Price & Time: Clustering of Time Cycles

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.

Foreign Exchange Price & Time at a Glance:

USD/JPY:

View gallery

.
PT_cycles_clustering_body_Picture_4.png, Price & Time: Clustering of Time Cycles

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/JPY has continued higher over the past couple of days from Monday’s gap open lower to test the 94.10 38% retracement of the 2007 to 2011 decline

- With the pair holding above the 94.75 2nd square root progression from last week’s high on our bias is still higher in the exchange rate

- Immediate focus is on the 61.8% retracement of the decline from last week’s high near 95.60, but strength over Gann resistance at 96.60 is really needed to signal a broader trend resumption higher

- A cluster of several short-term cycles over the next couple of days signals greater potential for a turn during this time

- Under 94.75 will turn attention lower and signal the start of more important correction

Strategy: Short-term cycles are turning negative over the next couple of days. Will look to get short on a break of 94.70.

USD/CAD:

View gallery

.
PT_cycles_clustering_body_Picture_3.png, Price & Time: Clustering of Time Cycles

Charts Created using Marketscope – Prepared by Kristian Kerr

- USD/CAD recovered smartly over the past few days from a retracement convergence in the 1.0170/85 area

- Subsequent strength back over the the 1.0240 1st square root progression from the year-to-date high has shifted our attention higher

-Resistance now seen at the 1x1 line drawn from the year-to-date high in the 1.0280 area with a clear break over this level needed to setup an upside extension

- A minor cyclical turn window in effect over the next couple of days

- A close back under 1.0240 turn us negative on Funds

Strategy: We covered our USD/CAD short for a 10 pip loss on the move over 1.0245. Cyclical picture is turning negative over the next couple of days and we will be looking to sell a break of 1.0235 if it happens during this time period.

EUR/GBP:

View gallery

.
PT_cycles_clustering_body_Picture_2.png, Price & Time: Clustering of Time Cycles

Charts Created using Marketscope – Prepared by Kristian Kerr

- EUR/GBP has moved steadily lower over the past week after failing once more at a critical retracement cluster in the .8780 to .8800 area

- Weakness under the 1x2 Gann line drawn from the early February low has turned us negative on the crossrate

-However, a close under the 2nd square root progression from last month’s high in the .8530 area needed to signal a downside resumption

- Minor cyclical turn window in effect through Thursday

- The 1x1 Gann line from last month’s low at .8590 is immediate resistance and only strength over this level turns us positive on the exchange rate

Strategy: Euro/Sterling confirmed our suspicions of a top forming near .8800. We took profit on our short position on the move under .8720 to lock in a 58bp gain. Now looking to sell a break under .8515.

Focus Chart of the Day: USD/NOK

View gallery

.
PT_cycles_clustering_body_Picture_1.png, Price & Time: Clustering of Time Cycles

We often mention “clusters” in reference to price which are really just different methodologies pointing to the importance of a particular price point. The same concept applies with time and whenever different cyclical methodologies point to a particular point in time being important the probabilities that it is do increase. Yesterday we noted that the second half of the week is a key Gann seasonal turn window. This coincides with other medium and short-term cyclical Fibonacci related bar counts which point to the next day or so being a least a minor inflection point for a few pairs. A pair where this time cycle is quite clear is in USD/NOK. Using a standard Fibonacci sequence (+/- a day) we can see minor turns have materialized around this count recently. We will be on the lookout for a turn over the next couple of days.

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

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

Are you looking for other ways to pinpoint support and resistance levels? Take our free tutorial on using Fibonacci retracements.

To receive other reports from this author via e-mail, sign up to Kristian’s e-mail distribution list via this link.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

View Comments (0)