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Price & Time: USD/MXN - The Trend Must Go On?

Price & Time: USD/MXN - The Trend Must Go On?

Kristian Kerr, Sr. Currency Strategist

Talking Points

  • Price & Time covers key technical themes daily and can be delivered to your inbox each morning by joining the distribution list: Price & Time
  • EUR/USD probes key Fibonacci zone
  • USD/MXN cracks major time resistance

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

ChartPrepared by Kristian Kerr

  • EUR/USD found strong support yesterday near the 1x1 Gann angle line of the March low around 1.1000
  • Our near-term trend bias remains negative whilst below 1.1215
  • Weakness back below the 50-day moving average around 1.1075 is needed to re-instill some downside momentum into the rate
  • A minor turn window is eyed early next week
  • A daily close above 1.1215 would turn us positive on the euro

EUR/USD Strategy: Square for now. Will look to be a buyer on weakness if spot can muster a close above 1.1215

InstrumentSupport 2 Support 1SpotResistance 1Resistance 2
EUR/USD*1.10751.11301.1215*1.12151.1250

Price & Time Analysis: USDOLLAR

ChartPrepared by Kristian Kerr

  • USDOLLAR has come under steady downside pressure since last week’s failure at the 12,050 78.6% retracement of the April – May decline
  • Our near-term trend bias is still positive on the index while above the 11,950
  • A move through 12,000 is needed to relieve some of the immediate downside pressure, but only traction over 12,050 signals a broader upside resumption
  • A very minor turn window is eyed around the first part of next week
  • A daily settlement below the 50-day moving average near 11,950 will turn us negative on USDOLLAR

USDOLLAR Strategy: Square for now.

InstrumentSupport 2 Support 1SpotResistance 1Resistance 2
USDOLLAR11,915*11,95011,95512,000*12,050

Focus Chart of the Day: USD/MXN

The breakout in USD/MXN yesterday to new all-time highs highlights the predicament that emerging market currencies are finding themselves in. The world is essentially being forced to buy back dollars that were used for funding, shall we say, rather questionable investments over the last 6 years. History suggests these types of moves can prove to be annoyingly persistent. As we wrote a couple of weeks back, the timing in USD/MXN at the peak recorded last month was an interesting one as it occurred right at a Martin Armstrong Pi cycle of 3.14 years from the 2012 high. This is oftentimes a powerful relationship. The high last year in WTI for instance came right around the 3.14 year interval from the 2011 high. Under normal circumstances following the July 30th reaction high in Dollar/Mex we would have expected more than just a couple of weeks of consolidation. When that is all a market can muster following an important “turn window” like that it is usually trying to tell you something. In this case the market seems to be screaming that the broader uptrend in USD/MXN is far from finished. In the shorter-term we suspect the negative sentiment extremes in the peso will lead to some more balanced two-way action in the not too distant future. All that said, our work with cycles suggests that the September – November period this year is setting up to be a tumultuous one for global markets. Expect EM currencies to remain at the epicenter.

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--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

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.

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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