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Price & Time: The EUR/USD Fork in the Road

Price & Time: The EUR/USD Fork in the Road

2014-06-04 12:15:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • USD/JPY testing key resistance zone
  • Important turn window next week in Gold
  • EUR/USD at important inflection point

New to Currency Trading? Learn More HERE

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

Price & Time: The EUR/USD Fork in the Road

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY touched its highest level in over a month on Wednesday before encountering resistance near 102.75
  • Our near term trend bias is lower in the rate while below 102.75
  • The 101.75 area is immeidate support, but a close under the 4th square root relationship of the year’s high at 101.35 is needed to set off a more serious decline
  • The next week or so in an important long-term window related to the 2011 low in the exchange rate
  • A daily close over 102.75 will shift the near-term trend bias higher.

USD/JPY Strategy: Like the short side while below 102.75 (on a closing basis). Would need to see 103.15 give way to get more excited about any potential upside.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

*101.35

101.75

102.55

*102.75

*103.15

Price & Time Analysis: GOLD

Price & Time: The EUR/USD Fork in the Road

Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD fell to its lowest level since late January on Wednesday
  • Our near-term trend bias is lower in the metal while under 1286
  • Immediate support is eyed at 1244 ahead of a major downside attraction at 1210/20
  • A minor turn window was in effect yesterday, but the middle of the month looks especially important for the yellow metal from a timing perspective
  • A daily close over 1286 will turn out attention higher in gold

XAU/USD Strategy: Square. Don’t like chasing here with such an important turn window coming up and sentiment at overly bearish extremes (DSI sub 10% bulls).

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

XAU/USD

*1210/20

1244

1245

1260

*1286

Focus Chart of the Day: EUR/USD

Price & Time: The EUR/USD Fork in the Road

The ECB tomorrow looks to be the event of the week – most definitely it will be for the euro. You can drive yourself mad thinking of the possible outcomes and scenarios. On the face of it, the price action of the past few weeks would suggest the market is looking for something at least a little out of the ordinary from Mr. Draghi and friends and is vulnerable to a sharp snapback if they don’t come through. If you overthink it you can also arrive to the conclusion that ECB has disappointed virtually every time they have been in a similar situation so the real consensus is that they will do nothing and the exchange rate is actually really at risk of collapse if they come even a little bit close to laying the groundwork to more accommodative policy. I could do this all day and now I remember why I focus primarily on technicals and cycles. Taking a look at the near-term cyclical picture in EUR/USD I would say it looks probably as clear as it can before a major risk event. Short-term cycle analysis suggests Monday was a decent low in the exchange rate. If it truly was then the euro should rally at least for a week (and likely longer) meaning Thursday will probably be a disappointment and the catalyst for a more meaningful push higher. That is how I’m leaning anyway. The alternative is that my interpretation of the cyclical picture is off base here. A move under 1.3585 after the dust settles following the inevitable intraday whipsaw would be a pretty clear signal that I am wrong. This would open the door to a few more weeks of downside.

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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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