Price & Time: USD/JPY Backtest or Something More?

Talking Points

• Euro briefly probes above key Fibo
• GBP/USD nearing important moving average
• USD/JPY cracks key support

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• EUR/USD probed above the 78.6% retracement of the May range near 1.1330 this morning before falling off
• Our near-term trend bias is higher is higher in the euro while above 1.1035
• A close above 1.1330 is needed to set off a more important leg higher in the rate
• A turn window of some importance is seen here
• A close below 1.1035 would turn us negative on the exchange rate

EUR/USD Strategy: Like the long side while above 1.1035

Price & Time Analysis: GBP/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• GBP/USDhas traded steadily higher since finding support last week near the 50% retracement of the April – May range near 1.5190
• Our near-term trend bias is higher in the pound while above 1.5190
• The 61.8% retracement of the mid-May to June decline at 1.5565 needs to be overcome to set off a more serious advance
• A minor turn window is seen around the end of the week
• A daily close under 1.5190 would turn us negative on the GBP/USD

GBP/USDStrategy: Square.

Focus Chart of the Day: USD/JPY

The market has been excited about USD/JPY and the potential for a sharp move higher after it broke out from a near 6-month consolidation late last month (us included). In hindsight it was clearly too excited. Sentiment towards the yen recently fell to just 5% bulls on the Daily Sentiment Index (DSI) which historically has been a pretty reliable gauge of too many participants liking the same trade. The sharp move lower today in response to Kuroda’s JPY REER valuation comments is a perfect example of what can happen when everybody gets caught leaning the same way. With the tree now good and shaken the big question is was that it or does this correction have more room to run? The bullish take of this action would be that it is some sort of backtest of the 6-month pattern breakout. If this is the case, spot could still trade down towards the December and March closing highs around 121.40 and remain structurally sound. We wouldn’t want to see the exchange rate fall too much below there, however, as that would raise some serious questions about the integrity of the May breakout.

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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