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Price & Time: Making the Contrarian Case For Crude

Price & Time: Making the Contrarian Case For Crude

2014-06-23 12:30:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • USD/JPY nearing neckline of possible head & shoulders pattern
  • GOLD stalls at Gann resistance
  • Important week for Oil from a timing perspective

New to Currency Trading? Learn More HERE

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

Price & Time: Making the Contrarian Case For Crude

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY is in consolidation mode above the 61.8% retracement of the May/June range at 101.55
  • Our near-term trend bias is lower in the exchange rate while below 102.80
  • A daily close under 101.55 is required to confirm the start of a more meaningful decline in the rate
  • A turn window is seen around the end of the month
  • A close over 102.80 would turn us positive on USD/JPY

USD/JPY Strategy: Like the short side while below 102.80.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

101.35

*101.55

101.85

102.35

*102.80

Price & Time Analysis: GOLD

Price & Time: Making the Contrarian Case For Crude

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GOLD surged through important Gann resistance at 1286 late last week to trade at its highest level since mid-April
  • Our near-term trend bias remains positive on the index while over 1286
  • The 1321 level is a key near-term pivot with a move over this level needed to trigger the next leg higher
  • A cycle turn window is seen around the second half of the week
  • A daily close under 1286 would turn us negative on the index.

GOLD Strategy: Like buying on weakness against 1286.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GOLD

*1286

1300

1313

*1321

1336

Focus Chart of the Day: CRUDE

Price & Time: Making the Contrarian Case For Crude

Longer-term cyclical analysis suggests the next week or so could prove quite important for Crude. Our modus operandi heading into these macro turn windows is to look for corroborative evidence of extreme positioning and lopsided sentiment that could facilitate any turn. In crude we have both as the latest CFTC data shows large specs increased their long positions to a new notional all-time high. Sentiment is also near potentially dangerous extremes as the Daily Sentiment Index (DSI) touched a lofty 88% bulls on Friday. The setup in terms of sentiment and positioning is very similar to what just recently occurred in Silver (ie extreme negative DSI and COT positioning) before its most recent run up (READ HERE). Is the same thing guaranteed to happen in Crude? Of course not, but when this “powder keg” of extreme positioning and euphoric sentiment is in place during a cyclical turn window the odds greatly increase in our opinion for some kind of counter-trend move to develop. Last week’s low around 105.00 looks to be an important near-term trading pivot with weakness below this level needed to confirm that some sort of reversal is actually underway. Resistance is eyed around 107.70 and 109.00.

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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.

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

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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