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/JPY:
Charts Created using Marketscope – Prepared by Kristian Kerr
–USD/JPY continues to move higher, but has stalled over the past couple of days near the 50% retracement of the 2007 to 2011 decline in the 99.80 area
–Our bias remains higher in the pair with focus on 99.80 and the psychologically significant 100.00 level
-Traction above these levels needed to setup the next leg higher towards 100.65 and beyond
-Near-term focused time cycle analysis indicates a minor turn window is in effect on Friday
-A convergence of Gann levels in the 98.30 area is now immediate support and only weakness below this level shifts our focus lower
Strategy: We remain long half a unit from 94.15. Stop now just under 98.20.
AUD/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–AUD/USD broke convincingly above the 1.0495 78.6% retracement of the year-to-date range on Thursday
-Our bias remains higher in the Aussie with attention now on a convergence of the 161.8% extension of the early April decline and the 61.8% projection of the March advance in the 1.0590 to 1.0620 area
-Short-term time cycle analysis indicates a minor turn could be seen on Friday
-The 4th square root progression from the year-to-date low in the 1.0520 area is immediate support
-However, only weakness on a closing basis under the 1.0495 78.6% retracement of the year-to-date range would shift our bias to negative
Strategy: Got long on the break of 1.0505. Took profit on half this position at 1.0575 (2x our initial risk). Stop on remaining position is now at cost.
USD/CAD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–USD/CAD came under further pressure on Thursday and broke below a key Gann Fibonacci confluence in the 1.0120/40 area
–Our bias is now lower in Funds with focus on the 61.8% retracement of the February advance and the 127% extension of the last week’s range in the 1.0070/85 area
-Traction below this area needed to confirm the integrity of the current decline and open the way for move towards 1.0030
-Short-term time cycle analysis indicates early next week is a minor turn window
-Immediate resistance seen at 1.0140, but only strength over the 1×1 Gann line from the year-to-date highat 1.0190 undermines the negative technical tone and turns us positive
Strategy: We were worried the C$ would try to play catch up with the rest of the commodity bloc. Long in Funds got stopped out at 1.0120. May look to get short around the middle of next week.
Focus Chart of the Day: EUR/USD
The next few days are a medium-term turn window in EUR/USD. During this time, the Euro will 8.6 months or one “pi cycle” from the 2012 low recorded in late July. Given the persistency of the move higher in the pair over the past week there is scope that a high of some sort will be recorded during this time. Some levels of focus for us are the 38% retracement of the 2012 range near 1.3150 and the 4th square root progression from last week’s low around 1.3200. A clear failure around these levels would be further evidence that a top is indeed materializing. We should not that this Pi cycle window looks potentially much more important for EUR/JPY (8.6 months from 2012 low, but cross has gone virtually straight up since then) and weakness in the cross could be the real driver. More details on EUR/JPY tomorrow.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX
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