Pairs driving the EUR price. In order EUR/CAD, EUR/NZD, EUR/GBP, EUR/CHF. Pairs EUR/JPY and EUR/AUD contribute nothing to the current EUR/USD move.
In Asia trading, EUR/INR is set for a big move and its purely EUR driven. This move is far greater than what EUR/CAD and EUR/NZD offers. INR is the Indian Rupee.
EUR/CAD. The current EUR/USD move leaves EUR/CAD overbought Vs EUR/USD and Oversold Vs USD/CAD. In normal market trading, EUR/CAD falls into the highly Neutral category among its peers. This means not much movements occurs especially seen in volatile news announcements. Its price is out of whack partly due to the current EUR move but most especially due to CAD from the BOC’s Interest rate cut. Its price therefore is in flux and will take a while to Normalize so EUR/CAD offers plenty of trading opportunities ahead. Quite rare to see a neutral pair offering best opportunities but it falls under my Realignment scenario as prices are in flux.
To define Normalization. 1 week after the BOC interest rate cut, CAD interest rates and Yields are still not aligned with counterpart currency pairs. How long does Normalization take is an answer I don’t yet, Yet. The same principle holds for CHF pairs but CHF normalization will take much longer due to the 35 Cent EUR/CHF move at one time.
EUR/CAD Levels. Two vital points for EUR/CAD 1.4134 and 1.4155. A break higher targets next level at 1.4282 while a break lower targets 1.3706. Past weeks saw EUR/CAD bounce nicely from 1.4100’s and 1.3700’s.
EUR/NZD. Vital points, 1.5339, 1.5251, 1.5240. 1.5108 and 1.5120. A cement Floor is located at 1.4436 while 1.4900’s are historic bottoms that recently broke.
EUR/GBP. Big break above 0.7544 Vs more cement Floors located at 0.7272 and 0.7219. A break of 0.7408 would see a run to 0.7272. EUR/GBP’s price will continue to see a slow grind because its position in the yield curve is located in a very small channel. Trade this pair at the 5 day average, now located at 0.7477 and current price just broke.
EUR/CHF. Trades at the 20 average, that means continued volatility and far into the future. Its trading based on CHF rather than EUR/USD and contributes little to nothing regarding EUR/USD prices.
EUR/JPY. I still expect the 132.63 break and to sustain. Range would become 132.63 – 130.04. The pair to watch in this scenario is JPY cross leader GBP/JPY. Its big break occurs at 175.39 and 170.37. And again, EUR/JPY is not a EUR/USD price driver at all. Nor is EUR/AUD.
EUR/USD Important fundamental point and continued driver of EUR/USD is QE and it begins next month. That’s when the big moves lower should be seen. For now, we’re viewing the current move as corrective and in sell rally mode. And so far we’re looking at targets around 1.08. This point will be updated with time.
More pairs, levels, targets posted here.
Brian Twomey Inside the Currency Market, btwomey.com