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
- USD/JPY traded to its lowest level in over a month on Monday before rebounding off a convergence of several key Gann Fibonacci levels in the 97.50/65 area
- While below 98.65 our near-term trend bias will remain lower in the exchange rate
- Clear weakness below 97.50 is now needed to trigger the next leg lower
- Cycle studies, however, suggest the rate is nearing an important cyclical turn window where the broader USD uptrend could try to re-assert
- Traction over 98.65 will turn us positive
Strategy: Like scaling out of profitable short positions as we near key support into this cycle turn window.
Charts Created using Marketscope – Prepared by Kristian Kerr
- USD/CHF has come under steady downside pressure since failing at the beginning of the month near the 88.6% retracement of the May to June decline in the .9760 area
- Our near-term trend bias is lower and will remain so as long as the exchange rate remains below .9345
- The 78.6% retracement of the June to July move higher at .9260 has so far acted as support and weakness below this level is needed to prompt another leg lower in the rate
- Cycle studies point to the latter half of the week as a likely cycle turn window
- A convergence of Gann levels near .9345 is key near-term resistance and a move over this level is required to turn the technical outlook to positive
Strategy: Like holding short positions while under .9345, but also need to start thinking about reducing size (taking profit) as the rate apporaches the cycle turn window.
Charts Created using Marketscope – Prepared by Kristian Kerr
- NZD/USD traded to its highest level in over a month last week before finding resistance at the 50% retracement of the late 2011 range in the .8100 area
- While above .7945 our near-term trend bias will remain higher in the Kiwi
- Traction over .8100 is now needed to trigger the next important move higher in the rate
- A minor cycle turn window is seen around the end of the week
- Only weakness below .7945 would undermine the positive technical structure and turn us negative on the Bird
Strategy: Longs favored while over .7945.
Focus Chart of the Day: AUD/USD
There appears to be a cyclical divergence amongst the major USD pairs and the sharp move lower in the Aussie on Tuesday seems to further confirm this notion. As far as AUD is concerned, the picture is now muddled from a cyclical perspective as a few short-term cycles are pointing in different directions. Our best guess is that the risk is now lower in the rate as we see potential for a false pattern breakout following last week’s brief probe over the .9280 neckline of a multi-week inverse head shoulders pattern. Often times some of the most dynamic moves come from failed patterns as the failure sparks short-term position adjustments. Tuesday’s move below the “right shoulder” of the pattern at .9130 seems to have sparked such adjustments and we imagine could intensify below the year-to-date low (head of the pattern) at .8995. Back over .9300 is needed to undermine this potential negative structure and set up a more important upside reversal.
— 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