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EUR/USD began the week 27 pips below the next vital level at 1.3787. Above, targets were at 1.1414 and 1.1422. The EUR/USD story remained the same during the week. Longer dated averages were oversold and driving EUR higher. The rising 5 year average was located at 1.1514 and a target at 1.1064.
The only positive to EUR/USD shorts to longer term targets is EUR/USD has been trading below all of the monthly averages dating back 10 years, yet all averages are rising.
The second positive is January enters EUR/USD’s traditional seasonal downtrend. Since 1995, EUR/USD has recorded 15 down months for January and 8 up months. In 2019, the pair ended the month with a Doji candle.
In order for EUR/USD’s downtrend to gain speed, it must break 1.1289 and then 1.1211. The overall trade strategy is long drops as more pips will profit on the upside.
CHF/JPY was held higher by 123.98 and 120.65. Both were overbought as well as every average dating to 100.00’s from 2002. CHF/JPY is a USD pair as it correlates to USD/JPY at +90%.
USD/JPY longs last week targeted 115.53, then short and USD/JPY we were forced to add 1 lot for the 2nd time in 8 weeks. USD/JPY’s problem over the last 2 weeks was not longs, as longs achieved their targets, but the problem is shorts.
From 115.53, USD/JPY then traded a free money bonus moving 80 pips higher to 116.34. And for the 2nd time in 8 weeks the 1 lot forced to add was at 116.34. Two options then existed. Either trade both lots to target or exit the 2nd lot at 15.53.
The addition of the 2nd lot at 116.34 was 115.53 + 81 pips. Longs from 115.08 to 115.53 then +45 pips. Total 2 trades: +126 pips. Total for 8 trades: + 1026 pips. USD/JPY lows for last week achieved at 115.46.
We now have USD/JPY short at 115.90 and 116.01 to target 114.85. Long 114.85 to target 115.43.
USD/JPY begins the week fairly neutral from overbought over the past 2 weeks while DXY achieved lows last week at 95.62 and 95.56 on the previous week. DXY 95.25 remains the big break to target 92.00’s.
Both USD/JPY and CHF/JPY then drop substantially to USD/JPY 110.00’s and CHF/JPY 118.00’s and 117.00’s. Both USD/JPY and CHF/JPY are overbought by miles
All JPY cross pairs remain massively overbought, including GBP/JPY. Best trades this week: EUR/JPY, GBP/JPY and CAD/JPY. AUD/JPY faces headwinds at 83.56 and 84.46. NZD/JPY is least favored.
GBP/USD levels are located at 1.3298, 1.3365, 1.3448, 1.3492, and 1.3629. Not only is the 5 year average at 1.3124, but many averages exist at 1.3100’s. GBP/USD averages are rising; same story as EUR/USD.
GBP/AUD remains a problem currency and EUR/AUD is the better trade despite tiny ranges.
Vital points for USD/CAD are found at 1.2250, 1.2467, `1.2676, 1.2851, and 1.3027.
In the following video, OANDA Senior Market Analyst, Craig Erlam, talks about the USD/JPY, which has pulled back in recent days leading to a potentially significant breakout.
Note, I am traveling, so I am typing the report early, 5 hours before the day session opens. Today is Friday, so weekly support and resistance are important. It looks like this...
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