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Price & Time: Never Buy a Friday High?

By , Sr. Currency Strategist
08 March 2013 17:25 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_never_friday_body_Picture_4.png, Price & Time: Never Buy a Friday High?

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/JPY broke above the 78.6% retracement of last month’s range over the past few days to trade to its highest level in over 3 ½ years

- Bias remains higher in the pair with focus now on a convergence of the 61.8% retracement of the 2008 to 2011 decline and the 161.8% extension of last month’s decline between 96.95 and 97.25

- Short-term cycles suggest the dollar is at risk of undergoing a minor turn over the next 3 trading days

- Former resistance at 95.40 is now immediate support

- However, only weakness below the 1x1 Gann line from last month’s low near 94.40 would undermine the positive tone

Strategy: Got long on the break of 93.85. It has worked out well. Raising our stop to just under 95.40.

GBP/USD:

PT_never_friday_body_Picture_3.png, Price & Time: Never Buy a Friday High?

Charts Created using Marketscope – Prepared by Kristian Kerr

- Cable’s failure to get above the 1.5200 Gann level has prompted a renewed decline through the 161.8% extension of the November to January advance to new multi-year lows

- Focus is still lower with attention now on the critical 61.8% retracement of the 2009 range near 1.4840

- It is worth noting that various cyclical techniques are warning that a near-term bottom could be attempted over the next few days

-Immediate resistance is seen at the 10th square root progression of the year-to-date high near 1.5075

-However, only strength over the 1.5200 Gann level signals the start of a more important counter-trend push higher

Strategy: Cycle picture is turning more negative on the Greenback over the next week. Going to hold off getting short here. May look to get long on a break of 1.5200 over the next few days.

EUR/GBP:

PT_never_friday_body_Picture_2.png, Price & Time: Never Buy a Friday High?

Charts Created using Marketscope – Prepared by Kristian Kerr

- EUR/GBP broke higher on Thursday from its consolidation around the 2nd square root progression of the year-to-date high

- Our bias remains higher, but strength over the 78.6% retracement of the most recent decline at .8760 is needed soon to increase the chances of a successful breach of the critical long-term Fibonacci retracement cluster just under .8800

- Near-term cyclical picture is less clear than we like but a slight negative bias in place for next week

- The 2nd square root progression from the February high near .8625 is key support

- Only a move through the 61.8% retracement of the February range at .8585 shifts our bias lower, however

Strategy: The magnitude of the resistance at .8800 keeps us doubting the long side. The break of .8670 got us long, but we are keeping it on a tight leash. Stop now at cost.

Focus Chart of the Day: NZD/USD

PT_never_friday_body_Picture_1.png, Price & Time: Never Buy a Friday High?

There is a popular saying in the FX trading community that states “Never buy a Friday high”. It will be interesting to see if the adage holds true next week as a lot of our cyclical work is turning more negative on the dollar in a variety of pairs during the first half of the week. NZD/USD looks especially susceptible within this framework as Monday/Tuesday looks like a pretty clear medium-term cyclical turn window for the pair. With respect to our recent short trade we will be looking to take profit ahead of .8170 and have lowered the stop to break even (.8285). While we are “house cleaning” we also like lowering the stop on our Euro/Stokkie short trade as well. The Fibonacci time harmonic we pointed out yesterday has elicited a response from the market like we hoped and there is a chance a further counter-trend move could develop. Our stop is now just over 8.3400 and we may look to go long sometime next week. The Euro also looks susceptible to a turn according to our cyclical method. An expanding triangle is clearly playing out on the daily and these are typically strong reversal patterns. Our stop on the EUR/USD short trade is now just above 1.3020

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

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

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08 March 2013 17:25 GMT