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FX Weekly: Trading Opportunities in Gap Opens, EUR Vs. DXY, JPY and GBP Pairs

By Brian TwomeyCurrenciesNov 20, 2022 11:14AM ET

www.investing.com/analysis/fx-weekly-trading-opportunities-in-gap-opens-eur-vs-dxy-jpy-and-gbp-pairs-200632592

By Brian Twomey | Nov 20, 2022 11:14AM ET

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A gap applies to a Sunday night open when the currency pair is severely overbought or oversold. The amount of pip movements depends on the degree of overbought or oversold. The purpose of the Gap open is to allow a currency price to begin the week in neutrality and to permit the currency pair to align to its counterpart currencies.

A weekly trade holds the same principles as a daily trade, as the price begins in neutrality and holds a fair chance to rise or fall.

Gap risk. No such concept exists to risk. Gap risk is an opportunity for free money. The following currencies from 28 are subject to Gap opens Short GBP/CAD, EUR/CAD, NZD/CAD, NZD/JPY, GBP/AUD. Long AUD/NZD.

AUD/CAD barely meets the requirements to be overbought, as does its massive overbought counterparts, but because AUD/CAD resides in the same family, AUD/CAD will follow short to its family members yet not for the same amount of pip movements.

USD/CAD fits into the equation by being deeply oversold as USD/CAD sits on its big break point at 1.3328 to target lower at 1.3236. The relationship between USD/CAD and cross pairs is CAD = CAD.

The current market trading period is the 2nd side of the currency pairs drives and moves in unison. Examples include CHF/JPY = USD/JPY, EUR/GBP = GBP/USD.

A currency pair is an equal opposite yet tilted to one side based on the market trading period. The foundation is EUR/USD / DXY.

Before 2008, the 1st currency drove and was responsible for all movements. The two sides and places seen are by Math as Correlations and bounded residual plots to Simple Regression.

When the 2nd side of currency pairs drives markets, ranges are suppressed and wider under the first currency pair side—seen most specifically in EUR/USD and USD/JPY.

DXY Vs. EUR/USD

The target last week at 105.05 traded to 105.34. DXY traded directly to target and never looked back and actually traded from oversold to more oversold. EUR/USD traded the opposite path from starting the week at overbought to trade higher overbought to 1.0481.

DXY this week was 107.81, 108.34, then the brick wall at many averages at 109.00s and 110.00s. DXY is supported at 106.30 and 105.67. The weekly range is about 200 pips.

EUR/USD is well supported at 1.0157 and 1.0186 Vs. 1.0376 or 190 pips. The EUR/USD target this week is 1.0215 and up from 1.0136 from last week. EUR/USD traded lows to 1.0272. By trading to overbought 1.0481, EUR/USD averages rose, and DXY averages remained on the slow downslope.

Currency markets this week are defined as 200 pips, then add 50 – 100 pips for cross pairs, and the week is established. DXY from 106.67 and 114 pips = 107.81. EUR/USD at 1.0322 to 1.0376 = 54 pips. DXY from 106.67 and 105.67 = 100 pips. EUR/USD from 1.0322 to 1.0186 = 136 pips.

EUR/USD last week traded at 211 pips and 189 for DXY. At 200 pips for this week, currency markets are tight and defined by compression of averages. Either markets breakout and offer wider trade ranges, or 200 defines markets for a long time into the future. EUR/USD close Friday is expected at 1.0254.

Trade Rankings

EUR/USD, EUR/JPY, EUR/CAD, NZD/JPY, NZD/USD, EUR/AUD, AUD/USD, CAD/JPY, AUD/JPY, USD/CAD, USD/JPY, AUD/CHF, CAD/CHF, NZD/CHF, EUR/NZD.

Best trades: : EUR/USD, EUR/JPY, EUR/CAD, NZD/JPY, NZD/USD, EUR/AUD, EUR/NZD

GBP Best: GBP/CAD, GBP/AUD, GBP/USD, GBP/JPY, GBP/CHF

Easiest trades first for maximum pips, then the next set of easiest trades, followed by trades of no interest or trades that require much figuring and factoring.

AUD/USD sits as least favored as 0.6659 decides AUD plus AUD just doesn’t know which way to travel, and the same applies to AUD/JPY and AUD/CHF. NZD/USD is the better trade.

USD/JPY 139.44 to 140.29 or 141.15 and 142.01. Least favored USD/JPY, but we have five days of day trades to guarantee profits.

GBP/JPY begins the week overbought, and it's shorts for JPY cross pairs. AUD/JPY is least favored, while GBP/JPY, EUR/JPY, and CAD/JPY remain preferred. GBP shorts favored all week.

Due to DXY's short ranges, SPX and stock markets will suffer from small moves this week. SPX traded 127 pips last week, and much the same is expected this week. XAU/USD will follow EUR/USD lower and target 1744. Overall, another range week and the same as last week.

Comments (1)

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imran bukhari Nov 21, 2022 11:22AM ET

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FX Weekly: Trading Opportunities in Gap Opens, EUR Vs. DXY, JPY and GBP Pairs

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