Is This Currency Pair Resuming the Broader Trend?

10/23/2014 9:00 am EST

Focus: FOREX

Kristian Kerr

Chief Technical Strategist, Forex Capital Markets LLC

An outside day pattern for this currency pair has the market looking for an early resumption of the broader downtrend, but Kristian Kerr, of DailyFX.com, suggests that such an occurrence would be a bit ahead of schedule and explains why.

Foreign Exchange Price and Time at a Glance

Price and Time Analysis: USD/JPY


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Charts Created using Marketscope-Prepared by Kristian Kerr
Click to Enlarge

  • USD/JPY has rallied steadily since closing on the 4th square root relationship of the year's high around 105.80 last week.
  • However, our near-term trend bias remains lower while below 107.45.
  • A close under 105.90 is needed to set off a new leg lower in the pair.
  • A turn window is eyed around the end of the week/early next week.
  • A close back over 107.45 is required to refocus our attention higher in USD/JPY.

USD/JPY Strategy: Like the Short Side While Below 107.45

Price and Time Analysis: Gold

chart
Charts Created using Marketscope-Prepared by Kristian Kerr
Click to Enlarge

  • XAU/USD has traded steadily higher since finding support at the beginning of the month near 1180.
  • Our near-term trend bias is higher in the metal while above 1213.
  • The 50% retracement of the July/October decline near 1264 is the next upside pivot of note.
  • An important turn window is eyed next week.
  • A close under 1213 would turn us negative on the metal.

XAU/USD Strategy: Square.

Focus Chart of the Day: EUR/USD

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Charts Created using Marketscope-Prepared by Kristian Kerr
Click to Enlarge

An outside day pattern in EUR/USD Tuesday, off key Gann resistance in the 1.2835 area, has the market looking for an early resumption of the broader downtrend. Our work with cycles and other timing methods suggests that such an occurrence would be a bit ahead of schedule as a continuation of the current correction/consolidation into next week is the ideal scenario. Of course, markets rarely give us ideal so we are open to an early downside resumption, but, that said, we really need to see support at 1.2605/1.2585 give way to confirm this more immediate negative view. A move back to 1.2785 would signal the euro remains in consolidation mode, but traction over 1.2835 is really required to force any sort of meaningful final squeeze higher in the exchange rate.

By Kristian Kerr, Senior Currency Strategist, DailyFX.com

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