Price & Time: Historical Extreme in USD/JPY

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:

XAU/USD:

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PT_historical_extreme_yen_body_Picture_4.png, Price & Time: Historical Extreme in USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

-XAU/USD rebounded last week from just above a convergence of the 1-year second standard deviation channel and the 127% extension of the late February advance in the 1535/40 area.

-Our bias is still lower, but traction under 1535 is needed to setup a more meaningful decline

-Near-term focused time cycle analysis is negative for a few more days and a medium-term turn window is seen around the start of next week

-The 38% retracement of the January to March decline is immediate resistance

-However, only clear strength over the 1618 2nd square root progression from the year-to-date low turns us positive on the metal

Strategy: Looking to sell around 1599 with a tight stop just over 1611.

GBP/USD:

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PT_historical_extreme_yen_body_Picture_3.png, Price & Time: Historical Extreme in USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

-GBP/USD reversed last week sharply from the 50% retracement of the late March advance to trade to its highest level in over a month and a half

-Strength over the 1.5250 50% retracement of the year-to-date range has shifted our bias to positive

-The 50% retracement from the February high in the 1.5355 area is now a key pivot with strength above this level required to trigger another leg higher towards 1.5430

-Near-term focused time cycle analysis suggests a minor turn window is in effect over the next couple of days

-The 3rd square root progression from the year-to-date low in the 1.5195 area is immeidate support and only weakness under this level turns us negative on Cable

Strategy: Got stopped out on our short GBP trade for a 65 pip loss. May look to get short again if 1.5195 break soon.

EUR/SEK:

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PT_historical_extreme_yen_body_Picture_2.png, Price & Time: Historical Extreme in USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/SEK failed last week at the 78.6% retracement of the late February to mid-March decline

-Focus is still lower in the cross, but the 2x1 Gann angle line from the year-to-date decline in the 8.3250 area needs to give way to trigger further weakness

-Short-term focused time cycle analysis suggests scope for a minor turn around the end of the week

-A convergence of Gann lines related to the year-to-date range in the 8.3900 area is immediate resistance

-However, only strength above a confluence of different retracement levels between 8.4300 and 8.4600 would turn us positive

Strategy: Frustrating trading last week as our short just got stopped out before going our way. Looking to get short over the next couple of days at 8.3950 with a tight stop just over 8.4150.

Focus Chart of the Day: USD/JPY

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PT_historical_extreme_yen_body_x0000_i1025.png, Price & Time: Historical Extreme in USD/JPY

The chart above shows USD/JPY and the Disparity Index. It measures how far spot prices are from the 200-day moving average (HT DR). Currently it is the furthest it has ever been since currencies have been free floating in the modern era. Historically such severe extremes are a warning sign of exhaustion. While it seems the pair can only trade higher at the moment the chart above suggests some caution is probably warranted as we approach key resistance levels over 100.

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

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

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