimoku Cloud chart: Price traded in and out of the daily Cloud all week but closed the week below the Cloud. This chart is divergent from the daily chart though and suggests choppiness.
EURX
Monthly: The June candle is currently printing a bearish coloured ‘Spinning Top’ candle but is holding well above the 94 level still giving the chart a ‘Double Bottom’ appearance.
Monthly Ichimoku: The June candle is trading below the Cloud.
Weekly: The weekly candle closed as a bearish coloured candle but is still within the weekly chart’s trading channel. There have been two conflicting weekly-based technical patterns competing over many months; a basing-style bullish ‘Double Bottom’ and a trading channel with a ‘Bear Flag’ look to it but there still isn’t a clear winner just yet. Any bullish continuation might eventually target the 50% and 61.8% fib levels of this two-year swing low move.
Weekly Ichimoku: Price is trading in the mid region of the weekly Cloud.
Daily: Price chopped lower last week.
Daily Ichimoku Cloud chart: Price traded below the Cloud all of last week.
4 hr: Price chopped lower last week.
4 hr Ichimoku Cloud chart: Price chopped in and out of the Cloud last week but closed the week below the Cloud. This chart is now aligned with the daily chart for SHORT EUR$.
General:
- Both indices continue to hold within long-term trading channel / Flag patterns that have persisted for over 16 months.
- Both indices closed with bearish weekly candles.
USDX: The US$ closed lower last week receiving little help from the FOMC decision but next week’s Brexit vote is now in focus. This vote result has the potential to shift all currency pairs and not just those containing the GBP. My thinking for the US$ with vote result scenarios is as follows:
- Any Brexit LEAVE result should see ‘Flight to Safety’ activity and the US$ could be a beneficiary of any such sentiment.
- Any Brexit REMAIN result could see a ‘risk-on’ relief rally and the US$ could suffer with such sentiment.
The US$ index continues to hold above major 92.50 support but I still consider it to be in no-man’s land whilst it trades above 92.50 and below 100. I am waiting for a decisive breakout from this region to signal the next major directional move on the index as this choppy and range-bound price action has gone on for over twelve months. The levels to keep watching on the USDX are:
- The daily chart’s descending channel trend lines.
- The 95.50 level above current price.
- The psychological 100 level above current price. This is the top of the trading range.
- The 92.50 level below current price. This is the bottom of the trading range.
EURX: The EURX also closed lower for the week with next week’s Brexit vote in focus here too. My thinking for the EUR$ with vote result scenarios is as follows:
- Any Brexit LEAVE result should see ‘Flight to Safety’ activity and the EUR$ could suffer with any such sentiment.
- Any Brexit REMAIN result could see a ‘risk-on’ relief rally and the EUR$ could benefit from such sentiment.
Traders need to remember also that there is policy divergence between Europe and the US with the Eurozone trading within a monetary easing cycle and the US trying to emerge from one. Both Indices remain trading within trading channels so I continue to wait for any decisive breakout from these resistance zones.
The levels to watch on the EURX continue to be:
- The weekly chart trading channel trend lines.
- The 103.5 level: The weekly chart reveals that a 50% fib retracement of the recent lengthy bear move is back up near the 103.50 level. Any bullish channel breakout might see the index target this region and the weekly 200 EMA is near this fib for added confluence.
- The 105.5 level: this is near the 61.8% fib.
- The 96 level:This is a major support level for the EURX and has been a previous monthly chart ‘Double Bottom’ region.
- The 94 level: This is the more recent ‘Double Bottom’ level as seen on the weekly chart.
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 terrorism-related, 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.
The post FX Indices ahead of the Brexit vote. appeared first on Trade Charting.
The post FX Indices ahead of the Brexit vote. appeared first on www.forextell.com.