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Price & Time: Pound Nearing Critical Levels

By , Sr. Currency Strategist
14 June 2013 12:00 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.

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Foreign Exchange Price & Time at a Glance:

EUR/USD:

PT_GBP_body_Picture_4.png, Price & Time: Pound Nearing Critical Levels

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/USD traded to its highest level since late February on Thursday before finding resistance at the 1.3390 3x1 Gann angle line of the year-to-date high

-Our bias remains positive on the single currency, but caution is warranted over the next few days as an important cyclical turn window is in effect next week that could prompt an important change in trend

-The 1.3390 level should remain a key near term upside pivot with strength above required to set up a further push towards 1.3470

-The 1x1 Gann angle line of the year-to-date-low near 1.3275 is immediate support

-However, only weakness below the 4th square root progression of the year’s low at 1.3215 indicates a more important turn and shifts bias to negative

Strategy: Longs favored in the euro while over 1.3215, but these should be reduced significantly going into the potentially important cyclical turn window next week. Won’t look to go short until 1.3215 gives.

USD/CHF:

PT_GBP_body_Picture_3.png, Price & Time: Pound Nearing Critical Levels

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/CHF fell to its lowest level in 4-months on Thursday before finding support from just below the .9145 7th square root progression of the year-to-date high

-Our bias is still lower in USD/CHF, but vigilance is required over the next few days as the pair enters into a cyclical turn window slated for next week

-The .9145 area now looks key for the exchange rate with weakness below needed to prompt futher downside

-The 2x1 Gann angle line of the year-to-date low at .9265 is immediate resistance

-However, only a clear push through .9320 undermines the negative technical picture and turns us positive on the rate

Strategy: Wary of a turn next week in USD/CHF so like only very small short positions under .9320. Above there we will be looking to go long.

NZD/USD:

PT_GBP_body_Picture_2.png, Price & Time: Pound Nearing Critical Levels

Charts Created using Marketscope – Prepared by Kristian Kerr

-NZD/USD has moved sharply higher over the past few days since reversing off the 10th square root progression of the year-to-date high during the Gann cyclical turn window

-The strength through .7940 has turned us positive on the Kiwi

-The .8110 4th square root progression of this week’s low has so far acted as resistance, but strength over the 1x1 Gann angle line of the year-to-date closing high near .8160 is needed to signal a broader trend shift

-The .8030 area is immediate support

-But only weakness below the 2nd square root progression of the year-to-date low at .7935 would re-focus lower

Strategy: Like holding longs in the Bird over .7935

Focus Chart of the Day: GBP/USD

PT_GBP_body_Picture_1.png, Price & Time: Pound Nearing Critical Levels

The 1.5750/90 area looks like a major resistance zone in Cable. In this 40-pip band we see a convergence of several important levels including the 1x1 Gann angle line drawn from the year’s high, the 61.8% retracement of the year-to-date range, the measured move of the March to May advance and the 8th square root progression of the year’s low. Such a confluence of key levels is rare and increases the chances of a counter-trend move emanating from this zone. Using various cyclical methods, the idealized time for a turn is around the middle of next week. A push through 1.5790 on a closing basis would signal a much more important move higher is developing in Sterling.

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

Looking for a way to pinpoint sentiment extremes in the GBP in real time? Try the Speculative Sentiment Index.

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

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14 June 2013 12:00 GMT