Talking Points

• Weekly close for SPX will be significant
• EUR closing in on important Gann resistance
• GBP/USD nearing key support level

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Focus Chart of the Day: SP 500

The SP 500 continues to meander around the 50% retracement of the August to September advance at 1680. On Thursday the index actually managed to close below this level, but the real test will likely come today as a weekly close under 1680 would suggest that a deeper correction is indeed unfolding. A successful hold of this level on a weekly basis, on the other hand, would suggest the action of the past few days has only been corrective. In the bigger picture scheme of things the real critical support level for the index looks to be the 2nd square root progression of the all-time high at 1652. A move below there at any time greatly increases the risk of a broader top.

Foreign Exchange Price Time at a Glance:

Price Time Analysis: EUR/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• EUR/USD punched through the 88.6% retracement of the year-to-date range near 1.3600 on Thursday to trade to its highest levels since the beginning of February
• Our near-term trend bias remains higher in the single currency whilst above 1.3475
• The 8th square root progression of the year’s low at 1.3655 is important resistance with traction above exposing natural attractions at 1.3710 and above
• A minor cycle turn window is seen during the first half of next week
• Only a daily close below the 2nd square root progression of the year’s high at 1.3475 would undermine the immediate positive tone in the single currency

EUR/USD Strategy: Maintain reduced long position while above 1.3475.

Price Time Analysis: GBP/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• GBP/USD traded to its highest levels since the start of the year early this week beforer encountering resistance at the 8×1 Gann line of the year’s high
• While above the 2nd square root progression of this week’s high at 1.6005 our near-term trend bias will remain higher
• A move back through Gann resistance at 1.6225 now looks needed to signal a reumption of the trend
• The first half of next week is a minor turn window in the rate
• A daily close below 1.6005 would warn that a deeper correction is likely to unfold

GBP/USD Strategy: Like holding longs whilst 1.6005 remains intact.

Price Time Analysis: NZD/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• NZD/USD found support earlier this week at the 6th square root progression of the year’s low in the .8200 area
• Strength from there has been persistent but a move back through .8340 on a closing basis is needed to shift the near-term trend bias to positive
• The .8200 level clearly remains an important downside pivot with weakness below deseperately needed to improve dopwnside prospects.
• A minor cycle turn window is seen around the middle of next week
• A close over the 1st square root progression of the September high at .8340 would turn the outlook on the Bird much more positive

NZD/USD Strategy: Might be worth a punt on the short side if the rate is still below .8340 around the middle of next week.

— 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