Price & Time: USD/JPY and the Importance of the 200-day Moving Average

DailyFX

Talking Points

  • USD/JPY testing major support zone
  • Kiwi looks to be nearing a minor top
  • S&P 500 cycle turn window late this week

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Focus Chart of the Day: USD/JPY

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PT_jpy_body_Picture_4.png, Price & Time: USD/JPY and the Importance of the 200-day Moving Average

USD/JPY touched its 200-day moving average on Tuesday. It is the first time the exchange rate has tested this widely watched support level since November of last year. More importantly it is the first time the rate has tested the 200-day at all since it began its meteoric rise last year. In our view, the odds greatly favor some sort of recovery in the next few days as first time tests of the widely watched moving average after prolonged periods above are usually successful in generating some sort of bounce. Why? Who knows. We suspect it is because a prolonged period above the 200-day moving average suggests a very strong uptrend while the 200-day MA is a finite level that even non-technical traders can sympathize with. Orders thus tend to congregate around it (this behavior is especially prevalent in individual stocks). Obviously a market can cut through its 200-day MA without stalling but this is much more the exception than the rule. Be on the lookout for a USD/JPY snapback.

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

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PT_jpy_body_Picture_3.png, Price & Time: USD/JPY and the Importance of the 200-day Moving Average

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD has come under modest pressure over the past few days
  • Our near-term trend bias is higher in the single currency while above 1.3475
  • The 8th square root projection of the year’s low at 1.3655 is a major upside attraction
  • The second half of the week is a minor turn window
  • Only a daily close below the 2nd square root progression of the year’s high at 1.3475 would undermine the near-term positive tone in EUR/USD

EUR/USD Strategy: Reduced longs favored while above 1.3475.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.3475

1.3545

1.3570

1.3595

*1.3655

Price & Time Analysis: NZD/USD

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PT_jpy_body_Picture_2.png, Price & Time: USD/JPY and the Importance of the 200-day Moving Average

Charts Created using Marketscope – Prepared by Kristian Kerr

  • NZD/USD remains trapped in a sideways to higher range below the 1st square root progression of the September high near .8340
  • Our near-term trend bias remans lower in the Bird while below this level on a daily close basis
  • Under .8250 is really needed to re-invigorate downside prospects in the Kiwi
  • Today is a clear cycle turn window and we are loking for some sort of peak
  • A daily close over .8340 would re-focus our attention higher

NZD/USD Strategy: We like selling the Kiwi into strength during this turn window.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

NZD/USD

*0.8200

*0.8250

0.8325

*0.8340

0.8370

Price & Time Analysis: S&P 500

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PT_jpy_body_Picture_1.png, Price & Time: USD/JPY and the Importance of the 200-day Moving Average

Charts Created using Marketscope – Prepared by Kristian Kerr

  • S&P 500 broke under the 50% retracement of the August to September advance in the 1680 area last week
  • Our near-term trend bias is now lower in the index as a result
  • The 61.8% of the August to September move higher at 1667 is now a level of focus with a move below likely needed the prompt more material weakness
  • The end of the week is a potentially important cycle turn window for the index
  • Back over 1700 is required to shift the near-term trend bias back to positive

S&P 500 Strategy: Looking to sell on strength.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

S&P 500

1652

*1667

1677

1693

*1700

--- 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

Looking for a way to pinpoint sentiment extremes in real time? Try the Speculative Sentiment Index.

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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