Talking Points

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

Price & Time: 9-Year Low in EUR/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY remains in consolidation mode below the 1st square root relationship of the year’s high at 120.70
  • Our near-term trend bias is higher in USD/JPY while above 119.40
  • Traction over 120.70 is needed to setup a push towards 122.00
  • An important turn window is eyed later this week
  • A close under 119.40 would turn us negative on the exchange rate.

USD/JPY Strategy: Medium-term we think USD/JPY is forming a secondary high. We are not sure if 120.80 was it or if there will be another push towards 122.00. W like holding only reduced long positions while above 119.40.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

*119.40

119.80

120.30

*120.70

121.00

Price & Time Analysis: AUD/USD

Price & Time: 9-Year Low in EUR/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

  • AUD/USD came under further pressure early on Monday to trade at its lowest level in over five years
  • Our near-term trend bias is negative while below .8160
  • Interim support is seen at .8040 ahead of a major support confluence between .8000 and .7950
  • An important turn window is seen later this week
  • A close over .8160 would turn us positive on the Aussie

AUD/USD Strategy: Like the short side while below .8160.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

*.8000

.8040

.8055

.8100

*.8160

Focus Chart of the Day: EUR/USD

Price & Time: 9-Year Low in EUR/USD

Some wild price action overnight in EUR/USD as the exchange rate gapped under 1.1995 and traded to as low as 1.1861 within 3 minutes. The pair then promptly rebounded to trade over a big figure higher by the start of European trading. If the first two trading days of 2015 are any sort barometer then the rest of the year should be quite interesting. However, we would caution against reading too much into the moves on Friday and early this morning as they occurred with marginal liquidity. We think the real test will be this week as volume returns to the market. As foolish as it may sound we think the euro should stage a decent counter-trend recovery within the next few days. The chart above shows that the gap lower this morning was through the bottom of the 1-year 2nd standard deviation channel. Historically this has been a pretty reliable indicator of a very extended trend – especially when it coincides with extremes in negative sentiment. On Friday the Daily Sentiment Index (DSI) fell to just 4% EUR bulls and just above the multi-year extreme. Since early October such extreme levels of pessimism have presaged all the recoveries in the euro. Combine all this with our short-term cyclical analysis which turns much more positive on the euro after today and we think the tide (in the short-term) be turning.

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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