Price & Time: The Unfolding Cycle in the Euro

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_euro_unfolding_body_Picture_4.png, Price & Time: The Unfolding Cycle in the Euro

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/JPY traded to its highest level in over 4 ½ years last week before finding resistance near the 78.6% retracement of the 2008 to 2011 decline in the 103.15 area

-Our bias is higher in the pair, but 103.15 is now a natural upside pivot with traction above needed expose the 7th square root progression of the month-to-date low in the 103.85 area

-Near-term focused time cycle analysis indicates the end of the week is a potential turn window

-The 5th square root progression of the month-to-date low 101.85 is immediate support

-However, only aggressive weakness below a convergence of the 38% retracement of the May advance and the 4th square root progression of the May low at 100.95 would turn us negative

Strategy: Like holding long positions in USD/JPY whilst above 100.95.

AUD/USD:

View gallery

.
PT_euro_unfolding_body_Picture_3.png, Price & Time: The Unfolding Cycle in the Euro

Charts Created using Marketscope – Prepared by Kristian Kerr

-AUD/USD fell to its lowest level since last June before finding support just ahead of the 88.6% retracement of the June to September advance in the .9700 area

-The 2nd square root progression of last week’s low comes into play around .9910 and while the rate is below this level our bias remains lower in the Aussie

-The .9700 level is now a clear downside pivot, but strong support is seen through to .9645

-Near-term focused time cycles suggest the end of the week is a potential turn window, but more important cycle turn seen in early June

-The .9810 level is resistance, but only strength over .9915 would turn us positive on the Aussie

Strategy: Short AUD positions favored whilst below .9915.

GBP/USD:

View gallery

.
PT_euro_unfolding_body_Picture_2.png, Price & Time: The Unfolding Cycle in the Euro

Charts Created using Marketscope – Prepared by Kristian Kerr

-GBP/USD broke below the 78.6% retracement of the April to May advance to trade to its lowest level in almost two months

-Our bias remains to the downside in Cable with focus now on the convergence of the 61.8% retracement of the March to May advance and the 4th square root progression of the May high in the 1.5125/05 area

-This is formidable support and weakness below will be needed to setup a more important decline

-A convergence of the 3rd square root progression and the 1x4 Gann angle line of the May high in the 1.5235 area is immediate resistance

-However, only traction over the 2nd square root progression of the May high at 1.5355 would turn us positive on Cable

Strategy: Continue to like holding Cable short positions whilst below 1.5355.

Focus Chart of the Day: EUR/USD

View gallery

.
PT_euro_unfolding_body_Picture_1.png, Price & Time: The Unfolding Cycle in the Euro

The cyclical picture in the Euro remains relatively clear following the successive tops recorded during the major turn window at the end of April and the start of May. A broader cycle of USD strength seems to be developing and is a potential fractal. The shorter-term cycle picture is similar. Since the 1.3240 absolute high seen at the start of the month the move lower has unfolded in an almost “textbook” cyclical manner. If this continues then the rate should see some sort of intermediate-term low around the end of this week before recovering for about a week or so before embarking on the next important leg lower. A more important cyclical low is not seen in the euro until next month. Over 1.3240 undermines the broader picture.

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

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

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

Need guidance managing risk on trades? Download the free Risk Management Indicator.

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)