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Price & Time: Approaching Key Levels, But EUR/USD Remains Vulnerable

By , Sr. Currency Strategist
22 May 2014 12:00 GMT

Talking Points

  • USD/JPY rebounds sharply from just above YTD low
  • AUD/USD nearing double top trigger
  • EUR/USD cyclical picture remains negative for at least another week

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

Price & Time: Approaching Key Levels, But EUR/USD Remains Vulnerable

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY touched its lowest level since the start of February on Wednesday before rebounding aggressively off the 127% extension of the April/May advance
  • Our near-term trend bias remains lower in USD/JPY while below 102.35
  • A daily close under 101.35 by more than a few pips is needed to confirm the start of a more impiortant downleg in USD/JPY
  • An important cycle turn window is seen next week
  • Only strength back through the 3rd square root relationship of the year’s high at 102.35 would shift the near-term trend bias positive

USD/JPY Strategy: Like the short side while below 102.35.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

*100.75

*101.35

101.60

101.75

*102.35

Price & Time Analysis: AUD/USD

Price & Time: Approaching Key Levels, But EUR/USD Remains Vulnerable

Charts Created using Marketscope – Prepared by Kristian Kerr

  • AUD/USD has fallen sharply since failing last week at the 78.6% retracement of the April/May decline near .9405
  • Our near-term trend bias is lower in the Aussie while below .9405
  • Interim support is seen around .9200, but the next real important action/reaction zone in the exchange rate looks to be around .9145/65
  • A cycle turn window of some importance looks to be around month-end
  • A move back through .9405 would turn us positive on the Aussie

AUD/USD Strategy: Like the short side while .9405 holds.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

*.9145/65

.9200

.9230

.9310

*.9405

Focus Chart of the Day: EUR/USD

Price & Time: Approaching Key Levels, But EUR/USD Remains Vulnerable

Since reversing from the important cycle turn window that we highlighted at the start of the month the euro has come under steady downside pressure. On Wednesday, EUR/USD touched its lowest level in over three months before rebounding off the 3rd square root relationship of the year’s high at 1.3640 - which is also just above the widely watched 200-day moving average. Was this an important low in the euro? We don’t think so. With the next important turn window eyed around the end of the month/first week of June we suspect general weakness will persist at least until then before a meaningful recovery in the euro is seen (though some minor strength looks possible early next week). The bottom of the1-year standard deviation channel coincides with the 4th square root relationship of the year’s high near 1.3550 and this still looks like a reasonable downside objective. Unexpected aggressive strength over 1.3820 would suggest that the euro has bottomed ahead of schedule.

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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 natural law and through the use of various geometric, 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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22 May 2014 12:00 GMT