U.S. Markets closed

Price & Time: Gut Check Time

Kristian A. Kerr

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:


PT_gut_check_body_Picture_4.png, Price & Time: Gut Check Time

Charts Created using Marketscope – Prepared by Kristian Kerr

- The Euro has rebounded from a multitude of Fibonacci retracement and projections levels found between 1.3150-70

- Downtrend from the early February high, however, has so far sustained little damage

- While the pair is below key resistance in the 1.3365-75 area which is a convergence of the 1x1 Gann line from the year-to-date high and the second square root progression from last week’s low our bias has to remain lower

- We should point out that several shorter-term cyclical methods suggest that a counter-trend move lasting a few days could start around the middle of the week

- Under 1.3150, ideally on a closing basis, needed to signal downside resumption

Strategy: Some backfilling from the 1.3150-70 support area is to be expected especially with shorter-term cyclical studies turning more positive here. This the hard part of the move. Stay short while 1.3375 holds.


PT_gut_check_body_Picture_3.png, Price & Time: Gut Check Time

Charts Created using Marketscope – Prepared by Kristian Kerr

- EUR/GBP touched its highest level since late October of 2011 on Monday

- A key Fibonnacci confluence of various longer-term retracements and the 127% extension of the early February decline in the .8780-.8800 area was also briefly overcome

-Focus remains higher, but traction above .8800 now required to set up a more important push higher

- Bigger picture cyclical turn window not seen until early April in the cross, but near-term cyclical techniques favor consolidation for a few days

- Gann square of nine level related to Monday’s high at .8720 now immediate support, but only under the further Gann level at .8625 would signal a false break and shift attention lower

Strategy: We were stopped out ahead of the latest move higher. We like the long side while over .8625, but prefer postioning for this on a break of .8800.


PT_gut_check_body_Picture_2.png, Price & Time: Gut Check Time

Charts Created using Marketscope – Prepared by Kristian Kerr

- The Kiwi’s decline from the .8530 78.6% retracement of the 2011 range has stalled around a convergence of Gann support in the .8335-45 area

- Upside retracement over the past few days still looks corrective and while the exchange rate is below various Gann and Fibonacci retracements at .8450 our immediate bias is lower

- A Pi cycle relationship with the June low coinciding with the recent high increases scope for a much bigger decline in the weeks ahead

- Near-term Fibonacci related cyclical studies are also negative for the next few days

- The .8345 Gann level remains a key pivot in the pair and renewed weakness under this level should prompt a more aggressive decline

Strategy: We like being short the Bird and only above .8450 fosters doubt. Strength over the .8530 high is really required, however, to throw the cyclical picture completely out of whack.

Focus Chart of the Day: EUR/NZD

PT_gut_check_body_Picture_1.png, Price & Time: Gut Check Time

Often times through the cyclical analysis of the main currency pairs we will “back into” potential cycles in related cross rates. We believe we have found one such instance in EUR/NZD. Through the use of various Fibonacci related ratios it looks to us that the EUR/USD is more prone to rally around the middle of the week. At the same time through the use of these same ratios the Kiwi looks vulnerable to a decline. Logically if our assumption is correct then EUR/NZD should soon rally. A quick cyclical day count of the cross further confirms this near-term outlook and suggests the cross is nearing the right time for a cyclical low of some magnitude. A push over resistance at 1.5850 should signal the start of a multi-day advance in the cross.

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

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

Are you looking for other ways to pinpoint support and resistance levels? Take our free tutorial on using Fibonacci retracements.

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

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.