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Price & Time: A Broader Shift in Currency Trend Developing?

By , Sr. Currency Strategist
09 August 2013 11:55 GMT

USD/JPY broke below key support this week, but is nearing another key zone. USD/CHF is on the verge of a broader trend shift while the S&P 500 flirts with very important technical levels. Cycle studies suggest next week will be significant for USD/CAD.

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

PT_broader_body_Picture_4.png, Price & Time: A Broader Shift in Currency Trend Developing?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY broke below a key Fibonacci confluence near 97.60 earlier in the week to trade to its lowest levels since mid-June on Thursday
  • The move under 97.60 has shifted our near-term trend bias in the rate to negative
  • The 78.6% retracement of the June to July advance near 97.50 is the next relevant support level with weakness below needed to prompt another leg lower
  • The near-term cyclical picture is not the clearest, but a minor turn window is eyed around the start of the week
  • The 97.60 area is now resistance and traction over this zone is required to turn the technical outlook more positive

USD/JPY Strategy: Don’t like chasing into this support zone. Would rather sell a break.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

*95.50

96.20

96.45

97.10

*97.60

Price & Time Analysis: USD/CHF

PT_broader_body_Picture_3.png, Price & Time: A Broader Shift in Currency Trend Developing?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/CHF traded to its lowest level in almost 2-months on Thursday before finding support at the 8th square root progression of the 2012 high in the .9170 area
  • Our near-term trend bias is negative and sustained weakness below the 2Q13 low near .9130 will shift the broader trend bias to negative as well
  • Immediate focus is on .9170 with a clear brake of this level needed to trigger the next material move lower
  • Very near-term focused cycle studies suggest strength could be seen over the next day or so
  • A convergence of various Fibonacci and Gann levels near .9270 is now key resistance and only strength through this area would turn us positive on the rate

USD/CHF Strategy: Again we don’t like chasing near such big support levels. May look to sell a break of .9170.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/CHF

*0.9130

*0.9170

0.9205

0.9245

*0.9270

Price & Time Analysis: S&P 500

PT_broader_body_Picture_2.png, Price & Time: A Broader Shift in Currency Trend Developing?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • S&P 500 failed at the start of the week near the 4th square root progression of the 2Q13 low in the 1710 area
  • An important cyclical low converges with the 3rd square root progression of the 2Q13 low around 1673/75 and while above this level our trend bias has to remain positive in the index
  • The 1710 level remains a key upside pivot with traction over this level needed to signal the start of a renewed push higher
  • Time cycle analysis suggests the whole first half of August is potentially significant for the index and a turn of some importance is possible during this time
  • A close below 1673 would confirm a top and open the way for a more serious decline in equities

S&P 500 Strategy: Longs favored against 1673, but if that level gives way we will be getting short.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

S&P 500

*1673

1684

1692

1700

*1710

Focus Chart of the Day: USD/CAD

PT_broader_body_Picture_1.png, Price & Time: A Broader Shift in Currency Trend Developing?

The 1.0440 Fibonacci confluence area in USD/CAD proved again to be worthy resistance. From a short-term perspective if the USD’s strength over the past couple of weeks was not an aberration then the rate should try to turn higher again sometime on Monday or early Tuesday. Confusing the matter somewhat is a potential longer-term cyclical influence related to the 2002 to 2007 decline. Will the longer-term cycle take over and push USD/CAD to new multi-week lows before trying to bottom? It is certainly possible. In any event we should know more on Tuesday. Continued weakness beyond Tuesday and below 1.0245 will be strong evidence that the longer-term cyclical influence is taking over.

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

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.

Looking for a way to pinpoint sentiment extremes in CAD 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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09 August 2013 11:55 GMT