Price & Time: Breakdown or Reversal in Gold Coming Up?

Kristian Kerr

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:

PT_gold_break_body_Picture_4.png, Price & Time: Breakdown or Reversal in Gold Coming Up?
PT_gold_break_body_Picture_4.png, Price & Time: Breakdown or Reversal in Gold Coming Up?

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/USD traded down to its lowest level since early April on Friday before finding support just ahead of the 4th square root progression of the month-to-date high in the 1.2785 area

-Our bias remains negative on the exchange rate with the weakness below 1.2780/90 now needed to setup the next leg lower

-Short-term time cycle studies are positive for another day or so

-The 2x1 Gann angle line from the year-to-date low in the 1.2910 is immediate resistance

-However, only aggressive strength above a cluster of various Fibonacci and Gann levels in the 1.3015 area would turn us positive on the euro

Strategy: Short positions favored whilst under 1.3015. We like adding on strength against this level.

USD/CAD:

PT_gold_break_body_Picture_3.png, Price & Time: Breakdown or Reversal in Gold Coming Up?
PT_gold_break_body_Picture_3.png, Price & Time: Breakdown or Reversal in Gold Coming Up?

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/CAD moved aggresively higher on Friday and traded to its highest level since early march before finding resistance at the 8x1 Gann angle line of the year-to-date high in the 1.0305 area

-We remain positive on Funds, but strenght over 1.0305 is now needed to pivot the rate towards critical Fibonacci resistance at 1.0335/50

-Short-term cycles give a mixed picture with scope for a minior turn seen on Tuesday and/or at the end of the week

-A confluence of several retracements and Gann lines in the 1.0260/70 area is near-term support

-Only aggressive weakness below the 50% retracement of the mid-May move higher in the 1.0165 area would turn us negative on Funds

Strategy: Like the long side whilst above 1.0165.

EUR/GBP:

PT_gold_break_body_Picture_2.png, Price & Time: Breakdown or Reversal in Gold Coming Up?
PT_gold_break_body_Picture_2.png, Price & Time: Breakdown or Reversal in Gold Coming Up?

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/GBP has been stuck in a narrow range for the better part of a month

-This has occurred below the 3rd square root progression of the of the year-to-date high and the 61.8% retracement of the late April advance in the .8535/45 area and while below this area our bias is lower

-The 38% retracement of the July to February advance in the .8400 area remains a key downside pivot with traction below this level required to signal the onset of a more important decline

-Near-term cycle analysis suggests a turn window will be in effect around the middle of the week from which a more important directional move can commence

-Strength above .8545 on a closing basis would turn us positive on the cross

Strategy: Like selling into strength against .8545 over the next couple of days.

Focus Chart of the Day: XAU/USD

PT_gold_break_body_Picture_1.png, Price & Time: Breakdown or Reversal in Gold Coming Up?
View photos
PT_gold_break_body_Picture_1.png, Price & Time: Breakdown or Reversal in Gold Coming Up?

We have been looking for a re-test of some sort of the lows recorded in Gold last month. Following the clear break of Gann support in the 1430 area last week this finally looks to be materializing. How the metal reacts around this area will be key in determining if some sort of low is in development or whether another liquidation phase is in the cards. The longer-term cycles point to late June and early July as the ideal time for a more meaningful turn in the metal. However, there is a cyclical turn window based on rudimentary Fibonacci relationships at the end of the week that suggests this timeframe will be somewhat significant for the metal at least in the short-term.

--- 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

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