Talking Points
- EUR/USD falls to lowest level since January of 2006
- Gold nearing important upside pivot
- Why 2000 looks so important for the S&P 500
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Foreign Exchange Price & Time at a Glance:
Price & Time Analysis: EUR/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/USD has come under renewed pressure this morning to trade at its lowest level since January of 2006
- Our near-term trend bias remains lower in EUR/USD while below 1.2000
- The next important action/reaction zone looks to be around 1.1750/80
- A medium-term turn window is seen later this week
- A close over 1.2000 would turn us positive on the euro
EUR/USD Strategy: We like holding only a reduced short position while under 1.2000.
| Instrument | Support 2 | Support 1 | Spot | Resistance 1 | Resistance 2 |
|---|---|---|---|---|---|
| EUR/USD | *1.1780 | 1.1800 | 1.1830 | 1.1875 | *1.2000 |
Price & Time Analysis: GOLD
Charts Created using Marketscope – Prepared by Kristian Kerr
- XAU/USD has moved steadily higher since finding support last week around the 1171 61.8% retracement of the November – December advance
- Our near-term trend bias is higher while above 1171
- The 1x1 Gann angle line from the 2012 high at 1230 looks to be a critical upside pivot with strength above needed to confirm the start of a more important push higher in the metal
- A minor turn window is seen on Thursday
- A close under 1171 would turn us negative on the metal again
XAU/USD Strategy: Like holding small longs while above 1171.
| Instrument | Support 2 | Support 1 | Spot | Resistance 1 | Resistance 2 |
|---|---|---|---|---|---|
| XAU/USD | *1171 | 1195 | 1213 | *1230 | 1238 |
Focus Chart of the Day: S&P 500
I use square root relationships heavily in my analysis because for whatever reason there is often a sort of “gravitational pull” towards them. This phenomena has been observed and used by various traders over the years with perhaps the most famous observation coming from the great Sir John Templeton who wrote in his 22 investment maxims (fittingly #16) that “The fluctuation of share prices is roughly proportional to the square-root of price.” The easiest way to incorporate such analysis is by subtracting the square root of an important high (adding to an important low) and its various progressions to identify potential price areas of importance. Subtracting two square root relationships from the all-time high gives us 2000 in the FXCM SPX500 (Fair value index), which was the closing price on Tuesday. The successful hold of this level is clearly a near-term positive that points at a potential trend resumption or at least an attempt. Failure to gain much traction followed by a close under 2000 would turn the technical picture very negative.
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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.
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX
