Price and Time: Key Week for the Euro In More Ways Than One

01/20/2015 9:00 am EST

Focus: FOREX

Kristian Kerr

Chief Technical Strategist, Forex Capital Markets LLC


Kristian Kerr, of DailyFX.com, offers a price and time analysis for three currency pairs and explains why this week’s events are critical, since whenever fundamental catalysts coincide with cyclical timing relationships, it’s usually a sign that something meaningful is about to happen in a market.

Talking Points

  • Critical timing relationship coming up in EUR/USD
  • USD/JPY rebounds off key support
  • GBP/USD probes key retracement level

Foreign Exchange Price and Time at a Glance:

Price and Time Analysis: USD/JPY

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

  • USD/JPY bounced sharply on Friday after breaking key support at 116.35
  • A near-term trend bias is negative on the rate while below 118.00
  • A close back under 116.35 is needed to signal a downside resumption
  • The next minor turn window is eyed around the end of the week
  • A close above 118.00 will turn us positive on USD/JPY

USD/JPY Strategy: Like the short side while below 118.00.

Price and Time Analysis: GBP/USD

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

  • GBP/USD retested the 88.6% retracement of the 2013/2014 advance at 1.5080 on Friday
  • A near-term trend bias is negative on the rate while below 1.5280
  • A close below 1.5080 is needed to signal the start of a more important push lower
  • A very minor turn window is eyed Monday
  • A close above 1.5280 will turn us positive on Cable

GBP/USD Strategy: Like the short side while below 1.5280.

Focus Chart of the Day: EUR/USD

chart
Click to Enlarge

Whenever fundamental catalysts coincide with cyclical timing relationships, it usually is a strong sign that something meaningful is about to happen in a market. On Thursday of this week we have the much anticipated ECB decision where some form of quantitative easing/extraordinary policy is expected to be announced. A mere three days later we have the Greek elections and the strong possibility that an anti-EuroZone political party will gain control of parliament. Right in between these two events we have an important cyclical relationship in EUR/USD as it will be exactly 8.6 months from the 2014 high which was sparked on the day of the ECB meeting in May. As regular readers know, the 8.6 month frequency is one of the more important and reliable cyclical relationships we follow. Heading into 8.6 month turn windows, we usually look for strong trends to reverse in some manner. In this case, the euro is clearly trending and perhaps dangerously so as sentiment and positioning measures remain right near historical extremes. If we are going to get a countertrend move of any significance in EUR/USD that washes out some of the excess speculation, then we would expect it to materialize sometime around this key window (Friday to Tuesday).

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.

By Kristian Kerr, Senior Currency Strategist, DailyFX.com

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