Talking Points
- Important potential cycle turn window in the Euro
- Cable trades to new 9-month highs
- USD/JPY threatening critical support level
To receive other reports from this author via e-mail, sign up to Kristian’s e-mail distribution list via this link.
Focus Chart of the Day: EUR/USD
EUR/USD has been unable to gain much traction over the 7th square root progression of the year’s low in the 1.3645 area. With today being a clear medium-term cycle turn window for the single currency we will be on the lookout for any potential signs of a top. The lack of any real extreme sentiment in the rate as evidenced by a sub 70% DSI reading is not our ideal setup for a trending instrument into a turn window. Nevertheless, there are plenty of potential momentum divergences on the daily that suggest the rate is vulnerable here. A level that we will be watching closely over the next couple of days is the 78.6% retracement of the year-to-date range at 1.3500. Weakness below there would be an initial sign of a top. The real clear level on the downside, however, is the 2nd square root progression of the year’s high at 1.3475. Strength after Wednesday above 1.3600 would invalidate the turn window.
Foreign Exchange Price Time at a Glance:
Price Time Analysis: USD/JPY
Charts Created using Marketscope – Prepared by Kristian Kerr
- USD/JPY has come under steady pressure since failing near the 78.6% retracement of the July to August decline at the beginning of last month
- A confluence of several key Gann and Fibonacci levels near 97.50 is major support and while above this level our trend bias is higher
- A move back over the 50% retracement of the July to August decline at 98.95 is needed to re-invigorate upside prospects
- The second half of the week is an important cycle turn window for the exchange rate
- A daily close below 97.50 would turn the technical outlook to negative
USD/JPY Strategy: Like the long side while above 97.50.
Price Time Analysis: GBP/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- GBP/USD overcame Gann resistance at 1.6240 on Tuesday to trade to a new 9-month high on Tuesday
- Our trend bias remain positive on Cable while above the 1×4 Gann angle line of the year’s low in the 1.6020 area
- A daily close over Gann resistance at 1.6140 is needed to prompt the next push higher towards attractions at 1.6040 and above
- A medium-term cycle turn window is seen around the end of the week
- Weakness below 1.6020 would warn that a more important correction is commencing
GBP/USD Strategy: Like the long side while over 1.6020.
Price Time Analysis: SP 500
Charts Created using Marketscope – Prepared by Kristian Kerr
- SP 500 tested the 3rd square root progression of the June low at 1673 on Monday before rebounding aggressively to close back above critical support at 1680
- While above the 50% retracement of the August/September range at 1680 our near-term trend bias will remain higher
- Traction over 1710 is needed to re-invigorate upside prospects
- A minor cycle turn window is seen today and early next week
- A daily close below 1680 would turn us more negative on the index
SP 500 Strategy: Like the long side whilst above 1680.
— 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
Looking for a way to pinpoint sentiment extremes in the SPX in real time? Try the Speculative Sentiment Index.
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX