Weekly Trades: AUD/NZD, NOK/SEK, USD/PLN, USD/HUF, USD/INR, USD/RUB

NOK/SEK and AUD/NZD are the exact same pair against identical exchange rate numbers. Together, both provide a double trade. NOK/SEK at current 1.0400’s provides support to USD/NOK and USD/SEK at 9.0000’s.

Both NOK/SEK and AUD/NZD are oversold, AUD/NZD is far more oversold than NOK/SEK. Both trade below 5 year averages at AUD/NZD 1.0718 and NOK/SEK approaching at 1.0487. Explains why NOK/SEK is less oversold than AUD/NZD. Its a question of distance.

Among 36 EM currency pairs, AUD/NZD and NOK/SEK exchange rates are listed at the lows. Both are located between USD/SGD at 1.3600’s and AUD/SGD at 0.9300’s. AUD/NZD shares a combination location between EM and G28. Below AUD/NZD and NOK/SEK in G28 proximate currency pairs are AUD/CAD 0.9000’s, NZD/CAD 0.8600’s and EUR/GBP 0.8400’s.

G28 currency pairs drive EM as G28 pairs contain lower exchange rate numbers and are more widely traded. Higher EM exchange rate numbers are built into the system to ensure economic viability. If G28 currency pairs crash, EM currencies won’t ever fall to Zero. EM currencies can always rebuild and trade to acceptable levels.

USD currencies were chosen today because EUR among practically every currency on the planet contains severely high and deeply dangerous Noise Levels. Thus means not only will prices not perform due to range persistence but a spark from an outside event can send EUR into wild spikes. Range persistence is quantified by extremely low variation against high noise. Only EUR pairs correct are EUR against PHP, BRL, HUF, ILS, ISK Krona, KRW, NOK, RUB, SEK and THB.

USD/RUB is offered due to a central bank meeting this week yet RUB is not only a dead issue currency pair, it falls almost into a fixed exchange rate.

USD/PLN and USD/HUF as always are not only terrific currency pairs but both trade correctly and respond perfectly to targets. USD/RON is the third to complete the trifecta.

USD/PLN

Long 3.8539 and 3.8457 to target 3.8701. Must cross 3.8580, 3.8621 and 1.3662. Long above 3.8785 to target 3.8949. Must cross 3.8826 and 3.8867.

AUD/NZD

Long 1.0432 and 1.0395 to target 1.0543. Must cross 1.0432 and 1.0506. Long above 1.0581 to target 1.0654. Must cross 1.0694 and 1.0617.

NOK/SEK

Long 1.0325 and 1.0364 to target 1.0522. Must cross 1.0404, 1.0443 and 1.0482. Caution 5 year average at 1.0487.

USD/HUF

Long 294.65 and 293.90 to target 298.39. Must cross 294.64, 295.38, 296.15, 296.89 and 297.63. Long above 299.14 to target 300.63. Must cross 299.88.

USD/INR

Long 70.19 and 70.42 to target 71.01. Must cross 70.66 and 70.89. Long above 71.12 to target 71.59. Must cross 71.36.

USD/RUB

Long 63.67 and 63.45 to target 64.03. Must cross 63.91. Long above 64.16 to target 64.49. Must cross 64.38.

 

Brian Twomey

Exchange Rates

 

GBP/JPY 142.58

GBP/JPY 1.4258

GBP/NZD 1.9989

GBP/AUD 1.9185

GBP/CAD 1.7397

EUR/NZD 1.6835

EUR/AUD 1.6161

USD/CAD 1.3248

GBP/USD 1.3131

GBP/CHF 1.3000

AUD/JPY 74.27

CAD/JPY 81.90

NZD/JPY 71.26

EUR/USD 1.1059

AUD/USD 0.6839

AUD/CHF 0.6772

NZD/USD 0.6562

NZD/CHF 0.6500

 

GBP/JPY =71.61

GBP/JPY =1.0410 and 1.0379

GBP/NZD 1.3275 and 1.3244

GBP/AUD 1.2873 and 1.2842

GBP/CAD 1.1979 and 1.1948

EUR/NZD 1.1698 and 1.1667

EUR/AUD 1.1361 and 1.1330

USD/CAD 0.9905 and 0.9874

GBP/USD 0.9846 and 0.9815

GBP/CHF 0.9781 and 0.9750

AUD/JPY 0.6994 and 0.6963

CAD/JPY 0.7376 and 0.7345

NZD/JPY 0.6844 and and 0.6813

EUR/USD 0.8810 and 0.8779

AUD/USD 0.6700 and 0.66 7

AUD/CHF 0.66 7 and 0.663

NZD/USD 0.6593

 

 

 

 

Weekly Trades: USD/CAD V GBP/USD, GBPCAD, NZD/JPY

The most interesting and defining currency market relationship this week is found between total opposites USD/CAD and GBP/USD.

GBP/USD ranged last week from 1.2897 to 1.3166 for 269 pips while USD/CAD traded 162 pips lower from 1.3320 to 1.3158. GBP/USD bounced from 1.2897 and just below our vital break point at 1.2759 as reported in last week’s post. USD/CAD broke most important 1.3254.

Last week GBP/USD and GBP/CHF traded in tandem at 1.2900’s then GBP/CHF traded 122 pips lower as highlighted from last week’s posted trade. While GBP/USD bolted higher Wednesday to 1.3100’s to trade in tandem to USD/CAD at 1.3100’s. GBP/USD and USD/CAD both at 1.3100’s is an impossible relationship to hold as either GBP/USD or USD/CAD must separate. GBP/USD held steady at 1.3100′ s while USD/CAD traded higher to 1.3200’s.

GBP/USD long term target currently resides at 1.3380. From GBP/USD’s close at 1.3131, the target is 249 pips. USD/CAD’s long term target is 1.2886. From USD/CAD’s close at 1.3248, the target is 1.2886 or 362 pips. The imbalance and trending pair is clearly GBP/USD.

When GBP/USD traded from 1.2900’s to its 9 year currency cycle bottom at 1.1900’s, the drop was not only straight down to trade in deep oversold every week but without a meaningful correction. When GBP/USD broke its vital high / low point at 1.2700’s, every week it traded higher against deep overbought. While GBP/USD trended from its uppermost highs and lows, USD/CAD since July traded a 300 pip range from 1.3000’s to 1.3300’s.

While USD/CAD’s restricted price ranges are experiencing a severe compression to its averages and warns of a massive break out in order to trade again normally. GBP/USD averages and ranges traded and currently trades perfectly normal since July. The big mover historically is clearly GBPUSD Vs USD/USD and this was accomplished not by the market but by central bank design inside the exchange rate numbers.

Overall GBP/USD is overbought , GBP/CAD and GBP/CHF is overbought. GBP/AUD the favored long term short trade is overbought. its longer term averages from 50 to 253 day to bring GBP significantly lower and all are at or approaching its extremes.

No different in GBP overbought from the EM space as GBP/ILS and GBP/THB stand out as significantly overbought across the board followed by GBP/CZK, GBP/TRY, GBP/RUB, GBP/RON, GBP/MYR.

GBP/BRL stand out as oversold and GBP/ZAR, GBP/SEK and GBP/NOK fairly neutral while the following pairs are on the verge to overbought provided a price increase is seen as follows: GBP/PHP, GBP/PLN, GBP/MXN, GBP/INR, GBP/HUF.

Trades

For the week, USD/CAD from its 1.3248 close contains massive supports at 1.3161 and 1.3183. On the upside, USD/CAD must break 1.3249 and 1.3261 in order to travel higher. USD/CAD current price is fairly neutral.

GBP/USD higher last week cleared a significant resistance point at 1.2926. To trade significantly lower to 1.2600’s, GBP/USD must break 1.2926, 1,2888 and 1,.2819.

The commonality to GBP/USD 1.2926 and ability for all GBP pairs to trade lower is GBP/CAD must break 1.7009 then 1.6986,

GBP/CHF remains solid at 1.2700’s, GBP/JPY 141.80 ahead of 139.26.

GBP/AUD on the opposite side must break crucial 1.9400;s to trade higher.

USD/CAD will trade erratic this week and here’s the trade

USD/CAD

Long 1.3224 and 1.3199 to target 1.3236.
Long above 1.3249 to target 1.3299. Must cross 1.3274.
Short 1.3299 and 1.3324 to target 1.3261. Must cross 1.3274.
Any price above 1.3324 is free trade short.

GBP/USD

Short 1.3148 and 1.3195 to target 1.2966. Must cross 1.3007.
Break 1.2926, targets 1.2872. Must cross 1.2901.
Any price above 1.3195 is a free trade and free money to add to shorts.

GBP/CAD

Short 1.7437 and 1.7469 to target 1.7046. Must cross 1.7373, 1.7309, 1.7244, 1.7180, 1.7116 and 1.7062

NZD/JPY

Short 71.50 to target 70.29. Must cross 70.83 and 70.49.
Short below 70.16 to target 69.48. Must cross 69.82

Brian Twomey

36 Currency Price Closes: Highest to Low, EM, ASIA and EUROPE

EUR/HUF 331.075

USD/HUF 299.40

SGD/JPY 79.82

EUR/INR 78.83

USD/INR 71.28

USD/RUB 63.7533

USD/THB 30.36

EUR/CZK 25.5395

USD/MXN 19.3100

EUR/ZAR 16.1701

USD/ZAR 14.6271

GBP/SEK 12.4791

GBP/NOK 11.9879

NOK/JPY 11.9008

SEK/JPY 11.4344

EUR/SEK 10.5040

EUR/NOK 10.0905

USD/SEK 9.4981

USD/NOK 9.1256

GBP/TRY 7.5907

ZAR/JPY 7.4263

EUR/TRY 6.3900

USD/TRY 6.7781

EUR/MYR 4.60

GBP/ILS 4.5566

EUR/PLN 4.2758

USD/MYR 4.15

USD/PLN 3.8664

EUR/ILS 3.8351

USD/ILS 3.4680

GBP/SGD 1.7872

EUR/SGD 1.5046

CHF/SGD 1.3737

USD/SGD 1.3605

AUD/SGD 0.9304

 

Brian Twomey Interested to Trade above pairs, contact

 

 

FX Forwards Monday Morning Macro

 

Lifted from Monday Morning Macro

There’s been a lot of discussion recently about $ strength preventing risk assets from making new highs. I don’t dispute the fact: it’s obvious we’re losing badly in the battle for competitive devaluation that global central banks have embarked upon. But it’s even worse than the headlines might suggest. Where the real damage is being done is in FX forward markets. In some cases, 12mth $ funding has more than doubled in the last two months alone.

One thing is clear, to refer to this as a “USD bull market” is not correct. As others have correctly pointed out: it’s really a bear market for $ funders. Typically, we’d see this manifest in overnight repo rates, but that’s not really happening. We might also see this show up in LIBOR/OIS spreads (and cross-currency basis) & it has, but to a fairly limited extent.

Where this is showing up instead is in FX forwards. In times of trade war, this is currency krav maga – the art of self-defense as a weaker opponent can gain the upper hand even in the face of seemingly insurmountable odds.

Consider this: since the start of the year, the average 1-year funding cost in EUR, GBP, JPY & CAD has moved by about 30%. Cheaper for those currencies, more expensive for the dollar.

Moreover, it’s showing no signs of stopping. It’s essentially an explosion of the developed markets FX carry trade: borrow in currencies where interest rates are low (or, in many cases, negative), to invest in those countries where yields are high. In order to do that, you need dollars. In the case of each of the 4 currencies listed above, the forward value of the dollar is cheaper than the spot – making the trade that much more attractive. Perhaps this stops when we reach zero, perhaps it just continues.

But that’s not even the biggest move. Beyond the developed markets, the real jump has taken place in just the last month as USDCNH forward points have gone up by more than 2x.

On a trade weighted basis, this is a monster move.

Take the top 10 currencies on a trade weighted basis (I’ll use the Fed’s weights for the sake of comparison).

https://www.federalreserve.gov/econres/notes/feds-notes/revisions-to-the-federal-reserve-dollar-indexes-20190115.htm

Consider what the trade weighted $ performance has been in spot space.

Now, overlay what the trade weighted $ performance has been in forward space all-in (spot + forward points).

Bottom line, it’s pretty clear that this $ move is being driven by the forward borrowing cost versus our major trading partners. In a trade war, this is logical self-defense. But the extent of the move is going almost entirely unnoticed since the spot richening of the $ has been “only” 5% over the same time period.

Until the forwards begin to retreat in a meaningful way, it’s only reasonable to presume this move should continue.

Disclosure/Disclaimers: This material may contain indicative terms only, including but not limited to pricing levels. There is no representation that any transaction can or could have been effected at such terms or prices. Proposed terms and conditions are for discussion purposes only. Finalized terms and conditions are subject to further discussion and negotiation. OTC Derivatives Risk Disclosures: To understand clearly the terms and conditions of any OTC derivative transaction you may enter into, you should carefully review the terms of trade with your counterparty, including any related schedules, credit support documents, addenda and exhibits.

You should not enter into OTC derivative transactions unless you understand the terms of the transaction you are entering into as well as the nature and extent of your risk exposure. You should also be satisfied that the OTC derivative transaction is appropriate for you in light of your circumstances and financial condition. In addition, you may be requested to post margin or collateral to support written OTC derivatives at levels consistent with the internal policies of your respective counterparty. I may have positions in assets mentioned above, but do not have plans to initiate any new positions within the next 72 hours.

This post was written by me, the material is my own (except where sourced), and it expresses my own opinions. I am not receiving compensation for it & have no business relationship with any of the companies and/or organizations whose assets may be mentioned in this post.

 

Brian Twomey

Weekly Trades: GBP/USD, GBP/CHF and GBP/JPY

 

For this week’s trades, GBP/USD, GBP/JPY and GBP/CHF as not only did GBP/USD and GBP/CHF close at 1.2926 but GBP/USD and GBP/CHF fits into my NZD analysis as currency prices serve as support and resistance levels against each other.

Big line breaks for lower GBP/USD, GBP/CHF and GBP/JPY are located at 1.2759, 1.2681 and 138.62. See GBP/CHF 1.2681 holds GBP/USD at 1.2759 and 1.3862 GBP/JPY trades far above both GBP/USD and GBP/CHF.

GBP/CHF must move down in order for GBP/USD to trade lower. As GBP/CHF trades lower then former GBP/CHF supports translates to GBP/USD supports on the way down. GBP/JPY becomes the follower to GBP/CHF and GBP/USD.

If GBP/CHF fails to move down or trades higher then GBP/USD is well supported by GBP/CHF and won’t trade lower. This translates to GBP/JPY non ability to trade lower and this situation serves for all GBP pairs.

GBP/CHF contains higher ranges than GBP/USD by design and GBP/JPY contains higher ranges than GBP/USD and GBP/CHF.

GBP/USD is stuck dead center as a middle range currency pair and requires movement from GBP/JPY or GBP/CHF in order to provide direction.

Actual commentary should state GBP/USD moved higher to GBP/CHF X Point or lower at GBP/CHF support because mathematically, supports and resistance points are perfect. Applies to targets a perfect mathematical points.

A break of GBP/USD 1.2759 targets 1.2610 on a break of 1.2685. GBP/CHF below 1.2681 targets 1.,2509 on a break of 1.2595. And GBP/JPY below 138.62 targets 136.47 on a break at 137.54.

Overall GBP strategy this week is short at higher levels.

GBP/USD

Short 1.2982 and 1.3019 to target 1.2833. Must cross 1.2945, 1.2908 , 1.2871 and 1.2859.
Short below 1.2759 to target 1.2685. Must cross 1.2722.

GBP/CHF
Short 1.2939 and 1.2982 to target 1.2766. Must cross 1.2896, 1.2853 and 1.2810. Short below 1.2681 to target 1.2595.

GBP/JPY
Short 141.80 and 142.33 to target 139.85. Must cross 141.27, 140.74, 140.47 and 140.20.

 

Brian Twomey