USDX
Monthly: Trend ranging upwards. The April monthly candle closed
as a bearish engulfing candle. The monthly 200 EMA is still above current
price, at around the 84 level, and helping to keep a lid on this! The very new
monthly candle is printing a small bullish candle.
Weekly: Trend up overall. The weekly support trend line is
still supporting price. The weekly candle closed as a hammer style candle. These
often suggest a bullish reversal when they appear in a downtrend but price
action here has been as much sideways as down so this may not have any real
significance. The current chart still looks to be forming a bearish ‘double
top’ though. You can see from the weekly chart just how choppy the last 9 weeks have been.
Daily: Trend up/ranging. Price has
traded below the key 82.59 level for most of the week. The 82.59 level represents the 61.8% fib retrace
level from the last major swing high back in mid 2010 and is still proving to
be very significant. Price rallied up to near this level following the positive NFP
result but fell back away after the poor US PMI data to give a bearish candle
for Friday.
Daily Ichimoku Cloud
chart: Price has traded in the Cloud for most of the week. This suggests more choppiness.
4hr: Trend choppy/down. Price trended down to start the week
but rallied on Thursday after some positive US data. The bearish ascending
wedge pattern and ‘Head and Shoulders’ patterns from last week did evolve and
play out in text book fashion! Price chopped around under the monthly pivot to
end the week with some spikes from NFP.
4hr Ichimoku Cloud chart: Price has traded below the 4hr for
most of the week. It finished the week trading below the Cloud. This is divergent from the daily chart and suggests
choppiness.
EURX
Monthly: Trend down overall but 7 of the last 9 months were
bullish. The April monthly candle closed as a bullish engulfing candle. The
very new monthly candle is printing a bearish ‘spinning top’.
Weekly: Trend up. Price had earlier failed to move above the
monthly 200 EMA. This had been major resistance so it was no surprise that
price had paused under this level. Price action had been quite parabolic for
‘risk on’ until recently and subsequently pulled back to the mean of the
support trend line; something that is not out of order as part of
any continued longer term bullish price action. This pullback has actually
played out in text-book fashion! The weekly candle closed as a small, but
bullish, candle. The current weekly chart print still looks to have evolved as
a ‘bull flag’ pattern. Price has now broken up and out from this flag pattern
suggesting that perhaps the retracement period might be over and that the
bullish movement might continue. Price is still sitting above this breakout
level but under the key 108.5 S/R level. The significance of this 108.5 level
can be seen if you cast your eyes across the weekly chart.
Daily: Trend ranging. Price has chopped around this week, again, between the 107.5 and 108.5 levels. Price finished the week with a bullish
candle near the midpoint of this trading channel.
Daily Ichimoku Cloud chart: Price has chopped around either
just above or in the top edge of the Cloud and just below the 108.5 level all
week. Price really needs to break above the 108.5 level to motivate any real ‘risk
on’ momentum for currencies. Price struggled to hold above the Cloud as the
week progressed but managed to close the week sitting just above it and,
you guessed it, just below the 108.5 level.
4 hr: Trend ranging. Price has chopped around between the
107.5 and 108.5 levels for the last 4 weeks. I have shaded this channel to make
it easier to see. Price finished the week near the middle of this channel.
4hr Ichimoku Cloud chart: Price has chopped around in, and just
under, the Cloud all week. Price finished the week in the Cloud. This is divergent from the daily chart and suggests
further choppiness.
Thoughts: NB: Not
much has changed over recent weeks so the write up is fairly similar again.
Choppy markets + Ichimoku: The Ichimoku charts are still divergent
and this suggests some further choppiness ahead. I do suspect this extended
period of choppiness is connected to the current market top action that is
being seen across many global stock markets. Stocks and currencies seem to be
at a major junction and are experiencing choppy action ahead of the next major
new momentum move. To me, this feels like the thunder building before a major
storm. I just don’t know whether the storm will be ‘risk on’ or ‘risk off’. So
even though I have no idea what that directional move will be, when it appears,
I will trade it. Stock moves seem to be suggesting more ‘risk on’ might be
ahead.
The consistent pattern with
Ichimoku divergence continues though. That is; choppy 4hr chart trading with
better trend trades found off 30 min charts during the US session. I would
expect that pattern to continue until such time as the charts do align again. This
has certainly been the case during this last week.
I am waiting for Ichimoku Cloud
alignment. I see this as being somewhat similar to any other seasonal business.
You just have to wait patiently and, as the saying goes, ‘make hay when the sun
shines’. All four index charts are trading very close to, or within, their
respective Clouds. Thus, momentum could swing either way, rather quickly and
easily, form this point. I am keeping an open mind here.
The EURX as ‘risk’ barometer: The EURX has been a proxy measure for
the mood for ‘risk appetite’ over recent months. The EURX has now pulled back
down and tested the support of the major monthly trend line. Price has now
bounced off this major support level and rallied for 4 of the last 5 weeks.
This is no guarantee that this trend will continue though. The next major
hurdle for the EURX is the 108.5 level. This level is proving to be a
significant challenge though and has managed to contain price for much of the
last three weeks. However, any break and close above this 108.5 level would
suggest that there might be some follow through with this bullish reversal and
a swing back towards ‘risk on’. This 108.5 remains the key level to watch in the
coming weeks.
USDX: The USD rallied on Friday, along with stocks, after the US positive jobs data. This rally stalled though after some weaker than expected US PMI data. It seems that we could be heading into a new period, or paradigm era, where the USD might be seen as the new 'growth' or 'risk on' currency. This is contrary to the previous dominant paradigm of the Euro, AUD and CAD etc carrying this mantle; a phenomenon I have noted and discussed before. I'm not sure how long a USD rally can tag with a stock rally though. I would have thought that one, eventually, has to hurt the other. I'm keeping an open mind though and will be on the lookout for further clues as to any shift.
Note: As always, Fundamentals, by
way of Euro zone dramas and news announcements, continue to be triggers for
price movement on the indices. These
events can always have the potential to undermine all Technical analysis.
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