SP 500 rebounds off an important support level, but still at risk of forming a broader top. EUR/USD breaks below 1.3220 while GBP/USD holds above a key Gann line.

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Foreign Exchange Price Time at a Glance:

Price Time Analysis: EUR/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• EUR/USD broke under the 38% retracement of the July to August advance on Tuesday to trade to its lowest level since late July
• The move under the 1.3220 2nd square root progression of the year-to-date high has turned out near-term trend bias to negative
• We would like to see a non-holiday daily close below 1.3220 to further confirm this shift in trend or a clear breach of the 1×2 Gann angle line of the July low at 1.3170
• A minor cycle turn window is seen during the second half of the week
• A move back over 1.3315 is needed to turn the technical outlook back to positive

EUR/USD Strategy: Looking to get short.

Price Time Analysis: GBP/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• GBP/USD rebounded last week off the 1×1 Gann angle line of the year’s high in the 1.5485 area
• While over this level our near-term trend bias will remain higher in Cable
• The 61.8% retracement of the late August decline at 1.5605 now needs to be overcome to further confirm a resumption of the broader uptrend
• A minor turn window is seen around the second half of the week
• A close under the 1×1 Gann agle line of the year’s high now at 1.5465 would turn the outlook to negative on Sterling

GBP/USD Strategy: Like the long side whilst over 1.5465.

Price Time Analysis: USD/CAD

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/CAD has entered into a sideways to higher range against the 1×2 Gann angle line of the 2012 closing low in the 1.0555 area
• While over the 50% retracement of the July range at 1.0425 our near-term trend bias will remain higher in Funds
• The 1.0555 area remains a minor pivot with strength above required to expose more important resistance near 1.0600
• A medium-term turn window is in effect over the next day or so
• Intermediate-term support is seen around 1.0470, but only a close under 1.0425 will undermine the positive technical structure

USD/CAD Strategy: Like the long side while above 1.0425.

Focus Chart of the Day: SP 500

The SP 500 reversed off the 1627 2nd square root progression of the all-time high last week. The reversal came during a medium-term cycle turn window. Following this occurrence strength should be expected for at least a few days, but we remain unconvinced that this latest turn higher is a resumption of the broader uptrend. The 1710 early August high was quite significant from a longer-term cyclical perspective and in our view while it remains intact there is significant risk for a more important correction in the weeks ahead. Conceivably the index could trade to as high as 1678 or even 1692 in the next few days. However, a failure to overcome these levels by early next week will greatly increase the risk that a broader top is developing. 1627 remains critical support with weakness below this level on a closing basis the likely lynchpin to further material weakness.

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

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