Talking Points
- EUR/USD nearing key cyclical inflection point
- USD/JPY fails at key retracement
- GBP/USD tests important Gann pivot
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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 reversed sharply on Friday from the 78.6% retracement of the December range near 120.50
- Our near-term trend bias remains positive while above 118.40
- Interim resistance is seen around 119.65, but a move through 120.50 is required to signal a resumption of the broader upmove
- A minor turn window is eyed on Wednesday
- A close below 118.40 would turn us negative on the exchange rate
USD/JPY Strategy: Like holding long positions while 118.40 holds.
Price Time Analysis: GBP/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- GBP/USD traded to its highest level in a month and a half this morning to test the 4th square root relationship of the year’s low near 1.5440
- Our near-term trend bias is positive while above 1.5195
- A close over 1.5440 is needed to trigger another leg higher in Cable
- A medium-term window is seen tomorrow/Wednesday
- A close below 1.5195 would turn us negative on GBP/USD
GBP/USD Strategy: Like holding only a reduced long position while above 1.5195.
Focus Chart of the Day: EUR/USD
It is shaping up to be an important week for EUR/USD as several key short and medium-term cyclical relationships are set to converge around the middle of the week. We should learn a lot about the nature of the current correction higher and whether it has more steam in it or is just about to peter out like all the rest. The reversal late last month in the euro came at the right time from a cyclical perspective and we were able to forecast it reasonably well (Read HERE). Our base case was that the correction would last a minimum of three weeks – which it has. Now the fun part, if the euro is going to follow the template of previous declines then it should top out sometime around Tuesday or Wednesday. A break below 1.1260 and more importantly 1.1210 would help confirm a broader downside resumption. On the other hand, continued strength past Wednesday into the latter part of the week would invalidate the turn window and signal an important change in behavior for the exchange rate. This would open the door to a few more weeks of upside for EUR/USD. The 1.1515 level looks to be a key upside closing pivot.
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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.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX