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 obtained.
Foreign Exchange Price & Time at a Glance:
USD/JPY:
Charts Created using Marketscope – Prepared by Kristian Kerr
-USD/JPY remains in consolidation mode below the 94.20 38% Fibonacci retracement of the 2007 to 2011 decline
- Attention remains higher with strength over this long-term retracement required to trigger the next push towards a Fibonacci extension just over 95.00
- A square root progression from last week’s high near 92.00 is still key support
- Only weakness below this level undermines the immediate positive tone and signals the start of a broader corrective move
- A variety of cyclical analysis techniques are marginally negative over the next few days
Strategy: Stay long while over 92.00, but if that level breaks convincingly then the short side becomes quite tempting.
NZD/USD:
Charts Created using Marketscope – Prepared by Kristian Kerr
- NZD/USD touched its highest level in almost a year and a half late last week before failing at a convergence of a longer-term Fibonacci retracement and a pitchfork line in the .8530 area
- Subsequent weakness under the first square root progression in the .8440 area has shifted focus lower
- However, a close under the next progression in the .8345 area is really required to signal the start of a more important decline
- A potential Pi time relationship with last June’s low suggests the Kiwi is susceptible to a decline of some magnitude over the next few days/weeks
- A minor Fibonacci retracement at .8490 is now immediate resistance, but only strength over last Friday’s high signals a broader trend resumption
Strategy: Last week’s failure at a key price level has turned us bearish. The negative cyclical picture increases our conviction. We like holding short positions while below last week’s high.
EUR/SEK:
Charts Created using Marketscope – Prepared by Kristian Kerr
- EUR/SEK remains weak since failing in December just below the 2x1 Gann fan line from the 2009 high
- Support has been found the past few days near 8.4300 which is the 100% projection of the December to January decline as measured from last month’s high
- A breach of this level is now needed to set off a downside extension towards the 61.8% retracement of the 2012 range in the 8.4000 area
- Cyclical picture is turning more positive over next few days and a counter-trend move looks more likely
-The 50% retracement of the 2012 range at 8.4800 remains immediate resistance with strength above this level required to undermine the negative tone
Strategy: Short side is favored while under 8.4800, but support levels need to give way soon. Over 8.5500 forces complete re-think.
Focus Chart of the Day: S&P 500
As we mentioned on Friday, a Pi frequency related to the 2000 secular high in the S&P 500 is potentially at play over the next few days. From a cyclical perspective this suggests that the index is more prone to embark on a reversal of some magnitude during this time, but what about price? Tuesday’s return from a bank holiday in the US has seen the index push aggressively higher which is somewhat to be expected if the index really is going to record some form of exhaustion high. Our idealized level using the Gann square of nine is the 1538 area. The price action around this level will be very telling and any negative action at this zone would give further credence to our admittedly very contrarian notion that a high is tracing out. On the other hand, should the index just continue to push higher with little respite into next week then that too will be a powerful signal that this uptrend in the S&P 500 has much more to run. Watching and waiting until then.
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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