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:
USD/JPY:
Charts Created using Marketscope – Prepared by Kristian Kerr
–USD/JPY broke below the 1×1 Gann angle line of the February low on Thursday and traded to its lowest level since early April
–The move below 95.00 has shifted our bias to negative, but caution is advised here as the cyclical picture begins to turn more positive later today
-The 88.6% retracement of the April to May advance and the 10th square root progression of the year’s high in the 93.55/85 area is critical support and weakness below is needed maintain the immediate downside tack
-Medium-term cycle turn window is in effect over the next couple of days
-The 8th square root progression of the year-to-date high near 95.55 is key resistance and move over this level is required to turn the technical picture positive
Strategy: Cycles suggest a turn could materialize over the next couple of days. As such, don’t like chasing the downside here. Will look to go long if price action confirms a turn.
USD/CAD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–USD/CAD broke below the 1.0165 61.8% retracement of the May range on Thursday and touched its lowest level in almost a month
-Our bias remains lower in Funds, but a close below 1.0165 is needed to set up further weakness towards 1.0115 and below
-The cyclical picture continues to favor general weakness into the middle of next week
-The 2nd square root progression of the year-to-date high near 1.0215 is immediate resistance
-However, only aggressive strength over the retracement confluence at 1.0265 alters the negative technical outlook and turns us positive on Funds
Strategy: Like the short side while the rate is below 1.0260.
GBP/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–GBP/USD broke above the 7th square root progression of the year-to-date low on Thursday to trade to a new multi-month high
-Our bias remains higher in Cable with traction over the 5th square root progression of the year-to-date high at 1.5705 needed to prompt a push towards a critical resistance cluster between 1.5760/90
-Near-term cycle studies favor strength into next week
-The 1.5585 area is immediate support
-However, only weakness under the 1×1 Gann angle line of the March low around 1.5550 would signal a turn in the rate
Strategy: Longs favored while over 1.5550.
Focus Chart of the Day: SP 500
The SP 500 undercut a key support level at 1605 last week before turning higher to overcome key resistance at 1630. Such action is usually indicative of an upside resumption. The index’s failure, however, to gain much upside traction these past few sessions now puts it in a precarious position. Weakness below last week’s 1597 low on a closing basis over the next day or so will put the index on the back foot and improve the odds for an important decline into the long-term cyclical turn window expected around June 20-25. However, medium-term cycles seem to favor an attempt at a low over the next day or so. Back over 1630 needed to confirm a base.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
Looking for a way to pinpoint sentiment extremes in the SPX in real time? Try the Speculative Sentiment Index.
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX