EUR/USD, G10 and Overall Currency Market Conditions.

Common themes to Currency market prices is the extreme divide between EUR, GBP, AUD, NZD Vs USD counterparts USD/CAD, USD/JPY and signal pair to JPY crosses, CHF/JPY. Currency Pair CHF/JPY is a USD pair and its purpose in the 28 major pair universe serves as insight to USD/JPY as the counter balance and same exact pair, insight to USD, insight to USD/CHF and insight to all JPY cross pairs.

Currency CHF/JPY sits dead neutral and now ranges from its 117.00 drop to current 112.00’s. The insight to CHF/JPY informs JPY cross pairs also trade at far extremes from EUR/JPY and GBP/JPY to counterparts CAD/JPY, AUD/JPY and NZD/JPY. Insights and trades were clear January to March / April as USD/JPY traded far lower than CHF/JPY then marriages and crossovers occurred. USD/JPY and CHF/JPY are currently in treacherous marriage mode.

Pairs EUR/JPY and GBP/JPY should trade miles lower as proper positions, counterparts higher but the extreme divide between USD and NON USD forces JPY cross pairs into neutrality as all are caught in the cross fire. CHF/JPY further informs USD/CHF sits at its traditional dead center position and smart for the SNB to allow equilibrium while the major pair extremes resolves itself and resolution means many months ahead rather than weeks. This means a stand alone trade in CHF crosses also retains dominance as minor range trades rather than trends. This includes CHF/JPY.

EUR/USD 1.1300’s, GBP/USD 1.2800’s, AUD/USD 0.7000’s, NZD/USD 0.6500’s retain positions as extreme lows and should trade easily 300 to 400 pips higher to declare normal currency markets within normalized ranges while USD/CAD 1.3100, USD/JPY 113.00 trade at extreme nadir and should trade miles lower.

USD pairs higher and non USD pairs lower only adds to an already deeply traded divide in currency market prices brought upon markets since the Mar / April period and FED interest rate raises. AUD and NZD were already off track by 300 and 400 pips but EUR and GBP lower ensured both pairs would remain lower for longer.

A meeting at the center is desperately required to see more normalized and wider ranges and lasting trends with purpose and meaning. Current trades at extreme divides lack description as trades or smart but more accurately reflects a dangerous and pure speculative trade. Currency pair choice and trade selection remains extraordinarily vital in the current divided environment. Best for daily and weekly trades to view wider range pairs until extreme divide rectifies itself and better trades materialize.

The central bank question is answer the FED call and raise interest rates to allow higher currency prices and obvious meeting at the equilibrium center or retain a lower and expensive currency price for export purposes at the expense of national GDP. Not sure Export to GFP correlation nor exchange rate equilibrium until data is seen but CAD/USD at 0.7631 may soon provide an answer against the BOC’s latest raise.

While overall USD Vs Non USD trade at exorbitant extremes, cross pair non compliance and caught in the cross fire forces a slow path to normalcy and the desperately needed position to the center.

Longs in EUR/USD, EUR/CHF and EUR/CAD are offset by shorts in EUR/JPY, EUR/NZD, EUR/AUD and EUR/GBP. Both EUR/JPY and EUR/CAD are fast moving and are dangerous close to perfect mathematical neutrality while EUR/CHF lacks ability outside a 100 pip range. EUR/USD lives on its own in the basement.

USD/CAD’s wider ranges are offset by dead ranges in CAD/JPY and CAD/CHF. Brexit and USD extremes are clearly seen in GBP/USD as current 1.4990 is the driver price and down from 1.5600’s at Brexit announcement.

Higher GBP to 1.3900 target can only materialize upon a Brexit and USD resolution. Meanwhile GBP/CAD is driven by USD/CAD while GBP/NZD and GBP/AUD are heading lower and driven by AUD/USD and NZD/USD, GBP/JPY retains neutrality and GBP/CHF lacks a significant range.

The most significant long trade is NZD/USD and any pairs with NZD in first position as NZD/USD alone targets multiple 100’s of pips higher.The least significant shorts are USD/CHF and USD/JPY but best is USD/CAD.

Currency market prices are in deep disarray and lack any resemblance to uniformity. Prior currency market periods experienced such USD V Non deep divides before and corrected more quickly as past periods allowed for far wider price movements. As range compression and slower price movements became the new order under the 2016 interest rate reforms, correction to the current chaos could take easily 6 months or more.

To a more distant divide in USD V Non is the question of results to an outside event such as war, terrorist attack, political calamity, an Iranian missile, troops at the border. Such an outside event would experience a 500 pip move faster than the eye could blink. Between the dangerous overall currency market structure and the political/ war scenario, deep caution is warranted.

EUR/USD. Break pont 1.1589.

GBP/USD break Point 13105.

GBP/JPY 146.43.

CHF/JPY 113.10.

EUR/JPY 129.50.

USD/JPY 111.76

 

Brian Twomey. For FX trades and assistance, contact.

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EUR/USD, EUR/JPY, USD/JPY and Realignment

The topic of rarely seen currency market Realignment was addressed before but EUR/JPY contains its best shot to break below 124.06 and force Realignment. Why EUR/JPY is because its most widely traded, it contains, as most currency pairs, 2 opposites and because currency markets are defined by cross pairs as many more exist than the 7 major pairs. Further, Cross pairs actually and traditionally run and define currency markets.

For 28 major currency pairs to include the USD V Non USD majors then 376 combinations exist. Subtract for example EUR/USD and USD/EUR then 14 pairs from the majors must subtract from 376 to define total currency market cross pairs as 362 cross pairs.

Realignment is defined periodically as a shift in currency pair focus every 10 to 12 years within any 50 year market period. From 1998 to 2008, EUR and risk on defined the period as EUR/USD climbed from 1.0000’s to 1.3900 and EUR/JPY from 110.00 to 169.00. USD/JPY traded at 110.00’s. Realigment hit in 2008 and EUR/USD dropped from 1.3900 to 1.0300, USD/JPY to 124.00 and EUR/JPY traded alongside USD/JPY but above 10 year averages.

Realignment is a correlational shift from cross pairs to major pairs and cross pairs define the shift. Realignment can only be seen from cross pairs. EUR/USD trades below its 10 year average at 1.2600’s, EUR/JPY above at 124.06 and USD/JPY above at 99.00. EUR/USD not only lost its association to EUR/JPY but it lost its correlational association as well. EUR/JPY and USD/JPY above both 10 year averages means both share correlational associations.

EUR/JPY and USD/JPY above 10 year averages and EUR/USD below define the 2008 to current period as USD dominant. Traditional USD dominant periods experience less volatility, bout 500 to 1000 pips while EUR/JPY correlational attachment to its rightful owner EUR/USD experiences higher volatility, bout 1000 pips higher. See 2015 EUR/JPY, USD/JPY, EUR/USD academic paper and Residual plots for a picture to pip boundaries from 1998 to 2008 and 2008 to 2015.

EUR/USD as the major pair must include to any realignment because Europe and the United States are complete opposite political and economic systems in yields, interest rates and economic prosperity. One side wins as the other side loses. But currency pairs are also opposites and again only one side can win while the other loses.
EUR/JPY must drop below 124.06 then realignment is upon us. The current USD dominant currency market is 10 years old and its a matter of time before the market realigns and shifts.

Realignment means easily 1000 pip currency markets to re normalize prices in relation to 10 Y averages. 1000 pips means EUR/USD to 1.2600, GBP/USD to 1.3900’s, AUD/USD to 0.7800’s, NZD/USD to 0.7500, USD/JPY to 97.00, USD/CAD to 1.1400’s and the list goes on.

Realignment means long and short trades to last for years. Traders can transform from trader to long term investor. Trades are long term in relation to 10 year averages. The shift means cross pairs realign to major counterparts. Throw a dart at a currency pair then go long or short for a year or 2.

Trump is viewed as the catalyst because he’s normalizing a 30 year out of control political system. All nations will and are currently following Trump to normalization.

Free float now year 46, at 50 current period must end. its biblical leviticus 25, jubilee at 49 Y. EUR/JPY below 124.06 also means the last hurrah for currency trading as a complete new method will dominate the next 10 years. Happened every time since BOE 1694 creation.

 

Brian Twomey

EUR/USD and G10: Levels, Ranges, Targets

 

 

The common theme in currency markets is volatility into the 4th quarter as it existed in the 2nd quarter is here and it demonstrates by the amount of trades and pips posted in the unrecognized March/ April period. 4th quarter volaitlity and number of great trades will exist as it did in quarter 2 and this volatility will also last for the entire quarter. Currency pair trade choices are always most vital as certain currency pair prices will out perfom others and because certain currency pair prices lead and lag each other.

Currency pair choices in the major pairs are 28 and this means 378 combinations of 2 or 378 currency pair selections to trade. The focus is always on the same old tired non mover pairs. EUR/USD is always a focus but this miserable currency pair lives in ranges for most of its trading life and rarely leaves it boundaries. When EUR/USD traded to 1.1800’s was the only time all year when EUR/USD contained a deviation worth trading as the deviation gap lacked any choice except to close to only then see EUR/USD back inside its same tired dead ranges. Vital to know specific range points in range trades or problems exist. Range pairs, EUR/USD specific, is always over forecasted.

USD/JPY or miserable currency pair number 2 trades all year at 200 pip break points from 104, 106, 108, 110. Now USD/JPY trades from its lower break point at 111.88 to 112.48. Its an untouchable currency pair especially above 112.48 and remains in ranges for months.

Opportunity is presented by a dead USD/JPY as the pre·eminence signal pair to JPY cross pairs is found in CHF/JPY. Know CHF/JPY then is known GBP/JPY, EUR/JPY and anti’s AUD/JPY, CAD/JPY and NZD/JPY. Know CHF/JPY then is known 6 trades to include CHF/JPY. Know JPY cross pairs to its major counterparts as attachments then is known double trades in EUR/USD and EUR/JPY, GBP/USD and GBP/JPY, AUD/USD and AUD/JPY, USD/CAD and CAD/JPY, USD/CHF and CHF/JPY. Total 5 more trades are added from 6. Know currency pair relationships then is known currency pairs formed as economic documents.

GBP/USD on paper is the big mover currency pair but never lives to its billing. At 1.3900 exist the overall target as mentioned many times since March/ April. GP/USD will trade to 1.3900.

AUD/USD and NZD/USD are off kilter by at least 300 to 400 pips and this means both should trade 300 to 400 pips higher. Off kilter means EUR/AUD and EUR/NZD are running to wild volatility.

EUR/AUD and EUR/NZD are good examples to today’s volatility. EUR/AUD shorts from 1.6300 traded to 1.5900’s against a 1.5600 target. Took 10 days for EUR/AUD to drop to 1.5900’s and 3 days to trade back from 1.5900’s to 1.6300. This trade is the exact same trade taken in March / April from short 1.6400 to 1.5600 target. Trade took almost 7 weeks to complete the 1.5600 target in March / April then 4 months to trade back to 1.6300’s.

EUR/NZD short from 1.7800 to target 1.7200’s traded days later to upper 1.7400’s then bounced to 1.7800’s days later.

EUR/AUD. Break Point 1.6026. Driver to EUR/AUD is AUD/USD. Lower AUD/USD then higher EUR/AUD, higher AUD/USD then lower EUR/AUD. More specifically EUR/AUD is currently overbought, AUD/EUR severely oversold. Both AUD/USD and EUR/AUD are severely off range by easily 300 to 400 pips. This means AUD/USD must trade to 0.7300 to 0.7400 and EUR/AUD to 1.6026 break then 1.5835 and longer term 1.5600’s.

Strategy. Short any market price from the close at 1.6337 to target 1.6176, 1.6085, break at 1.6026 then 1.5835 and longer term 1.5611. Short only strategy means short tops.

Few traders are assisted with daily and long term trades and these longer term trades are becoming very popular as we’re trading 8 and 10 pairs at a clip. Contact if interested.

Break Points.

EUR/USD. 1.1680.

CHF/JPY 114.30.

GBP/JPY. 147.19.

GBP/USD 1.3150.

AUD/USD 0.7290.

EUR/CAD 1.5132.

USD/CAD 1.2956. See 1.2600 target written ad nauseam since March / April.

GBP/CHF 1.2881.

EUR/NZD 1.7463.

 

Brian Twomey