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.
Foreign Exchange Price Time at a Glance:
EUR/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–EUR/USD came under further downside pressure on Friday and touched its lowest level since early April
–Our bias remains lower in the exchange rate with immediate focus on the 61.8% retracement of the April to May advance in the 1.2930 area
-A break below this level exposes 1.2880 and below
-Scope for a minor time cycle low seen on Tuesday and at the end of the week
-The 50% retracement of the decline from last month’s high near 1.3090 is now key resistance with strength above required to turn us positive on the exchange rate
Strategy: Continue to like short Euro position whilst below 1.3090
USD/CAD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–USD/CAD found support last week at the Fibonacci/Gann confluence zone in the 1.0015/35 area
-Subsequent strength through the 1×1 Gann angle line of the year-to-date high has turned us positive on Funds
-Focus now is on the 2nd square root progression of the year-to-date high in the 1.0140 area with strength above needed to further confim the integrity of the latest move higher
-Near-term focused time cycle analysis suggest the middle of the week could see a minor turn in the pair
-The 1×1 Gann angle line in the 1.0080 are is now immediate support, but only weakness under 1.0015 undermines the postive technical structure in the rate and shifts bias back to lower
Strategy: We like holding longs in Funds whilst above 1.0015
USD/CHF:
Charts Created using Marketscope – Prepared by Kristian Kerr
–USD/CHF surged late last week and traded to its highest level since August of last year
–Our bias remains higher in the exchange rate with immediate attention on the 3×1 Gann angle line of the 2012 high in the.9630 area
-This resistance level capped the rate last week and a clear break above is needed to maintain the upside tack and expose .9670 and above
-Time cycles suggest scope for a minor turn on Tuesday and late this week
-The 1st square root progression of last week’s high in the .9630 are is immediate support, however, only weakness below the 2nd square root progression at .9430 would turn us negative on USD/CHF.
Strategy: Favor the long side in USD/CHF whilst over .9430.
Focus Chart of the Day: SP 500
Last week was significant from a time cycle perspective for a variety of FX markets including the Euro, Gold in USD terms, Cable and EUR/JPY. The latter half of the week also looks relevant for US equities as a simple bar count on the daily chart reveals a burgeoning Fibonacci relationship. Weakness below Friday’s low will confirm a top of some sort and setup at least a minor short-term correction. A move through Thursday’s high eliminates this possibility. Given the importance of the late April trun window for US equities from a cycle perspective and the fact that indices were able to push so easily through this “time resistance” suggests stocks have more to go in a medium-term sense with the second half of June the next cyclical time resistance of note.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To receive other reports from this author via e-mail, sign up to Kristian’s e-mail distribution list via this link.
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX
Need guidance managing risk on trades? Download the free Risk Management Indicator.