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 found support again on Wednesday at the 50% retracement of the June to July advance in the 97.60 area
• Subsequent strength back through 98.65 has shifted our near-term trend bias to positive in the exchange rate
• The 4th square root progression of the of the year-to-date high at 99.65 is now a near-term pivot with strength above needed to trigger the next important move higher
• The positive reaction in the rate during the cycle turn window at the middle of the week favors further strength over the next few days
• The 97.50 level remains a key support and only aggressive weakness below this level would undermine the positive technical developments of the past few days and turn us positive on the rate

Strategy: Tested and held major support during the cycle turn window. We like the long side now while above 97.60.

USD/CHF:

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/CHF traded to its lowest level in over a month on Wednesday before rebounding off the 6th square root progression of the year-to-date high in the .9240 area
• The 1×2 Gann angle line of the year’s high has acted as strong resistance over the past couple of weeks and only traction over this level now at .9225 will shift our trend bias to higher
• However, an important medium-term cycle turn window is in effect over the next day or two and the exchange rate looks much more susceptible to a reversal during this time
• Weakness below .9240 now needed to alleviate our concerns of a reversal and signal a resumption of the near-term downtrend
• Any strength through .9225 will turn us positive on on the exchage rate and set up a possible resumption of the broader uptrend

Strategy: Like taking profit on any remaining short positions. May look to get long on a move through .9225.

USD/CAD:

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/CAD has come under steady downside pressure since failing just under the 6th square root progression of the May low near 1.0600 at the beginning of July
• The near-term trend bias remains lower in Funds with a close over the 61.8% retracement of the June to July advance at 1.0315 needed to turn it higher
• A cycle turn window is in place for another day or so and the exchange rate looks prone to a turn higher during this time
• Clear weakness below the 78.6% retracement of the June to July advance at 1.0235 would undermine this possibility and set up a much more important move lower
• A close over 1.0315 over the next few days will confirm that a low of some importance is in place and open the way for a resumption of the broader USD uptrend

Strategy: Like getting square here and may look to get long on a close over 1.0315.

Focus Chart of the Day: EUR/USD

The near-term cyclical picture in the Euro looks fairly clear. Following the anticipated weakness at the beginning of the week, the single currency has moved steadily higher to trade to its highest level in over month into the important cycle turn window that we identified during the second half of this week. If our cyclical analysis is correct then EUR/USD should soon turn down again and embark on another important decline. A move under this week’s low at 1.3210 would be preliminary evidence that this is indeed occurring but weakness below 1.3110 is really required to confirm that a broader Euro peak is in place. We cannot rule out a final spike higher in EUR/USD before the end of this turn window, but it does look unlikely. Only strength over the Gann price/time convergence level at 1.3415 would alter our broader negative framework.

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

Looking for a way to pinpoint sentiment extremes in the Euro in real time? Try the Speculative Sentiment Index.

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