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 found strong resistance on Wednesday at the 4th square root progression of the year-to-date high in the 1.3240 area
–Failure to close over 1.3200 keeps our bias lower, but weakness under a convergence of several key Gann and Fibonacci levels in the 1.3050/85 area is required to spark a more important downside run
-Short-term cycles are unclear at the moment, but a minor turn looks due around the start of next week
-A broader time cycle turn window remains in effect through to May 12
-A close over 1.3200 is needed to turn us positive on the exchange rate
Strategy: A broader top seems to be building, but want to see confirmation before positioning aggressively on the short side.
AUD/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–AUD/USD has come under steady downside pressure over the past couple of days and unwound the gains of the past week
-Our bias is still lower in the exchange rate with focus on the 1.0215 78.6% retracement of the March to April advance
-Traction below this level is needed to trigger a more aggressive decline towards 1.0155 and below
-Near-term focused time cycle analysis suggests a turn could be seen around the first half of next week
-The 2nd Gann square root progression from the year-to-date high near 1.0360 remains key resistance and only strength above this level shifts attention higher in the rate
Strategy: Like holding short positions whilst below 1.0360
EUR/JPY:
Charts Created using Marketscope – Prepared by Kristian Kerr
–EUR/JPY has traded in a narrow range above the 4th square root progression of the February low in the 127.50 area
–Our bias is lower while the cross remains below the 161.8% extension of the march to April decline in the 130.20 area
-The 127.50 Gann level remains a key pivot and weakness below this level ideally on a closing basis is needed to signal the start of a more important decline
-Near-term cyclical analysis indicates a minor turn window will be in effect early next week
-Traction over 130.20 will shift our bias immediately higher
Strategy: Jury is still out with respect to the importance of the cyclical tops recorded last month, but need to see weakness soon if a deeper correction is going to play out.
Focus Chart of the Day: SP 500
Much of our attention today will be on the US equity markets. Wednesday’s decline was the first real sign that a top of some sort is actually trying to materialize in the indices following the important cyclical turn window we highlighted at the start of the week. In addition to the decline in price, we witnessed a divergence between SP 500 futures and cash as the former was able to overcome Tuesday’s high while cash fell 2 cents shy. In our experience, such divergences are important around cyclical turn windows and often act as a leading indicator of a more important decline to come. If this is indeed a high of some importance in the SP 500 then Tuesday’s cash high of 1597.57 should continue hold. Continuation weakness under Monday’s low would be further immediate evidence of a turn while strength over 1597.57 would undermine the negative cyclical prospects.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX
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