Daily cloud charts: DXY and EUR

Daily Ichimoku cloud charts can provide some tactical guidance on the U.S. Dollar Index (DXY) and Euro / U.S. Dollar (EURUSD). If DXY stays below its daily Ichimoku cloud, EURUSD likely stays above its cloud. If DXY breaks above its cloud, EURUSD likely breaks below its cloud. Tactical signals are not clear yet but could get clearer in coming days.

U.S. Dollar Index (DXY) tactical signals to watch

The DXY defended support at its July low at 96.38, which was also a test of a 14-year uptrend support (see Chart 2 below). In our view, the daily Ichimoku cloud span can offer some guidance on the tactical trend for the DXY. While below the cloud span and chart resistances from 98.31 to 98.83, the immediate trend for the DXY is challenged with the September and July lows at 96.38-96.22 exposed. It would take a move above this resistance to suggest a tactically stronger pattern for the DXY. This would also increase the potential that the 14-year uptrend line on DXY holds.

Chart 1: U.S. Dollar Index (DXY): Daily chart with Ichimoku cloud span

Chart 2: U.S. Dollar Index (DXY): Monthly chart

Euro / U.S. Dollar (EURUSD) tactical signals to watch

The EURUSD attempted to break higher in mid September but quickly declined to negate the breakout, leaving a failed breakout (aka bull trap) in its wake. This provides a tactical overhang, but in order for EURUSD to flip tactically bearish, it needs to break below its Ichimoku cloud span and chart support from 1.1645 to 1.1583. The bull trap, which is reinforced by chart resistance at 1.1780-1.1830 (failed breakout zone), keeps this support at risk with the next level at the early August low at 1.1390.

In addition, EURUSD remains below its longer-term downtrend line - see Chart 4. Moving below the daily cloud span could signal that this downtrend resistance holds.

Chart 3: Euro / U.S. Dollar (EURUSD): Daily chart with Ichimoku cloud span

Chart 4: Euro / U.S. Dollar (EURUSD): Monthly chart