The commonality to currency markets this week as it pertains to EUR/USD, AUD/USD, USD/JPY and EUR cross pairs is all require a correction higher while USD/JPY desperately needs a correction lower.
Correction for EUR/USD, EUR cross pairs and AUD means overall ranges from 50 to 150 pips and nothing at all special as downside prices traveled to oversold.
Note 50 to 150 pip ranges best describes the overall trading conditions in a vast majority of currency pairs and this means breakouts are coming to expand trading ranges.
Oversold and 150 pips is far to kind as applied to EUR and AUD but its USD/JPY easily will dictate EUR and AUD because USD/JPY needs a 150 pip correction. The higher USD/JPY travels from current prices without a correction then the harder it will fall in 1 fat candle.
USD/JPY since March was and will remain the odd ball and problem currency pair as its price is far to high and it approaches dangerously high levels near 113.00’s.
Higher for EUR and AUD means its vital break points to travel higher will hold and lower USD/JPY also means its break point holds. Until vital points are broken then current trends remain and seen overall is a true correction.
EUR/USD and its cross pairs all remain comfortably below vital break points. EUR/NZD however contains severe pressure on current prices and must move higher but higher means a challenge to vital point at 1.7094.
Yet at the 1.7021 close, EUR/NZD sits 1 pip below its important point at 1.7022.
While the SNB in 2009 released the 1.2000 Floor to the EUR/CHF Peg against EUR/USD, here’s EUR/CHF at 1.1743 and EUR/USD at 1.1771.
The SNB’s Peg to EUR/USD is contained inside a whole different dimension as it allows EUR/CHF to trade within EUR/USD ranges.
It represents an unfair game as EUR/CHF is taken from its normal allowable trading ranges and eliminated as a standalone currency pair to trade. Of all EUR/USD cross pairs, EUR/CHF and EUR/NZD contain the widest ranges and on paper is allowed to move far and wide but the EUR/CHF Peg to EUR/USD cuts EUR/CHF to far less than 1/2 its allowable distance.
EUR/NZD price pressures is nothing new in the life of its ranges and seen all the time. In another few months, guaranteed we’ll see it again.
The why is explained by completely dead European interest rates and the influence interest rates share to German yields. The ECB like the SNB and all central banks are equally abusive to their exchange rate ranges as they know exactly how to control the game and its not through yields any longer as once existed pre 2008 and post 2016 changes. For interested, the how aspect to yields, interest rates and central bank control was written in deep detail to the exact pip. We remain again ahead of the central banks.
USD/JPY correction lower begins first at 110.33 then to target at 109.46. Many resistance points exist in the 109.00’s from 109.77, 109.87 to 109.46, 109.39 and 109.34.
Overall break point for lower USD/JPY to target 108.44 is located at 109.39. Top channel is now 113.25. To understand slow grind, USD/JPY’s break point at 109.39 was 109.28 on Feb 23rd.
USD/JPY began its March journey higher from 104.00’s then it broke rough resistance zones at 106.00’s to next travel to and break of the next set of rough points at 108.00’s and trade to 110.00’s.
The rough resistance points higher located every 200 pips forced a slow 3 months and 600 pip grind. Fed speakers and promise of Fed rate hikes forced USD/JPY higher as interest rates began to reflect the rise otherwise USD/JPY has no business at such high prices as miles of downside exits.
EUR/USD Vital break point is located at 1.2018 and not expected to break this week. A correction from deeply oversold forces EUR/USD higher to target first 1.1829 then 1.1883.
Overall EUR/USD dropped from 1.2500’s in February due to approach to the 10 year average at 1.2800’s and severely overbought from 1.1300’s, 1.1400’s and 1.1500;s. The big break at 1.2300’s then 1.2100’s was responsible to see current 1.1700’s.
While 1.2018 is today’s break point for higher, 1.2300’s remains and will remain in many months to come as the vital break to see EUR back to 1.2500’s and higher. Further, weekly averages since February began its drop against a higher EUR and this week is no different therefore until the averages began to rise, the correct move higher represents a correction to the larger downtrend.
EUR/AUD target lower from the March short trade at 1.6100’s remains 1.5559. A correction is warranted first yet overall EUR/AUD remains in sell rally mode until 1.5500’s achieves its destination.
EUR/AUD break point is located at 1.5767, top channel at 1.5823 and again not expected to break anytime soon. Higher for EUR/AUD means a target at 1.5721 then begins the drop to 1.5631.
Overall, AUD/EUR broke and must remain above 1.5765 as well as a higher expected AUD/USD to ensure EUR/AUD travels to 1.5631 and target to 1.5500’s.
EUR/CHF from its 1.1743 close faces it channel bottom at 1.1732 and 1.1719 as well as extreme oversold at 1.1675. EUR/CHF break point is located at 1.1807 and again not expected to break anytime soon. First target above is located at 1.1769 then 1.1788. The downside then resumes to 1.1719.
EUR/CAD. From the close at 1.5166, first target is located at 1.5199 then 1.5236. Overall break point is located at 1.5350 and top channel now at 1.5609.
Recall the short in March from 1.5500’s. The top at 1.5609 is the result of weekly averages dropping since 1.5500’s in March.
EUR/NZD closed at 1.7021 and next prices are dictated by the break point at 1.7022. Below 1.7022 targets 1.6931 while above targets 1.7094 and 1.7113. Most vital for short continuation is for EUR/NZD to remain below 1.7094.
AUD/USD break point is located at 0.7622 while below AUD hits extreme prices at 0.7463. Same story reported week after week, AUD is deeply oversold. First target above is located at 0.7551 then 0.7586. Longer range target remains 0.7811.
EUR/GBP was reported last week and short remains the strategy to target first 0.8663 then 0.8500’s. Longs are impossible for weeks to come.
Brian Twomey