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Price & Time: The Sterling Threshold

Price & Time: The Sterling Threshold

2015-02-04 13:30:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

Price & Time: The Sterling Threshold

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY remains in consolidation mode above key support at 116.00/35
  • Our near-term trend bias remains positive while above 117.40 (closing basis)
  • Interim resistance is seen around 118.00, but traction over 118.85 is really needed to signal that a more important push higher is underway
  • A very minor turn window is seen here
  • A close under 117.40 would turn us negative on the exchange rate

USD/JPY Strategy: Square.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

*116.00/35

117.40

117.45

118.00

*118.85

Price & Time Analysis: S&P 500

Price & Time: The Sterling Threshold

Charts Created using Marketscope – Prepared by Kristian Kerr

  • S&P 500 has moved sharply higher over the past few days after finding support just ahead of the 200-day moving average
  • Our near-term trend bias is positive while above 1989
  • Interim resistance is eyed around 2046, but a move through 2067 is really needed to kick off a more important push higher
  • A minor cycle turn is eyed late this week
  • A close below 1989 would turn us negative on the index

S&P 500 Strategy: Like the long side while above 1989.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

S&P 500

*1989

2013

2044

2046

*2067

Focus Chart of the Day: GBP/USD

Price & Time: The Sterling Threshold

The fluctuation of prices is roughly proportional to the square-root of the price.

-Sir John Templeton

The 2nd square root relationship of the yearly low in GBP/USD has been a “magic” level of sorts over the past few weeks. The level calculated by taking the square root of the January 23rd 1.4950 low and multiplying by 2 and then adding it back to the low comes in around 1.5195. As the chart above shows this level has been very good resistance with recent advances stalling around there either intraday or on a closing basis. If one takes the prior yearly low of 1.5033 and does the same thing they will see the early January advance stalled out at just shy of 2 square roots. Our general rule of thumb with square roots in strongly trending markets is that “healthy” corrections should stay within 2 square roots of recent extremes. When a market finally does make a move above the 2 square root threshold it is usually a good indication that the corrective process is about to get more sloppy. Interestingly in cable the 2nd square root relationship roughly coincides with the neckline of a potential inverse head & shoulders pattern on the daily chart. The next day or so should prove key as a close above 1.5195 would be a strong sign that much more important counter-trend move is unfolding while a failure to gain any real traction above there would warn of an early downside resumption.

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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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