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Price & Time: EUR/USD - Correction or Change in Trend?

Kristian Kerr

Talking Points

  • Euro decline gathers pace
  • Range break looming in USD/JPY
  • GBP/USD flirting with key support level


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Focus Chart of the Day: EUR/USD



PT_OCT_31_body_Picture_4.png, Price & Time: EUR/USD - Correction or Change in Trend?

Writing a cycle focused market report on the last day of the month is always a bit of a crap shoot as a couple of big orders around the London fix can make one look very foolish. That said we will give it a go as the EUR/USD short-term picture looks fairly clear. The correction we were looking for from last week’s medium-term cycle turn window has unfolded nicely and especially over the past 24-hours as the rate has taken out key support levels at 1.3740 and 1.3715. Friday and part of Monday look like a pretty clear minor turn window from where EUR/USD should try to turn up. How aggressive this anticipated move up is will be a big clue as to whether the correction has more room to run or not. A tepid recovery (or failure to bounce at all) that holds well below 1.3770 and lasts only a couple of days sets up a deeper decline over the next few weeks. An aggressive rally, on the other hand, early next week back through 1.3770 would signal that correction was only a week long affair and the broader uptrend is resuming.



Foreign Exchange Price & Time at a Glance:


Price & Time Analysis: USD/JPY

PT_OCT_31_body_Picture_3.png, Price & Time: EUR/USD - Correction or Change in Trend?

Charts Created using Marketscope – Prepared by Kristian Kerr


  • USD/JPY remains stuck near the center of the multi-month narrowing range
  • Our near-term trend bias is positive on the exchange rate while above 96.55
  • The 5th square root progression of the year’s low at 98.60 is immediate resistance, but traction over 99.00 is really need to signal the start of a more meaningful direction move higher
  • A longer-term Fibonacci time relationship suggest a breakout of the range is forthcoming in the next few days
  • The 97.55 area is near-term support, but only under the 7th square root progression of the year’s high at 96.55 would turn us negative on the rate


USD/JPY Strategy: Square awaiting more directional clarity.



Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

*96.55

97.55

98.20

98.60

*99.00



Price & Time Analysis: GBP/USD

PT_OCT_31_body_Picture_2.png, Price & Time: EUR/USD - Correction or Change in Trend?

Charts Created using Marketscope – Prepared by Kristian Kerr


  • GBP/USD has come under steady pressure following last week’s failure to overcome the early October high at 1.6260
  • Our near-term trend bias is higher while above 1.6015
  • The 1.6090 area is immediate resistance, but traction over 1.6260 is really needed to signal that the broader uptrend is resuming
  • Early next week is a minor turn window
  • A daily close below the convergence of the 78.6% retracement of the year’s range and the 1x3 Gann angle line of the year’s low in the 1.6015 area would shift the trend bias to negative


GBP/USD Strategy: Like only reduced longs while above 1.6015.




Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

1.5960

*1.6015

1.6035

1.6090

*1.6260



Price & Time Analysis: AUD/USD

PT_OCT_31_body_Picture_1.png, Price & Time: EUR/USD - Correction or Change in Trend?

Charts Created using Marketscope – Prepared by Kristian Kerr


  • AUD/USD found support yesterday just below the .9455 61.8% retracement of the October range
  • Our near-term trend bias is lower in the Aussie while below the 8th square root progression of the year’s low at .9595
  • The .9455 level is now an important near-term pivot with weakness below needed to trigger the next leg lower in the rate
  • A very minor cycle turn window is seen over the next day or so
  • Only unexpected aggressive strength back over .9595 would shift our trend bias back to positive in the Aussie


AUD/USD Strategy: Like the short side while below .9595



Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

0.9400

*0.9455

0.9500

0.9550

*0.9595





--- 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




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