The US$ looks set to bounce, yet again, off the major 92.50 support region thus keeping price action within the 15 month+ trading channel. The end of last week saw the daily chart’s bearish cycle of lower Highs and Lows come to an end with the printing of a higher Low and higher High daily candle close. Next week brings FOMC and this may help to define the next major move for the US$.
NB: further w/e updates will be brief as it is along w/e here. As well, I am on holidays for a month from next Wednesday and updates during this period will be very brief and few.
USDX
Monthly: The April candle is now printing a bullish-reversal style Hammer candle as it tries to bounce up from major 92.50 support. The monthly chart shows a Bull Flag still forming but, the 100 level resistance, does give this chart some ‘Double Top’ appearance 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: Friday’s bullish action has not been captured in this chart)
Monthly Ichimoku: The April candle is trading well above the Cloud.
Weekly: The weekly candle closed as a bullish candle and this follows on from last week’s bullish engulfing candle. Price action remains range-bound between 100 and 92.50 though and has been within this channel for over 15 months. 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, 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 back up at the top edge of the weekly Cloud.
Daily: The last three days of the week were bullish and BoJ news on Friday about potential further easing helped to carve out a rather bullish day for this index. The previous bearish cycle of lower Highs and lower Lows has come to an end with a higher Low and a higher High forming although price action is still within a descending trading channel. The next hurdle will be the 95.50 level:
Daily Ichimoku Cloud chart: Price traded below the daily Cloud all week.
4hr: Price drifted lower but then higher last week.
4hr Ichimoku Cloud chart: Price chopped within the Cloud last week but moved higher on Friday to close above the Cloud. This chart is still divergent from the daily chart though and suggests choppiness.
EURX
Monthly: The April candle is still printing a bearish coloured ‘Inside’ candle but is holding well above the 94 level giving the chart a ‘Double Bottom’ appearance.
Monthly Ichimoku: The April candle is trading below the Cloud.
Weekly: The weekly candle closed as a bearish candle but is still stuck within the weekly Flag. There have been two conflicting weekly-based technical patterns competing over many 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% and 61.8% fib levels of this two-year swing low move.
Weekly Ichimoku: Price is now trading in the lower region of the weekly Cloud.
Daily: Price action was bearish every day last week except Tuesday. Friday was the worst day following US$ strength on the back of BoJ news.
Daily Ichimoku Cloud chart: Price traded lower last week and is now back down just above the daily Cloud. This Cloud is only thin though and it wouldn’t take much of a bearish shift to put this below the Cloud and, thus, in alignment with the 4hr chart for SHORT EURX.
4 hr: Price chopped lower last week.
4 hr Ichimoku Cloud chart: Price traded below the 4hr Cloud for most of last week. This chart is still divergent from the daily chart for now though and suggests choppiness.
General:
- Both indices continue to hold within long-term Flag patterns that have persisted for over 15 months.
- Both indices remains trapped in their weekly Ichimoku Cloud although the USDX is closing to breaking up and out from this resistance
- The USDX and EURX are still divergent on their Ichimoku 4hr & daily charts suggesting choppiness.
USDX: The US$ closed higher for the week despite weaker than expected US Building Permit and Manufacturing data. US Weekly Unemployment Claims continues to be a bright spot on the data front though as well as some second-tier Existing Home Sales. The index got a, possibly artificial?, boost on Friday though with the announcement that the BoJ are considering further easing.
The US$ index had been down near major 92.50 but price action looks to be bouncing, yet again, off this level. The daily chart’s bearish cycle of lower Highs and lower Lows came to an end with the printing a higher Low and Higher High to finish the week. There is FOMC next week and this news may help to determine how the index trades from this 92.50 support.
I still consider the US$ 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 weekly chart Flag trend lines.
- 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 closed lower for the week despite some decent PMI data on Friday but clear policy divergence, with the Eurozone trading within a monetary easing cycle and the US trying to emerge from one, seems to have dominated again this week. Both Indices remains trading within technical-based Flag patterns and within their weekly Ichimoku Clouds though and 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 Flag 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 Flag 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.
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