Weekly Trades: USD/PLN, USD/HUF, USD/BRL

Last time we visited USD/HUF, USD/PLN and USD/BRL was last December 2019 then August 2019. For August was posted 16 EM currency pairs alongside entries and targets and the exact same set up as posted to weekly G28 currencies.

Only difference between EM and G28 currencies is EM currencies contain higher exchange rate numbers than G28 and EM ranges are wider than G28’s. Wider ranges are built into the exchange rates by the central banks.

Best EM currencies to trade are PLN, HUF, BRL and RON, the Romanian Leu. All move extremely well against wide ranges and targets hit perfectly. The Mexican Peso, MXN follows a close second then TRY.

BRL and MXN however contain vastly different orientations to exchange rates than PLN, HUF and RON. BRL is a true currency pair as its daily price is negotiated in a room of bankers everyday at 11:00 am New York time. Then a price is released.

MXN’s price is released the day before the price is fixed by Banxico everyday at 12:00 Noon New York time. The next level to analysis to trade MXN correctly is to factor MXN interest rates, TIIE and Cete rates. TIIE and Cete rates work on overnight rates which is the normal funding rate for all currencies then 28 day, 91 and 182 days. Non normal numbers from all central banks but Banxico works in arrears. Banxico views most vital TIIE rates as equilibrium rates which is exactly the perfect definition to an interest rate traded in markets.

Last August, USD/PLN traded at 3.61 and now 4.24. USD/HUF traded at 294.00, now 338.09. USD/BRL traded 3.98, now 5.3501.
USD/PLN is approaching 60 year highs at 3.66, USD/BRL’s price at 5.3501 doesn’t exist in the past 32 years. USD/HUF’s price at 338.08 doesn’t exist in the past 52 years.

USD/PLN, USD/HUF and USD/BRL are overbought to extremes.

Similarly, EUR/PLN, EUR/HUF and EUR/BRL are also overbought to extremes. EUR/PLN from its 4.58 close is approaching 60 year highs at 4.85 and seen February 2004. EUR/HUF from its close at 338.26 is approaching 52 year highs at 366.08. EUR/BRL from its close price at 5.7855 doesn’t exist in 32 years.

Add non existent prices to AUD/CHF and NZD/CHF, markets are trading in uncharted territory. And 48 years into free float currencies against government debt sure to mount to fight COV 19, market analysts are beginning to speak of the next market period and insolvency. This is the exact same story to every market period dating to BOE in 1694. A new period of market trading is upon us. Its no mystery to non existent prices and 50 year highs and lows as the magic number is 50 when it all ends.

Trades

USD/HUF. Short 339.84 and 342.12 to target 319.68. Short 316.80 to target 293.74.

USD/HUF long term target 285.29 achieves by breaks at 307.73, 298.81 and 292.08.

USD/PLN Short 4.2564 to target 4.0730. Short 4.0425 to target 3.9814. To understand the target, 50 day average is located at 4.0129.

USD.PLN long term target 3.7891 achieves by breaks at 3.9572, 3.9022 and 3.8509.

USD/BRL Short 5.3658 and 5.3903 to target 4.9501.

USD/BRL long term target 4.0480. Context to this trade, the 50 day average is located at 4.7641.

 

Brian Twomey

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