DXY traded to 101.54 lows last week and closed at 101.99 at the previous week’s low. Highs achieved 102.90 inside a 136 pip trade week. DXY’s vital levels at 102.95 and 103.29 held yet brought markets and prices directly to the brink.
DXY’s 102.90 allowed EUR/USD to break 1.0866 and trade to 1.0886, AUD/USD broke 0.6977 to trade 0.7062 and NZD/USD 0.6458 traded to 0.6529. GBP/USD traded to 1.2435 highs to further challenge the break at 1.2551.
DXY’s critical levels this week are 102.21, 102.75, 103.06, and 103.57. From the low 103.00s, averages are positioned every 100-ish pips above and place DXY on a continuation to short-only strategies.
GDP reports Thursday. GDP is defined three letters and factors the same moving averages as DXY or EUR. GDP is an economic release, while EUR or DXY is classified as a market-traded document. The difference between GDP and EUR/USD ranges as GDP ranges are tiny about EUR and DXY.
As reported by the RBNZ, they post GDP numbers after every release, GDP numbers 4.05, 3.89, 3.81, 3.73, and 3.65. 3.58, 3.52, 3.45, 3.33. The Atlanta Fed holds at 3.51 and above 3.2 from Q3 2022.
The problem with Thursday’s release is that GDP averages from 1 to 11 years trades in a tiny range as averages are neither overbought nor oversold but contain targets within 3.89 to 3.45 and 3.33.
No surprises are expected; however, the consensus estimate at 2.8 assumes a break at the 11-year average at 2.29 to place GDP’s next release in February from 2.39 to 2.37 and 2.05.
EUR/USD Vs USD/EUR and DXY
EUR/USD trades a range from 54 to 108 daily pips Vs. USD/EUR at 47 and 94 pips. Very few EUR/USD pips trade on any trading day. DXY trades 51 or 102 daily pips, yet EUR/USD was constructed as opposite USD and driven exclusively by USD.
The Week
We’re cautious this week to a long USD as USD/JPY and USD/CAD and short non-USD strategy, particularly when EUR, GBP, AUD, and NZD trade just below vital levels. Without breaks above significant range points to begin a new 300 pip range and trend, severely overbought range points below averages warrant shorts to EUR, AUD, NZD, and GBP.
Despite shorts, the best short targets are 120 to 150 pips. EUR/USD, for example, targets 122 pips below 1.0732. The DXY trend lower and 96.00 at the 50-year average is too powerful a downtrend to warrant a EUR or non-USD correction to travel much lower than 120 and 150 pips. More than 150 pips assume DXY trades to the middle 103.00s.
DXY Levels: 102.21, 102.75, 103.06 and 103.57. EUR/USD trades from 1.0547 to 1.0882 or 335 pips and no changes from prior weeks. Next above 1.0882 is located 1.0918 and 1.0933.
USD/JPY trades from 125.13 to 133.96 and 134.54. While 125.13 held relatively steady over the past month, USD/JPY upper averages dropped about 100 pips from 135.00’s. USD/JPY above averages will continue a slow drop lower.
JPY Cross Pairs
We’re cautious about USD/JPY longs and JPY cross pairs this week and view the best trades as CAD/JPY, GBP/JPY and AUD/JPY as a distant 3rd. NZD/JPY is least favored, especially over the past months, as NZD/JPY lacks range and a clue to weekly moves except to follow AUD/JPY. EUR/JPY also lacks excitement as EUR/JPY begins the week dead neutral without a purpose.
The best NZD/JPY and EUR/JPY strategies are short highs and extended lows as both will follow leaders GBP/JPY and CAD/JPY. The attraction to GBP/JPY and CAD/JPY is ranges offer movements, best profit opportunities, and trade signals are pretty straightforward.
- GBP/JPY 156.16, 159.30, 161.39, and 162.45.
- CAD/JPY 95.13, 99.83, and 100.81.
- EUR/JPY 135.27, 140.93, and 141.10.
- AUD/JPY 86.92, 91.25, and 91.32.
- NZD/JPY 80.45, 82.21, 83.97 and 83.99.
Above targets for the week are located in the same EUR/USD range as 120 and 150 pips.
AUD/USD and NZD/USD
AUD/USD 0.6819, 0.6977, and 0.7132. Next, above 0.7027.
NZD/USD 0.6277 to 0.6469. Next, above 0.6484 and 0.6492.
GBP/USD trades in wide ranges from 1.2061 to 1.2306 and 1.2551.
GBP/AUD 1.7688 to 1.7999.
USD/CAD over the past two months traded from 1.3300 to 1.3500s and 1.3600s. Until the 1.3300 range breaks to target 1.3200 and final at 1.3100, the range trade remains the best strategy.
Trade Ranks
EUR/USD, USD/JPY, AUD/USD, AUD/JPY, EUR/AUD, EUR/CAD, NZD/USD, CAD/JPY, USD/CAD, EUR/NZD, EUR/JPY, NZD/JPY.
Best overall: EUR/USD, USD/JPY, AUD/USD, EUR/CAD, NZD/USD, CAD/JPY, USD/CAD.
GBP Best trades: GBP/USD, GBP/CAD, GBP/AUD.