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Price & Time: Reversal in the Pound Significant?

Price & Time: Reversal in the Pound Significant?

2014-01-06 13:00:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • EUR/USD breaks below key support level
  • Gold testing important resistance
  • GBP/USD approaching important near-term pivot

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

PT_JAN_6_body_Picture_3.png, Price & Time: Reversal in the Pound Significant?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD closed below the 1.3655 2nd square root relationship of the 2012 high on Friday
  • Our near-term trend bias is now negative on the Euro and will remain so while below 1.3800
  • The 3rd square root relationship of the 2012 high at 1.3540 is the next significant downside attraction for the exchange rate
  • Minor cycle turn windows are seen around the middle of this week and early next week
  • Only a daily close over last year’s closing high near 1.3800 would turn us positive on the Euro again

EUR/USD Strategy: Like selling the Euro into strength while below 1.3800.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

1.3490

*1.3540

1.3600

1.3655

1.3775

Price & Time Analysis: GOLD

PT_JAN_6_body_Picture_2.png, Price & Time: Reversal in the Pound Significant?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD has moved steadily higher since finding support on the last day of trading last year at the 161.8% extension of the October advance near 1183
  • Our near-term trend bias is lower while below 1243
  • An interim downside pivot is seen at 1206, but traction under 1183 is really required to signal a resumption of the broader decline
  • A minor cycle turn window is seen around the middle of the week
  • A daily close over the 2nd square root relationship of the 2013 low at 1243 is required to turn us positive on the metal

XAU/USD Strategy: Like the short side while under 1243.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

XAU/USD

*1183

1206

1237

*1243

1263

Focus Chart of the Day: GBP/USD

PT_JAN_6_body_Picture_1.png, Price & Time: Reversal in the Pound Significant?

GBP/USD peaked last week during a medium-term cycle turn window on the first official day of trading for 2014. What makes the reversal potentially more important is the fact it came just a few pips shy of the 15th square root relationship of the 2013 low at 1.6610 (setting up a possible price/time “square out”). Interestingly the 1st quarter high in 2013 came on the on the first day of trading and this led to a sharp multi-month decline. It is much too early in this move down to suggest that something similar will occur, though we do see scope for at least a multi-week decline based on the current cyclical profile and the fact January is historically one of the worse performing months for Cable. The 2nd square root relationship of last week’s high at 1.6340 is a key near-term pivot with weakness below on a closing basis needed to further confirm the cyclical importance of recent price action.

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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 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 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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