Price & Time: Calm Before the FX Storm?

DailyFX

  • S&P 500 leaves potentially important divergence
  • GBP/USD encounters Gann resistance in the 1.5960 area
  • USD/JPY holds a key support

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

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PT_storm_body_Picture_4.png, Price & Time: Calm Before the FX Storm?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY has come under steady downside pressure since failing last week near the 3rd square root progression of the year’s high in the 100.65 area
  • Our near-term trend bias is higher in the exchange rate and will remain so while above the 50% retracement of the May to June decline in the 98.75 area
  • The 61.8% retracement of July to August decline near 99.55 is an interim pivot, but only traction over 100.65 signals a more important upside resumption
  • The second half of the week is a cycle turn window
  • A close under 98.75 would turn us negative on the exchange rate

USD/JPY Strategy: Like the long side against a 98.75 close.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

97.65

*98.75

99.15

99.55

*100.65

Price & Time Analysis: GBP/USD

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PT_storm_body_Picture_3.png, Price & Time: Calm Before the FX Storm?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD broke above the 1x3 Gann angle line of the year-to-date high to trade to its highest levels since mid-January on Monday
  • Our near-term trend bias remains higher in Cable while above 1.5755
  • The 3rd square root progression of the year’s high at 1.5960 has so far capped and a close over this level is needed to maintain the immediate upside tack
  • The first half of next week is a possible medium-term turn window
  • A loss of the 1.5755 area on a closing basis would undermine the immediate postive tone in the pound and turn us negative

GBP/USD Strategy: Like the long side while over 1.5755.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

*1.5755

1.5830

1.5905

*1.5960

1.6025

Price & Time Analysis: USD/CAD

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PT_storm_body_Picture_2.png, Price & Time: Calm Before the FX Storm?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/CAD has come under steady pressure since failing early in the month at the 1x3 Gann angle line of the 2012 closing low in the 1.05550 area
  • Our near-term trend bias remains lower in Funds while below the 50% retracement of the July range in the 1.0430 area
  • The 3rd square root progression of the year’s high near 1.0300 is an important pivot with a close below required to set off the next leg lower in the rate
  • The first half of next week is a potential medium-term turn window
  • The 2x1 Gann angle line of the 2012 low at 1.0340 is immediate resistance, but only a close over 1.0430 would turn us positive on the rate

USD/CAD Strategy: Like holding short positions while below 1.0430.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/CAD

1.0260

*1.0300

1.0315

1.0340

*1.0430

Focus Chart of the Day: S&P 500

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PT_storm_body_Picture_1.png, Price & Time: Calm Before the FX Storm?

The early August timeframe in the S&P 500 was extremely significant for us from a cyclical perspective. We have maintained that the high recorded during this time could lead to a more serious decline over the traditionally negative September/October period. On Monday, both the futures and fair value contracts of the S&P 500 traded to new all-time highs in the overnight session. However, by the time the cash market opened these derivatives were off the highs and cash never managed to trade above its all-time high of 1710. This has left a glaring divergence on the daily charts and one that is sometimes seen around important re-test/double tops. A close over 1710 in SPX cash is needed to alleviate this potential technical negative and clear the path for a more important move higher in the index. Weakness below 1670 would greatly increase our concern that a top of importance is materializing.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

Looking for a way to pinpoint sentiment extremes in SPX in real time? Try the Speculative Sentiment Index.

To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX

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