The EUR/USD and DXY relationship begins the week at crucial inflection points at EUR/USD 1.0012 and DXY 111.00s and 113.00s. DXY broke the five-year average at 95.00’s last January and traded 1900 pips in September to 114.79 highs. EUR/USD broke below the five-year average at 1.1400s and traded 1900 pips lower to 0.9500’s.
Since DXY achieved 114.79, DXY traded lower highs for the past five weeks, while EUR/USD traded higher lows for the same five weeks. EUR/USD at 1.0012 is the vital average and developed from the break at 1.1400’s and followed EUR/USD lower every week since last November when EUR/USD broke the five-year average.
DXY from 50-year averages written last September. The top from 110.72 to 111.55 normalizes the DXY price from 40 and 50-year averages. Above 110.72 and 111.55 begins overbought from 40 and 50-year averages. Overbought means counting another 100 pips and every 100 pips from 111.55. Above 111.55, for example, trades 112.18, 112.20, 112.24, 112.29, and 112.36. Then next comes 113.00s and 114.00s. DXY, for the past five weeks, traded highs at 112.86, 113.90, 113.95, 112.50, and 113.16.
DXY, for the past five weeks, struggled to move higher from the crucial 110.00s and 111.00s to target lower highs at 113.00s. DXY from 110.76 open this week is no different from the past five weeks as many vital points exist at 111.00’s to target a high 113.00’s. DXY 111.00’s begins at 111.28, 111.38, 111.71, and, most important,111.83.
DXY lower traded 100 pips higher targets over the past three weeks from 1107.00s to 108.00s, and this week at 109.00s. DXY weekly range is located from 1109.00sto 111.00’s, then overbought from 111.00’s to 113.00’s. DXY from the 40 and 550-year averages at 95.00’s and 96.00’s is matched by EUR/USD’s 5fiveyear average at 1.1398.
The Week
EUR/USD from the 0.9957 open trades 55 pips to vital 1.0012 and targets 1.0060 and 1.0108 on a break higher, while a failure at 1.0012 targets easily 0.9821. The EUR/USD and DXY relationship and price resolution are responsible for every market price traded this week.
Gold for example as XAU/USD follows EUR/USD higher and lower. Lower for Gold must break 1.1658 and 1.1650 to target low 1600s and .1597 or higher to target 1720s. EUR/USD fails to break 1.0012, then GOLD trades lower.
USD/CAD at 200 pips is caught between vital 1.3600’s and a big break for lower at 1.3418. USD/JPY is well prepared by 300 pip ranges from 145.87 to 148.56. Not much difference over the past three weeks. GBP/USD at vital 1.1598 and from the 1.1372 open trades neutral and will follow EUR/USD. Same for AUD/USD, vital level is 0.6579.
NZD/USD opens at 0.5927 and trades 17 pips from crucial 0.5944 and offers much downside to 0.5742 if 0.5944 fails to break higher. NZD/USD lower requires an assist by NZD/CHF to break 0.5856 and NZD/CAD to break lower at 0.7965.
USD/JPY and JPY Cross Pairs
While USD/JPY trades 300 pip ranges, GBP/JPY vitals are located from many points at 168.00’s to 165.72. Below 165.72 targets 164.00’s. The best trades this week are GBP/JPY, EUR/JPY, and NZD/JPY. CAD/JPY is good also, while NZD/JPY begins the week severely overbought.
GBP/CAD and EUR/CAD
GBP/CAD begins the week severely oversold while EUR/CAD lacks a clue to direction. Short NZD/CAD highs all week and watch 0.7965. Higher but short only strategy for EUR/AUD, GBP/AUD and EUR/NZD. GBP/NZD is the outlier this week, along with GBP/CAD as both begin the week massively oversold.
Overall, DXY and EUR/USD vitals are growing closer by the week and cannot hold much longer as we must see a larger move to create wider trade ranges.