Analyst Picks
Analyst Picks

Talking Points

  • AUD/USD nearing critical resistance zone
  • Just a routine consolidation or is a reversal taking shape?

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

The near term technical picture in AUD/USD turned a little less negative last week after thepair failed to record a new low under .7625. The subsequent ‘higher low’ on the daily chart is a warning sign that the downtrend is starting to fatigue, but strength has so far been pretty mild and for the most part unimpressive. The key price zone for us looks to be the .7870/85 as this area marks a nice convergence of several important levels of resistance including the month-to-date high, 38% retracement of the year’s range and the 3rd square root relationship of the year’s low. This area could also be interpreted as the trigger for a potential ‘double bottom’ pattern. Trading is a lot about observation and how the exchange rate reacts around this key zone should shed a lot of light on what is really going on. While below .7870 we have to give the benefit of the doubt to the broader trend. Traction above .7885, however, would warn that a more meaningful correction higher is beginning to take hold.

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AUD/USD Daily Chart: February 6, 2015

Key Price Zone Ahead For AUD/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

Key Event Risk in the Week Ahead:

Key Price Zone Ahead For AUD/USD

LEVELS TO WATCH

Resistance: .7875 (MTD high), .7885 (Gann)

Support: .7740 (WTD low), .7715 (YTD closing low)

Strategy: Buy AUD/USD

Entry: Buy AUD/USD if it closes above .7885 within the next couple of trading days

Stop: Daily close .7845

Target: .7980

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

To contact Kristian, e-mail [email protected]. Follow me on Twitter [email protected].

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

Talking Points

  • Narrow range day points to volatility expansion
  • NFP a clear catalyst for USD/JPY

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

Despite some turbulent action elsewhere in the FX markets, USD/JPY has gone virtually nowhere as the range this week in the pair is a little over 100 pips. Yesterday, in fact, was the narrowest range in almost a month. Such a sharp contraction in near-term volatility is usually a reliable signal and precursor to a meaningful directional move given the inherent mean reverting tendency of volatility. US employment data should be a clear catalyst for volatility expansion. Our game plan after the data will be to watch how the exchange rate reacts around this week’s range extremes. A convincing break of 116.86 will be seen as a negative and should open the way for a more serious decline while traction over 118.00 will be taken as a bullish development.

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USD/JPY Daily Chart: February 6, 2015

Volatility Expansion Looming In USD/JPY?

Charts Created using Marketscope – Prepared by Kristian Kerr

Key Event Risk in the Week Ahead:

Volatility Expansion Looming In USD/JPY?

LEVELS TO WATCH

Resistance: 117.98 (WTD high ), 118.90 (trendline)

Support: 116.86 (WTD low), 116.10 (trendline)

Strategy: Sell USD/JPY

Entry: Sell USD/JPY if spot closes the day below 116.86

Stop: Daily close above 117.40

Target: 115.00

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

To contact Kristian, e-mail [email protected]. Follow me on Twitter [email protected].

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

Talking Points

  • USD/CAD touches highest level since April of 2009
  • Spot testing major long-term retracement level

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

USD/CAD traded at its highest level since April of 2009 earlier today. To say the advance over the past few weeks has been impressive is probably a bit of an understatement as the pair has overcome a multitude of key long-term Fibonacci levels this past month including the 61.8% and 78.6% retracements of the 2009-2011 decline and the 38.2% and 50% retracements of the 2001-2007 decline. Overcoming just one of these levels would be an important technical development, but breaching all four in a matter of weeks is almost unprecedented. Not surprisingly sentiment towards the CAD has collapsed during this time with the DSI (Daily Sentiment Index) now at levels of extreme pessimism on every timeframe out to three weeks. From a contrarian perspective this lopsided sentiment is a cause for concern and the sentiment profile is now actually very similar to the one in JPY heading into December. We think like in yen there is a strong chance this extreme sentiment situation will lead to a decent USD/CAD correction in the near future, but we will need to see price action begin to confirm this thinking before actually positioning against this near parabolic uptrend.

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USD/CAD Monthly Chart: January 29, 2015

USD/CAD Overloved?

Charts Created using Marketscope – Prepared by Kristian Kerr

Key Event Risk in the Week Ahead:

USD/CAD Overloved?

LEVELS TO WATCH

Resistance: 1.2700 (Psychological), 1.2720 (Feb 2009 monthly close)

Support: 1.2560 (Gann), 1.2500 (Psychological)

Strategy: Sell USD/CAD

Entry: Sell USD/CAD if spot closes below 1.2625 within the next two trading days.

Stop: Daily close above 1.2680

Target: 1.2500

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

To contact Kristian, e-mail [email protected]. Follow me on Twitter [email protected].

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

Talking Points

  • New 11-year low in EUR/USD
  • Spot testing major long-term retracement levels

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

Over the course of my 15 year career in the financial markets I have seen two stock market crashes, a real estate crash, an energy crash, a flash crash, several investment banks go under and the list goes on. I thought I had pretty much seen it all. Then last week happened and a major developed currency crashed 30% over a matter of minutes. If nothing else it was a good reminder that anything can and will happen in the financial markets. This brings me to EUR/USD. After perhaps one of the most telegraphed moves in recent history the euro has continued to collapse in the wake of the ECB decision to launch a QE program. The conditions surrounding this latest decline continue to send off red flags from a sentiment, positioning and statistical standpoint, but so far the markets could care less. It would be highly unusual for the conditions in place not to lead to some sort of meaningful counter-trend move, but after last week highly unusual has clearly become the new normal. My work with cycles suggests the next few days are absolutely critical for the euro. At the same time the single currency is testing and so far breaking a critical price zone at 1.1210/40 as this marks the 50% retracement of the 1985 “Plaza Accord low” (using synthetic rates) and the all-time high in 2008 and the 61.8% retracement of the all-time traded low in 2000 and the 2008 high. Failure to get back above 1.1240 within the next couple of days will continue to favor the “highly unusual”.

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EUR/USD Weekly Chart: January 23, 2015

Sell The Rumor Sell The News?

Charts Created using Marketscope – Prepared by Kristian Kerr

Key Event Risk in the Week Ahead:

Sell The Rumor Sell The News?

LEVELS TO WATCH

Resistance: 1.1270 (Gann), 1.1390 (Gann)

Support: 1.1155 (Gann), 1.1115 (Gann)

Strategy: Buy EUR/USD

Entry: Buy EUR/USD if it closes above 1.1240 within the next couple of days

Stop: 1.1155

Target: 1.1400

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

To contact Kristian, e-mail [email protected]. Follow me on Twitter [email protected].

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.