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.
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Foreign Exchange Price Time at a Glance:
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/USD has broken away from the 1.3000 6th square root progression of the year-to-date high
- Our trend bias remains lower, but weakness below the 78.6% retracement of the May to June advance near 1.2925 is needed to maintain the immediate downside tack
- Medium-term focused time cycle studies indicate early next week is a turn window of some importance
- The 61.8% retracement of May to June move higher at 1.3030 is now immediate resistance
- However, only over 1.3125 turns us positive on the Euro
Strategy: Like holding short positions while below 1.3125
NZD/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
- NZD/USD continues to consolidate above the 78.6% retracement of the June to April advance in the .7715 area
- Our trend bias remains lower, but traction below .7715 is desperately needed to trigger more meaningful downside momentum
- Cycle studies point to early next week as a potential turn window in the Kiwi
- The 2nd square root progression of last month’s low in the .7860 area remains key near-term resistance
- Only clear strength above this level would turn us positive on the Bird
Strategy: Like being square for the time being. May look to go long next week if the Kiwi reacts well during the turn window.
EUR/CHF:
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/CHF has moved steadily higher since finding support in late June at the 78.6% retracement of the April to May advance near 1.2235
- Our trend bias is lower while below the 1×2 Gann angle line of the year-to-date high in the 1.2355 area
- The 50% retracement of the late June advance near 1.2300 needs to give way to set up a downside resumption
- Very near-term focused cycles favor strength for a few more days
- However, only a close over 1.2355 suggests a trend shift and turns us positive on the cross
Strategy: Only small short positions favored while below 1.2355.
Focus Chart of the Day: GBP/USD
Cable traded to its lowest level in over a month on Wednesday before rallying sharply from just under the 78.6% retracement of the May – June advance at 1.5165. The action is interesting from a short-term cyclical perspective as often times Sterling acts as a leader. As we noted yesterday, the broader cyclical outlook seems to favor a USD peak sometime around late this week or early next week. The current strength in the Pound suggests early/mid next week is now probably the more likely timeframe as another day or so of strength looks likely before the next move lower into the medium-term turn window. Aggressive strength over 1.5400 would signal that the rate has bottomed early. This looks less likely.
— 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