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Price & Time: Cyclical Relationships Converge on USD/JPY

Price & Time: Cyclical Relationships Converge on USD/JPY

2014-12-23 13:15:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • Cycles converge on the yen
  • EUR/USD records a new low for the year
  • AUD/USD breaks from multiple inside day pattern

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

Price & Time: Cyclical Relationships Converge on USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD has come under renewed pressure this morning to record a new low for the year
  • Our near-term trend bias is higher lower in EUR/USD while below 1.2360
  • Interim support is eyed around 1.2200 ahead of a major inflection point at 1.2135 which is the 50% retracement of the all-time low and the all-time high
  • The next turn window of importance is seen around the end of the month
  • A close above 1.2360 would turn us positive on the euro

EUR/USD Strategy: Like to sell on strength while below 1.2360

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.2135

1.2200

1.2210

1.2260

*1.2360

Price & Time Analysis: AUD/USD

Price & Time: Cyclical Relationships Converge on USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

  • AUD/USDregistered a new low for the year this morning
  • Our near-term trend bias is negative while below .8200
  • A close under .8070 is needed to re-instill downside momentum in the rate
  • A turn window is seen around the start of next month
  • A close over .8200 would turn us positve on the Aussie

AUD/USD Strategy: Like the short side while below .8200.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

.8000

*.8070

.8130

.8175

*.8200

Focus Chart of the Day: USD/JPY

Price & Time: Cyclical Relationships Converge on USD/JPY

The “Pi cycle” relationships discovered by the admittedly controversial economist Martin Armstrong are perhaps some of the most reliable cyclical intervals we implement in our analysis. Whenever some of these relationships converge we usually pay pretty close attention. This week USD/JPY has a convergence of several of these relationships. The most important one in our view is related to the 2002 high as this week marks 4,711 calendar days from the high recorded on January 31, 2002. 4,711 is significant as it is 1.5x Pi (3141+1570=4711 or 12.9 years) and is an interval that has repeatedly proven influential in the cyclical analysis of the financial markets. Another interesting relationship this week is related to the 2011 low in USD/JPY recorded on October 31st of that year. This week USD/JPY will be 1,149 calendar days from that all important low. Astute readers will observe that number is also 3.14 years. Before scoffing at this relationship, we would alert readers to the fact that this year’s top in Crude came right around the same relationship and helped us “call it” (read HERE). What does all this mean for USD/JPY? We think it suggests that the exchange rate is vulnerable to a secondary high sometime over the next few days. A confluence of resistance between 120.50 and 120.70 suggests that area is important and above that the year-to-date high at 121.85 is obviously an area of interest. We will be keen to see how the exchange rate reacts around these levels as a clear failure would confirm the notion of a secondary high and set the stage for a period of more meaningful weakness. We should note that just because a market has these timing convergences does not mean that the market has to react. The S&P 500 has had a multitude of such convergences over the past few years and managed pretty much to blow through them all. (Interestingly the low last week in the S&P 500 came right around 3,141 trading days from the 2002 low). New highs into late next week would negate the negative view, though we would caution against getting too positive on the exchange rate if this occurs as another important turn window is eyed around the second week of January.

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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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