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Weekly Ichimoku Analysis Nov. 2nd+
The armor has been dented. The first signs of damage to the upward assault have been marked on the shield and the first wound delivered. Why?
Since the pair broke above the weekly 20ema and the Kumo, there has not been one weekly loss this heavy on a closing basis. On top of that, in the last 33 weeks, we’ve only had two other closes (on a weekly basis) this strong or more. On top of this, in comparison to the other two candles of this magnitude, this one opened closer to its high and closed closer to its low so the selling pressure this week was most consistent.
Does this mean I want to be short EURUSD yet? Not necessarily. Being long USD is not my favorite prospect at the moment and needs more confirmation. Am I open to being short now? Yes, with more confirmation since the armor has been weakened.
Some options for shorting would either be towards the previous yearly highs or on a weekly close below the Tenkan (has not happened in 27 weeks). Options for going long would be on a bounce off the weekly Tenkan or on the 20ema.
Overall Kumo structure suggests medium to long term the trend should remain up. But there the price action suggests a short term correction could be underway. Be warned as overall prospects for being bullish are not as golden as they were before.
The picture for this pair did not get any clearer after last weeks close. If anything, it made it more annoying as it posted an inside week. The good thing about this is probabilities suggest this week will be an outside one. The malo thing about this is the direction of which the break will occur is less clear from the price action. The Tenkan, 20ema and Kijun are coming closer suggesting decision has yet ot really manifest itself so building heavy positions is not recommended until we have a solid break, particularly above 1.6750ish or below 1.6200.
Price is still inside the kumo and if we do not get a close outside of it on either side by year end, the beginning of the next year should get messy till early summer. Overall, until a break of the aforementioned levels, we recommend shorter day trades on this while not holding any positions beyond an intraday session.
The outlook on this pair is similar than the EURUSD except the pair had its strongest open-close loss in the last 33 weeks so the stakes are up’d a bit. The pair has found buyers at the weekly Tenkan so this should inspire bulls for now. Pero, another failure at the yearly top made two weeks ago, or at a fib level from that top (.9326) to the current tenkan reading would strengthen the bears claws.
Our strategy for this is the same as the EURUSD on both sides of the market along with the overall medium/longer term outlook. The only thing which would change our long term view would be a weekly close below the Kumo but we place this at about a <20% chance of happening and feel overall any strong dips are opportunities to buy AUDUSD for another run up to an eventual parity which we feel will happen in 1st or 2nd Q of 2010 since the overall weekly kumo is building over time.
Producing back to back weekly gains – something it has done only 3x in the last 34 weeks the next test for the bulls is the weekly 20ema, an entity which strongly rejected it the last time. The difference this time is a major fib for the swing move down from 1.3000 was right there at the 20ema when it happened. On top of this, the weekly advance prior to attacking the 20ema the last time was smaller in nature than the current week that just closed suggesting there is more power behind this move than the last. This is also represented mathematically in the last major attack on the 20ema was 580pips over 4weeks while this last advance was roughly 580 pips over two weeks – an important fact to be considered.
One other important note was the kumo wherein last time it was much thicker and in the zone of the 20ema whereas now its further away from price (less of a threat) and thinner in nature so a reversal is much more likely to happen now than ever. If it does not break the kumo to the upside between now and end of March next year, chances for bulls to establish control weaken.
The funny thing about last week was that the pairs that were doing the best against the USD suffered the most while the pairs doing the worst endured the least amount of torture. Not really funny as it makes sense from an order flow perspective, pero – the kiwi really took one on the chin uppercut style. In fact, it was the only trending pair which closed below the weekly tenkan which is the most damaging to the bulls technically. So far, the pair has now treated the tenkan as resistance while making modest gains. If the current model plays itself out with the pairs that had done the best against the USD are now going to fare the worst, the kiwi is in for a larger fall.
Downside tests are the 20ema, something not seen since the first week in may so any test if this should be very interesting with a close below likely resulting in a drastic and quick fall to the kijun causing a technical event to force bulls to exit most of their positions. Overall, we feel the medium to longer term bullish structure is in place as the kumo is lo mismo to the AUDUSD and supports an upside advance as long as no weekly close below the kumo happens between now and early March 2010. Dips that travel to the south will likely return north for an attack upon 82 cents (the high from 2008).
Chris Capre specializes in using Ichimoku, Momentum, Bollinger Band, Pivot and Price Action models to trade the markets. He has built Ichimoku Systems for Institutions and has an Advanced Ichimoku Course for further training. For more information about his services or his company, visit https://2ndskiesforex.com
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