GBP/USD”s main problem is found between the USD/CAD and USD/JPY relationship.
USD/JPY 1.2724
GBP/USD 1.2629
USD/CAD 1.2694.

The battle lines are drawn and its the fight in the center between middle currencies. Middle? Reverse exchange rates is best seen to the relationships.

EUR/USD 0.9302
USD/JPY 0.7861
USD/CAD 0.7878
GBP/USD 0.7916.
NZD/USD 0.6540.

2 sets of exchange rates exist and 2 separate trades: middle currencies Vs top and bottom as EUR/USD vs NZD/USD. The current paralysis between GBP/USD, USD/CAD and USD/JPY is enough to stop dramatic movements to EUR/USD and NZD/USD. Most trades are found as middle currencies because of tendencies to create much distance from top and bottom counterparts.

See AUD/USD for example. AUD/USD traveled 100 pips higher from 0.7037 last Wednesday.

Last Wednesday’s lineup:

GBP/USD 0.8012
USD/CAD 0.7813
USD/JPY 0.7894.

AUD/USD was massively oversold against all counterparts.

Middle currencies are followers. A big EUR/USD move is always followed by GBP/USD in a delayed reaction the next day. Overall we have response Vs reaction.

A big GBP/USD move has 2 choices: either correct to meet its middle counterparts or EUR/USD and NZD/USD must respond. Overall normality or harmony must be found and settled between top and bottom Vs the middle.

Response Vs reaction is an interesting case as it relates to music as Call and response. High notes respond to low notes and low notes to high notes. Its the mode of travel to play a vast majority of songs in any genre. Musical notes meet in the middle after the call and response.

Ask the currency brokers why they set up exchange rates with vast distances. GBP/USD at 0.8012 = 1.2481, GBP/USD 0.8011 = 1.2482, GBP/USD 0./8013 = 1.2479. GBP/USD contains a built in differential of 2 pips. This 2 pips is low in relation to GBP/USD by 1 point exchange rates.

GBP/USD as 1 point exchange rates should be viewed as 4 pips to start vs an 8 pip maximum to satisfy day trades.

GBP/USD must first cross above USD/CAD then USD/JPY decides targets and /or where to take profits when satisfied. Ultimately, we want GBP/USD to cross above USD/JPY then GBP/USD is home free to travel massively higher. Or a higher USD/JPY makes GBP longs so much better. USD/JPY at 1.2800’s allows GBP/USD more breathing room to bank many more pips.

Brian Twomey

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