Talking Points

• USD/JPY nearing critical upside pivot
• AUD/USD at important cycle turn window
• SP 500 records new all-time high

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Foreign Exchange Price Time at a Glance:

Price Time Analysis: USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/JPY broke over the 2×1 Gann angle line of the year’s high on Friday to trade to its highest level since early September
• Our near-term trend bias is higher in the exchange rate while above 98.60
• A major upside pivot is the 3rd square root progression of the year’s high at 100.65 with a daily close above needed to usher in another period of important strength in the exchange rate
• The first and latter part of next week are important cycle turn windows for USD/JPY
• Only a move under the 5th square root progression of the year’s high near 98.60 would turn us negative on USD/JPY

USD/JPY Strategy: Like the long side while over 98.60.

Price Time Analysis: AUD/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• AUD/USD is in consolidation mode just above the 1×1 Gann angle line of the August closing low at .9270
• Our near-term trend bias is lower in the Aussie while below the 4th square root progression of the year’s high at .9360
• Support between .9270 and .9205 are important with weakness below needed to confirm a resumption of the broader decline
• The next day or so is a medium-term cycle turn window in the rate
• A daily close back over .9360 would turn us positive on the Aussie

AUD/USD Strategy: Like holding only a reduced short position while below .9360.

Price Time Analysis: SP 500

Charts Created using Marketscope – Prepared by Kristian Kerr

• SP 500 punched above the 6th square root prgoression of the June low at 1778 early this week to record new all-time highs
• Our near-term trend bias is higher in the index while over 1742
• After psychological resistance around 1800 the next real sticky point looks to be at 1813
• The next cycle turn window of importance looks to be around the end of the month
• Only aggressive weakness below Gann support at 1742 would turn us negative on the index

SP 500 Strategy: Like the long side while over 1742.

Focus Chart of the Day: NIKKEI 225

In yesterday’s Price Time we wrote on USD/JPY and the Fibonacci time relationship that helped signal the recent breakout attempt from the range. Other evidence that suggests this latest break is for real is the action in the Nikkei 225. In other attempts higher over the past few months the Index has been conspicuously absent failing shy of the July high around 15,000 several times. This time, however, the move higher in USD/JPY has been accompanied by a break higher in stocks with the index finally mustering a break and close above the July barrier on Thursday. The overt strength in the index is a little surprising as Fibonacci time relationships favored a break next week, but it is a positive sign for USD/JPY nonetheless. The 88.6% retracement of the May to June decline near 15,500 is the next clear resistance level of note ahead of the all-important May high. Only weakness under 14,400 raises the possibility of a false pattern break scenario.

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— 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

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