FX Weekly: EUR/USD V DXY, GBP, AUD, NZD, CAD

The currency market story this week to normal moves and no significant breaks to averages is found in the DXY Vs EUR/USD relationship. DXY vital average breaks as supports are located at 101.65, 101.93 then many averages exist at 100.00’s. Topside averages are found at 102.01, 102.17 then 103.14. Overall range 103.14 to 101.65 or 149 pips. DXY massive break to change the overall trend to much lower levels is located at 97.00’s.


DXY’s current downside trajectory at current 102.00’s is the result of the overall move from 89.00 in February 2021 to 104.95 May 2022 highs or 1500 pips. In 15 months from 89.00’s to 104.00’s, DXY averaged roughly 225 pips per month. From 104.95 last month, DXY dead stopped at vital 101.38 or 357 pips at a rough average at 178 pips per month.


EUR/USD broke below its 5 year average at 1500’s last November 2021 and traded 1200 pips to 1.0350 lows May 2022. EUR/USD’s ultra slow crawl averaged roughly 75 pips per month in each of 16 months to 1.0300’s.


While DXY averages 149 pips from 101.65 to 103.14, EUR/USD ranges from 1.0826 to 1.0623 or 203 pips. Recall last week’s range from 1.0818 to 1.0583 and 1.0556 or roughly 235 and 262 pips. DXY and EUR/USD are currently running nearly a pip to pip race as EUR/USD ranges slightly wider than DXY but only by 54 pips. EUR/USD averages are rising while DXY averages are falling.


No dramatic moves nor breaks to significant averages is the result of the DXY V EUR/USD relationhship until the logjam is eventually broken.


EUR/USD Vs NZD/USD


EUR/USD’s big break for higher is located 1.0826 and NZD/USD 0.6591. Both breaks result to significantly higher levels however DXY must trade to near low 101.00’s for breaks to occur.


The Week


EUR/USD


EUR/USD lifetime lows occurred in 1997 at 1.0406 then 2017 at 1.0346 at the end of the ECB’s negative interest rate program and 1.0350 in May 2022. The break lower at 1.0406 gave us 1.0346 but 1.0346 held last month at 1.0350. A lower EUR/USD must crack below 1.0350 and 1.0346.

Many are short EUR/USD with 1.0300’s as targets. Not close nor likely anytime soon. Lower targets if seen must trade above 1.0350.


Last week 1.0818 big break as written won’t trade higher. EUR/USD achieved 1.0786 highs. This week’s vital average at 1.0826 also won’t break nor will 1.0826 hold upon a break.


EUR/USD big break above are located at 1.0742, 1.0767, 1.0775, 1.0792, 1.0801, 1.0813, 1.0819. We’re long from 1.0667 and 1.0657 to target 1.0801 then short to target 1.0725.


JPY Cross Pairs


JPY cross pairs begin the week in stratospheric overbought territory. The message is short anywhere to target 200 pips lower. Start with the big 3 movers as GBP/JPY, EUR/JPY and CAD/JPY. JPY cross pairs contain 1 trade and 1 direction as short is the only way forward.


USD/JPY


USD/JPY is not only massive overbought from the 5 day average to 1998 averages but supports are located at 129.75, 129.91. USD/JPY’s trend changes to short upon a break at 125.14. Overbought USD/JPY complies to overbought JPY cross pairs as both again correlate in high +90%.


GBP


The shining star for the week is GBP/USD and GBP cross pairs as GBP currencies across the board are deeply oversold. Best trades are GBP/CAD, GBP/AUD and GBP/JPY. GBP/USD above targets are 1.2637, 1.2673 and 1.2710. GBP/USD higher represents a correction higher from oversold until 1.2784 breaks higher.


AUD


AUD/USD contains problems this week as AUD/USD is fighting against overbought AUD/JPY and AUD/CHF Vs oversold AUD/CAD. Better and easier trades exist to pay more without struggling with AUD/USD levels. AUD/USD strategy for the week is short but don’t expect dramatic moves.


NZD


NZD/USD is in a much better position than its AUD/USD counterpart. NZD/JPY is massively overbought while NZD/CHF, NZD/USD and NZD/CAD sits deeply oversold. NZD is the better trade than AUD.


USD/CAD


USD/CAD contains problems over many past months. CAD/JPY and CAD/CHF as the same exact currencies rose higher into deeper overbought territory while USD/CAD sat idle.


USD/CAD at 1.2500’s, GBP/USD at 1.2500’s and previous USD/JPY at 126.00’s were all in contention to each other as all contained the same exchange rates. USD/JPY broke higher, GBP/USD lower and USD/CAD remained stuck in the middle without direction nor purpose.


USD/CAD ranges from vital breaks at 1.2974, below at 1.2366 and a fat average at 1.2712 stuck in the middle. USD/CAD is a terrific currency and good mover to pay much but last months, USD/CAD traded complete dead.


USD/CAD from 1.2591 fits into the family of exchange rates is supports to USD/JPY, EUR/CAD and EUR/JPY while USD/CAD serves as tops to GBP/CHF. Currently, GBP/USD and USD/CAD are in the battle for dominance as USD/CAD is the higher exchange rate. GBP/USD must cross above USD/CAD to trade higher.


10 Year Yield


The 10 year sits on supports at 2.9125 and 1.9010. A break lower targets 2.81. The 10 year will struggle to trade to 3.00’s and won’t see 3.00’s anytime soon.

Brian Twomey