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Talking Points

  • Key week for the euro
  • Gold lacking momentum for now
  • Important month for the FX markets as a whole?

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

Price & Time: Known Unknown

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD touched its lowest level in almost nine months today
  • Our near-term trend bias is lower in the euro while under 1.3450
  • The 1.3315/1.3300 area is the next important downside attraction
  • An important cycle turn window is seen this week
  • A move over 1.3450 would turn us positive on the euro

EUR/USD Strategy: Like only a minimal short position while below 1.3450. Will look to stop and reverse on any move through 1.3450.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.3300

1.3330

1.3340

1.3400

*1.3450

Price & Time Analysis: GOLD

Price & Time: Known Unknown

Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD is in consolidation mode above 1280
  • Our near-term trend bias is lower while below 1300
  • Critical support is eyed between 1280 and 1262 with weakness below needed to kick off a more important move lower
  • A cycle turn window is eyed late this week
  • A move over 1300 would turn us positive on the metal

XAU/USD Strategy: Square, but will look to go long on a move through 1300.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

XAU/USD

*1262

1280

1286

*1300

1321

Focus Chart of the Day: AUD/NZD

Price & Time: Known Unknown

One of the more interesting cyclical frequencies I track is the Armstrong 8.6 year Pi cycle. If you have any doubts about how useful it is I suggest taking a look at a chart of AUD/NZD (above) as the recent advance commenced 8.6 years from the major low in 2005 – virtually to the day! This month marks the 43rd anniversary of the collapse of Bretton Woods and the birth of the modern fiat currency era. 43 years is potentially significant to me as it falls on an 8.6 year interval (8.6 * 5 = 43). This particular cycle is interesting as it has coincided with important events in the past, most notably the devaluation of the Thai Baht in 1997 which helped kick off the Asian crisis (Pi cycle actually led by a few weeks). Are the currency markets about to undergo some sort of similar event? What Donald Rumsfeld notoriously categorized as a “known unknown”? Surveying the FX markets there certainly are plenty of FX regimes that look vulnerable at the moment (CNY, HKD, HUF, CHF etc), but the truth is these things are impossible to forecast. What we do know is that FX volatility across the board is compressed and complacency is running high much like it was in the mid 1990’s. “Minsky moments” are spawned from precisely these type of environments and taking a punt on FX vol rising from here doesn’t look so stupid anymore.

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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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