Price & Time: Cable Undercuts the 200-Day Moving Average

Talking Points

  • GBP/USD breaks key long-term support level
  • USD/JPY nearing critical resistance area
  • Gold meanders

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Foreign Exchange Price Time at a Glance:

Price Time Analysis: USD/JPY

Price amp; Time: Cable Undercuts the 200-Day Moving Average

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY continues to edge higher off the 101.50 78.6% retracement of the July range
  • Our near-term trend bias is higher in the exchange rate while above 101.50
  • The 61.8% retracement of the April/May decline near 102.85 reamins an important upside pivot with a close over this level needed to confirm more serious move higher is underway
  • A minor cycle turn window is seen on Wednesday
  • A move under 101.50 would turn us negative on the rate

USD/JPY Strategy: We like the long side while above 101.50.

Price Time Analysis: GOLD

Price amp; Time: Cable Undercuts the 200-Day Moving Average

Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD continues to chop around key Gann levels between 1321 and 1280
  • Our near-term trend bias is positive on the metal while over 1280
  • A move through 1321 is needed to confirm that a more meaningful move higher is in fact underway
  • A cycle turn window of importance is seen around the start of next month
  • A daily close under 1280 will turn us negative on Gold

XAU/USD Strategy: Like the long side while 1280 holds.

Focus Chart of the Day: GBP/USD

Price amp; Time: Cable Undercuts the 200-Day Moving Average

The price action in Cable has been very interesting over the past few days. On Thursday the pound reversed from the 200-day moving average near 1.6660 almost to the pip. A gap higher was then seen on Monday morning after newspaper comments from the head of the Bank of England over the weekend. This strength proved short-lived, however, as the gap has been filled this morning with GBP/USD falling sharply lower and below the 200-day MA for the first time in almost a year. This action is a little surprising. We say this because we have noticed over the years that currency rates that spend an extended period of time over the 200-day MA tend to find support on the first test of the moving average. We like giving the pound a little more room as there is a decent chance this is just a slight undercut of the 200-day MA and part of some sort of larger temporary bottoming process. Tuesday and Wednesday’s close should prove important in this regard as a failure to get back over 1.6660 would turn the medium-term picture even more negative and undermine further the potential for a correction before September.

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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

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