Price & Time: Key Levels to Watch Ahead of the FOMC

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Talking Points

- AUD/USD prone to a reversal

- USD/JPY in consolidation mode

- Gold nearing important inflection point

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

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Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY remains in consolidation mode below the year-to-date high at 103.91
  • Our near-term trend bias is positive on the exchange rate while above the 2nd square root relationship of the year’s high at 101.85
  • The 103.90 area is interim resistance ahead of the 100% extension of September/October decline at 104.55
  • A medium-term cycle turn window is seen around the latter part of next week
  • Only a daily close below 101.85 would turn us negative on USD/JPY

USD/JPY Strategy: Favor the long side while over 101.85.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

*101.85

102.50

102.95

103.90

*104.55

Price & Time Analysis: GOLD

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Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD has traded in a sideways to higher range since finding support near the 1st square root relationship of the year’s low earlier in the month
  • Our near-term trend bias remains lower in the metal while below last week’s high near 1268
  • The low close of the month at 1219 is an important pivot with weakness below on a closing basis needed to singal a downside resumption
  • A medium-term cycle turn window is seen around the latter part of next week
  • Traction over 1268 is needed to turn us positive on Gold

XAU/USD Strategy: Favor the short side while under 1268.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

XAU/USD

1200

*1219

1232

1248

*1268

Focus Chart of the Day: AUD/USD

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AUD/USD recorded a new low close for the year on Tuesday (by 1/10th of a pip on the FXCM platform). The decline to this point has been impressive with the exchange rate losing more than 8 big figures since its failure at the 200-day moving average back in October. However, the decline is now more than 40 trading days old. One of our favorite trend cycle lengths is around 45 days as this marks a Gann Commodity “Death cycle” where short-term reversals are more frequent. Interestingly this day count will roughly coincide with the Winter Solstice (in the Northern Hemisphere) this weekend which is another potentially important inflection point in Gann theory. It is also worth pointing out that the last few weeks of December are one of the stronger periods of the year for the exchange rate on a seasonal basis. Factors certainly seem to be aligning for at least a short-term reversal in the Aussie over the next week. Tempting as it might be to try to catch the bottom tick, we prefer to wait for strength that confirms our notion before positioning. Any continued weakness into the latter part of next week will negate the potential positive cyclicality.

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

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

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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