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EUR/USD, G10 and Overall Currency Market Conditions

Published 10/28/2018, 05:50 AM
Updated 09/03/2023, 03:41 AM
EUR/USD
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GBP/USD
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USD/JPY
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USD/CHF
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USD/CAD
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NZD/USD
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EUR/AUD
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CAD/JPY
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EUR/NZD
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CAD/USD
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Common themes to Currency market prices is the extreme divide between EUR, GBP, AUD, NZD Vs USD counterparts USD/CAD, USD/JPY and signal pair to JPY crosses, CHF/JPY.

Currency Pair CHF/JPY is a USD pair and its purpose in the 28 major pair universe serves as insight to USD/JPY as the counter balance and same exact pair, insight to USD, insight to USD/CHF and insight to all JPY cross pairs.

Currency CHF/JPY sits dead neutral and now ranges from its 117.00 drop to current 112.00’s. The insight to CHF/JPY informs JPY cross pairs also trade at far extremes from EUR/JPY and GBP/JPY to counterparts CAD/JPY, AUD/JPY and NZD/JPY. I

nsights and trades were clear January to March / April as USD/JPY traded far lower than CHF/JPY then marriages and crossovers occurred. USD/JPY and CHF/JPY are currently in treacherous marriage mode.

Pairs EUR/JPY and GBP/JPY should trade miles lower as proper positions, counterparts higher but the extreme divide between USD and NON USD forces JPY cross pairs into neutrality as all are caught in the cross fire.

CHF/JPY further informs USD/CHF sits at its traditional dead center position and smart for the SNB to allow equilibrium while the major pair extremes resolves itself and resolution means many months ahead rather than weeks. This means a stand alone trade in CHF crosses also retains dominance as minor range trades rather than trends. This includes CHF/JPY.

EUR/USD 1.1300’s, GBP/USD 1.2800’s, AUD/USD 0.7000’s, NZD/USD 0.6500’s retain positions as extreme lows and should trade easily 300 to 400 pips higher to declare normal currency markets within normalized ranges while USD/CAD 1.3100, USD/JPY 113.00 trade at extreme nadir and should trade miles lower.

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USD pairs higher and non USD pairs lower only adds to an already deeply traded divide in currency market prices brought upon markets since the Mar / April period and FED interest rate raises. AUD and NZD were already off track by 300 and 400 pips but EUR and GBP lower ensured both pairs would remain lower for longer.

A meeting at the center is desperately required to see more normalized and wider ranges and lasting trends with purpose and meaning. Current trades at extreme divides lack description as trades or smart but more accurately reflects a dangerous and pure speculative trade. Currency pair choice and trade selection remains extraordinarily vital in the current divided
environment. Best for daily and weekly trades to view wider range pairs until extreme divide rectifies itself and better trades materialize.

The central bank question is answer the FED call and raise interest rates to allow higher currency prices and obvious meeting at the equilibrium center or retain a lower and expensive currency price for export purposes at the expense of national GDP. Not sure Export to GFP correlation nor exchange rate equilibrium until data is seen but CAD/USD at 0.7631 may soon provide an answer against the BOC’s latest raise.

While overall USD Vs Non USD trade at exorbitant extremes, cross pair non compliance and caught in the cross fire forces a slow path to normalcy and the desperately needed position to the center.

Longs in EUR/USD, EUR/CHF and EUR/CAD are offset by shorts in EUR/JPY, EUR/NZD, EUR/AUD and EUR/GBP. Both EUR/JPY and EUR/CAD are fast moving and are dangerous close to perfect mathematical neutrality while EUR/CHF lacks ability outside a 100 pip range. EUR/USD lives on its own in the basement.

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USD/CAD’s wider ranges are offset by dead ranges in CAD/JPY and CAD/CHF. Brexit and USD extremes are clearly seen in GBP/USD as current 1.4990 is the driver price and down from 1.5600’s at Brexit announcement.

Higher GBP to 1.3900 target can only materialize upon a Brexit and USD resolution. Meanwhile GBP/CAD is driven by USD/CAD while GBP/NZD and GBP/AUD are heading lower and driven by AUD/USD and NZD/USD, GBP/JPY retains neutrality and GBP/CHF lacks a significant range.

The most significant long trade is NZD/USD and any pairs with NZD in first position as NZD/USD alone targets multiple 100’s of pips higher.The least significant shorts are USD/CHF and USD/JPY but best is USD/CAD.

Currency market prices are in deep disarray and lack any resemblance to uniformity. Prior currency market periods experienced such USD V Non deep divides before and corrected more quickly as past periods allowed for far wider price movements. As range compression and slower price movements became the new order under the 2016 interest rate reforms, correction to the current chaos could take easily 6 months or more.

To a more distant divide in USD V Non is the question of results to an outside event such as war, terrorist attack, political calamity, an Iranian missile, troops at the border. Such an outside event would experience a 500 pip move faster than the eye could blink. Between the dangerous overall currency market structure and the political/ war scenario, deep caution is warranted.

EUR/USD. Break pont 1.1589.

GBP/USD break Point 13105.

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GBP/JPY 146.43.

CHF/JPY 113.10.

EUR/JPY 129.50.

USD/JPY 111.76

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