This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved.

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Foreign Exchange Price Time at a Glance:

USD/JPY:

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/JPY failed just below the 78.6% retracement at 101.60 during our cyclical turn window this week
• Subsequent weakness below 99.65 shifted our near-term trend bias lower
• The 5th square root progression of last month’s low near 98.25 is now key support and weakness below is needed to prompt the next important decline
• Near-term cycles indicate Monday and Tuesday is the next minor turn window
• The 61.8 % retracement of the May to June decline at 99.95 is immediate resistance, but only traction over 101.15 turns us positive on the dollar

Strategy: There is a good chance the broader uptrend will try to resume early next week during the minor turn window. Like being square for a few days.

NZD/USD:

Charts Created using Marketscope – Prepared by Kristian Kerr

• NZD/USD intradays trength above the .7860 2nd square root progression of the year-to-date low proved very shortlived as the rate was rejected by the 1×1 Gann angle line of this year’s closing high
• The Bird’s failure to gain any traction over .7860 has kept our trend bias lower
• The 1st square root progression of the year’s low at .7765 is immediate support and weakness below this level would be further evidence of a broader downside resumption
• The near-term cyclical outlook is messy, but Monday is a minor turn window
• The .7860 level remains a key pivot and only strength above on a closing basis would undermine the negative technical structure and turn us positive on the Kiwi

Strategy: Until it closes over .7860 it is difficult to get too positive on the Kiwi. We like small short postions while below.

XAU/USD:

Charts Created using Marketscope – Prepared by Kristian Kerr

• XAU/USD has recovered further over the past few days to test test the 3rd square root progression of last month’s low in the 1282 area
• While below 1301 our near-term trend bias has to remain lower in the metal
• The 2nd square root progression of the year’s low at 1248 is now a near-term pivot with weakness below on a closing basis required to signal a downside resumption
• The end of the July/First week of August looks like the next important cycle turn window in Gold
• Only traction over former support turned restiance at 1301 would turn the technical picture more positive

Strategy: Reduced short position favored while under 1301.

Focus Chart of the Day: SP 500

Since bottoming during our cyclical turn window late last month the SP 500 has traded steadily higher with only one down day seen since then. Last week we noted that the 1637/40 area in the index looked like a key pivot and if the index could get above this resistance area convincingly then a re-test of the May highs would become very likely. This seems to be happening now with the index having recorded a new all-time closing high yesterday and within earshot of the 1687 intraday high. We suspect this level will be overcome in relatively short order and the bullish chorus that most certainly comes along with it will be deafening. However, we will develop a much more cautious stance above 1687 as we believe the index is in the midst of some sort of medium-term topping process. The last week of this month and the middle of August look to be the next cycle turn windows of significance. A minor window is seen late next week.

— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

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To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX