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:
USD/CHF:
Charts Created using Marketscope – Prepared by Kristian Kerr
–USD/CHF touched the .9750 100% projection of the February to March advance late last week before undergoing the current consolidation
–Our bias is still higher in the exchange rate and .9750 now looks like the natural upside pivot for a push towards the 8th square root progression of the year’s low near .9800
-Short-term term cycle counts warn that a minor top could be seen around the end of the week
-The 3rd square root progression of the 2012 high in the .9630 area is immediate support
-However, only aggressive weakness below the 38% retracement of the April to May advance near .9550 would turn us negative on the dollar
Strategy: Longs favored with the rate over .9550.
NZD/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–NZD/USD found support last week from just below the 161.8% projection of the late April advance in the .8075 area
-The recovery that has followed has been unimpressive and while the Bird is below the .8240 2nd square root progression of last week’s low our bias has to remain lower
-Attention remains on the .8075 level with traction below this level needed to setup a move to .7995 and below
-Near-term focused cycles point to the latter part of this week as a potential turn window in the exchange rate
-The 23.6% retracement of the year-to-date range is immediate resistance, but only a move through .8240 undermines the the negative technical structure and turns us positive on the Kiwi
Strategy: Short positions favored while below .8240.
GOLD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–XAU/USD traded to its lowest level in over a month on Monday before reversing sharply
–Despite this impressive price action our bias is still lower in the metal while below the 50% retracement of the April to May advance in the 1405 area
-A convergence of the1st square root progression of the year’s low and the 78.6% retracement of the April to May advance near 1355 is critical support with a close below needed to signal the onset of a deeper decline
-Short-term cycles point to late this week as a being a potential turn window while longer-term cycles point to the second half of June as being a significant timeframe for the metal
-The 2nd square root progression of the year’s low at 1395 is near-term resistance, but only traction over 1405 turns us positive on Gold
Strategy: Short positions favored while the metal is below 1405.
Focus Chart of the Day: EUR/GBP
EUR/GBP looks to be at an important cyclical inflection point. Our medium-term cycle counts suggest the cross has reached a point where the broader downtrend in place since February should try to re-assert. However, some longer-term techniques point to the second half of May as being the start of a more important up cycle. These competing cycles or “phasing” are actually quite common in EUR/GBP and make it one of the harder cross rates to decipher. From a practical point of view we will give the medium-term cycle one more day to try to re-assert. Following yesterday’s close above the critical 2×1 Gann angle line from the year-to-date high (red ellipse on chart) a clear price action failure of some sort is needed by today’s close on the daily chart. Any strength through Wednesday’s high tomorrow will completely undermine the negative medium-term cycle.
— 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.