FX Weekly Commentary and EM

EUR/USD again begins the week deeply overbought and severely compressed ranges. USD/JPY begins the week deeply oversold and fairly normal ranges.


The most vital relationship this week is found at USD/JPY 107.58 from the close at 107.86. USD/JPY breaks below 107.58 not only targets 108.89 easily but JPY cross pairs are in question to follow USD/JPY lower.


EUR/JPY for example correlates to USD/JPY at +95%., AUD/JPY at +94% and NZD/JPY at + 92%, CAD/JPY at +98% and GBP/JPY at +96%.


USD/JPY holds at 107.58 then targets 108.95 and higher USD/JPY brings down EUR/USD. USD/JPY below 107.58 finally rightsizes the EUR/USD Vs USD/JPY relationship from severely off kilter when USD/JPY broke above 106.00’s at the end of February.


USD/JPY traded above 106.00’s while EUR/USD was above 1.1800;s misaligned the relationship for the past 2 months. Proper is USD/JPY and EUR/USD must trade on opposite sides to most vital MA’s. From current prices, EUR/USD at 1.1977 and USD/JPY 107.58 defines the MA arrangement.
The misaligned EUR/USD Vs USD/JPY relationship completely paralyzed JPY cross pair movements as defined by Correlations.


GBP/USD Vs GBP/JPY +96%, AUD/USD Vs AUD/JPY +94%, NZD/USD Vs NZD/JPY +88%, EUR/USD Vs EUR/JPY +10% and USD/CAD Vs CAD/JPY -97%. The only viable JPY cross pairs operating correctly are CAD/JPY and EUR/JPY.


Proper is EUR/USD correlates to EUR/JPY, GBP/USD to GBP/JPY, AUD/USD to AUD/JPY and NZD/USD to NZD/JPY and USD/CAD opposite to CAD/JPY. When USD/JPY and EUR/USD trade on opposite sides to vital MA’s then the relationship is defined as a long risk market as JPY cross pairs provide supports to higher prices and short when USD/JPY owns the correlations to JPY cross pairs while USD/JPY and EUR/USD trade on opposite sides of MA’s.


The current USD/JPY, EUR/USD and JPY cross pair paralysis now in its 2nd month is about to end and allow far better movements, particularly JPY cross pairs. The current range compression is the result of MA’s concentration due to inability to move and affected all 28 currency pairs.


EUR/USD


EUR/USD Friday broke the 10 year average at 1.2067 and explains the sudden 30 pip rise before the close. The wider range is now 1.2067 to 1.2607 with vital points at 1.2100, 1.2134, 1.2202, 1.2337 and 1.2472. EUR/USD below must break 1.2067, 1.2028, 1.1977 then 1.1800’s and 1.1600’s.


Maintain short JPY cross pair strategy, long USD/CAD, short CAD/JPY. While NZD/USD is neutral to overbought, NZD/CAD watch 0.8976 from the 0.8978 close. NZD/CAD below will assist NZD/USD shorts. NZD/CAD 0.8976 vital point coincides to 0.8977 at the 5 year average and represents a huge break.


AUD/CAD just broke below at 0.9673 and next watch 0.9616 at the 15 year average and 0.9683 at the 5 year.


GBP/CAD begins the week deeply oversold, along with GBP/NZD and GBP/AUD. EUR/AUD however will offer better trades and movements than GBP/AUD.


EM


USD in the EM space is massively oversold and it applies across the board to EM currencies.


USD/BRL Long 5.4597 and 5.4426 to target 5.1195.


USD/CNY Long 6.4753 and 6.4661 to target 6.5165


USD/CZK Long 21.27 to target 21.67


USD/DKK long 6.1474 to target 6.1868


USD/HRK Long 6.2582 to target 6.2967


USD/HUF Long 299.28 and 298.88 to target 300.85.


USD/MYR long or short at 4.1098, below targets 4.0937 and higher targets 4.1219.


USD/PLN Long 3.7596 and 3.7530 to target 3.7827


USD/RON Long 4.0647 and 4.0598


USD/RUB Long 74.79 and 74.66 to target 75.46


USD/TRY Short 3.3774 and 8.3930 to target 8.1589


USD/ZAR Long 14.2612 and 14.2544 to target 14.3838

Brian Twomey

For trades contact brian@btwomey.com

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