FX Weekly: USD/JPY Weekly Trade, EUR/USD Targets, Fed And Interest Rates

Currency markets are heading for a good trade week. EUR/USD begins the week oversold and targets 1.1383 and 1.1394. The 5 year average and a rising weekly line is located at 1.1530 and targets 1.1098. A brick wall for EUR/USD exists at 1.1527, 1.1530 1.1540. Yet the lines are rising to offer a continuous long only strategy.

While the Fed proposes many raises to infinity, Fed Fund averages from 1 month to 30 year monthly averages range from 0.08 to 2.4605 highs, a spread of 2.3805.

The long term rate or the natural/neutral rate of interest from 1800s Economist Knut Wicksell is located at 1.3905. Inflation at the 2% target factors the natural rate at 1.4405. Averages to 30 years are fairly neutral as they are not overbought nor oversold.

The question to many raises is are central banks prepared to match Fed raises? Also, will the Fed send exchange rates vs each central bank that are at extreme deviations vs each other?

Its been 90 years since the Currency Wars of the 1930s. Then it was an economic and export war to undervalue by competitive devaluations the currency price vs nation counterparts to gain export and economic advantage.

GBP as the leading currency was the target exchange rate and barely survived, most prominently by France and the French Franc.

I recommend "The Gold War: The Story of the World’s Monetary Crisis" by Ian Davidson and Gordon Weil, 1970. Not only a fascinating read, but an imperative lesson in how to maintain central bank to central bank interest rate sync in order to maintain smooth and functioning markets. Otherwise, markets risk extreme volatility and the beginnings of another currency war. After 90 years, markets are due.

No changes to GBP/USD as the following levels hold: 1.3384, 1.3446, 1.3599, 1.3676, and 1.3753. Last week’s GBP/USD lifted from 1.3585. GBP/USD’s problem higher is a severe overbought GBP/JPY and targets lower prices at 153.00.

The same story holds true for AUD/USD and AUD/JPY, NZD/USD and NZD/JPY, EUR/USD and EUR/JPY. GBP/JPY is the JPY leader and is overbought enough to drive not only JPY cross pairs lower but also GBP/USD.

AUD/JPY, NZD/JPY, and EUR/JPY sit fairly neutral to overbought. Nothing exciting about AUD/JPY, NZD/JPY, or EUR/JPY movements, although this week we stand clear and cautious regarding AUD/JPY.

NZD/USD is facing massive resistance at 0.6811, 0.6828, and 0.6859. NZD/USD’s 5 year average is located at 0.6828 and a massive break. If NZD/USD were to brake above the 5 year average and sustain, then all currencies will break their 5 year averages.

NZD/USD as the bottom most exchanged rate and signal currency influences all currencies for direction.

USD/CAD saw no changes from last week. Levels for the week hold at 1.2644, 1.2652 Vs 1.2832. CAD/CHF is in a much better position to move and assist USD/CAD movements.

AUD/CHF is the leader to CAD/CHF and NZD/CHF and GBP/CHF leads EUR/CHF.

EUR/NZD stands this week dead last in the 19 currency pair trade rankings to favor instead GBP/NZD. GBP/NZD maintains a short only strategy. GBP/NZD is expected to move higher this week as NZD/USD trades near its 5 year average. GBP/NZD targets low 2.0200 to upper 1.0100s.

USD/JPY - Week 13 begins at 1738 pips profit from weekly trades as the 2nd leg trade last week completed from 114.84 to 115.25 for 41 pips and 102 pips from the first leg. Total 143 pips on a 107 pip range and 36 extra pips.

USD/JPY medium term targets are located at 113.39 and 112.34 and hold short only trade strategies.

USD/JPY Weekly Trade - Short 115.57 and 115.64 to target 114.76. Long 114.76 to target 115.37. Or Short below 114.40 to target 113.67. Long 113.67 to target 114.03. USD/JPY 114.40 is expected to hold this week yet the trade is offered just in case.