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 above the 6th square root progression of last month’s low on Monday to trade to its highest level in almost a month
- Our trend bias remains higher in the exchange rate while over 97.60
- The 61.8 % retracement of the May to June decline in the 99.95 area is immediate resistance and a close over this level is required to maintain the immediate upside tack
- Medium-term focused time cycle analysis indicates that the latter half of the week is a turn window
- Near-term support seen around 98.60, but only weakness below 97.60 undermines the positive technical structure and turns us negative on the rate
Strategy: Like holding long positions above 97.60
USD/CHF:
Charts Created using Marketscope – Prepared by Kristian Kerr
- USD/CHF traded to just below the 4th square root progression of the June low on Monday in the .9510 area before stalling
- Our trend bias is higher in the rate while above the 2nd square root progression of last month’s low in the .9320 area
- The 1×2 Gann angle line of the year-to-date high converges with the 4th square root progression of last month’s low in the .9515/25 area over the next few days and a close above this level will be needed to trigger the next important move higher
- A medium-term cycle turn window is seen around the end of the week
- The .9415/00 area is immediate support, but only aggressive weakness below .9320 alters the positive technical outlook and turns us negative on the dollar
Strategy: Like holding long positionis while above .9320
XAU/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
- XAU/USD fell below several key long-term retracements last week to trade at its lowest level since August of 2010 before finding support at Fibonacci symmetry in the 1180 area
- While below 1284/1301 our trend bias has to remain lower in the metal, but the break of the 1248 2nd square root progression of last week’s low is suggestive of a more important turn
- The cyclical picture is a bit unclear as a Gann time cycle relationship with the October high did exist late last week, but a more important window looks to be around mid-July
- The 1st square root progression of last week’s low at 1215 is immediate support, but back under 1180 needed to signal a broader downtrend resumption
- Strength on a closing basis over 1301 would alter the negative structure and turn us positive on the metal
Strategy: Reduced short postions favored while below 1301.
Focus Chart of the Day: FXCM Dollar Index
Several Fibonacci based time cycle techniques point to the end of this week and the start of next week as being significant for a few dollar pairs and a likely short-term cyclical inflection point. The fact this turn window coincides with a fundamental event line Non-Farm Payrolls makes it even more compelling and suggests to us that the data could influence the currency markets for at least a few days. The FXCM Dollar Index corroborates this analysis of the single pairs and points to a turn around the same time. In the index, however, the idealized time for a turn actually is early next week (Monday) which makes us wonder whether the data will force a final spike in the direction of the trend. More on this as it unfolds. For the moment the cyclical picture seems to favor a USD peak.
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX