As DXY broke below its 5-year average at 95.25 last Wednesday, EUR/USD traded exactly to its 3-year monthly average at 1.1480 and just ahead of the 5-year average at current 1.1517. EUR/USD averages continue to rise, and the downside target is now located at 1.1070.
While EUR/USD’s response to the DXY break was correct and immediate by shooting higher, USD/JPY’s downside answer was a laggard move by two full trade days.
USD/JPY traded above its vital point Wednesday at 114.03, then bounced 113.96 Thursday, then bounced, and finally broke 113.90 on Friday. USD/JPY achieved lows Friday at 113.46 or 44 pips.
USD/CHF’s immediate reaction to DXY was seen by the break at 0.9203 Wednesday and eventually bolted 112 pips to 0.9091 lows Thursday.
USD/CAD as leader of the big 3 USD pairs was already in its downtrend Tuesday by the break lower at 1.2665 and traded 215 pips to 1.2450 lows.
EUR/USD from the 1.1387 break to 1.1480 traded 93 pips, DXY traded 62 pips lower to 94.63, USD/CHF achieved 112 pips and 44 pips for USD/JPY.
A rare day for DXY as the market leader due to the same comparable ranges to EUR/GBP but the 95.25 break was overwhelming and required rapid movements from all currencies and market instruments.
As stated over many years, USD/JPY was born and lived its trade life as a horrible currency pair, which explains why USD/JPY was never included in the weekly trade lineup.
DXY’s new 5-year average level is located at 95.06. The 5-year average is a midpoint to tops at 98.00’s and 99.00’s Vs. bottoms at 92.00’s and 91.00’s. DXY above or below 95.00 represents a 400 pip range.
USD/CHF
USD/CHF at current 0.9100, trades at DXY 91.00 bottoms. To travel higher, USD/CHF must break 0.9138, 0.9183, and 0.9240. A brick wall of averages exists from 0.9400’s to 0.9600’s. For USD/CHF to test 0.9400’s and 0.9500’s, DXY must trade to tops at 98.00’s and 99.00’s.
The current 95.00 DXY and 0.9100 USD/CHF relationship holds right around a 300 pips range and will remain permanent for the distant future. For DXY to trade to 92.00’s and 91.00 bottoms, then USD/CHF must trade to 0.8900’s and 0.8800’s.
The Week Ahead
Currency and all markets are tied to EUR/USD 1.1517 and DXY 95.06. An average trade week is ahead without any dramatic moves.
On the GBP side, best trades are located in GBP/USD, GBP/JPY and GBP/NZD while nothing special exists to GBP/CHF, GBP/AUD and GBP/CAD. GBP/JPY top at reported 157.00’s traded to 155.00’s.
Both EUR/USD and USD/JPY begin the week in terrible positions, and EUR/USD is at the bottom of weekly trade rankings.
NZD/USD and NZD cross pairs begin the week oversold as well as AUD/USD and AUD cross pairs. Since November, AUD pairs are the better trades as NZD has been a dead issue. NZD/USD last week was the worst-performing currency to the DXY 95.25 break.
USD/JPY
Last week’s target achieved 114.85. However, entries never materialized. USD/JPY trade the previous week is written as no trade. This week’s trade is a pass until a viable entry exists. Stay tuned.