Price & Time: "Flaky Pattern" in USD/JPY

Talking Points

• USD/JPY flirting with important downside pivot
• GBP/USD stalls at Fib level
• EUR/USD test key moving average

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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 has recovered steadily after finding support last week near the 1.0585 78.6% retracement of the late March range
• Our near-term trend bias is lower while below 1.0830
• A breach of 1.0585 looks needed to set off a more important move to the downside in the euro
• A very minor turn window is eyed tomorrow
• A close over 1.0830 would turn us positive on the exchange rate

EUR/USD Strategy: Like the short side while under 1.0830.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	*1.0585	1.0700	1.0750	1.0805	*1.0830

Price & Time Analysis: GBP/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• GBP/USD stalled on Friday at the 1.5050 50% retracement of the late February/April decline
• Our near-term trend bias is higher in Cable while above 1.4800
• A close above 1.5050 is needed to trigger a more meaningful push higher in the pound
• A very minor turn window is eyed tomorrow
• A daily close under 1.4800 would turn us negative on the pound

GBP/USD Strategy: Looking to buy on weakness against 1.4800.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
GBP/USD	*1.4800	1.4885	1.4940	1.5000	*1.5050

Focus Chart of the Day: USD/JPY

“Mainstream” analysts don’t seem to like chart patterns. This is a mistake in my view as chart patterns can give tremendous behavioral/psychological insight into an exchange rate. I am not the only who thinks this way apparently as even researchers at the Fed found them useful (albeit begrudgingly) in their rather infamous 1995 research piece “Head & Shoulders: Not Just A Flaky Pattern”. It can be read HERE. Personally I think where people run into trouble with pattern analysis is by trying to apply strict and rigid rules to them (which is ironically what the Fed researchers did). A pattern really is just showing a behavioral tendency after a set of technical occurrences. A “head & shoulders” pattern, for instance, is really just a development in a market where it has failed to record new highs. The “neckline” is just the point where a lot of short-term participants will bail out of long positions (or be forced to bail out if one acknowledges the self-fulfilling aspect of widely watched patterns). So why do I bring all this up today? USD/JPY - the price action since early February has set up a pretty clear potential head & shoulders pattern on the daily. Under 118.40 triggers.