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Price & Time: Don't Forget About the Yen

Price & Time: Don't Forget About the Yen

2014-06-05 11:41:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

New to Currency Trading? Learn More HERE

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

Price & Time: Don't Forget About the Yen

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD is in consolidation mode above the 78.6% retracement of the February to May advance near 1.3585
  • Our near term trend bias is lower in the rate while below 1.3675
  • A move under 1.3585 on a closing basis is needed to trigger a new leg lower in the euro
  • A turn window was seen earlier this week
  • A move over 1.3675 would turn us positive on the exchange rate

EUR/USD Strategy: Flat. May look to go long if 1.3675 breaks.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.3520

*1.3585

1.3605

*1.3675

1.3710

Price & Time Analysis: NZD/USD

Price & Time: Don't Forget About the Yen

Charts Created using Marketscope – Prepared by Kristian Kerr

  • NZD/USD fell to its lowest level since early March on Wednesday before finding support near the 50% retracement of the year’s range
  • Our near-term trend bias is lower in the Bird while below .8460
  • A daily close below .8410 is needed to signal a downside resumption
  • An important turn window ended yesterday
  • A daily close over .8460 will turn us positive on the Kiwi

NZD/USD Strategy: Flat. Reversal yesterday off key support during important cycle turn window warns a bigger turn could be in the cards. Like going long over .8460.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

NZD/USD

.8350

*.8410

.8445

*.8460

.8500

Focus Chart of the Day: USD/JPY

Price & Time: Don't Forget About the Yen

I try to look at sentiment figures at least once a day. One of my favorite metrics is the Daily Sentiment Index or DSI which surveys daily the bullishness of a select group of futures traders on several commodities, currencies and indices. I view anything under 15% bulls or over 85% bulls as a strong contrarian indicator. After a long period of doing nothing, I have noticed several markets over the past few days have begun to reach these contrarian warning levels. Particularly interesting is the yen which fell to just 13% bulls (ie. 87% bulls in USD/JPY) on Wednesday. Such extremes in sentiment are usually reserved for markets on or near multi-month highs. USD/JPY on the other hand is still at the low end of a multi-month range. The surge in positive sentiment in the exchange rate when it really hasn’t gone anywhere suggests to me that the belief in the Kuroda/Abe trade remains very strong and market participants are still just chomping at the bit to position themselves. While I think USD/JPY eventually moves a lot higher I am not sure it happens without a more meaningful “gut check” position washout first. The next week or so is a long-term cycle turn window related to the 2011 low in USD/JPY. The market looks vulnerable to a top of some importantance during this time (ideally from slightly higher levels in sentiment). A move above 103.15 would make me doubt this negative view, but only traction over 104.10 would completely undermine.

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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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