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:
EUR/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–EUR/USD rebounded on Wednesday from the convergence of the 50% retracement of the April advance and the 2nd square root progression of this year’s low in the 1.2970 area
–While under the 1.3200 4th square root progression of the year-to-date low our broader bias remains lower in the single currency
-Focus remains on 1.2970 with weakness below this level needed to prompt a more aggressive decline
-Short-term cyclical counts are positive for another day, but a major time cycle turn window related to the all-time low and high is in effect for a few days
-The 1×1 Gann angle line from the year-to-date high at 1.3115 is immediate resistance, but only traction over 1.3200 turns us positive
Strategy: Short-term cyclical counts seem to favor Euro strength into the longer-term turn window seen over the next few days. Looking to fade this strength if it materializes.
GBP/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–GBP/USD moved sharply higher on Thursday and traded to its highest level in over two months
-The break of several Gann levels in the 1.5325 area has turned us positive on Cable
-The 61.8% retracement of the February to March decline in the 1.5480 area is immediate resistance ahead of a Gann line convergence in the 1.5515 area
-Short-term cycles look positive for a few more days
-The 38% retracement of the year-to-date range in the 1.5400 area is immediate support, but only weakness under 1.5325 turn us negative on the exchange rate
Strategy: Don’t want to chase near this resistance zone. Looking to buy on weakness.
GOLD:
Charts Created using Marketscope – Prepared by Kristian Kerr
–XAU/USD broke convincingly above the 1434 38% retracement of the March to April decline on Thursday
–Despite this recent strength, our broader bias remains lower while under key resistance near 1500
-However, weakness under the 2nd square root progression from the year-to-date-low in the 1395 area is needed to signal a downside resumption
-Short-term cycle studies favor strength for a few more days
-The 4th square root progression from this year’s low in the 1465 area is immediate resistance, but only strength over a convergence of several key Gann and Fibonacci levels near 1500 would shift bias higher
Strategy: Want to get short in the days ahead. Ideally just ahead of the resistance confluence near 1500.
Focus Chart of the Day: USD/JPY
We have been focused on the Fibonacci time cycle turn window anticipated in the Euro over the next few days. However, a potentially important Gann related turn window is in effect at the same time in USD/JPY. Yesterday we highlighted the Gann wheel relationship between the late October 2000 all-time low in the Euro and late April and its potential to spark a turn. Using the same technique in USD/JPY shows a similar time relationship between late April and the start of the current multi-year uptrend in the exchange rate as the low was recorded on October 31, 2011. The fact this turn date coincides with other exchange rates on different cycles makes it potentially more important. This obviously has important knock on implications for EUR/JPY and suggests a turn of significance could materialize in the cross too. Somewhat fittingly, late April also has a Gann wheel relationship in EUR/JPY as this time period coincides with the low recorded in the cross last July. From a time cycle perspective the next few days look very important for the currency markets and we will be closely monitoring EUR/USD, USD/JPY and EUR/JPY for any signs of a turn.
— 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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