Currency markets this week are driven by middle currencies GBP/USD, AUD/USD and associated cross pairs while top and bottom currency pairs EUR/USD and NZD/USD remained trapped in tiny ranges.
GBP/USD began the week above vital 1.3357 followed by Sunday’s reported levels at 1.3357, 1.3441 and 1.3459. While GBP/USD appears to have broken 1.3459 to trade higher, the average at 1.3459 traveled higher as GBP/USD rose. GBP/USD this week was caught in a trap however higher price vs higher averages warns to eventual drop as GBP/USD must correct lower.
The GBP/USD line up remains as 1.3165, 1.3357, 1.3442 and 1.3484. The level at 1.3459 traveled 25 pips higher and GBP/USD eventually broke to trade 1.3503. Shorts remain as current GBP/USD targets a break at 1.3442 to then 1.3407 then 1.3368.
GBP/USD main price driver is 1.3357 as GBP/USD is far to low in the vicinity of 1.3357. GBP/USD this week traded 115 pips.
GBP/JPY against an +85% correlation to GBP/USD naturally traveled 229 pips higher. GBP/JPY at 155.00’s sits massive overbought and just below a multi year range top; at 157.00’s. GBP/JPY is the lead driver to GBP/USD lower. GBP/JPY overall began the current upmove from 148.00 and traded 700 pips higher. Miles of downside exist yet to trade.
AUD/USD traded as GBP/USD. AS AUD/USD traded higher then averages at 0.7255 and 0.7260 rose to eventually stop AUD/USD’s climb. Vital breaks for higher are now located at 0.7260, 0.7268 and 0.7307. AUD/USD targets mid to lower 0.7100’s. The main driver to a lower AUD/USD is deeply overbought AUD/JPY.
USD/JPY short at 114.72 traded to 115.21, off 40 pips from entry and a Christmas gift to free money. USD/JPY began the week overbought and offered an extra 40 pips to downside profits. Longer term, USD/JPY is overbought from 101.00, 109.00, 110.00’s, 112.00 and 113.00’s. USD/JPY is overbought across the board.
DXY traded not only weekly lows to 95.77 but a break at 95.25 then USD travels lower on a deep slide and assists to USD/JPY’s 110 target.
EUR/USD and Cross Pairs
EUR/USD’s range and neutrality problem is located in a deeply oversold EUR/CHF, overbought EUR/JPY and dead ranges to EUR/CAD, EUR/AUD and EUR/NZD.
EUR/NZD contains a correlation dilemma to EUR/USD at +42% and +10% to NZD/USD. EUR/NZD higher is prevented by NZD/USD at 0.6841, 0.6854 and 0.6890.
EUR/USD is free to travel higher to target now 1.1418 and 1.1435 however the correlations to EUR/NZD prevents cross pair assistance particularly EUR/NZD and EUR/JPY.
EUR/NZD’s buy drop strategy targets 1.6520 then 1.6637 and just head of big break lines at 1.6760 and 1.6772.
Despite an 84% correlation to EUR/USD, EUR/CAD to move higher must break 1.4531, 1.4557, 1.4693, 1.4722 then 1.4800’s. EUR/CAD offers no assistance to a higher EUR/USD.
EUR/AUD is trapped between 1.5475 to 1.5733, 1.5749 and 1.5787. The positive to EUR/AUD and long drop strategy is correlations to EUR/USD at +81% and +67% to AUD/USD. Long term, nothing exciting exists to EUR/AUD except to range trade.
The true insight to EUR/AUD is richter scale overbought to AUD/EUR and overbought is enough to assist to lower AUD/USD.
USD/JPY Cross Pairs and Correlations
JPY cross pairs remain deeply overbought to include CHF/JPY. For CHF/JPY is massive overbought from every average dating to 1999, overbought to 5, 10 and 14 year averages, overbought to shorter averages from 5 to 253 day.
CHF/JPY correlates to USD/JPY at 97% and is the best assist to a lower USD/JPY. Great long term short.
USD/JPY negatively correlates to EUR/JPY -69%, AUD/JPY +17%, NZD/JPY -19% and +43% to CAD/JPY.
Next week’s trade and lazer focus is GBP as the best category to offer best trades and most profits.