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 touched its lowest level since early May on Monday before rebounding sharply off the 2nd square root progression of the May low in the 98.90 area
–Our bias is lower while the exchange rate is below the 3rd square root progression of the year-to-date high at 100.65
-A Pi cycle time relationship related to last September’s low is in effect and suggests an upside resumption is likely after Monday’s action
-Weakness below 98.90 is required to undermine this potential and signal the start of another more important move lower
-Traction over 100.65 will confirm a trend shift and turn us positive on USD/JPY
Strategy: The action during the current cyclical turn window favors a low. Over 100.65 needed to confirm. Any weakness below 98.90 will get us aggressively short.
AUD/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–AUD/USD tested the 10th square root progression of the year-to-date high in the .9545 area last week
-Recovery from this zone has been fierce, but the rate’s inability to overcome a key Gann and Fibonacci confluence between .9790 and .9815 keeps our bias lower in the pair
-A Fibonacci time cycle turn window related to the January and April peaks seems to favor a downside trend resumption after the action of the last few sessions
-Weakness below .9625 would be further evidence that the downtrend is indeed resuming
-A clear break above .9815, on the other hand, is required to undermine this potential and setup a much more significant upside correction
Strategy: The price action of the last couple of days within the context of the current cyclical turn window seems to favor a downside resumption. Under .9625 confirms. Through .9815 on the upside signals the opposite. Such an occurrence would be a very compelling long opportunity.
GOLD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–XAU/USD has traded in a sideways to higher range since finding support a few weeks ago at the 78.6% retracement of the April to May advance
–Our near-term bias is higher in the metal while over 1358, but our expectations are low as the broader cycles remain generally negative into the second half of the month
-An important Pi cycle turn window related to the October high will be in effect between June 20-25th
-The 1430 3rd square root progression of the year-to-date low needs to be overcome soon to trigger further upside
-The 61.8% retracement of the April to May advance near 1385 is immediate support, but only weakness below 1358 signals an early downside resumption
Strategy: Short-term cycles turned positive a few weeks ago, but the move higher has been unimpressive. We are wary of an early downside resumption. Hold only a marginal long position against 1358.
Focus Chart of the Day: CAD/JPY
Last week we wrote that we would be monitoring closely CAD/JPY into the Pi cycle turn window slated for the main pairs this week. On Monday the cross rate traded down to our idealized support zone between 96.00/30 before rebounding sharply. The subsequent price action has left a clear ‘doji’ on the daily chart in candlestick parlance and is a pattern often associated with reversals. This rare combination of price, time and pattern seems to favor a resumption (or at least an attempt) of the broader up trend in place since June of last year in the days ahead. A higher low on Tuesday would be further confirmation of a reversal. Any weakness below 96.00 undermines the technical setup and re-focuses attention lower.
— 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