From 2018 to April 2021, when Inflation printed 3.00’s, weekly trading ranges traded 150 ish pip weeks and cross pairs at 150 to 200 ish pips. As higher Inflation and interest rate changes became the norm, trading ranges expanded to the current 150 X 3 or 450 to 500 pips.
Yet the current 450 – 500 pip weeks failed to match the 600 and 650 pip weeks from 2008 to 2010 due to the market crash than to price normalization. The 600 equates to 150 X 4. The current 450 to 500 exceeds weekly trade ranges at 300 and 350 from 2006 to 2007 or 150 X 2.
Trade ranges will eventually contract to 300 pips, then 150, particularly when DXY approaches 96.00’s and EUR/USD to 1.1300s at 5-year averages. Currency prices cycle in 50-pip increments over two years and move exceptionally slowly. Trade ranges will contract to 400 and 450, then 350 to 400, and settle to 300 and 350.
Count 50 points less for current S&P 500 at 200 and 250 weeks to trade 150 to 200. Gold, Silver, Commodities, interest rates, and yields all trade fewer ranges than DXY while Nasdaq and Dow Jones Industrial Average trade higher ranges than DXY. DXY is the driver and foundation of all market prices and is built into the numbered market system. SPX, for example, can’t trade higher ranges than DXY.
DXY at 106.42 and SPX at 3992.93 are the same instruments tied in marriage by a decimal point, as is every financial instrument across every nation.
DXY
This week’s target of 106.26, as written Friday, was achieved the target on Friday. Count 100 pips to the next target at 105.04. Higher DXY must clear above upper 108.00s to target 111.00s. Target supports and resistance levels are located at every 125 pips. Movements are backed in the cake.
EUR/USD
Break below 1.0050 targets easily 0.9970, then 0.9891. Target (NYSE:TGT) this week is 1.0130 and easily achievable upon a break at 1.0210.
Trade Ranks
EUR/USD, EUR/CAD, USD/JPY, AUD/JPY, AUD/USD, EUR/AUD, NZD/USD, CAD/JPY, USD/CAD, EUR/NZD, AUD/CHF, NZD/CHF, CAD/CHF, EUR/JPY, NZD/JPY.
Exclude the best of 15: EUR/USD, USD/JPY, EUR/AUD, EUR/CAD, NZD/USD, CAD/JPY, USD/CAD, EUR/NZD, CAD/CHF. Overall best trades are EUR/USD, GBP/USD, USD/JPY. The least favored is AUD/USD, as AUD has problems.
JPY cross pairs are oversold. Best trades are GBP/JPY and CAD/JPY. Oversold CAD/CHF will assist CAD/JPY higher.
USD/CAD must clear 1.3370, but the main line is located at 1.3500’s, dropping as DXY by 100 pips per week. Above 1.3300’s targets 1.3400s and a roadblock at 1.3500;s.
As DXY supports and resistance levels are located at every 125 pips, EUR/USD is located at every 117. GBP/USD is the best trade at 142 pips, then GBP/JPY at 152.
FED Funds Vs. 10-year Yield
Fed Funds at 3.83 is matched by the United States 10-Year at 3.81. Fed Funds must trade lower, or the ten-year must trade higher as this relationship cannot hold. Overall, good movements and a great trade week ahead.