Price & Time: December Dollar Surprise?

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Talking Points

• USD/JPY calm before the storm?

• AUD/USD cracks major support

• Big test for USD

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Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/JPY

Charts Created using Marketscope – Prepared by Kristian Kerr

• USD/JPY is in consolidation mode below 119.00

• Our near-term trend bias is positive on the exchange rate while above 116.80

• The 119.00 area is interim resistance ahead of the next key Gann pivot at 119.50 and a long term retracement zone at 120.20

• The next turn window of significance is eyed early next month

• A close under 116.80 would turn us negative on USD/JPY

USD/JPY Strategy: Like the long side while over 116.80.

Price & Time Analysis: AUD/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

• AUD/USD broke under the 50% retracement of the 2008-2011 advance yesterday to trade at its lowest level in 4-years

• Our near-term trend bias is lower in the Aussie while below .8660

• The 127% extension of the early November advance at .8470 is the next key support of note

• A minor cyclical turn window is eyed around the end of the week

• A close above .8660 would turn us positive on AUD/USD

AUD/USD Strategy: Like the short side while under .8660.

Focus Chart of the Day: FXCM US DOLLAR INDEX

We are starting to have doubts about the Dollar again in the medium-term. December is historically one of the worse months for the Dollar Index from a seasonal perspective. This coupled with the fact that the FXCM US Dollar Index is hitting a major resistance cluster between 11,310 and 11,400 (78.6% retracement of 2009-2011 decline, 50% retracement of 2001-2011 decline and the 61.8% projection of the 2011-2013 advance) at the same time that long USD positioning is at all-time highs by some measures and sentiment towards other developed currencies is at or near decade long lows is certainly worrisome from a contrarian point of view. The talk going into end of year is that these trends should continue and the fact is they usually do, but most years the FX markets aren’t exhibiting these outlier extremes in positioning and sentiment. In our view, the end of the calendar year now becomes a double edged sword. Yes there are plenty of incentives to keep the party going, but it only takes one or two major players to decide to throw in the towel early and things can turn ugly fairly quickly with the markets leaning so much in the same direction. Our work with cycles suggests that December should be more volatile this year for the Greenback. Next week’s ECB meeting looks to be the clearest potential catalyst as disappointment from Draghi whether perceived or real could force some liquidations. We shall see. Happy Thanksgiving!

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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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