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Price & Time: Don’t be Fooled by the "Inactivity" in USD/JPY

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

Talking Points

  • EUR/USD nearing important resistance zone
  • Cycle turn window coming up in GBP/USD
  • Important couple of days for the Yen

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_25_body_Picture_3.png, Price & Time: Don't be Fooled by the "Inactivity" in USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD remains in consolidation mode below the 1st square root relationship of the 2013 high at 1.3775
  • Our near-term trend bias is higher in the Euro while above 1.3685
  • Traction above 1.3775 is needed to set up a more important advance
  • An important cycle turn window is seen over the next couple of days
  • A daily close below 1.3685 would turn us negative on the exchange rate

EUR/USD Strategy: Square for the moment. Want to see how the rate reacts into the cycle turn window.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

1.3660

*1.3685

1.3750

*1.3775

1.3805

Price & Time Analysis: GBP/USD

PT_FEB_25_body_Picture_2.png, Price & Time: Don't be Fooled by the "Inactivity" in USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD found support yesterday from just below the 38% retracement of the month-to-date range at 1.6605
  • Our near-term trend bias is positive on Cable while over the 2nd square root relationship of the year’s high at 1.6560
  • Interim resistance is seen around 1.6730, but a move through the 127% extension of the Jan/Feb decline at 1.6780 is needed to confirm a broader upside resumption in the rate
  • A cycle turn window is seen on Wed/Thurs
  • Weakness below 1.6560 would turn our outlook negative on the Pound

GBP/USD Strategy: Like the long side while over 1.6615.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

*1.6560

1.6615

1.6695

1.6730

*1.6780

Focus Chart of the Day: USD/JPY

PT_FEB_25_body_Picture_1.png, Price & Time: Don't be Fooled by the "Inactivity" in USD/JPY

The price action in USD/JPY over the past couple of weeks has been uninspired to say the least. The 2nd square root relationship of the year’s low at 102.75 has been formidable resistance so far keeping rally attempts well contained. The next couple of days look important for USD/JPY from a short-term cyclical perspective and we should learn a lot more about where the rate stands in the bigger picture scheme of things. A high during this time (perhaps even briefly above 102.75) followed by a turn lower under 101.35 would suggest to us that the decline that started in USD/JPY at the start of the year is resuming. Given the narrowing range on the daily chart such a move would likely be swift and aggressive. The more positive scenario requires that USD/JPY gain traction over 102.75 and hold over this level into late on Thursday. Such an occurrence would likely lead to an important move higher as the rate plays “catch up” with other pro-risk markets. We slightly favor the former at the moment.

--- 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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25 February 2014 13:00 GMT