Weekly Trades: EUR/USD, EUR/GBP, NZD/USD

EUR/USD is driven by two factors. The first is the traditional 9 year currency cycle bottom achieved in 2017 at 1.0300’s from its cycle high in 2008 at 1.6000’s.

Second factor is the falling line at current 1.1179. In the week of January 4, the line was located at 1.1280. In the week of June 6, 2019, the line was 1.1394. Weekly, the line moves slowly yet moves slowly downward.

The competition to 1.1179 is the 5 year average at current 1.1278. In 2008, the 5 year average was located at 1.3200’s. The formal break of 1.3200’s in 2012 was not only the mid point of the 9 year currency cycle to price and time but allowed EUR/USD to continue its travels to the 1.0300’s cycle bottom.

EUR/USD remains trapped between 1.0300’s and 1.1179 and the 5 year average at 1.1278, a rough mid point at about 1.0748.

EUR/USD currently trades above its mid point at 1.0800’s.

Non USD currency pair commonality is all trade below 5 year averages while all USD currency pairs trade above. This includes all EM currencies. Also includes DXY as it trades at overbought from 100.36 and trades above its 5 year average at 96.45.

DXY or USD currency pairs lack any chance to break 5 year averages anytime soon nor will non USD currency pairs such as EUR/USD and GBP/USD break its 5 year averages.

Until a break is seen to 5 year averages, the vast majority of currency pairs are contained in about 300 pip ranges for USD and Non USD currency pairs.

JPY cross pairs are contained within 200 to 300 pip ranges. Higher range pairs such as GBP/AUD, EUR/AUD, EUR/NZD and GBP/NZD contain about 300 to 500 pip ranges.

Wide range EM currency pairs to include RON, PLN, HUF and BRL ranges are at about 5 to 800 pips.

How 5 year averages translates to currency pairs and prices is the higher prices travel to 5 year averages then the higher expands the ranges. The more distant to trade away from 5 year averages then the more ranges compress. The more compression is seen from ranges warns to not only higher prices but subject to violent upswings. Above describes EUR/USD and all non USD currency pairs.

The reverse is true for USD currency pairs. The more prices travel lower to 5 year averages then expands the ranges.

Its May and the traditional time for EUR/USD to begin its seasonal 6 month upswing until it tops in December and January. Then falls from January to May. Always a EUR/USD price caution to traditional European Parliament budgets passed in November.

EUR/USD seasonal effects are assessed by my friend Peter Wadkins, formerly 15 years at Thomson Rueters and 47 year FX veteran. The Peter Wadkins Upswing Indicator works like this and perfectly over the past 15 years for EUR/USD and its past currency, USD/DEM.

Whenever Peter takes traditional June vacations, the EUR/USD travels higher and remains higher throughout the summer. To truly understand the depth to the Peter Wadkins Upswing Indicator, USD/DEM rose upon June vacations every year in the pre EUR/USD days.

On the interest rate front, USD interest rates last week failed to move all week. Literally, failed to move and an event not ever seen. If USD interest rates fail to move then every nation’s interest rates fail to move. Did we truly believe USD could ever trade negative. Its impossible because every nation’s interest rates would trade lower or to negative because every nation prices interest rates from USD.

Weekly Trades

This week’s trades are EUR/USD to again trade continuously throughout the week and maximize profit pips. NZD/USD is included for no particular reason but it contains good potential for continuous trades. EUR/GBP, a most horrible, horrible currency pair is at richter scale 0.8900’s and represents a decent trade.

EUR/USD

Long 1.0790 and 1.0771 to target 1.0884. Must cross 1.0827, 1.0845 and 1.0866.
Long above 1.0902 to target 1.1012. Must cross 1.1009.
Short below 1.0902 to target 1.0836. Must cross 1.0866 and 1.0845.

EUR/GBP

Short 0.8942 and 0.8958 to target 0.8774. Must cross and watch 0.8808.

NZD/USD

Long 0.5905 and 0.5892 to target 0.6099. Must cross 0.6005, 0.6030, 0.6055 and 0.6080.
Long above 0.6130 to target 0.6223. Must cross 0.6155, 0.6180 and 0.6205.
Short 0.6223 to target 0.6160.

Or
Cautious short 0.6099 to target 0.6020. Must cross 0.6080, 0.6055 and 0.6030

Brian Twomey

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