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Price & Time: Euro Dead Cat Bounce Or Something More?

Price & Time: Euro Dead Cat Bounce Or Something More?

2015-01-27 13:30:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • EUR/USD probes key upside pivot
  • USD/JPY consolidation pattern close to resolution?
  • GBP/USD recovers from multi-year low

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

Price & Time: Euro Dead Cat Bounce Or Something More?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY remains in consolidation mode around 118.50
  • Our near-term trend bias is positve while above 117.40
  • A close over 118.85 is needed to reinstill upside momentum in the rate
  • A very minor cycle turn window is seen today
  • A close below 117.40 would turn us negative on USD/JPY

USD/JPY Strategy: Square.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

116.95

*117.40

118.10

118.50

*118.85

Price & Time Analysis: GBP/USD

Price & Time: Euro Dead Cat Bounce Or Something More?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD traded at its lowest level since July of 2013 last week
  • Our near-term trend bias is negative on Cable while below 1.5195
  • A move under 1.4950 is needed to signal that a new leg lower in the rate is underway
  • A minor turn window is seen on Thursday
  • A close over 1.5195 would turn us positive on the pound

GBP/USD Strategy: Like the short side while under 1.5195

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

*1.4950

1.5000

1.5070

1.5100

*1.5195

Focus Chart of the Day: EUR/USD

Price & Time: Euro Dead Cat Bounce Or Something More?

The 8.6 month cyclical relationship with last year’s high seems to be eliciting a reaction from EUR/USD. Just how important this reaction will be still remains to be seen. With cyclical relationships I have found that it is fairly easy to identify inflection points, but determining the duration and extent of the move that follows is the real tricky part. The conditions in place at the moment (extreme negative sentiment, IMM short positioning at 2.5 year highs, spot recently touching the bottom of its 1-year 4th standard deviation channel) in the exchange rate suggest there is some serious potential for a decent counter-trend move to develop. However, a lot of these conditions have been in place for quite some time and the euro has so far ignored them. With respect to the USD, it is almost starting to feel pre-Plaza Accord like. I am currently focused on 1.1310 in the euro as a daily settlement above there would be a strong signal that a counter-trend move of some significance is indeed underway.

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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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