Currency markets this week begin a repeat performance from last week as long EUR/USD, EUR cross pairs, and short USD/JPY. As written last week, Currency markets are driven by EUR/USD, EUR cross pairs, and USD/JPY. When EUR/USD achieves 1.1300 ‘s and USD/JPY relieves massive overbought conditions, markets resume normality.
EUR/USD closed last week at 1.0928 and 1.0910 this week. EUR cross pairs barely closed 100 pips higher from last week. EUR upside contains a long way to go as trades this week are the same as last week.
Oversold GBP/USD and GBP cross pairs join EUR to travel higher. Nothing special exists to GBP/USD except oversold and a forced move higher. GBP cross pairs are far better trades. We’re cautious this week to GBP/JPY as GBP/JPY is off-kilter to JPY cross pairs and GBP/USD.
DXY achieved its top at 99.00. Following targets lower are located at 98.56,98.34, 98.14 then 97.84, 97.76, and 96.73. The 5-year average is found at 94.93.
All JPY cross pairs are severely overbought. EUR/JPY last week traded to 129.00’s from 124.00’s and began the week at 127.00’s and dead center to 125.00’s and 129.00’s. EUR/JPY 129.00’s represents a multi-year top.
AUD/USD and cross pairs remain severely overbought. AUD/USD’s main problem is a severely oversold EUR/AUD. EUR/AUD closed barely 100 pips higher from last week’s close and must travel far higher for AUD/USD to trade a more comprehensive and acceptable range.
Overbought NZD/USD is in the same predicament as AUD/USD to NZD/USD’s relationship to EUR/NZD. EUR/NZD closed 100 pips higher from last week and must travel higher to open NZD/USD ranges. NZD cross pairs sit overbought to begin the week except NZD/CAD as 0.8660 decides NZD/CAD direction.
USD/CAD’s multi-week story remains the same as big breaks higher are located at 1.2841 and 1.2863. The 5-year average is positioned at 1.3009. CAD/JPY and CAD/CHF trade this week in perfect harmony.
The big move concept, as reported last week, is not only seen in EUR/USD and EUR cross pairs but in the two defining currency market pairs: USD/CAD and GBP/USD. From the 1.3036 and 1.2747 close, the spread factors 289 pips are much too close.
Either GBP/USD and USD/CAD cross each other, or the spread must widen to 500 to 600 pips. 300 to 600 pips are pretty normal and 700 to 900 overbought, which means the spread must compress.
During Brexit, for example, spreads were located at a great 1800 and 1900 pips. Either way, GBP/USD and USD/CAD trades warn to a big move ahead.
To verify GBP/USD Vs. USD/CAD, 1.9138 GBP/NZD as the highest exchange rate minus 0.6363 NZD/CHF as the lowest rate factors to 1.2775 and a midpoint at 1.2750.
The overall big move concept is constituted every two years in currency markets as the distance between anchor and cross pairs reaches their furthest peaks. The result is 300 and 600 pip trades as anchor pairs, and cross pairs compress back to normal ranges.
Exactly three periods exist for every 2-year concept. Either cross pairs must trade back to anchor pair ranges to normalize the relationship, or anchor pairs must trade back to cross pairs to normalize the relationship.
Trades are easy, and big profits are earned quickly, especially from longer-term targets. The time factor usually is about three months to trade back to normalcy. The remainder period occurs when anchor pairs are trading in sync to cross pairs in regular traded markets.
USD/JPY Weekly Trade
Week 16 begins at 1875 pips. However, last week’s trade traveled off course.
The trade is as follows; Short 115.30 and 115.42 to target 114.59. USD/JPY traded to 117.26 or minus 184 pips. USD/JPY at worst should’ve held 116.06 but traded higher. The best I can find for USD/JPY to trade to such high levels is the 10-year average target at 117.14.
USD/JPY begins the week severely overbought, and action plans to add one lot to the current price to target at least 115.88. This offers +138 pips and 46 pips from the 115.42 entry from last week. Last week was the 3rd time in 16 weeks USD/JPY traveled off course.
Recall, off 80 and 95 pips to entry to two trades. By adding one lot, USD/JPY not only traded both lots to target, but extra pips of 80 and 95 pips were added to the trade. We continue to 2500 pips.