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Price & Time: Is the ’Feel Good’ QE Era Really Coming to an End?

By , Sr. Currency Strategist
07 February 2014 13:00 GMT

Talking Points

  • EUR/USD rebounds off key Gann level
  • GOLD consolidates below key resistance
  • USD/JPY a key cyclical inflection point

Unfamiliar with Gann Square Root Relationships? Learn more about them here.

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

PT_FEB_7_body_Picture_3.png, Price & Time: Is the 'Feel Good' QE Era Really Coming to an End?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD traded to its lowest level since late November earlier this week before rebounding off the 1x1 Gann angle line of the 2013 low near 1.3500
  • Our near-term trend bias is lower in the exchange rate while below the 2nd square root relationship of this week’s low near 1.3710
  • A close below 1.3500 is needed to signal a resumption of the broader decline
  • A minor cycle turn window is seen today
  • Only a close over 1.3710 would turn us negative on the Euro

EUR/USD Strategy: We like the short side while below 1.3710.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.3500

1.3540

1.3565

1.3605

*1.3710

Price & Time Analysis: GOLD

PT_FEB_7_body_Picture_2.png, Price & Time: Is the 'Feel Good' QE Era Really Coming to an End?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD remains in consolidation mode since encountering strong resistance last week at the 38% retracement of August to December decline near 1276
  • Our near-term trend bias is higher in Gold while above the 50% retracement of December to January range at 1229
  • A daily close over the 61.8% retracment of the August to December decline at 1292 is really needed to signal the start of a more important move higher in the metal
  • A cycle turn window is seen around the second half of the month
  • Only a daily close below 1229 would focus immediate attention lower

XAU/USD Strategy: Like only small longs while over 1229.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

XAU/USD

*1229

1247

1262

1276

*1292

Focus Chart of the Day: USD/JPY

PT_FEB_7_body_Picture_1.png, Price & Time: Is the 'Feel Good' QE Era Really Coming to an End?

We noted in yesterday’s piece the importance of the end of the week for the S&P 500 from a time cycle perspective. Whether the pro-risk “QE trade” has one more leg in it or not likely depends on what materializes in the aftermath of today’s US employment data. Given the high correlation of USD/JPY to equities over the past year we obviously expect the exchange rate to be similarly influenced. We should note, however, that USD/JPY also has an important longer-term cycle turn window of its own this week which increases our conviction that we are at an important inflection point in terms of time for global markets as a whole. As for USD/JPY, the reversal from the 100.80 200% extension of the mid-January advance earlier in the week looks like a potential low of importance. Continued strength next week would further confirm this notion. With NFPs on the horizon we can’t rule out a spike lower (though it seems unlikely), but only weakness AFTER TODAY below 100.80 (or whatever is this week’s low) would signal that a much deeper decline is likely over the next few months.

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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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07 February 2014 13:00 GMT