FX Weekly: BOJ, YCC, JGB, 20 Currency Levels and Targets

US Dollar Index for the week will struggle to break 103.00’s and trade to 104.00’s as averages are again building at 102.00’s and 103.00’s to prevent a DXY rise. The weekly downside dilemma to DXY is middle 101.00’s become severely oversold. Yet the downside and shorts is the only trade available.

DXY’s beginning position for the week translates to severely overbought to EUR/USD, GBP/USD and AUD/USD particularly from lower averages. Instead of EUR/USD, GBP/USD and AUD/USD trading to a normal and workable Friday close price, all decided to challenge vital points higher. GBP/USD failed to break 1.2850, EUR/USD 1.0987 and AUD/USD at 0.6914.

The end result for EUR/USD, GBP/USD and AUD/USD is a shallow and overbought close price and weekly positions just below vital points. All GBP currencies suffered the same fate as GBP/USD. GBP/CAD for example failed at 1.6947, GBP/CHF at 1.1511 and GBP/NZD at 2.0670.

The Week

All GBP currencies begin the week overbought. GBP/JPY’s monthly Averages from 32 to 38 years run as 172.24, 174.83, 176.61, 178.02, 179.57, 181.07 and 184.14. GBP/JPY correlation to USD/JPY = 92% and GBP/JPY to GBP/USD at 91%.

GBP/USD lacks ability to break and hold at 1.2850. For the week, lower to 1.2600’s then long for next week to break 1.2850 and trade higher. Averages align as 1.2434, 1.2599, 1.2850, 1.3246. The GBP/USD break at 1.2850 and 1.2850 to 1.3246 range places GBP in a historic midrange from 1.1800 lows and the 2016 Brexit drop at 1.4800’s in June 2016.

GBP/NZD averages severely compressed over the past 2 weeks. GBP/NZD’s top is located at 2.0670 and targets 2.0318, 2.0242 and 2.0054. Longer term, GBP/NZD vital averages are found at 1.9900’s and 1.9800. GBP/NZD is the preferred currency to EUR/NZD.

GBP/CHF trades overbought inside 1.1299 to 1.1693. EUR/CHF trades 0.9788 to 1.01398. Both GBP/CHF and EUR/CHF trade oversold and contain enormous potential to trade much higher than current range points. GBP/CHF and EUR/CHF support higher to GBP/USD and EUR/USD on long only strategies.

JGB 10 Year, BOJ and USD/JPY

The JGB 10 year opens at 0.403 and last week 0.426. The 10 year last week was to high in relation to the YCC band and was forced lower.

The 10 year minus 3M = 0.538 and perfectly bumps against the YCC band. Inside the 10 year minus 3 month offers analysis to the domestic interest rate. The 10 year minus 2Y = 0.467. Not terrible in relation to YCC bands.

YCC not only operates perfectly but allows the BOJ to view USD/JPY and JPY cross pairs in increments of 1000 pips. A lower USD/JPY won’t derive from the YCC bands unless the bands lose control. The economic side as the monetary base, GDP and Inflation are primary to view for a lower USD/JPY. The BOJ intention is an overshoot and tiny range above the 2% Inflation target much the same as the BOC in Canada.

The BOJ last intervened October 2022 at USD/JPY 151.00’s or JPY/USD at 0.0066216. Current USD/JPY at 141.85 trades JPY/USD at 0.0070497 and a difference of 0.0004281. At USD/JPY 151.00’s, Japan imported more from Asia, Europe and the Middle East than exports.

By May 2023, the export/ import story turned fairly Export positive for Japan particularly for Asia, United States and parts of Europe. Intervention wasn’t a question to level of exchange rate but exchange rate level in relation to Exports.

USD/JPY targets easily 140.03 and 139.48.

EUR/USD

EUR/USD vital levels for the week are located at 1.0927 and 1.0856. EUR/USD trades from 1.0771 – 1.0926 and 1.0927 to 1.1114. Long term target remain 1.1037.
EUR/CHF big break above 1.0138 and coincides to GBP/CHF at 1.1693.

AUD/USD trades 0.6718 to 0.6916, above targets 0.6959 and 0.7002. NZD/USD 0.6174 to 0.6403.

USD/EM

USD as USD/EM trades massive oversold. Oversold USD/CZK higher targets 21.7876 and 21.9154. USD/HUF and USD/DKK begins the week oversold. Oversold USD/PLN targets 4.1260.
USD/RON targets 4.5503 and 4.5609

Brian Twomey