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Price & Time: The Long Term Bullish Cyclical Case For USD/JPY

Price & Time: The Long Term Bullish Cyclical Case For USD/JPY

2013-03-12 16:25:00
Kristian A. Kerr,
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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.

Foreign Exchange Price & Time at a Glance:

USD/JPY:

PT_LT_CASE_FOR_USDJPY_body_Picture_4.png, Price & Time: The Long Term Bullish Cyclical Case For USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/JPY pushed marginally above the 96.60 6th square root progression of last month’s low on Tuesday to record new multi-year highs

- Focus is higher, but important resistance lurks overhead with the critical 1x1 Gann line of the 2011 low now at 97.25

-Strength over this level is really needed to trigger a more important push higher

- A Gann related cyclical turn window is currently in effect and the potential for a reversal of some importance is high over the next day or so

- The 95.60 5th square root progression from last month’s low is immediate support, but only weakness under the 1x8 Gann fan line at 94.95 shifts our bias lower

Strategy: Still long from 93.85. Worried about a turn here, but keeping the stop just under 95.40.

GBP/USD:

PT_LT_CASE_FOR_USDJPY_body_Picture_3.png, Price & Time: The Long Term Bullish Cyclical Case For USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

- GBP/USD continued its decline on Tuesday and touched its lowest level since June of 2010

- Our bias is lower, but caution is strongly advised as we now probe a critical long-term Gann/Fibonacci cluster between 1.4815 and 1.4850

- The short-term cyclical picture is still positive on the pound and warns a counter-trend move of some magnitude could materialize over the next day or so

- A Gann Wheel level related to the January year-to-date high in the 1.4940 area is now immediate resistance

-Any strength over this level in the next couple of days will signal the start of a more important reversal

Strategy: Cable is near an absolutely critical level. With the cycles turning positive a counter-trend move should be expected. We want to buy a break of 1.4940 if it happens.

EUR/GBP:

PT_LT_CASE_FOR_USDJPY_body_Picture_2.png, Price & Time: The Long Term Bullish Cyclical Case For USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

- EUR/GBP has moved higher over the past few days to re-test a critical retracement cluster between .8780 and .8800

- Our bias is higher in the exchange rate, but a close over .8800 is really needed to confirm the integrity of the latest push higher and setup a more meaningful advance

- Near-term time cycles analysis is negative on the cross over the next couple of days and a counter-trend move could develop during this time (especially with Cable at similar critical levels)

- Immediate support is seen at the 1st square root progression of the year-to-date high in the .8725 area

- However, a move under the 1x2 Gann line of the last month’s low near .8675 is really required to signal the start of a more important decline

Strategy: Still long the cross from .8670, but wary of a failure at the .8800 resistance zone. Moving stop up to just under .8720

Focus Chart of the Day: USD/JPY

PT_LT_CASE_FOR_USDJPY_body_Picture_1.png, Price & Time: The Long Term Bullish Cyclical Case For USD/JPY

One of favorite longer-term cycle counts is between 16 and 18 years. This fits well with Pi and various other methodologies and routinely shows up throughout market history. One reason we are positive on USD/JPY in the longer-term is that it exemplifies this cycle quite well. The chart above shows that an important low was recorded in late 1978 and another one in the Spring of 1995 for a low to low cycle of just under 17 years. From this 1995 low to the next major significant low recorded in October of 2011 the duration was once again just under 17 years (16.5). The pair clearly responds well to this particular frequency and given these long-term cyclical lows have led to advances in the past of more than 3 years ranging from +56% to 85%; the move in USD/JPY looks far from finished in a broader cyclical sense.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter at@KKerrFX.

Are you looking for other ways to pinpoint support and resistance levels? Take our free tutorial on using Fibonacci retracements.

To receive other reports from this author via e-mail, sign up to Kristian’s e-mail distribution list via this link.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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