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Price & Time:Time Cycle Turn Windows Shaping Up

By Kristian A. Kerr
07 March 2013 18:08 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:

EUR/USD:

PT_time_cycles_body_Picture_4.png, Price & Time:Time Cycle Turn Windows Shaping Up

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/USD closed under the important 1.3010 6th square root progression from the year-to-date high on Wednesday before reversing sharply today to trade at its highest levels in over a week

- While under a confluence of various retracements in the 1.3165 area our bias is still to the downside in the pair

- Focus is still primarily on the 1.3010 level with weakness below here needed to setup a renewed decline towards the next relevant support zone near the 50% retracement of the 2012-2013 advance near 1.2900

- Time cycles are somewhat unclear, but look marginally negative for a few more days into next week’s medium-term turn window

- Strength over 1.3165 needed to signal more important reversal already underway

Strategy: Still short the euro with a stop over 1.3170.

AUD/USD:

PT_time_cycles_body_Picture_3.png, Price & Time:Time Cycle Turn Windows Shaping Up

Charts Created using Marketscope – Prepared by Kristian Kerr

- AUD/USD reversed earlier this week from just above the 1.0100 50% retracement of the 2012 range

- Recovery has so far stalled at the 38% retracement of the year-to-date range in the 1.0300 area

- While under this level our immediate bias is still to the downside

-Cycles are negative on the pair for a couple more days, but a medium-term turn window seen at the start of next week

- Close over the resistance at 1.0300 would shift our bias higher and set the stage for a more important counter-tren dmove

Strategy: Took profits on our Aussie short on the move through 1.0240. With cycles turning positive next week we don’t like getting short here. May look to get long later next week.

EUR/SEK:

PT_time_cycles_body_Picture_2.png, Price & Time:Time Cycle Turn Windows Shaping Up

Charts Created using Marketscope – Prepared by Kristian Kerr

- EUR/SEK has broken impulsively lower over the past few days from the two-week long consolidation near the 50% retracement of the 2012 range

- Support is so far being found near the 200% extension of the January advance near 8.2950

- While below the 61.8% retracement of the 2012 range near 8.3700 our focus will remain lower in the cross

- Fibonacci time harmonic related to the 2012 extremes now in effect and this increases the risk for a turn over the next few days

- A close over 8.3700 would signal a more important counter trend move is underway and our focus would turn higher in the exchange rate.

Strategy: Our short position in Euro/Stokkie from 8.4300 has worked out nicely. Lowering our stop now to just above 8.3760.

Focus Chart of the Day: EUR/SEK

PT_time_cycles_body_Picture_1.png, Price & Time:Time Cycle Turn Windows Shaping Up

A potentially interesting time/price harmonic is setting up in EUR/SEK. A simple Fibonacci time retracement reveals a clear symmetry between today, the December high, the October high and last year’s low. According to the methodology this dynamic increases the probability for a change in trend (or at least an attempt) over the next few days. A similar relationship existed in Cable late last week and prompted a 2 day 2 big figure move higher in the pair. Over 8.3700 will warn that a more significant counter-trend move is shaping up. We like to give these turn windows a day or so of latitude on either side, but if further weakness is seen next week then it will negate the potential of the turn window.

--- 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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07 March 2013 18:08 GMT