The current range compression showdown between EUR/USD and USD/JPY continues into week 4 from Feb 23rd as EUR/USD’s larger range from 524 pips dropped to today’s 505 while USD/JPY’s 447 pip highs collapsed to today’s 442 pips.
From last week, EUR/USD’s range lost 4 pips from 509 while USD/JPY forfeited 5 pips from 447. The week 4 story is failure to break significant points hence the reason for range constriction.
EUR/USD’s larger range is located from 1.2825 to 1.1815 and this range moved down 19 pips over the past 4 weeks while EUR/USD trades between its shorter range at the 5 and 10 year averages from 1.1960 to 1.2812.
Upside 1.2800’s remains blocked by 1.2833, 1.2841, 1.2870 and 1.2895 to explain the drop in upper range points. As EUR/USD falls, upper range points drop.
Any chance to challenge 1.1960 then EUR/USD must break 1.2211 and 1.2211 is a 55 pip drop from 1.2166 Feb 23rd but to offer validation to respective break points, 1.2211 was once the vital 1.1100 break dated June 2017.
Must break points this week for higher and lower EUR/USD are located from 1.2320 to 1.2360. The 1.2360 and higher problem is EUR/USD leaves its range above 1.2364. At 1.2211 must rise in order to see the next level at 1.2405 and a good short point.
Below 1.2320 comes next 1.2315, 1.2308 and 1.2281. At 1.2281 must break in order for 1.2211 to target below 1.2176, 1.2162 and 1.2150.
USD/JPY as was the case last week will lead the way higher. USD/JPY’s larger range is located from 109.61 to 100.76 and trades between its 5 and 14 year averages from 109.82 to 102.99.
Higher for USD/JPY to target its vital break point at 107.94 must trade above 106.62 and 107.02. Lower targets 104.00, 103.49 and 103.09.then 102.99. Most vital is 103.09.
The shorter range is located from 104.65 to 105.19. Why USD/JPY leads the way higher is because it trades outside its range and must travel higher to 105.87 on a break of 105.18, 105.19 and 105.30. EUR/USD 1.2320 corresponds to 105.19 while 105.30 translates to EUR/USD 1.2296 and above the break at 1.2281. Caution is warranted.
USD/JPY longer term trades above neutrality and flat on the floor in the daily view while EUR/USD’s current price longer term is far to high but a base is forming.
Despite a 1 pip difference from 105.18 and 105.19, USD/JPY radically changes its ranges and its relationship to neutrality above 105.18. This means the break above 105.18 and 105.19 will see USD/JPY skyrocket higher as was the case last week when it was written USD/JPY must travel above 106.32.
EUR/USD will see its best volatility at 1.2320 and 1.2281. Overall for the week, EUR/USD travels lower while USD/JPY higher.
Brian Twomey