Overall currency markets are confronted by a crucial yet extremely cautious week ahead. Price ranges this week are running at widest points in many months and adds to the potential of big moves.
EUR/USD 1.2061, AUD/USD 0.7657 and USD/CAD 1.2783 decides future and current direction to all 28 currency pairs. EUR/USD and AUD/USD breaks then much lower or much higher. USD/CAD breaks 1.2783 then much higher or a failure to break then much lower.
JPY cross pairs remain overbought and reveals EUR/USD and AUD/USD will eventually break lower and USD/CAD breaks higher. GBP and NZD will then follow lower.
Not a driver to market prices this week are the typical alarm bells written by market writers with specialization in marketing rather than expertise in markets, trading and market prices. Elections, Covid, lockdowns, vaccines, central bank meetings, yields, month end, Fed, Powell and the Mars rover landing failed to move market prices. Not at the time of release nor in subsequent trade days did prices move except to the degree intended from the start of the day or week.
A market price will achieve its destination by mathematical certainty without regard to outside events yet professional alarm bell ringers are surprised at a rise in yields, no movements to NFP and central bank meetings and to a price that fails to respond to their sounding of the bells in the market square.
NFP and fed meetings barely moved EUR/USD 20 pips in each of the last 6 and 8 months. Whistle blowers month end and rebalance will be heard this week. Meanwhile monthly averages haven’t changed in many months and a rebalance nor month end changes to prices fails to exist as price fail to move enough to require changes to averages.
DXY monthly averages remain inside 89.95 to 91.43, Gold 1815 -1642. EUR/USD traded 1.1900’s -1.2200 in February, 1.2000’s to 1.2300’s in January. The 2 year yield traded 0.11 to 0.23 in the past 9 months. The S&P’s traded 300 points from 3900 to 3600 for February, 200 points for January. WTI traded 10 points in February from 51.00 to 61, and 6 Points for January.
Our professional alarm bell ringers are long on whistles but short on market competency. Necessary yet least favored aspect to market prices, trades and economics is the requirement to run and enter data for a clear picture to entries and exists and to understand the economic condition. But markets and profits were never nor will ever be the ultimate goal to reporting.
The ultimate revelation to a cautious market this week is found in GBP/AUD and GBP/NZD. GBP/AUD at 1.8059 resides inside vital range points from 1.7885 to 1.8130 and GBP/NZD at 1.9318 to 1.9176. Both GBP/AUD and GBP/NZD from oversold last week drifted higher directly into a neutral zone for this week
EUR/AUD and EUR/NZD however are deeply oversold and contains ability to travel higher while GBP/AUD and GBP/NZD remain stuck in neutrality.
EUR/USD led the charge higher for non USD pairs upon the break of the 5 year average at 1.1300’s last July and is in the position to take down GBP, NZD and all non USD pairs. GBP/USD must break 1.3600’s and NZD/USD 0.7100’s to assist in a wholesale trend change.
Deeply oversold USD/CHF at 0.9084 broke higher from 0.9001, CAD/ZAR trades above 11.86 and USD/CAD is on the verge of a break higher at 1.2783.
GBP/USD retains slight overbought status while next highest exchange rate GBP/JPY is deeply overbought and next lowest GBP/CHF also opens the week in richter scale overbought. Same situation exits for EUR/USD, AUD/USD and NZD/USD as EUR/CHF and EUR/JPY are both overbought.
NZD/CAD and AUD/CAD offer no assistance as leaders to NZD/USD and AUD/USD direction as both sit in neutrality.
EUR/GBP challenges 0.8732 on a break of 0.8573 or a drift to 0.8400;s. EUR/GBP traded to exactly 0.8728 Friday then lower to close at 0.8655.
DXY remains in a 89.95 to 91.43 range and a break higher at 91.43 challenges 92.78.