Price & Time: Breakout Coming in EUR/JPY?
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:
EUR/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
-EUR/USD failed last week just above the 50% retracement of the year-to-date range in the 1.3225 area
-Subsequent weakness has been unimpressive, but while under 1.3225 our bias remains lower in the exchange rate
-The 6th square root progression of the year-to-date high which coincides with the 2nd square root progression of last week’s high in the 1.3015 area needs to give way to trigger a more important decline
-Short-focused cycle analysis suggests that a minor turn window is in effect today
-A breach of 1.3225 would shift our bias to higher in the exchange rate
Strategy: Risk remains that a broader top is building. Like the short side while under 1.3225
NZD/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
-NZD/USD found resistance last week at a convergence of the 1st square root progression of the year-to-date high and the 1x3 Gann line from the year’s high close in the .8580 area
-Weakness from this level has been modest and a move back under the 1x1 Gann line from the year-to-date closing high now in the .8460 area is needed to signal the start of a more important decline
-Time cycles indicate that a minor turn window is in effect over the next couple of days
-The 61.8% retracement of the mid-April decline in the .8555 area is immediate resistance
-However, only traction above .8580 confirms the Bird has resumed its broader advance
Strategy: Want to see .8580 or .8460 break before positioning.
EUR/GBP:
Charts Created using Marketscope – Prepared by Kristian Kerr
-EUR/GBP traded to its lowest level since late January last week before finding support at the 38% retracement of the July to February advance in the .8400 area
-Our bias remains lower in the cross, but a close under .8400 is really needed to trigger a more important decline
-Time cycle analysis indicates that turn window exists around the second half of the week
-The 4th square root progression from the year-to-date high in the .8440 area is immediate resistance
-Only strength over the 38% retracement of the late April decline in the .8490 turns us positive on the crossrate
Strategy: Prefer the short side whilst below the .8490 level.
Focus Chart of the Day: EUR/JPY
We are watching the price action in EUR/JPY very closely. As we have noted before, the early April peak came right on a Pi cycle turn window related to the 2012 low. The late April secondary peak coincided with a similar Gann square of nine relationship. Given the importance of the two cycle points registered last month we would have expected to see more downside in the wake of them. However, the weakness that has followed has been uninspired leaving a fairly bullish consolidation on the daily chart. A push over last month’s 131.10 high and offsetting two key levels of “time resistance” in the days ahead would be a very positive development for the cross and set the stage for another important move higher - we like buying the break if it occurs. Of course there is a chance the cross could still be forming a top, but the odds of this are diminishing the closer we get to last month’s highs. Only weakness below last week’s low near 127.00 would re-focus lower.
--- 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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