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.

Foreign Exchange Price Time at a Glance:

EUR/USD:

Charts Created using Marketscope – Prepared by Kristian Kerr

–EUR/USD remains in consolidation mode since finding support the week before last just ahead of the 4th square root progression of the May high in the 1.2780 area

–While below the convergence of the 2nd square root of the May high and the 50% retracement of the May range in the 1.30010/20 area our bias is lower

-Focus is on a convergence of several Gann and Fibonacci levels in the 1.2850 area with weakness below needed to signal a downside resumption

-Near-term time cycle analysis indicates the latter part of the week is a turn window for the pair

-Only traction above 1.3020 undermines the immediate negative technical tone and turns us positive on the Euro

Strategy: Short positions favored in the Euro whilst below 1.3010

AUD/USD:

Charts Created using Marketscope – Prepared by Kristian Kerr

–AUD/USD touched the 1×2 .9600 Gann angle line from the year-to-date closing high on Tuesday before rebounding sharply

-Our bias is still lower in the exchange rate, but a close under .9600 is needed to setup a deeper decline and test of the pivotal 50% retracement of the 2010 to 2011 advance in the .9565 area

-Short-term time cycle analysis is positive on the Aussie for a few days

-Former Fibonacci support at .9700 is now resistance

-However, only strength over a convergence of several key Gann and Fibonacci levels in the .9780 to .9800 area would turn us positive on the rate

Strategy: Reduced Aussie short positions favored while below .9800.

GOLD:

Charts Created using Marketscope – Prepared by Kristian Kerr

–XAU/USD continues to consolidate below the 2nd square root progression of the year-to-date low in the 1395 area

–Our bias is lower in the metal, but a close under the 78.6% retracement of the April to May advance near 1357 is needed to signal the start of a more important decline

-Short-term cycles are modestly positive on Gold, but longer-term cycles continue to point to the second half of June as being a critical timeframe for the metal

-The 1395 level remains important resistance

-A close over this level is needed to shift our bias to higher

Strategy: Like Gold short positions on weakness below 1357.

Focus Chart of the Day: USD/JPY

USD/JPY has rebounded sharply today after finding support at a convergence of an Andrew’s line connecting the February and March lows and the 4th square root progression of the month-to-date low in the 101.00 area. As we noted last week, the end of this week is a potentially critical time period for the exchange rate from a cyclical perspective. The timeframe will mark 8.6 months from the September low which is an idealized Pi cycle relationship. Should the rate continue higher into this cyclical turn window the potential for a peak of some importance will be high. Extreme negative sentiment towards the yen on a variety of metrics further supports this notion. Last month EUR/JPY underwent a correction after hitting its Pi cycle time resistance from the July low. We would expect a similar reaction in USD/JPY (at a minimum) if it succumbs to this time resistance.

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

To receive other reports from this author via e-mail, sign up to Kristian’s e-mail distribution list via this link.

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

Need guidance managing risk on trades? Download the free Risk Management Indicator.