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Price & Time: Key Retracement In Time Ahead For the Euro

Price & Time: Key Retracement In Time Ahead For the Euro

Kristian Kerr, Sr. Currency Strategist

Price & Time covers key technical themes daily and can be delivered to your inbox each morning by joining the distribution list: Price & Time

Talking Points

  • 61.8% time retracement this week in EUR/USD
  • Historically positive seasonal period nears

Unfamiliar with Fibonacci Relationships? Learn more about them HERE

EUR/USD: Key Retracement in Time Coming Up

Wednesday of this week marks the autumnal equinox. For Gann analysts this is a potentially important time. The scientific world will usually scoff at such a notion, but Gann understood the divisional nature of time and its impact on market prices. His basic premise was that the natural world’s rhythm often coincides or more importantly impacts those of the financial markets.

EUR/USD has an interesting recent history with equinoxes. The low this year in the single currency, for instance, came the same week of the spring equinox. A seasonal chart of the euro (and deutsche mark) also shows a very clear tendency for strength after the autumnal equinox. Coincidence perhaps, but something worth following. As with all cyclical relationships I am big believer in the idea of convergence. In other words, the more unrelated potential timing relationships we have around a period, the higher the probability a turn of importance will occur.

This week’s equinox coincides with the 61.8% retracement in time of last year’s May high and this year’s March low on both a trading day and calendar day count. The trading day count is now, while the calendar day count is late this week/early next week. The calendar day count is arguably more important as previous time retracements related to the May 2014 – March 2015 decline have already led to turns in spot – most notably the 50% retracement which occurred last month right before the euro rallied some 7 big figures.

What does this all mean going forward? It is difficult to say as EUR/USD has been fairly choppy this past week. Perhaps Friday marked an important turn related to today’s 61.8% trading day retracement, but it is not my favorite scenario. Given the turn on August 24th occurred on a nice Fibonacci timing relationship, I have been giving the benefit of the doubt to the broader downtrend reasserting itself here shortly. As such a secondary high into the calendar day retracement later this week/early next week would be the more idealized scenario. We shall see. The wild card is the positive seasonal period coming up in the euro, but it is not too much of a concern unless EUR/USD continues to weaken past Wednesday.

--- 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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