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:

EUR/USD:

Charts Created using Marketscope – Prepared by Kristian Kerr

• EUR/USD remains in recovery mode since finding support last week at the 8th square root progression of the year-to-date high in the 1.2790 area
• While above the 2nd square root progression of last week’s low in the 1.2975 area our near-term trend bias will remain higher
• However, a minor time cycle turn window is in effect on Wednesday that could see the broader downtrend attempt to re-assert
• The 4th square root progression of last week’s low near 1.3200 remains a key upside pivot with strength above needed to signal that a more important correction higher is underway in the Euro
• Back under 1.2975 will turn us negative on the single currency and suggest a broader downside resumption

Strategy: Longs favored while over 1.2975, but risk the downtrend re-asserts over the next couple of days.

AUD/USD:

Charts Created using Marketscope – Prepared by Kristian Kerr

• AUD/USD has moved strongly higher over the past couple of days to overcome the 2nd square root progression of the year-to-date low at .9185
• Strength through this level has shifted the near-term trend bias higher in the exchange rate
• The 12th square root progression of the year-to-date closing high at .9295 remains a key upside pivot with tracton above required to signal that a more important upside push is indeed developing
• Very near-term cycle studies suggest the latter half of the week is a minor turn window
• The .9040 level remains key support and only weakness below this level turns us negative on the Aussie

Strategy: Like holding long positions while over .9040.

XAU/USD:

Charts Created using Marketscope – Prepared by Kristian Kerr

• XAU/USD continues to consolidate around the 3rd square root progression of the year-to-date low in the 1281 area
• While below a key long-term retracement at 1301 and the 4th square root progression at 1316 our near-term trend bias has to remain lower
• Short-term cycles studies point to the end of the week as a likely turn window in the metal
• The 2nd square root progression of last month’s low in the 1248 area is near-term support with weakness below needed to re-focus on the broader decline
• A close above 1316 would suggest a more important turn Gold has already been seen and turn us positive

Strategy: Reduced short positions favored while under 1301.

Focus Chart of the Day: EUR/USD

The next few days look important for the dollar as several short-term cycle studies suggest a near-term turn window will be in effect. How the USD reacts during this timeframe (especially against the European currencies) should shed light on the true state of the broader USD advance. The 1.2975 level looks key in EUR/USD. Weakness back below this level would suggest a resumption of the broader downtrend and open the door for further weakness into the more important longer-term cycle turn window seen around the end of the month. A continuation higher in EUR/USD past Thursday, however, and through 1.3200 would alter some near-term counts and set up a stronger correction into month-end.

— 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