Price & Time: USD Waiting On A Catalyst

Talking Points

• USD/JPY tests trendline resistance
• GBP/USD threatening new yearly lows
• FXCM US Dollar Index in consolidation mode

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/JPY traded at its highest level in seven years yesterday before running into trendline resistance around 116.00
• Our near-term trend bias is positive in the exchange rate while over 113.85
• A move through 116.00 is needed to signal an upside resumption and open the way for a push to the 200% extension of the October correction near 118.00
• A minor turn window is eyed today/tomorrow
• Weakness under 113.85 would turn us negative on the exchange rate

USD/JPY Strategy: Like the long side while over 113.85.

Price & Time Analysis: GBP/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• GBP/USD has been in consolidation mode for the past few days
• Our near-term trend bias is lower in Cable while under 1.6020
• Interim support is eyed around last week’s low of 1.5790, but weakness under 1.5720 is really required to confirm that a more serious decline is underway in the pound
• A minor turn window is eyed tomorrow
• A close over 1.6020 would turn us positive on GBP/USD

GBP/USD Strategy: Like the short side while under 1.6020

Focus Chart of the Day: FXCM US Dollar Index

The FXCM US Dollar Index failed last week just shy of the 78.6% retracement of the 2009-2011 decline at 11,315. The decline that has followed has been quite mild and looks like only a minor pause in the broader uptrend. However, given the extremes in sentiment recorded last week where the euro, yen & franc all recorded DSI (Daily Sentiment Index) levels of just 3% bulls we can’t rule out some further backfilling before the Buck tries to turn up again. Our analysis of cycles and other timing methods suggests the dollar could try to put in a low tomorrow or early next week, but the big component question remains the yen which is still exhibiting signs of extreme pessimism. We would feel much better about an upside USD resumption if the yen could flush some of these extremes out. In any event, only unexpected aggressive weakness under 11,150 would suggest a deeper and more important correction lower is unfolding.

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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