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Price & Time: Early Downside Resumption in EUR/USD?

Price & Time: Early Downside Resumption in EUR/USD?

Kristian Kerr, Sr. Currency Strategist

Talking Points

  • EUR/USD nearing key long-term retracements
  • GBP/USD reverses sharply from 1-month high
  • USD/JPY threatening breakout

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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 sharply higher on Friday to its highest level in three weeks
  • Our near-term trend bias is positive while above 118.50
  • The 1x1 Gann angle line from last year’s high around 119.20 is a key upside pivot
  • A minor turn window is seen today
  • A close under 118.50 would turn us negative on the exchange rate

USD/JPY Strategy: Like holding long positions while above 118.50

InstrumentSupport 2 Support 1SpotResistance 1Resistance 2
USD/JPY117.95*118.50119.00*119.20119.45

Price & Time Analysis: GBP/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD traded to its highest level in over a month last Friday before reversing sharply
  • Our near-term trend bias is negative while above 1.5195
  • The 1.5320 area is key resistance with a move above this level needed to trigger a more important push higher
  • A medium-term turn window is seen next week
  • A close below 1.5195 would turn us negative on Cable again

GBP/USD Strategy: Square.

InstrumentSupport 2 Support 1SpotResistance 1Resistance 2
GBP/USD1.5105*1.51951.52101.5275*1.5320

Focus Chart of the Day: EUR/USD

EUR/USD started its latest recovery right around the key Pi cycle turn window that we highlighted at the end of last month (Read HERE). After rallying a little over 4 big figures the pair ran into stiff resistance last week at the 20-day moving average. Ideally the upside correction in the euro would last another week or so to better fit some of our short-term cyclical calculations, but a hallmark of the decline in the euro since May has been quick downside resumptions. Given the repeated failures at the 20-day moving average last week and the aggressive decline that followed US employment data we can’t help but wonder if the downtrend is about to reassert itself “ahead of schedule” again? What makes this time a little different and a little more complicated is the proximity of two key long term retracement levels as 1.1240 marks the 50% retracement of the 1985 Plaza Accord low and the 2008 high (using synthetic rates) while 1.1210 marks the 61.8% retracement of the all-time traded low recorded in 2000 and the 2008 all-time high. Yes we recognize this support zone was taken already taken out last month, but when dealing with long-term retracements we believe in giving a decent amount of leeway. As such our fear is that if a more serious counter-trend recovery is going to materialize in EUR/USD then it is most likely to occur somewhere around these levels. In order to confirm a downside resumption and alleviate some of our paranoia we would like to see 1.1210 materially breached on a daily closing basis.

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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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