Even though this market isn’t technically an fx pair the US dollar index (USDIDX) is worth watching and currently sits at a very interesting level. The market has bounced after falling close to its lowest level since January 2015. The low of the week at 92.38 is now an important reference point and if price can hold above here then a recovery is possible. The relative strength index (RSI) on a weekly chart has been in oversold territory (sub 30) of late and the downtrend maybe a little overdone.
Friday’s price action was constructive with a larger engulfing candlestick and there could be further gains ahead. For the past month the downtrend has been clearly defined by the 8 and 21 period EMAs on a H4 chart with a bearish orientation (8 below 21) indicative of a downtrend. These EMAs formed a positive cross on Friday and whilst price remains above them, this could be seen to suggest an uptrend has begun.
Possible support: 92.38, 92.00, 90.00
Possible resistance: 94.05, 94.85, 96.19
This pair had been looking to recover last week after forming a double bottom at 1.7425, but Thursday’s bearish engulfing candlestick ended those hopes for now. The market remains underneath the Ichimoku cloud on D1 and therefore could be seen to be in a downtrend. A break below the previous double bottom would open up the possibility of further declines to 1.7027. Alternatively a break above last week’s high of 1.7990 would expose the top of the cloud and a break above there (currently 1.8150) would change the outlook for this market.
Possible support: 1.7425, 1.7200,1.7027
Possible resistance: 1.7830, 1.7990, 1.8150
Price broke below a rising trendline in the past week and the recent gains seen in the past two months could now be vulnerable. The weekly low of 87.30 is the first level to watch on the downside but if this fails to hold then the sell-off could gather pace. Whilst price remains below the double top at 89.05 the bears will feel optimistic and that further declines are possible.
Possible support: 87.30, 86.80, 85.65
Possible resistance: 88.20, 89.05, 90.00