The EUR/USD driving average is at 1.0805. Recall past writings. The target on a break of the 5-year average at 1.1400’s was 1.0800, but EUR/USD decided to travel an additional 800 pips to 0.9500 bottoms.
DXY 95 break at the 5-year average targeted 103.00’s and decided to travel an additional 1100 pips to 114.00’s. EUR/USD's drop to 0.9500’s and DXY rise to 114.00’s was unaccounted for by five and 50-year averages or 600 monthly averages. Where was the true average? 60, 80-year monthly averages.
In the life of trading and markets, we may never see again a market price so over and undervalued to trade at 50-year averages, especially from normal currencies such as EUR/USD and DXY. Only cross pairs and JPY contains the ability to trade to such extraordinary depths yet remain rare.
For the first time since March 22, when EUR/USD broke below 1.0800, EUR/USD at 1.0223 normalized to account for a respectable average but only for the short term. Longer term, EUR/USD remains deeply oversold from target averages at 1.1100s, 1.1300s, and 1.1600s.
The following longer-term targets are found at 1.0592, 1.0798, and 1.0967 upon a break at 1.0805. Not only is EUR/USD oversold, but its price remains extraordinarily low. The following targets are short-term at 1.0375, 1.0417, and 1.0592. Massive supports from rising averages are located at 1.0044, 1.0004, and many averages at 0.9900’s.
Higher EUR/USD faces the challenge of seasonality when EUR/USD begins its 6-month drop from December/ January to May/June while DXY and USD/JPY begins its six-month rise for the same period December/ January to May /June. EUR/USD traded its lowest lows for the year in January.
Next Week
Main drivers this week and next week are USD and non-USD currencies. Cross pairs follow. Best trades are EUR/USD and GBP/USD then USD/JPY and USD/CAD. EUR/USD trades overbought and is due for a correction to 1.0168 and 1.0127 easily.
DXY faces massive hurdles at 109.25, 110.20, then 111.00’s and 112.00’s. DXY from 107.00’s and five and 50-year averages at 95.00’s and 96.00s reveals DXY and USD currencies contain a long, long way to drop. The next target for next week is 106.26.
USD/JPY break below the current 142.64 was extraordinary, but this average held for the past year. We’re long for next week to target 140.00s and 141.00s.
USD/CAD, as written last week, held at 1.3600’s. Last week, 1.3418 broke and traded to 1.3284 lows—a break of 1.3380 targets higher for USD/CAD.
GBP/USD target at 1.1887 achieved 1.1775. The following week targets high of 1.1600 as the GBP/USD big break is located low 1.1600’s to trade much lower.
AUD/USD trades comfortably above 0.6599, and only a break at 0.6647 challenges 0.6599. Short for next week remains the overall strategy however a higher AUD would serve as a better short trade for maximum profits. Same for NZD.
GBP/AUD drives EUR/AUD at GBP/AUD 1.7589. EUR/AUD comfortably holds above 1.5236. The divergence between GBP/AUD and EUR/AUD builds, and both may remain last on the trade rank list.
GBP/JPY must clear above 165.27 to travel higher and allow all JPY cross pairs to follow. Last week’s post-break 165.72 targets 164.00. GBP/JPY traded to the low 163.00s. Overall next week is a range trade week.