Price & Time: Calm Before the Storm?

DailyFX

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:

EUR/USD:

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PT_calm_body_Picture_4.png, Price & Time: Calm Before the Storm?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD has been in consolidation mode since finding resistance at the 1.3200 6th square root progression of the month-to-date low
  • While over 1.2975 our near-term trend bias will remain higher
  • However, the short-term cycles suggest the broader downtrend could attempt to re-assert here, but under 1.2975 needed to confirm
  • The 1.3200 level remains key on the upside
  • Traction above this level opens the way for stronger move higher over the next week

Strategy: Little conviction with the rate stuck between 1.2975 and 1.3205. Like going with a break of this range.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.2975

1.3020

1.3095

1.3175

*1.3205

GBP/USD:

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PT_calm_body_Picture_3.png, Price & Time: Calm Before the Storm?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD has moved steadily higher since reversing off the 1.4820 12th square root progression of the year-to-date high during last week’s cycle turn window
  • While above 1.5050 our short-term trend bias will remain higher in Cable
  • A minor cycle turn window is in effect today
  • Strength above a convergence of the 4th square root progression of last week’s low and the 50% retracement of the June-July range near 1.5300 is needed to prompt a more important upside push
  • A close below 1.5050 is needed to undermine the immediate positive tone and turn us positive on the rate

Strategy: The price action over the next couple of sessions should signal whether the broader downtrend is set to resume here or not. We like only small long positions while above 1.5050.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

*1.5050

1.5125

1.5205

*1.5300

1.5325

NZD/USD:

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PT_calm_body_Picture_2.png, Price & Time: Calm Before the Storm?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • NZD/USD has traded steadily higher since finding support near Fibonacci symmetry in the .7700 area last week
  • The move above the 2nd square root progression of the year-to-date low at .7860 has turned the near-term trend bias higher in the Kiwi
  • The 1x1 Gann angle line of the year’s closing high near .7935 is key resistance and traction over this level is needed to signal the start of a more important move higher
  • Some minor cycle turn windows are seen today and Monday
  • Only a close back below .7860 turns us negative on the Bird

Strategy: Small long positions favored while above .7860. May look to add if the Kiwi can gain traction over .7935.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

NZD/USD

0.7770

*0.7860

0.7885

*0.7935

0.8000

Focus Chart of the Day: S&P 500

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PT_calm_body_Picture_1.png, Price & Time: Calm Before the Storm?

The next few weeks look significant for the S&P 500 from a cyclical perspective as we see several long-term turn windows materializing between now and the middle of next month. The latter half of next week is the first important window of this cluster and if the index continues to trade higher into this this timeframe it sets up a potential top of importance. However, as the last important turn window in June proved - a lot can happen leading into these windows. Further muddling the picture is the fact that today looks to be a minor turn window. Obviously given the persistent trend over the past few days this favors a high which in turn raises the possibility for a low next week into the bigger picture turn window. Should the SPX ignore this short-term window and accelerate higher into late week we will be very confident that a high is indeed developing in the index.

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

Looking for a way to pinpoint sentiment extremes in the 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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