EUR/CHF January 2015 dropped 2300 pips from 1.2000 to 0.9600’s. The plummet was especially seen in longer term moving averages and resulted in an 8 and 9 Standard Deviation move. As a price distribution and as extraordinary as it was, it was a market event. The current GBP/USD drop is a far different structure as Brexit and the price drop is more than an event but rather its a wholesale structural change, a complete shift and seen from a complete price distribution as prices are now 14 Standard Deviations from the main breaks at now 1.4383 and 1.4431. Both must break to even consider higher prices.
The fact USD/JPY dropped and won’t rise while USD/CAD and USD/CHF skyrocketed informs the 10 year Realignment is upon us. In the 2008 Realignment, EUR/USD was at 1.6000’s and EUR/JPY 169.00’s. Eight years later, EUR/USD saw 1.0400 lows while EUR/JPY dropped 5700 pips from current 112.00. Key for USD/JPY is 100.06 and 99.62 and most important 100.06.
Most informative in Realignments is not only wonderful volatility but multi year trends and trades once Realignment completes. If Realignment completes as suspected and Risk on results in higher EUR, GBP and risk on pairs then USD/JPY may suffer years of low prices. The last Realignment was a risk off event and why USD/JPY jumped from 80.00 lows to 125’s. The new Realignment must result in Risk on as wholesale market shifts must occur and take its turn.
EUR/CHF recovered from 0.9600’s to 1.1038 or 1376 pips 8 months later and 13 months later saw 1.1191 highs or 1529 pips. Our longer range GBP target so far remains 1.3800’s.
GBP/USD broke below the last base at 1.3503 to form a new base at 1.3084. Prices now betwen 1.3084 to 1.3220 are flat on the floor. As mentioned before Brexit, refrain from longs. After Brexit, don’t dare short for 1 pip.
The big breaks above are located at 1.3347, 1.3482, 1.3573, previously 1.3503. Volatility is again found due to 74 daily pip ranges. GBP is allowed to fly under 74 pip ranges.
The strategy moving forward is buy any and all dips.
Brian Twomey, Inside the Currency Market, btwomey.com