FX Weekly: GBP/USD V USD/CAD, EUR/USD, JPY Cross Pairs

GBP/USD last month broke below its 5 year average at 1.3100’s and traveled 900 pips to 1.2200’s but the vast majority of the 700 pip move occurred last month to GBP/USD 1.2400’s.


USD/CAD last month bolted from 1.2400’s to current 1.2900’s but 400 pips last month resulted in the vast majority of the USD/CAD move. GBP/USD outpaced USD/CAD by about 2 times.


GBP/ USD at 1.2300’s sits deeply oversold from its 5 year average. USD/CAD failed to break its 5 year average at the corresponding 1.3100’s. USD/CAD’s 5 year average now sits at 1.2986 vs lows at 1.2400’s or 500 pips. USD/CAD previously was located from 1.2200 to 1.3100 or the same 900 pips to GBP/USD.


Target for USD/CAD above 1.2986 is located at 1.3416 or 500 pips and corresponds to the 10 year average target at 1.3544.


USD/CAD’s big line average breaks are found at 1.2862, 1.2812, 1.2724, 1.2657. USD/CAD is fairly well trapped in a 300 pips range. GBP/USD breaks higher 1.2356, 1.2456, 1.2479, 1.2788, 1.2933. GBP/USD 1.2933 happens to be found at the 50 day average.


GBP/USD 1.2470 is located the 5 day average and the first major break in order for GBP/USD to trade within the proper 5 to 253 day average framework.


USD/CAD’s dead range is equally blamed on USD/JPY as both correlate at + 88%. USD/JPY vital points below: 130.44, 129.70, 124.03, 123.89. USD/JPY 123.00’s corresponds to USD/CAD lows at 1.2400’s. USD/JPY 129.70 corresponds to USD/CAD 5 year average at 1.2986. USD/JPY 130.44 becomes USD/CAD’s first target on a break of 1.2986.


The overall driver to USD/CAD is GBP/USD deeply oversold from the 5 day average to averages dated to 1998. USD/JPY as the next driver to USD/CAD is deeply overbought from the 5 day average to averages dated to 1998.


USD/CAD at 1.2900’s is trapped in the middle of GBP/USD 1.2300’s to USD/JPY 130.00’s. Working against a higher USD/CAD is deeply overbought CAD/JPY and CAD/CHF. Both correlate to USD/CAD at +80 and +64% for CAD/CHF. Longer term, USD/CAD sits dead neutral from averages at the 5 day to 1998 averages.


GBP/USD’s averages at 1.2400’s should break easily to target 1.2600’s. GBP/JPY at -99% is the only currency in GBP’s universe to negatively correlate. GBP/NZD is light at +67% but the correlation explains NZD/USD wider movements to finally wake up from its months long coma.


EUR/USD


EUR/USD big break for higher is located at 1.0881 and this number happens to correspond to the 50 day average at 1.0841. Above targets easily 1.1026.
EUR/USD sits deeply oversold from short to longer dated averages to 1998. EUR/USD sits massive oversold at the 5, 10 and 15 year averages. The EUR trade and direction is higher.


For Sunday to Monday’s 24 hour trade, upper target is located at 1.0627 and just shy of the 20 day average at 1.0664.


24 Hour Trades


24 Hour trades contain 2 longs and 2 shorts and 1 reversal per each long and short.


GBP/JPY


As current leader of JPY cross pairs, GBP/JPY sits fairly neutral at 160.00’s from the 1.4800 to 168.00 move. Big break for lower is located at 159.95.


JPY Cross Pairs


USD/JPY is back to +99% Correlations to JPY cross pairs. For the week, we’re cautious to weekly trades as JPY cross pairs all resemble GBP/JPY’s neutral position. Neutral means JPY cross pairs could easily fly either way. The strategy is short rallies.


20 Currency Pair Ranking Scale


For the first 14 currency pair rankings as follows: Favored trades this week: EUR/USD, EUR/CAD, AUD/USD, AUD/JPY, EUR/AUD, EUR/NZD, NZD/USD, AUD/CHF, CAD/CHF, NZD/CHF, USD/CAD, CAD/JPY, EUR/JPY, NZD/JPY.


JPY cross pairs are relegated to the bottom, USD/CAD doesn’t have a clue, CHF cross pairs are normally decent trades week to week but lack big moves.


Best trades from the overall rankings: EUR/USD, EUR/CAD, AUD/USD, EUR/AUD, AUD/JPY, EUR/NZD, NZD/USD.


GBP


GBP/USD, GBP/AUD, GBP/NZD, GBP/CAD, GBP/CHF, GBP/JPY. Best trades: GBP/USD, GBP/AUD, GBP/CAD, GBP/NZD.


Currency Markets


Currency market prices overall are back to normal from a few fairly tough weeks. The yearly pattern is currency prices goes haywire at least 2 times per year and always in the March and April period. Except for an occasional week now and then to go off kilter, currency markets function +90% for any given year.


As off kilter subsided, normal will last for the remainder of the year. Normal means wider daily movements will disappear to favor the daily to weekly balance to overall trades. Previously, daily moves stole pips from weekly trades. Rare day to see such events.

Brian Twomey