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 failed last week at the key 4th square root progression from the year-to-date low in the 1.3200 area
–Bias is now lower in the exchange rate with immediate focus on the 1.3015 6th square root progression from the year-to-date high ahead of a critical Gann support zone near 1.2965
-The second half of this week marks the start of a potentially important long-term Fibonacci cycle turn window related to the all-time high and low in the pair
-A convergence of the 1×1 Gann line from the year-to-date high and the 1×4 line from the year-to date low in the 1.3140 area is important resistance
-However, only traction over the critical 1.3200 area will turn us positive on the euro
Strategy: The next few weeks look critical for the euro from a cyclical perspective. Will be looking to fade strength/weakness seen into the second half of the week.
USD/JPY:
Charts Created using Marketscope – Prepared by Kristian Kerr
–USD/JPY continues to find strong resistance just below the psychologically signficant 100.00 level which also coincides with the 50% retracement of the 2007 to 2011 decline
-Our bias is higher, but traction over 100.00 now needed to confirm the start of the next leg higher
-Near-term focused cycle studies are negative on the pair over the next few days
-An Andrews line drawn from the February low in the 99.00 area is immeidate support
-Only weakness under a multitude of Gann levels in the 98.30/50 area would turn us negative on the exchange rate
Strategy: Exited our remaining long position from 94.15 last week when 98.20 was given. Looking to go long on a break through 100.00. Probably on the second time through.
AUD/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–AUD/USD failed earlier in the month from just below the 161.8% extension of the early April decline in the 1.0590 area
–Subsequent weakness below the 1.0495 78.6% retracement of the year-to-date range has turned us negative on the pair
-Immediate focus now on the 1×1 Gann fan line drawn from the year-to-date high in the 1.0215 area with traction below needed to expose critical supports at 1.0215 and 1.0170
-Near-term focused time cycle analysis looks negative for a couple more days
-Convergence of Gann levels in the 1.0320 area is important resistance and only strength over this zone undermines the immediate negative technical tone
Strategy: Stopped out of our remaining long position for a scratch at 1.0505 last week. We booked profit on the other half at 1.0575. Now looking to sell on strength.
Focus Chart of the Day: EUR/USD
We have written at length over the past few months about the cluster of important long-term time cycles seen over the next few weeks. The first cycle point of significance is the 61.8% retracement in time of the advance from the 2000 all-time low to the 2008 all-time high at the second half of this week. This increases the chances in our view that the exchange rate will undergo an important shift of some sort during this time. The question now is in which direction? Before last week’s failure at 1.3200 it looked like a high of some magnitude would be recorded, but given the weakness over the past few days a low can no longer be ruled out. How the pair reacts at key price levels later this week will be key in determining where it is headed. We will go more in depth on the levels we are focusing on in the days ahead.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX
Are you looking for other ways to pinpoint support and resistance levels? Take our free tutorial on using Fibonacci retracements.
Need guidance managing risk on trades? Download the free Risk Management Indicator.
To receive other reports from this author via e-mail, sign up to Kristian’s e-mail distribution list via this link.