EUR/USD V CAD/ZAR, Transition: levels, Ranges, Targets

CAD/ZAR V EUR/USD currently trade at extreme wide distances to each other and this view from every month in 2017, 2016 and 2015. CAD/ZAR is far to low while EUR/USD is far to high. Why view CAD/ZAR is because its a USD pair and it serves as the most revealing currency pair to define overall currency market relationships and because Correlations to EUR/USD always trade at far extreme opposites. In the 2008 and 2009 crash period, CAD/ZAR traded far to high Vs EUR/USD at far low levels. Both traded to far extremes. While CAD/ZAR traded at 21.00’s, EUR/USD traded to 1.0300’s. EUR/USD today at 1.1900’s and CAD/ZAR at 9.7800’s revealed CAD/ZAR crossed below EUR/USD over the last years.

Viewed from 2014, CAD/ZAR and EUR/USD are married at the hip which means overall currency markets trade at their defining moment. Last post addressed currency market transition currently as viewed from EUR and G10 currency pairs.
The 2014 CAD/ZAR Vs EUR/USD defining moment further reinforces an enormous change inside currency prices as the next currency market period is upon us. Informed for the 2014 CAD/ZAR Vs EUR/USD relationship is the possible cross.

If EUR/USD crosses above CAD/ZAR then EUR/USD not only travels far higher but EUR/USD longs and buy drop strategies will survive through 2018 and most likely far into 2019. This means, USD heads miles lower into 2018 and 2019. A formal cross is mandatory because currency pairs in cross situations contain tendencies to bounce rather than cross. Currency market transitions and new periods while revealing for positioning don’t come easily. Sometimes it takes a few bounces and time before an actual cross. But an actual cross solidifies whether EUR or USD will be dominant and dominant means years not months.

As to overall currency market health, EUR/USD, EUR/JPY and USD/JPY trade at correct positions to each other in relation to 2016, 2015 and 2014. A healthy currency market reveals wild volatility lacks order of the day. The transition means just as the word implies, smooth currency prices to enter the new period will be seen. If EUR/USD, EUR/JPY and USD/JPY traded in unhealthy situations to each other then the transition would be extremely volatile.

The most important pair to watch in the mix is EUR/USD because of its lead tendencies to all currency pairs. The second pair is EUR/JPY because it always offers best movements as it transitions to its proper location to align formally to either USD/JPY or EUR/USD.

Short term, CAD/ZAR and EUR/USD extremes informs EUR/USD is in dire need of a healthy correction and USD higher. Higher for CAD/ZAR at current 9.78 means 1st the 5 year average at 10.10 then 10.33 and 10.78. EUR/USD at 1.2005 is on top of its 5 year average. EUR/USD’s big break below is located at 1.1780. Variation in CAD/ZAR reached extremes short term and set for a big bounce.

EUR/USD Break points 1.2005, 1.1799 and 1.1780.
AUD/USD 0.7743, 0.7841 and 0.7939.
USD/JPY. 112.57 and 112.52.
EUR/JPY 132.76 and 132.61.
NZD/USD. 0.7039 and 0.7132.

 

Brian Twomey