Talking Points

• Major resistance could prompt correction in EUR/USD
• Cycles point to range break in USD/JPY
• USD/CHF nearing major support zone

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Focus Chart of the Day: EUR/USD

EUR/USD recorded new year-to-date highs this morning before encountering resistance at the 100% extension of the early October decline. While sentiment is very positive on the Euro following the break of the 1Q13 1.3710 high earlier this week, we are a bit wary of chasing here as several shorter-term cyclical methods point to the next couple of trading days as a clear possible turn window from where a reversal of some kind (likely just a minor correction) could occur. Further bolstering this cyclical view is the proximity of three important resistance levels in the form of the 61.8% retracement of the 2011 to 2012 decline at 1.3830, the 10th square root progression of the year’s low at 1.3880 and the 61.8% retracement of the 2009 to 2010 decline at 1.3895. If a correction is going to materialize during this cyclical turn window then we would expect it to occur around this resistance zone. Strength over 1.3895 into next week would greatly quell correction concerns. In a broader cyclical sense, the middle of November and the first half of December look quite important for the exchange rate.

Foreign Exchange Price Time at a Glance:

Price Time Analysis: USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/JPY continues to meander around the middle of the multi-month contracting range
• While over 96.55 our near-term trend bias remains positive on the exchange rate
• Interim resistance is at 97.55 but traction over the 5th square root progression of the year’s high in the 98.60 area is really required to re-invigorate upside prospects
• A Fibonacci time cycle suggests that a break from the range could occur over the next few days
• A daily close under the 7th square root progression of the year’s high at 97.55 would turn us negative on the rate

USD/JPY Strategy: Square here, but will go with a break of 96.55 or 98.60.

Price Time Analysis: USD/CHF

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/CHF has come under aggressive downside pressure over the past few days and traded to its lowest level since November of 2011 on Thursday
• Our near-term trend bias remains lower in the rate while under the 10th square root progression of the year’s low near .8975
• A Gann/Fibonacci support cluster between .8875 and .8835 is a clear attraction/reaction zone
• A medium-term cycle turn window is in effect over the next couple of trading days
• A move over .8975 on a daily closing basis will improve the immediate negative tone tone in USD/CHF

USD/CHF Strategy: Short while under .8975, but will look to book partial profit ahead of .8875 into this cyclical turn window.

Price Time Analysis: NZD/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• NZD/USD traded to its highest level since early May on Tuesday before encountering resistance near the 78.6% retracement of the year-to-date range and has since come under steady pressure
• A daily close below the 2nd square root progression of the week’s high at .8355 will turn us negative on the Kiwi
• A Gann level at .8440 is a near-term pivot with strength above needed to refresh upside prospects
• A minor cycle turn window is seen around the middle of next week
• Weakness below .8355 on a daily close basis will shift our near-term trend bias to negative

NZD/USD Strategy: Long against .8355, but may start looking to go short on a clear break of that level.

— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

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To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX