EUR/USD is on the verge of confirming a change in trend. NZD/USD still looks higher while EUR/GBP flirts with key support and AUD/USD nears an important cyclical inflection point.
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Foreign Exchange Price Time at a Glance:
Price Time Analysis: EUR/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/USD surpassed last month’s 1.3345 high on Thursday to trade to its highest level since mid-June
- The breach of this level is potentially significant and a close over 1.3345 will shift the near-term trend bias to positive
- The 5th square root progression of last month’s low at 1.3300 is now relevant support and a close back under this level is needed to re-invigorate downside possibilities
- The cyclical picture is unclear at the moment, though short studies suggest a minor high could be seen over the next day or so
- A close over 1.3345 will confirm that a near-term trend shift has occurred, but traction over the 2Q13 high near 1.3415 is really needed to undermine the broader negative cyclical picture
EUR/USD Strategy: Square here. Need some cyclical clarity before the next operation.
Price Time Analysis: NZD/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- NZD/USD found support at the start of the week from just below the 2×1 Gann angle line of the 2009 low in the .7760 area
- Subsequent strength back through .7860 has shifted the near-term trend back to positive in the Bird
- The 4th square root progression of the year-to-date low near .8030 is once again important resistance and a close through this level is required to set up more material strength in the rate
- A minor turn window is seen around the end of the week
- Only weakness back .7860 would undermine the burgeoning positive structure and turn us negative on the Kiwi
NZD/USD Strategy: Like the long side while the Kiwi is over .7860, but will wait for better levels to position.
Price Time Analysis: EUR/GBP
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/GBP traded to its highest level in over 4-months last week before failing at the 4th square root progression of the 2Q13 low near .8760
- Subsequent weakness below the 3rd square root progresion of the April low .8670 has shifted the near-term trend bias to negative in the cross
- A key downside pivot is now seen at 2×1 Gann angle line of the 2Q13 low near .8580 and a clear breach of this level should spark a more important move lower
- Near-term cycles studies suggest the end of the week is a minor turn window
- Only back through .8720 improves the negative picture
EUR/GBP Strategy: Like selling the cross on strength against .8720.
Focus Chart of the Day: AUD/USD
A couple of weeks ago we wrote about the likely downside “pain trade” in AUD/USD after it briefly pierced the .9300 neckline of a multi-week inverse head shoulders pattern. The sharp decline in the wake of the false pattern breakout materialized as we envisioned with the rate falling all the way to .8850 before finding support. The snapback from this level has been fairly aggressive, but the rate looks to be nearing a cyclical crossroads of sorts over the next couple of days. If this recovery is just a correction before another leg lower then it should run out of gas sometime early next week (Mon/Tues). Our idealized stopping point would be somewhere around the 61.8% and 78.6% retracements of the July to August decline in the .9135-.9215 area. Continued strength into Wednesday over .9215 would signal that a more important advance is occurring.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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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To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX