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 closed under the 1×2 Gann angle line of the 3Q12 low near 99.40 on Thursday
• Our near-term trend bias is now lower in the exchange rate
• A confluence of various Gann levels in the 98.15 area make it a key pivot with traction below needed to set off a more important decline
• The middle of next week looks to be a clear medium-term cycle turn window where the broader USD uptrend should try to reassert
• However, only strength above the 1×1 Gann angle line of the year-to-date high now at 100.90 would signal that the uptrend is resuming and turn us positive on the exchange rate

Strategy: Like the short side for a few days, but in the bigger picture this anticipated weakness should provide an opportunity to align with the broader USD uptrend.

AUD/USD:

Charts Created using Marketscope – Prepared by Kristian Kerr

• AUD/USD failed again on Wednesday near the 12th square root progression of the year’s high in the .9300 area
• Weakness from there found support near .9140 and while over this level our near-term trend bias will remain higher
• The .9300 level remains critical and a close over this level is now badly needed to prompt a more serious correction higher
• Near-term focused cycle studies suggest the middle of next week is a minor turn window in the rate
• A close back under .9140 would turn us negative on the Aussie

Strategy: We were shaken out by the volatility mid-week. Still like the long side in the Aussie over the next few days and will add on the next move through .9300.

USD/CHF:

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/CHF has come under steady downside pressure this week and traded to its lowest level in over a month on Friday
• While below .9400 our near-term trend bias will remain lower in the exchange rate
• The 2nd square root progression of the year-to-date low in the .9245 area is the next downside pivot of significance and weakness under this level is needed to trigger the next leg lower
• The second half of next week looks like the next important cycle turn window
• Only traction above .9400 would undermine the immediate negative tone in the pair and turn us positive

Strategy: Short positions favored while under .9400.

Focus Chart of the Day: EUR/USD

The second half of next week looks significant for EUR/USD from a medium-term cyclical perspective and we suspect that the broader downtrend will attempt to reassert itself during this time. Some of the very shorter-term cyclical studies suggest some minor weakness could be seen over the next day or two before a final run higher into late next week. As far as price levels from which this trend resumption could materialize we will be intently looking at 1.3300/15, 1.3360 and 1.3415. The latter cannot be materially overtaken as it represents the clear Gann price and time “square out” on which our broader bearishness is based upon. On the downside the 1.3130 area is a key downside pivot, but this could change (shift up) as the week unfolds.

— 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