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Ichimoku Charts That Matter: USD Weakness Pauses, Clouds Expect More

Ichimoku Charts That Matter: USD Weakness Pauses, Clouds Expect More

Tyler Yell, CMT, Currency Strategist


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Ichimoku Technical Analysis Focus:

  • USD may accelerate after nearly three-months of sideways price action with no bullish catalysts
  • GBP, EUR look set to resume march higher with GBP the stronger of the two
  • Commodity FX mixed with a preference for strength on NZD, CAD and a weak AUD

Quiet markets can be frustrating. A benefit of Ichimoku is that the multi-faceted indicator keeps your eyes on the larger picture, which we’ll be bringing back into focus today. Among the broader themes continues to be likely US Dollar weakness, resumption of strength with British Pound and EUR, and lastly a mixed back in the Commodity FX scene with likely AUD weakness and CAD strength.

The Ichimoku Charts that matter this week will focus on the following currencies:

  • US Dollar moving into long-term trendline, Ichimoku cloud resistance and set to move lower
  • Resumption of British pound strength set to continue with EUR catching collateral effects
  • Strength of commodity FX (NZD, CAD) likely to leave AUD out and down

Want a full (& FREE) guide to walk you through Ichimoku? I created one here (click Advanced Guides)

Traders are often impatient when a bullish move stall. However, a stall is not the same as the terminus of a move. A key currency in the cross-hairs to this testament is the British Pound and US Dollar. Cable (GBP/USD) has traded sideways while the risk premium in the UK has eroded, which could lift GBP/USD higher.

Ichimoku Analysis Applied to US Dollar- Bearish View in Play

First in focus is the weakening US Dollar that has recently moved into the Ichimoku cloud after trading sideways for nearly threemonths. In addition to the cloud, Ichimoku has also come into a long-term trendline drawn from lower-highs that seem to favor the broader bearish view of US Dollar until the price trades above the cloud and the trendline.

The US Dollar Could Soon Resume Its Multiple-Month Decline

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Chart Source:Pro Real Time, IG UK Price Feed. Created by Tyler Yell, CMT

Ichimoku Analysis Applied to British Pound- Bullish View in Play

Traders should look for signs of continuation on the charts, and Ichimoku does a good job making continuation of a trend easy to identify. One of my favorite methodologies of trend continuation is through an indicator called the Commodity Channel Index with a 26-period setting or CCI(26).

I explain in detail how to complement the Ichimoku Cloud with CCI(26) in this free article.

Addition to Ichimoku, the sentiment derived from options traders are showing the highest level of sterling optimism since February as evidenced by one-month risk-reversals. Risk-reversals help traders to see the ratio of premium being paid in currency pairs to protect against large directional moves that are currently out-of-the-money.

Favorable Tailwinds Lift Cable With Ichimoku Supporting Upside View

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Chart Source:Pro Real Time, IG UK Price Feed. Created by Tyler Yell, CMT

Australian Dollar Departs from Relatively Strong Commodity FX

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Chart Source: Pro Real Time with IG UK Price Feed. Created by Tyler Yell, CMT

The Australian Dollar has persistently been on the decline against stronger FX like the British Pound as seen on the chart above.

On Tuesday, the Australian Dollar did attract buyers and rally on the back of the Xi speech at the Asian Forum in Boao that inspired confidence in global markets. However, the RBA has held a firm dovish stance that could continue to see AUD sold.

Enhancing Ichimoku with IG Client Sentiment

Ichimoku has value in helping traders see and trade in the direction of a momentum-backed trend. Retail traders, at least when looked through the lens of IG Client Sentiment, tend to fight strong trends.

We often recommend backing your technical analysis with IG client sentiment as it can do a good job of helping you see sentiment backed moves, which tend to carry on for long periods, which can make for good trades if you’re on the right side.

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For those needing a refresher, Dailyfx will typically take a contrarian view to crowd sentiment, and when retail traders are building a net-short position, the signal is often triggered to buy or at least suggests prices may rise.

Recently, there has been a jump in GBPJPY and GBPUSD short positions that would favor further GBP appreciation that is in-line with Ichimoku analysis.

New to FX trading? No worries, we created this guide just for you.

---Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.