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Price & Time: How Important is the Reversal in the Euro?

By , Sr. Currency Strategist
03 January 2014 13:10 GMT

Talking Points

  • USD/JPY nearing key support zone
  • GBP/USD reversal gaining momentum
  • EUR/USD flirting with important downside pivot

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

PT_Jan_3_body_Picture_3.png, Price & Time: How Important is the Reversal in the Euro?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY failed on Thursday just below the 61.8% retracement of the 2007/2011 decline at 105.55
  • While over a key Gann angle line 104.00 our near-term trend bias will remain higher in the exchange rate
  • The 105.55 level remains important resistance and needs to be overcome soon if the rate is to embark on another important leg higher
  • A minor cycle turn window is seen early next week
  • A move under 104.00 would shift our near-term trend bias to negative in USD/JPY

USD/JPY Strategy: Favor the long side while over 104.00

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

103.40

*104.00

104.45

104.70

*105.55

Price & Time Analysis: GBP/USD

PT_Jan_3_body_Picture_2.png, Price & Time: How Important is the Reversal in the Euro?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD reversed sharply on Thursday from just below the 15th square root relationship of the 2012 low at 1.6610
  • A move under 1.6410 will shift our near-term trend bias to negative in Cable
  • Immediate resistance is seen at 1.6495, but traction over 1.6610 is really needed to signal a resumption of the broader uptrend
  • A minor cycle turn window is seen early next week
  • A daily close below 1.6410 will confirm the importance of yesterday’s reversal and turn us negative on the Pound

GBP/USD Strategy: Like the short side on a move under 1.6410.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

1.6375

*1.6410

1.6430

1.6495

*1.6610

Focus Chart of the Day: EUR/USD

PT_Jan_3_body_Picture_1.png, Price & Time: How Important is the Reversal in the Euro?

The EUR/USD selloff we have been looking for to start the year occurred pretty much right on schedule following Monday’s high close for 2012 at 1.3801. A key downside pivot for the exchange rate is the 1.3655 2nd square root relationship of last year’s absolute high. On Thursday this level was broken intraday, but by the end of the day the rate managed to finish well above it. A daily close below 1.3655 over the next few days will be further evidence that an important top is in place and should pave the way for further weakness over the next few weeks. Last year’s closing high of 1.3801 is now important resistance and only a move back through this level would undermine the burgeoning negative cyclicality in the Euro.

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--- 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

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

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03 January 2014 13:10 GMT