Price & Time: Looking for the Pound to Peter Out

Talking Points

• Convergence of cyclical relationships point to a reversal in GBP/USD
• EUR/USD trades to lowest level in a month
• Gold nearing key retracement levels

Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• EUR/USD briefly broke under the 2nd square root relationship of the year’s high at 1.3730 this morning to trade at its lowest level in a month
• Our near-term trend bias is lower in the exchange rate while below 1.3875
• The 1.3730 remains a critical downside pivot with a daily close below needed to confirm that a more important leg lower is indeed underway
• A minor cycle turn window is seen early next week
• A move back over the the highs of the week at 1.3875 would turn us positive on the exchange rate

EUR/USD Strategy: We like the short side while below 1.3875

Price & Time Analysis: GOLD

Charts Created using Marketscope – Prepared by Kristian Kerr

• GOLD traded at its lowest level in almost a month and a half yesterday before finding support just ahead of the 50% retracement of the December/March advance at 1285
• Our near-term trend remains lower in the metal while below 1350
• Weakness under 1285 is needed to signal that start of a new leg lower that exposes a confluence of supports at 1260
• The latter part of next week is an important cycle turn window
• A move back over 1350 would turn us positive on the metal

GOLD Strategy: We like the short side while under 1350.

Focus Chart of the Day: GBP/USD

The next couple of trading days look quite important for GBP/USD from a timing perspective. A few different cyclical relationships are converging during this period - the most important of which is probably an 8.6 month “Pi cycle” related to last year’s low. A similar relationship existed around the middle of the month in Gold right before it turned down. With Cable rallying fairly aggressively over the past few days into this turn window we are looking for secondary peak to develop in the exchange rate. We can’t rule out some final strength on the day, but the resistance zone between the 50% and 61.8% retracements of the most recent Feb/March decline around 1.6640/80 looks like an ideal turning point area. Weakness under 1.6555 will probably be enough to confirm that a top is in place, while continued strength after Monday over 1.6680 would severely undermine our negative cyclical view.

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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 kkerr@fxcm.com. Follow me on Twitter @KKerrFX