Price & Time: Situation Critical For The Euro

Talking Points

• EUR/USD cracks 2013 low
• Gold nears last year’s low
• USD/JPY stalls at long-term trendline

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/JPY is in consolidation mode below the trendline connecting the 2002 and 2007 peaks in the 109.50 area
• Our near-term trend bias is higher while over 107.35
• A move through 109.50 is needed to set of the next leg higher in the rate
• An important turn window is seen early next month
• A close below 107.35 would turn us negative on the exchange rate

USD/JPY Strategy: Like holding reduced long positions while above 107.35.

Price & Time Analysis: GOLD

Charts Created using Marketscope – Prepared by Kristian Kerr

• GOLD has come under renewed pressure over past couple of days to trade at lowest level since the start of the year
• Our near-term trend bias is lower in the metal while below 1235
• Interim support is eyed at 1203 and 1293 ahead of last year’s low at 1179
• A minor turn window is eyed here
• A close over 1235 would turn us positive on Gold

XAU/USD Strategy: Square.

Focus Chart of the Day: EUR/USD

EUR/USD has come under renewed pressure over the past few sessions to record its lowest level since November of 2012. In a strange way this is precisely what I want to see heading into the key cyclical period I have highlighted over the next few days as there is little ambiguity in what to look for. Almost like clockwork as the euro has begun to break down into this key period articles have begun to appear in the financial press explaining why the euro is such a clear sell. In my experience when the mainstream press finally “sees it” a move is much closer to its end than beginning. This development dovetails the extremes in sentiment recorded in the DSI since the start of the month (on Wednesday it fell back to 5% EUR Bulls or 95% USD Bulls) and the drop in the exchange rate to the bottom of the 1-year standard deviation channel (historically a good metric of an oversold market). Longer-term I think the euro is in trouble, but with this turn window hitting over the next few days and sentiment/positioning so extended and the market getting to key technical levels everything seems to be coming together for some sort of counter-trend recovery. Let’s see…

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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.

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

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