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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.

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Foreign Exchange Price & Time at a Glance:

EUR/USD:

PT_levels_body_Picture_4.png, Price & Time: Key Levels to Watch Around the Event RiskCharts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD touched its lowest levels in a month on Wednesday before rebounding sharply off the 78.6% retracement of the May to June advance at 1.2925
  • While below 1.3125 our trend bias remains lower in the Euro
  • A close below 1.2925 is now needed to signal a broader downside resumption
  • Medium-term focused cycle studies point to the first half of next week as a turn window, but shorter-term counts look positive for another couple of days
  • The 3rd square root progression of last month’s high at 1.3065 is more immediate resistance, but only traction over 1.3125 turns us positive on the single currency
Strategy: Like holding short positions while below 1.3125

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.2925

1.2970

1.3005

1.3065

*1.3125

GBP/USD:

PT_levels_body_Picture_3.png, Price & Time: Key Levels to Watch Around the Event RiskCharts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD reversed sharply higher on Wednesday from just below 1.5165 78.6% retracement of the May to June advance, but the advance was short-lived
  • While below the 2nd square root progression of Wednesday’s low near 1.5375 our trend bias is lower
  • Medium-term cycles studies point to next week as a somewhat important turn window
  • The 1.5090 level is now a key downiside pivot with a close below needed to confirm a downside resumption
  • Only a close over 1.5375 alters the immediate negative outlook and turns us positive on the Pound
Strategy: Short positions favored while below 1.5375.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

1.5025

*1.5090

1.5095

1.5290

*1.5375

USD/CHF:

PT_levels_body_Picture_2.png, Price & Time: Key Levels to Watch Around the Event RiskCharts Created using Marketscope – Prepared by Kristian Kerr

  • USD/CHF traded to its highest level in a month on Tuesday before finding resistance just ahead of a key Gann convergence near .9540
  • Our trend bias is higher in USD/CHF while above .9335
  • Traction over .9540 now needed to signal a broader upside resumption
  • Very near-term focused cycles favor another day or so of weakness before attempting to resume higher into next week
  • A close over .9335 will turn us negative on the exchange rate
Strategy: Long positions favored while above .9335

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/CHF

*.9335

.9440

.9495

.9505

*.9540

Focus Chart of the Day: FXCM Dollar Index

PT_levels_body_Picture_1.png, Price & Time: Key Levels to Watch Around the Event RiskIt is a holiday in the United States, but other markets are open. This always poses problems for technical analysts that focus heavily on the x-axis of time like myself. The medium-term picture looks relatively clear with several cyclical techniques pointing to a USD peak of some sort materializing sometime next week. The short-term picture, however, is a bit muddled with the holiday. Why? Because we are unsure as to whether we should count Thursday as a full trading day or not. If it is a full trading day, it pulls the USD turn window we are anticipating back to the first part of the week. If it is not it pushes the turn window out more towards the middle of the week. The hourly charts should help to clear up the cyclical picture over the next few sessions. Given the slew of big event risks over the next 24 hours we are leaning to counting it as a full day.

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

Looking for a way to pinpoint sentiment extremes in the Euro in real time? Try the Speculative Sentiment Index.

To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX

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