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 closed below the 6th square root progression of the June high in the 1.2835 area on Friday
- Our trend bias remains lower in the single currency while below 1.3030
- The 8th square root progression of the year-to-date high at 1.2790 is now a key near-term pivot with weakness below required to trigger the next important decline
- A medium-term cyclical turn window in the Euro is seen later this week (Wed – Fri)
- The 78.6% retracement of the May to June advance at 1.2930 is now immediate resistance, but only aggressive strength over 1.3030 on a closing basis turns us positive on the exchange rate
Strategy: The cyclical picture suggests the rate should carve out at least a minor low this week. We think there is still another leg lower. For now we like being short the Euro while below 1.3030.
AUD/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
- AUD/USD tested the 14th square root progression of the year-to-date high near .9040 early on Monday
- So far the Aussie has been unable to gain any traction below this level and a close below .9040 is needed to signal the commencement of another material decline
- A medium-term cyclical turn window is in effect over the next couple of days
- An Andrew’s line related to the April high at .9130 is immediate resistance
- However, only a close above .9220 would alter the immediate negative technical structure and turn us positive on the Aussie
Strategy: Like holding short positions while below .9220
GBP/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
- GBP/USD has come under aggressive downside pressure since failing last month at the 1×1 Gann angle line of the year-to-date high near 1.5750
- Support has been found near the 1.4875 7th square root progression of last month’s high, but while below 1.5120 our trend bias remains lower in Cable
- The 61.8% retracement of the 2009 range near 1.4840 halted the decline back in March and remains a critical support level – traction below is requred to trigger the next serious decline
- A medium-term cycle turn window is seen around the middle of the week
- A confluence of Gann levels between 1.4940/60 is immediate resistance, but only a close over 1.5120 would turn us positive on Sterling
Strategy: Short positions favored while below 1.5120
Focus Chart of the Day: EUR/SEK
Back in early March we highlighted a cyclical turn window in EUR/SEK. We admittedly were a couple of days early in our forecast, but the turn that materialized on March 13 from this window has led to a steady advance over the past 4 months. The Fibonacci time cycle that helped identify that turn window could once again influence as the next few days will exhibit a similar relationship with prior key cycle highs and lows. Given the persistence of the trend leading into this window a peak of some sort forming is the favored scenario. How the cross reacts around last month’s high should be especially telling. More on this as it develops.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
Looking for a way to pinpoint sentiment extremes in the Euro in real time? Try the Speculative Sentiment Index.
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX