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Price & Time: Key Levels to Watch Ahead of the FOMC

Price & Time: Key Levels to Watch Ahead of the FOMC

2013-07-31 11:42:00
Kristian Kerr, Sr. Currency Strategist
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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.

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

Foreign Exchange Price & Time at a Glance:

EUR/USD:

PT_fomc_body_Picture_4.png, Price & Time: Key Levels to Watch Ahead of the FOMC

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD has consolidated below the 1.3300 1st square root progression of the June high for the past few days
  • While above 1.3160 our near-term trend bias will remain higher in the exchange rate
  • The 1.3300 level is still a clear pivot and traction above is needed to set up a more important push higher
  • Cycle studies, however, suggest the rate is nearing an important cyclical turn window where the broader downtrend could try to re-assert
  • The 50% retracement of the year’s range at 1.3225 is immediate support, but only weakness under 1.3160 turns the near-term outlook negative

Strategy: Like reducing long positions here as we near the cycle turn window.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.3160

1.3225

1.3255

*1.3300

1.3360

GBP/USD:

PT_fomc_body_Picture_3.png, Price & Time: Key Levels to Watch Ahead of the FOMC

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD has come under steady pressure over the past few days following last week’s failure near the 7th square root progression of the year’s high in the 1.5430 area
  • Wedensday’s weakness below 1.5250 has shifted our near-term trend bias to lower in Cable
  • The 3rd square root progression of the of the year-to-date low at 1.5175 is now a key near-term pivot and weakness below is needed to force the next leg lower
  • The next couple of days are a medium-term cycle turn window
  • Only a close over the 61.8% retracement of the June to Jule decline at 1.5390 would undermine the negative structure and turn us positive on Cable

Strategy: Like selling the Pound on strength over the next few days.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

*1.5125

*1.5175

1.5200

1.5295

*1.5390

AUD/USD:

PT_fomc_body_Picture_2.png, Price & Time: Key Levels to Watch Ahead of the FOMC

Charts Created using Marketscope – Prepared by Kristian Kerr

  • AUD/USD has come under aggressive downside pressure over the past few days following last week’s failure at the 10th square root progression of the year-to-date high
  • The move under .9140 has shifted our near-term trend bias to lower in the exchange rate
  • The year-to-date low around .8995 is now a key pivot with a clear break under this level the likely trigger to a more important decline
  • A minor cycle turn window is seen around the end of the week
  • The .9160 area is immediate resistance, but only strength over .9300 alters the negative technical outlook and turns us positive on the Aussie

Strategy: Like selling on strength over the next few days.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

0.8920

*0.8995

0.9025

0.9160

*0.9300

Focus Chart of the Day: NASDAQ 100

PT_fomc_body_Picture_1.png, Price & Time: Key Levels to Watch Ahead of the FOMC

The equity markets seemingly flipped the script on us again by selling off into last week’s cycle turn window. The low that followed during the turn window is now an important cyclical inflection point that theoretically argues for further gains in the weeks ahead. The daily chart of the NASDAQ 100 best reflects this as the index recorded a ‘hammer” like reversal candle at the end of last week before pushing to new multi-year highs over the past couple of days. However, we are not so sure about how really bullish last week’s reversal was. Sentiment, positioning and margin debt levels are all at levels coincident with important tops. There is also a lot of interesting and important cyclical timing over the next couple of weeks that favors viewing the whole first half of August as one giant turn window instead of individual ones. If the equity indices can make it through the next few weeks relatively unscathed then we will look at them in a much more positive light. However, until then we will have to view them with caution. Last week’s low in the indices is now a key price and time inflection point that should not be undercut if a bullish scenario is truly taking hold.

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

Looking for a way to pinpoint sentiment extremes in stocks in real time? Try the Speculative Sentiment Index.

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

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

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