rrency markets contain two common themes: GBP/USD and its correlational relationship to its cross pairs is operating, for the first time in at least 1 year, perfectly. NZD/USD functions perfectly while AUD/USD and EUR/USD remain completely lost in its correlations. The best EUR/USD offers is EUR/AUD and EUR/NZD at + 54% and + 45% while EUR/JPY barely reveals a pulse at +23%. AUD/USD is negative minus 73% to minus 93% Vs AUD/JPY, AUD/NZD, AUD/CHF and AUD/CAD.
GBP and NZD volatility is terrific while AUD and EUR prices remain contained inside small ranges. Part of the NZD explanation is recent RBNZ introduction of the 1 year bond as part of its contribution to the overall structural adjustments by all central banks throughout the world. Rather than adjust New Zealand’s perfectly operational interest rate system as other central banks conducted, the RBNZ added another interest rate by 1 year bond issuance.
EUR/USD currently sits on a big base at 1.1001 and today’s bottom at 1.0962 and 1.0976. Not only is the EUR/USD price low and oversold intraday and historic but any intraday price drops are falling at significant oversold levels. Correlation is one explanation as EUR/USD lacks ability to rise without cross pair assistance. The monthly July forecast Vs DXY from 1.1106 also revealed a 205 to 224 maximum pip range range and 15 days into the month, EUR traded in the range. Coupled against correlation is significant price points to prevent EUR/USD rises.
Last week the big break for EUR/USD was 1.1153 with a must break at 1.1140 and 1.1141 to have any chance for a run to 1.1153. Today, 1.1153 is located at 1.1132, a 21 pip drop but built inside EUR/USD price is resistance at 1.1139 and 1.1140 then 1.1163. To see 1.1132 break then 1.1090 and 1.1119 are first hurdles. Failure to break above only sees 1.1132 decrease further in days ahead.
What prevents EUR/USD rises intraday is massive resistance built inside today’s prices from 1.1031 to 1.1039. A break above 1.1039 then a chance exists to see next 1.1066 and dead center inside the current range.
To offer what a low EUR/USD price means, any price from 1.0970’s to 1.0950’s reaches far extremes. A drop in the vicinity of 1.0970’s intraday cannot hold any gains and must rise to cross today’s base at 1.1001.
Overall, EUR/USD price is low and oversold yet massive supports and resistance points are built inside current prices to severely contain movements. EUR/USD has the ability to rise but lacks the impetus to move.
Brian Twomey, Inside the Currency Market, btwomey.com