EUR/USD and GBP/USD Long Term

EUR/USD for December and January traded 111 pips from 1.1273 to 1.1384. The reversion to 1.1300’s and a neutral price is driven by 1.1387, 1.1435, 1.1480 and 1.1511. EUR/USD’s problem is overall price drivers are contained within middle monthly averages.


EUR/USD averages lack anything close to uniformity. EUR/USD drops were met by deeply oversold longer dated averages to force EUR higher to neutral 1.1300’s. If EUR/USD averages were orderly and aligned properly, EUR would’ve trended to lower targets at current 1.1057.


The positive aspect to EUR/USD is it trades below every average yet every average is rising ever so slowly and explains EUR/USD slow grind lower. A higher EUR meets a concentration of averages from 1.1387 to 1.1900’s and aligned less than 100 pips apart. EUR 1.1400’s, 1.1500’s and 1.1600’s form a solid steel wall.


The best targets currently are located at 1.1057 then bottoms at 1.0900’s and 1.0800’s. From 1.0900’s assumes DXY trades to its tops at 99.00’s. Also assumes DXY contains 300 pips to travel higher and matches 300 EUR pips to 1.0900’s from 1.1200’s.


EUR/USD’s target is benchmarked by seasonality. Within any given year, traditional EUR/USD downtrends begin in December/ January and ends May/June then begins EUR/USD’s 6 month uptrend.


EUR/USD’s December/ January drop is the result of the European Parliament’s funding of the annual budget beginning normally by December. A traditional lower EUR in January allows funding the budget at a lower cost. EUR has 6 months to achieve targets.


GBP/USD


GBP/USD’s situation is similar to EUR/USD as averages lack uniformity yet averages are positioned to allow GBP a valid trade range. GBP/USD trades 1.3357, 1.3443 and 1.3492. Above 1.3492 becomes 1.3492 to 1.3760. Overall lower range is located from 1.3492 to 1.3298 then a brick wall to averages exists at 1.3100’s.


A lower GBP/USD rises as longer dated averages at 1.3700’s and 1.3800’s trades oversold and forces GBP higher. Overall averages are rising.


Banks target GBP/USD by end 2022 at 1.2500’s. The target at 1.2500’s is pushing the envelope to far and assumes breaks at 1.3193, 1.3180 and 1.3120. A break at 1.3100’s targets bottoms at 1.2700’s and 1.2600’s. GBP/USD lows for the year coincide to UK February / March budgets. GBP/USD failure to break 1.3100’s targets 1.3400’s.


For the week, vital breaks for higher/ lower are located at 1.3492 and 1.3503.

Brian Twomey