Price & Time: Opposing 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:

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PT_opposing_cycles_body_Picture_4.png, Price & Time: Opposing Cycles

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/JPY has come under renewed pressure over the past few days and closed under the 94.75 Gann level on Friday

- Our bias is now lower in the exchange rate with immediate focus on the 94.10 38% retracement of the 2007 to 2011 decline

- Weakness below this level needed to setup a more important correction

- Short-term time cycle analysis is mixed (see Focus Chart of the Day), but medium-term cyclical studies remain negative into early next month

-The 1x1 Gann line drawn from the year-to-date high in the 95.80 area is important resistance and strength above this level really needed to shift our attention higher

Strategy: We got short USD/JPY on the break of 94.70. The short-term cyclical picture is mixed here and not worth taking on too much risk going counter-trend. Stop just over 95.15. Will look to take off half if 93.80 is given.

GBP/USD:

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PT_opposing_cycles_body_Picture_3.png, Price & Time: Opposing Cycles

Charts Created using Marketscope – Prepared by Kristian Kerr

- GBP/USD traded to a new multi-week high on Monday before finding supply at the 50% retracement of the 2009 range in the 1.5255 area

- We remain positive on the pound, but are wary of a broader downtrend resumption commencing here

-A convergence of the 61.8% retracement from last week’s low and the 1x3 Gann line from the year-to-date low in the 1.5115 is a critical near-term pivot and below will shift bias lower

- Short-term time cycles look negative for a few days

- Strength over 1.5255 peferably on a closing basis now needed to signal upside extension in Cable

Strategy: Still long half a unit of Cable from 1.4940. Failed at an important level today. Raising stop to just under 1.5110.

AUD/USD:

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PT_opposing_cycles_body_Picture_2.png, Price & Time: Opposing Cycles

Charts Created using Marketscope – Prepared by Kristian Kerr

- AUD/USD continued its advance Monday and touched its highest level since late January

- We remain positive on the Aussie, but strength over several key Gann angle lines and square root progressions between 1.0470 and 1.0510 needed to signal the start of a more important upside push

- Time cycles analysis suggests the next few days are a medium-term turn window

- The 61.8% retracement of the January to March decline in the 1.0430 is immediate support

- However, only weakness under the 1.0390 Gann level turns us negative on the pair

Strategy: Approaching important resistance as we enter a cyclical turn window. Keeping stop on remaining long position at 1.0410. May look to go short over next few days if price action suggests a clear failure at resistance.

Focus Chart of the Day: USD/JPY

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PT_opposing_cycles_body_Picture_1.png, Price & Time: Opposing Cycles

USD/JPY is at an important juncture in a short-term cyclical sense. Often times when analyzing cycles (especially in the short-term) we will notice two separate cycles converging at the same time. When this occurs and the cycles are pointing in the same direction it increases our conviction that we are on the right side. However, when this occurs and the cycles are opposing it fosters doubt. We believe we are at one of these junctures now in USD/JPY. One Fibonacci related time cycle count suggests last Friday’s low will lead to strength over the next week or so while another similar technique is negative and suggests weakness should be seen in the exchange rate into the middle of the week before rebounding for a couple of days. Obviously Friday’s low now becomes an important near-term pivot as any weakness below this level in the next couple of days will eliminate the more positive count.

--- 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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