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Price & Time: USD/CHF Correction?

By , Sr. Currency Strategist
16 May 2013 12:02 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_CHF_Correction_body_Picture_4.png, Price & Time: USD/CHF Correction?

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/USD has been under steady downside pressure since breaking below the 1x1 Gann angle line of the year-to-date low last week

-Our bias is lower, but close attention must be paid to 1.2845/60 as it marks a convergence of the 78.6% retracement of the year-to-date range and the 3x1 Gann angle line from the year’s low

-Weakness below this support zone is required to maintain the immediate downside tack

-Short-term time cycle studies suggest the end of the week could see a minor turn materialize in the pair

-The 1.2900 area is immediate resistance, but only back over the 1x1 Gann angle line of the year-to-date low now at near 1.3050 would undermine the near-term negative technical outlook.

Strategy: Like holding short positions in the Euro whilst under 1.3050.

AUD/USD:

PT_CHF_Correction_body_Picture_3.png, Price & Time: USD/CHF Correction?

Charts Created using Marketscope – Prepared by Kristian Kerr

-AUD/USD remains under heavy downside pressure and touched its lowest level since last June on Thursday

-Our bias is still down in the exchange rate with the next big level of interest seen around .9790 to .9800

-This area marks a convergence of the 78.6% retracement of the June to September advance and the 161.8% projection of the April decline with a close below this support needed to expose .9700 and below

-Some scope for a minor turn to be seen around the end of the week using some near-term focused cyclical methods

-The .9890 square root progression level is now resistance and a move above this zone would setup a more important counter-trend move higher

Strategy: Like holding reduced Aussie short positions under .9890.

EUR/GBP:

PT_CHF_Correction_body_Picture_2.png, Price & Time: USD/CHF Correction?

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/GBP mas moved modestly higher since finding support at the 38% retracement of the July to February advance in the .8400 area

-While below the 3rd square root progression of the year-to-date high in the .8530 area our bias remains lower in the cross

-The 4th square root progression of the year-to-date higher at .8435 is immediate support, but traction under .8400 is needed to signal the start of a more important move low

-Short-term focused time cycles suggest some strength could be seen into the first part of next week

-A close over .8530 is needed to undermine the negative technical structure and turn us positive on the cross

Strategy: Like selling against .8530 if we get there in the next few days.

Focus Chart of the Day: USD/CHF

PT_CHF_Correction_body_Picture_1.png, Price & Time: USD/CHF Correction?

How important was yesterday’s high in USD/CHF? As the chart above shows there is a clear Fibonacci time relationship between yesterday, the November high, the July high and the April 2011 peak. Further supporting the case for a top of some sort was the fact that the pair failed on Wednesday near the .9750 100% projection of the February to March advance (as measured from the April low) as it sets up a clear potential time/price square. Weakness under Wednesday’s .9640 low would signal the likely start of a more material correction lasting at least a few days, while traction over .9750 negates the negative implications of the burgeoning Fibonacci price/time relationship.

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

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

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16 May 2013 12:02 GMT