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Price & Time: GBP/USD Touches New Multi-Year Low

By Kristian A. Kerr
01 March 2013 17:42 GMT

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:

PT_gbp_multi_year_body_Picture_4.png, Price & Time: GBP/USD Touches New Multi-Year Low

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/JPY has recovered further since finding support at the 90.90 fourth square root progression of the year-to-date high

- Strength over the 61.8% retracement of last month’s range at 93.15 has shifted our bias higher

- Immediate focus now on the 78.6% retracement in the 93.80 area with a break over this level needed to confirm the integrity of the latest push higher

- A Gann level related to both extremes of last month’s range near 91.85 is immediate support, but only weakness under 90.90 signals the start of a more important downside correction

- Cyclical studies are turning more negative around the middle of next week

Strategy: Creep higher over the past few days was painful and we stopped out on the move over 93.20. Now looking to buy, but only on a break of last month’s high.

GBP/USD:

PT_gbp_multi_year_body_Picture_3.png, Price & Time: GBP/USD Touches New Multi-Year Low

Charts Created using Marketscope – Prepared by Kristian Kerr

- GBP/USD broke under the 1.5070 tenth square root progression from year-to-date high on Friday and our bias remains lower

- Immediate support comes into play at the 161.8% extension of November to January advance near 1.4990

- However, key downside pivot looks to be the next square root progression near 1.4940 with weakness under there needed to prompt another material leg lower

-Time cycle analysis is modestly positive for a few days in Cable

-The 1.5070 Gann level is now immediate resistance, but only strength over 1.5200 would signal the start of a more important counter-trend move

Strategy: Still short Cable. Lowering stop to just over 1.5080

AUD/USD:

PT_gbp_multi_year_body_Picture_2.png, Price & Time: GBP/USD Touches New Multi-Year Low

Charts Created using Marketscope – Prepared by Kristian Kerr

- AUD/USD remains weak since breaking under the 1.0230 38% retracement of the late 2012 advance and our focus is still to the downside

- A minor Fibonacci extension in the 1.0185 area is so far acting as a support and a clear break under this level is now needed to prompt another leg lower towards a measured move projection near 1.0150

- Shorter-term cyclical relationships are positive for a couple of days, but longer-term studies remain negative through much of March

- The former support at 1.0230 is now immediate resistance

- However, only strength over the 50% retracement of the decline over the past couple of weeks in the 1.0280 area would undermine the negative tone

Strategy: Still short with a stop over 1.0240. We’ll see if that is far enough away to keep us in the trade during the strength we expect in the pair over the next couple of days.

Focus Chart of the Day: S&P 500

PT_gbp_multi_year_body_Picture_1.png, Price & Time: GBP/USD Touches New Multi-Year Low

For students of Gann the month of March holds more significance than most. It is the “start of the year” for many Gann cyclical based methodologies and as such this time period is theoretically more prone to volatility and more likely to see reversals in trend. Gann theory also places importance on anniversary dates of significant market highs and lows. With this coming Wednesday (+/- a day) marking the fourth anniversary (and more importantly four revolutions around the Gann wheel) of the low of the current bull cycle at 666 in the S&P 500 it has decent potential to draw a reaction from the index. The Gann start of the year on the 20th of the month is also potentially important.

--- 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.

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01 March 2013 17:42 GMT