Price & Time: Finally a Correction in Cable!

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:

EUR/USD:

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PT_Finally_body_Picture_4.png, Price & Time: Finally a Correction in Cable!

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/USD remains weak (printed new year-to-date-lows Thursday) and has been unable to gain any traction on the upside despite the positive short-term positive cyclical picture

- Our bias remains lower while under the 1.3075 1x2 Gann line from the year-to-date high

- Caution is advised, however, over the next few days as a confluence of several key Gann and Fibonacci levels between 1.2880/95 has potential to spark a more serious counter-trend move

- Time cycle analysis suggests next turn window of importance is the middle of next week

- Weakness below 1.2880/95 on a closing basis needed to relieve current apprehension and signal the next important decline is underway

Strategy: We covered our short euro position at the start of the week. Want to see how this test of 1.2900 pans out before embarking on our next operation. Strength over 1.3075 will get us long.

AUD/USD:

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PT_Finally_body_Picture_3.png, Price & Time: Finally a Correction in Cable!

Charts Created using Marketscope – Prepared by Kristian Kerr

- AUD/USD overcame key retracement and Gann resistance in the 1.0300 area earlier in the week to trade to its highest level since early February on Thursday

- Bias is now higher in the pair with focus on a convergence of the 61.8% retracement of the year-to-date range and the 3rd square root progression of this month’s low near 1.0415

- A break through this level is required to setup a further continuation towards 1.0470

- Very minor time cycle turn window seen over next three days

- The 1x1 line drawn from this year’s closing low at 1.0280 is now critical support and only weakness under this level shifts our bias lower again

Strategy: Got long the Aussie on the break of 1.0300. Like booking partial profit ahead of 1.0400. Raising stop to just under 1.0300.

EUR/SEK:

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PT_Finally_body_Picture_2.png, Price & Time: Finally a Correction in Cable!

Charts Created using Marketscope – Prepared by Kristian Kerr

- EUR/SEK found support on Wednesday from just under the 78.6% retracement of the 2012 range at 8.2670

- Subsequent strength through the 8.3400 3rd square root progression from the year-to-date low has turned us positive on the cross

- Initial focus is on a confluence of various Gann, Andrews & Fibonacci levels in the 8.3975 to 8.4075 area with strength above required to signal that a more important counter trend move is indeed underway

- Short-term cyclical analysis is positive for a few days

- The 1x1 angle from the year-to-date closing low near 8.2900 is important support and only weakness below this level will undermine the immediate positive tone in the cross rate

Strategy: We took profit on our short Euro/Stokkie at 8.3400 to lock in a gain of 107 basis points. Looking now to get long the cross at 8.3200 with a stop just under 8.2800.

Focus Chart of the Day: GBP/USD

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PT_Finally_body_Picture_1.png, Price & Time: Finally a Correction in Cable!

Cable has bounced aggressively from the crucial 1.4800 to 1.4840 support area we highlighted earlier in the week. The zone is a convergence of various key levels including the 61.8% retracement of the 2009 range, the 12th square root progression from the year-to-date high and the 3rd standard deviation channel in the 1-year look back period. In addition there was an extended time cycle related to the February high suggesting that a turn was possible. Such a confluence of different methodologies is rare and something we look for in the markets we follow. Our broader cycles remain negative on Sterling into May so at some point we will look to realign ourselves with them, but for the moment we will let this counter-trend move play out. We are long from 1.4940. We are looking to take some profit ahead of the 2nd square root progression from the year-to-date low near 1.5072. Our stop is now just under cost.

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

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

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