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Price & Time: EUR/JPY at a Critical Juncture

By , Sr. Currency Strategist
12 April 2013 15:49 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_EURJPY_key_body_Picture_4.png, Price & Time: EUR/JPY at a Critical Juncture

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/USD touched the 1.3130 127% extension of the late March to early April decline on Thursday before seeing some weakness on Friday

-Our bias remains higher in the exchange rate with immediate focus on 1.3130

-However, a convergence of the 1x1 Gann line from the year-to-date high and the 4th square root progression from the year-to-date low in the 1.3200 area looks like formidable resistance over the next few days

-A Pi relationship with last year’s low suggests the next couple of trading days could see a turn of some importance materialize in the rate

-The 1.3020 1st square root progression from Thursday’s high is immediate support and weakness below this level would warn of a more important top

Strategy: Turn window is in effect over the next couple of days, but with Friday’s early weakness there is a chance now it could be low. Want to see how price action develops over the next couple of days. Strength or weakness through the range extremes of the past two days should be the tell.

NZD/USD:

PT_EURJPY_key_body_Picture_3.png, Price & Time: EUR/JPY at a Critical Juncture

Charts Created using Marketscope – Prepared by Kristian Kerr

-NZD/USD touched its highest level in over a year and a half on Thursday before finding strong resistance at the .8675 88.6% retracement of the late 2011 decline

-We remain positive on the Bird, but strength over .8675 and then the .8710 6th square root progression of the year-to-date low needed to trigger a more important push higher

-Near-term focused time cycles look negative for a few more days

-The 1st square root progression from Thursday’s high is immediate support

-However, only weakness below the .8530 78.6% retracement of the late 2011 decline would turn us negative on the Kiwi

Strategy: Will look to buy on weakness over the next few days. Ideally somewhere near .8530.

EUR/CHF:

PT_EURJPY_key_body_Picture_2.png, Price & Time: EUR/JPY at a Critical Juncture

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/CHF rebounded at the start of the week from a convergence of the 4th square root progression of the year-to date high and the 78.6% retracement of the September to January advance in the 1.2115/20 area

-Weakness has been seen over the past few days, but while over 1.2115/20 our bias is higher in the cross

-Short-term focused cycle analysis looks negative for another day or so

-Strength over the 61.8% retracement of the September to January advance in the 1.2215 area needed to signal a more important advance

-Under 1.2115 will turn us negative on EUR/CHF

Strategy: Long from 1.2170. Under 1.2115 will stop us out.

Focus Chart of the Day: EUR/JPY

PT_EURJPY_key_body_Picture_1.png, Price & Time: EUR/JPY at a Critical Juncture

Today is 8.6 months or one Pi cycle from the July low recorded in EUR/JPY. Since then the cross has traded steadily higher with the exception of the two month period of consolidation in February and March. We like to see such strong multi-month run ups leading into a turn window as they usually increase the probability of witnessing a good counter-trend move. Friday’s weakness in the cross has therefore come right on schedule and warns a stronger move could be in the works. Weakness under Friday’s low on Monday would be further evidence of this. We can’t totally discount the possibility, however, that this weakness will somehow be able morph itself into a low as that has been a common occurrence of late around these turn windows (March 24th in the Euro is a prime example). Strength over Friday’s high next week would be a strong indication of this. Interestingly Friday’s high (so far) came at the 1x4 Gann angle line drawn from the July low which further confirms the potential price/time dynamic that seems to be developing.

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

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

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12 April 2013 15:49 GMT