Talking Points
- EUR/USD nearing important cycle turn window
- XAU/USD trades to 5-month low
- USD/JPY sentiment at historical extremes
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Foreign Exchange Price Time at a Glance:
Price Time Analysis: EUR/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/USD traded to its highest level since late October on Friday before encountering resistance just ahead of the 61.8% retracement of the October/November decline at 1.3625
- Our near-term trend bias is positive on the Euro while over 1.3430
- A push through 1.3625 is needed to force another leg higher
- An important cycle turn window is seen around the second half of the week
- Only a daily close below the 6th square root relationship of the year’s low at 1.3430 would turn us negative on the rate
EUR/USD Strategy: Don’t like buying Euros this close to the cycle turn window.
Price Time Analysis: GOLD
Charts Created using Marketscope – Prepared by Kristian Kerr
- XAU/USD finally broke away from the 5th square root relationship of the August high at 1242 on Monday as the metal traded to its lowest level in five months
- Our near-term trend bias is lower in Gold while below 1286
- The 1st square root relationship of the year’s low at 1214 is key support ahead of 1180
- Some caution is recommended here as a Gann cycle turn window is in effect today
- Only a daily close over 1286 would turn us positive on XAU/USD
XAU/USD Strategy: Like being square for a few days.
Focus Chart of the Day: USD/JPY
The Daily Sentiment Index (DSI) in the Yen reached just 7% bulls on Friday. The market is very confident that USD/JPY is headed higher in the near-term. We now have our doubts. When sentiment gets so lopsided it is usually a strong sign that a market has begun to get a little ahead of itself (at least in the short-term). Additionally several short-term cyclical methodologies suggest Monday was the right time for at least a minor peak that could lead to a few days of corrective behavior. The 103.00 to 103.70 area is also full of several key resistance levels including the 161.8% extension of the Sep/Oct decline, the year’s high and a Gann angle line related to the 2007 high – all of which are important enough in their own right to inspire some sort of counter-trend reaction. Of course the counter argument to all this is that exchange rate is breaking out of a multi-month consolidation (i.e. has a lot of “stored energy”) and corrections will be limited and few and far between. We now prefer a buy into weakness strategy, but a clear move through 103.70 would change this.
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— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX