Early Warning to impending Extremes, NZD forever remains signal Currency
From Feb 17 to 27th
AUD a major market problem due to trade to oversold extremes
This week’s trades are again based on solicitation from traders and I agreed to post the 11 currency pairs as follows: CHF/JPY, GBP/NZD, GBP/AUD, GBP/ZAR, USD/NOK, USD/SEK, USD/CHF, EUR/USD, EUR/JPY, EUR/AUD, EUR/NZD.
Normally, EUR/USD lacks trade consideration due to the ECB’s new STR interest rate introduced last October and result to 100 pip EUR weekly ranges. Same status to 50 and 100 pip weekly movements for USD/CHF but USD/CHF overall remains its normal dead range currency. USD/CHF should and eventually will trade a 1.000 handle.
USD/NOK, USD/SEK and GBP/ZAR contain miles upon miles of downside as all trade at the top of a 20 year range and all medium to long term are far, far overbought. Sell strategies is the way for many months in the future until at least 2000 pip targets achieve destination. USD/NOK at 9.0000’s should trade an 8.000 exchange rate, lower 9.0000’s for USD/SEK and GBP/ZAR from 19.0000’s should trade to 18.0000’s.
Good weekly trade choice for CHF/JPY as it begins the week in deep overbought against a 200 pip downside target. CHF/JPY is the exact same pair as USD/JPY which means its a USD currency. USD/JPY is massively overbought and complies to overbought CHF/JPY.
For EUR/JPY nothing special this week and this applies to all JPY cross pairs although GBP/JPY is a special currency pair in its own category within the JPY cross pair lineup. Lower this week for USD/JPY, CHF/JPY and JPY cross pairs.
EUR/AUD and GBP/AUD overall contains much downside not only from GBP but against deeply oversold AUD. Higher AUD will assist EUR/AUD and GBP/AUD downside. EUR/AUD however has been and may always remain a sell strategy as 1.5900 target awaits.
EUR/NZD was in full compliance mode to last week’s 300 pips and straight up. EUR/NZD forced higher in GBP/NZD as deep divergence was seen. This week, both are in compliance.
EUR/USD prices will again trade normally.
Long 1.0841 and 1.0828 to target 1.0946.
Must cross 1.0867, 1.0892, 1.0917 and 1.0942. Long above 1.0971 to target 1.1073. Must cross 1.0996, 1.1021, 1.1046 and 1.1071.
Long 0.9743 and 0.9724 to target 0.9781. Must cross 0.9762. Long above 0.9801 to target 0.9876. Must cross 0.9838.
Short 12.21 and 120.99 to target 120.24. Must cross 120.89, 120.78, 120.67.
Short below 120.14 to target 119.26.
Short 114.28 to target 112.04. Must cross 113.71, 113.42, 113.13, 112.88, 112.59.
Short 1.9585 and 1.9626 to target 1.9199. Must cross 1.9544, 1.9503, 1.9442.
Short 2.0401 and 2.0433 to target 2.0045. Must cross 2.0369, 2.0305, 2.0272.
Short below 2.0013 to target 1.9884. Must cross 1.9981, 1.9949 and 1.9917.
Short 1.6383 and 1.6361 to target 1.6240. Must cross 1.6361, 1.6339,1.6273 and 1.6251.
Short below 1.6229 to target 1.6185. Must cross 1.6225 and 1.6207 .
Short 1.7112 and 1.7136 to target 1.7018. Must cross 1.7089, 1.7066, 1.7043.
Short below 1.6995 to target 1.6807. Must cross 1.6972, 1.6949.
USD/NOK is a much better trade than USD/SEK.
Short 9.3162 and 9.3446 to target 9.2033. Must cross 9.2593. longer term target 8.4047 on a break at 9.1460, 9.0306. short entry just ahead of 1.3732.
Short 9.7315 and 9.7405 to target 9.6594. Must cross 9.7135, 9.6955 and 9.6775. Longer term target 9.0188 on a break of 9.6414 then 9.5047, 9.2345 and 9.0966.
Short 19.4643 and 19.4833 to target 19.2580. Must cross 19.4456, 19.4269, 19.4082 and 19.3331.
The weekly trade was long 1.4357 to target 1.4500’s. A good valid weekly trade as usual. However, EUR/CAD traded to lows at 1.4262 and off entry by 90 pips.
I cannot state this point enough, an entry miss is a bonus to profits. Normal traded markets never experiences an entry nor target miss. But now and then in our weekly trades, an entry miss is seen.
But an entry miss only affects 1 or maybe 2 currency pairs and extremely rare to see entry misses on multiple currency pairs. For example, USD/CAD might experience an entry miss. This means CAD/JPY will miss entry as well. Possibly, all GBP or all EUR might witness an entry miss
The only manner to see en entry miss is a price trades from oversold to more oversold or an overbought price rises to more overbought. This week and 2 weeks ago, all prices are trading lower on oversold and higher on overbought. Signifies an ailing market overall as prices lack symmetry from currency pair to currency pair.
GBP/NZD is a good example. this week as entry 2.0304 was surpassed 3 times. Rare to see 2 times for the same trade entry. Overbought 2.0304 went to more overbought 3 times.
Never a problem as strategy is add 1 lot to a missed entry and never think twice as this decision should be automatic. The target is never in question but in GBP/NZD;s case, entry was the problem.
Example to missed entry and break even trade.
Add 1 lot at lows 1.4262 and so far traded highs was 1.4338. Add 1 lot result was +76 pips so far. EUR/CAD will eventually trade to original entry at 1.4357. Good choice to exit the first lot at break even and now we run at least a 76 pip profit on the second lot.
The second choice to the trade is hold both lots to the 1.4500’s target. But that is an individual decision to holding periods. Most traders want the weekly trades then to exit by Friday so then a new trade is issued every Saturday.
The lesson here is not only how to trade to break even on a missed entry and how to profit from a second lot but most importantly, currency and all financial instrument trading never experiences losses. Hard concept to grasp for the majority but if the price context is fully understood then losses are impossible. Many traders that trade with me for many moons fully achieved understanding to this concept and all know exactly what to do on missed entry, break even, profit trades and never a loss.
And note to the trade, 3 numbers for entry and target. Nothing more is required. Not a stop, chart, graph, Conovirus or the latest market talk or economics. A market price doesn’t care about such things as it only knows entry and target and the price always complies.
EUR/USD, AUD/USD, NZD/USD and GBP/USD all trade not only in deep oversold territory and further dropping but all currency pairs lost control to proper attachments to its JPY cross pairs. EUR, AUD, GBP and NZD broke below vital break points to allow the drops to oversold but JPY cross pairs failed to follow.
EUR/USD for example trades below 1.0982 Vs EUR/JPY above at 120.06.
AUD/USD trades below from 0.6769 while AUD/JPY trades above at 74.00
NZD/USD trades below from 0.6465 while NZD/JPY trades above at 70.68.
The ultimate story is GBP/USD trades below 1.2925 and GBP/JPY far above at 141.33
The opposite side is severely overbought USD pairs beginning with USD/JPY from vital 109.32 trades above, USD/CAD at 1.3215 trades above and USD/CHF at 0.9797 trades above.
USD/CHF above at 0.9797 also reveals correctly CHF/JPY above at 111.61.
The wild card pairs are always USD/CAD trades above yet on the brink and CAD/JPY correctly trades above.
Overall USD/JPY and all JPY cross pairs trade above respective high / low break points while all Non USD pairs trade below.
USD/JPY above vital high/ low point and all JPY cross pairs trading above vital points not only explains why EUR and non USD pairs continue drops into oversold but also explains current far deviations in USD Vs Non USD pairs. A deeper explanation to present currency markets is a Realignment.
As an example, most widely traded EUR/USD, EUR/JPY and USD/JPY.
Currently USD/JPY owns EUR/JPY and EUR/USD is odd ball currency kicked to the curb. Most stunning and rare to the synopsis to realignment is GBP/USD, GBP/JPY and USD/JPY.
USD/JPY now owns GBP/JPY and GBP/USD is also left on its own. GBP/JPY is a highly special currency pair and rarely loses its attachment to GBP/USD. For GBP/USD to lose its association to GBP/JPY is a massive development.
Typical and correct currency pair arrangements in currency markets are AUD/USD owns AUD/JPY, NZD/USD owns NZD/JPY, EUR/USD owns EUR/JPY, GBP/USD owns GBP/JPY. In this development, USD/JPY is left on its own. Normal trading then means for example, AUD/USD and AUD/JPY are the same trade as AUD V AUD, long or short as a double trade.
Mathematically, the word “own” means a massive Correlational shift. Correct is EUR/USD and EUR/JPY as rightful owners by EUR V EUR and strong Correlations while USD/JPY as odd currency contains no correlational association to EUR/USD or EUR/JPY.
In current Realignment, the reverse now holds which means USD/JPY and JPY cross pairs are now the double trade to long or short. But it also means USD/JPY as new owners to JPY cross pairs holds a strong Correlational association to JPY cross pairs and no association to EUR/USD.
To define a Realignment, its a Correlation shift or transfer from either negative to positive or positive to negative, depending which currency pair is affected. Correlation is a commentary and derivation on a Standard Deviation which is the overall glue that holds currency prices and currency markets together by defining movements.
The last 2 major Realignments occurred from 1998 to 2008 and from 2008 to present. Generally, major Realignments last roughly 8- 10 years. Within the 10 year framework, mini Realignments occur to last anywhere from 2 to 3 years. How strong and lasting are major Realignments requires a view to at least 10 years of Regression Statistical moving average data from EUR/USD, EUR/JPY and USD/JPY.
Seen from the data to include Correlations however are longer term trades to last for mutli years as the data sees the future over many years. Year 2007 was clearly evident to the impending 2008 crash and the massive Correlations shift as the Correlations from USD/JPY and EUR/USD revealed a top.
By defining movements addresses predominantly ranges. Residual Plots define multi year boundaries and ranges compress when USD/JPY owns JPY cross pairs and expands when EUR/USD for example owns EUR/JPY. Same principle for AUD/USD VS AUD/JPY, GBP/USD V GBP/JPY. Its a USD Vs Non USD move as USD volatility is quite low when USD is the dominant feature to currency markets and contracts when in its descent.
The derivatin to current Realignment by speculation derives from DXY at 99.00’s as the 5 year average is located at about 95 to 96.00. DXY naturally allowed USD/JPY to trade hgher, non USD to trade lower and JPY cross pairs to attach to USD/JPY. Then JPY cross pairs transforms to trading exactly the same as USD which means they are now USD pairs rather than non USD pairs when attached to for example EUR/USD and EUR/JPY.
For USD/JPY watch 112.03 at the 5 year average, EUR/JPY at 123.21, GBP/JPY 147, CHF/JPY 114.14 and CAD/JPY at 85.77.
Under Realignment, USD/JPY, USD/CHF and JPY cross pairs higher while Non USD pairs much lower. If my speculation is correct then markets could very well be under at least a 2 -3 year Realignment.
Interested students of the markets are invited to read my 2015 academic paper when EUR/USD, EUR/JPY and USD/JPY were analyzed by 10,000 exchange rate data from 1998 to 2008 and 2008 to 2015.
Here’s my counts
Monday 1.7309 highs to Tuesday lows 1.7214. Questionable to take profits here when targets failed to achieve and did we know GBP pairs would skyrocket higher. GBP does this from time to time on an entry then decides to rocket higher. And at the same time when exact entry wasn’t seen.
Then Tuesday 1.7303 highs to Wednesday, today, 1.7133 target. The sell Point was 1.7315 and 1.7341.
Same story with GBP/NZD. Achieved 116 pips on shorts then traded past 2.0304 weekly entry. And did we know GBP would trade higher, no.
But Monday’s 2.0290 was close enough to 2.0304 for entry. The final highs were 2.0400 and passed entry. That’s wonderful.
Let;s assume no short entry at 2.0290 but entered at 2.0304 and add 1 lot at 2.0400. Lows achieved 2.0236. From 2.0400 then 164 pips and 2.0304 is 68.
GBP/NZD target remains far away at 1.9900’s. Should we even take profits and count above pips.
My advice for most traders is get the money 1st and target die to distance, second.
Not sure GBP/AUD is under question at 1.9515 from 1.9480
EUR/CAD runs a loss about 100 pips
Most don’t bother with GBP/ZAR nor NOK and other currencies outside our regular 28
Trades this week were based on trader requests. GBP pairs worked on 2 rounds of shorts. This happens at times especially when we see entry hit on Monday or Tuesday. To respectfully restate for new viewers, the job of the trader is enter and exit at target. This is done Sundays. Never a need to watch screens all week as trades are perfect. We don’t use charts, graphs, stops, indicators. I use math but math formulas that work as many don’t. Peruse the site and my words are backed by performance over 16 years.
Target is never in question as targets are written in math formulas. On occasion we miss an entry but never far from the original weekly entry. Add a lot and continue with the trade to target as a missed entry is free money bonus points.
Open trades as this week all posted on Linked IN, twitter and Fxstreet.
This week’s trade theme derived from solicited trader requests and the winning pairs are GBP/NZD, GBP/AUD, GBP/CAD, EUR/CAD and again, GBP/ZAR. All wide ranging currency pairs to include 2 traditionally neutral pairs; EUR/CAD and GBP/CAD.
Two factors qualify EUR/CAD as neutral: as middle currency to EUR/USD and current price location between the 5 and 10 year averages from 1.4200’s to 1.4700’s. Recall last year’s March / April’s EUR/CAD trade from 1.5300’s to 1.4800’s. As stated last year, EUR/CAD was then dropped from trade consideration as 1.4800’s settled EUR/CAD’s price. Once a price is settled, any pair is dropped.
Since last April 2019, EUR/CAD traded 1.5100’s to 1.4300’s and 1.4900’s to 1.4300’s from July 19 to current day. Why drop is due from a 500 pip range and settled price lacks qualification for longer term 5 and 800 pip trades and EUR/CAD’s range longer term entered compression mode. A breakout is warranted from current location between 5 and 10 year averages but until EUR/CAD trades to either 1.5500’s or 1.3500’s then only a weekly trade exits.
GBPCAD automatically qualifies as neutral due to total opposite and location between defining currency market pairs, GBP/USD and USD/CAD. GBP/CAD further qualifies as neutral as it currently trades between 5 and 10 year averages from 1.7200’s to 1.7600’s.
Normal neutrality for GBP/CAD is trade between 5 and 16 year averages. As EUR/CAD, a breakout is on the way for GBP/CAD.
Short term, nothing special in regards to GBP/CAD except its wide ranges and qualification as a great weekly trade.
Overall, the vast majority of G28 currency pairs trade below 5 year averages and this means not only are prices extremely low but wide ranging movements remains dead. Until prices trade above 5 year averages, volatility will remain lifeless.
Short term, daily non movement to nation’s interest rates are compressing currency price ranges and this situation is growing worse. The ECB’s new STR interest rate introduced last October now allows EUR/USD barely a 100 pip trade week, AUD at barely 50 pips, NZD at 100 and the list goes on.
Nothing special to GBP except it trades within the confines of its basic ranges.
GBP/ZAR contains easily ability to trade 4500 – 5000 pips per week. Currently GBP/ZAR at its 19.4546 close is massively overbought. The long term target remains 18.2850 on a break of its 5 year average at 18.5877.
GBP/USD remains overbought and in a downtrend since it touched its long term target at 1.3400’s. Until 1.3515 breaks, GBP/USD’s downtrend remains.
GBP this week will suffer a bit higher until short points are achieved.
GBP/NZD. Short 2.0276 and 2.0304 to target 1.9991. Must cross 2.0248, 2.0220, 2.0192, 2.0162, 2.0134, 2.0106, 2.0078, 2.0050, 2.0022 and 1.9994.
Break 1.9931 targets 1.9820.
GBP/AUD. Short 1.9441 and 1.9480 to target 1.9117. Must cross 1.9402, 1.9363, 1.9324, 1.9285, 1.9246, 1.9207, 1.9168 and 1.9129.
GBP/CAD. Short 1.7315 and 1.7341 to target 1.7133. Must cross 1.7289, 1.7263, 1.7237, 1.7211, 1.7185 and 1.7159.
Short below 1.7081 to target 1.6977. Must cross 1.7055, 1.7029 and 1.7003.
EUR/CAD. Long 1.4357 and 1.4342 to target 1.4534. Long at market open is also acceptable. Must cross 1.4386, 1.4415, 1.4445, 1.4474, 1.4504 and 1.4519.
GBP/ZAR short 19.4716 and 1.4886 to target 19.0636. Must cross 19.4546, 19.4376, 19.4206, 19.4036, 19.3866, 19.3695, 19.3526, 19.3356, 19.3186, 19.3016. 19.2846, 19.2676, 19.2506, 19.2336,19.2166, 19.1996, 19.1826, 19.1656, 19.1486, 19.1316, 19.1146, 19.0976, 19.0806, 19.0636 target.