FX Weekly: EUR/USD V DXY

Favored trades this week: EUR/USD, AUD/JPY, EUR/AUD, EUR/CAD, NZD/JPY, AUD/USD, AUD/CHF, NZD/CHF, CAD/CHF, CAD/JPY, NZD/USD, USD/CAD, EUR/JPY, EUR/NZD.


Best trades: EUR/USD, EUR/CAD, EUR/AUD, AUD/JPY, NZD/JPY.


GBP Best Trades: GBP/USD, GBP/AUD, GBP/CAD, GBP/CHF.


Missing from the GBP lineup is GBP/JPY while EUR/JPY again earns last place rankings. EUR/JPY do or die is located at 138.22 and GBP/JPY at 162.71. EUR/JPY and GBP/JPY sit oversold however vital breaks exist just below. Better trades exist to shorts in AUD/JPY, NZD/JPY and CAD/JPY.


EUR/USD traded 198 pips last week and 229 pips in the prior week. EUR/USD traded 60 pips for ECB’s raise. EUR/USD range this week is located from 1.0302 to 1.0148. Breaks higher or lower won’t travel far and slated for longs and shorts.

DXY V EUR/USD


DXY trades below 107.09, above targets 108.89, below targets 105.69. USD/JPY’s drop Friday was the result of the DXY break below at 107.09. DXY traded its usual 200 pips last week. The break below 107.09 was huge and now places DXY inside the next 200 pip range from 105. to 107.


DXY for many months to come will trade 200 pip weekly ranges. Break at 105.00’s then becomes 105 to 103, then 103 to 101 and 101 to 99. Every 100 pips upon a break higher to significant averages becomes severely overbought.


EUR/USD and non USD currencies will trade 200 pip ranges and cross pairs 300 to 400 pips. Not a terrible situation for trades and profits as 200 pip weeks factors to 100 pip trade days.


From 2019 to central bank interest rate raises, EUR/USD and non USD currencies traded 150 pip weekly ranges. Central bank change of interest rates offered 50 extra pips to weekly trade ranges. Once raises are complete, 200 pip weeks will drift back to 150 weekly ranges.


More precise trades are located at 150 pip weeks than at current 200.


DXY from 88 broke above the 5 year average at 95 last October while EUR/USD broke below its 5 year average at 1.1500’s last November. DXY from current 106 trades 1100 pips from 95 and EUR/USD from 1.0200’s trades 1300 pips.


Spreads to individual currency prices reflects to the massive DXY Vs EUR distance as GBP/USD Vs USD/CAD trades 900 pips, EUR/USD to USD/CAD at 2700, EUR/USD Vs GBP/USD at 1700. Cross pairs are the glue to hold currency markets in check so to not trade in the stratosphere at any moment in time.


A break of 95 and 1.1500 is required to change the entire currency market relationship to EUR and DXY. DXY is deeply overbought at 95 while EUR/USD trades severely oversold from 1.1500. DXY and EUR/USD trade in compression mode to meet in the center at 95 and 1.1500.


Weekly Closes


AUDJPY Close 94.15, Last week 94.00
GBPCHF 1.1527, Last week 1.1578


EURNZD 1.6331, Last week 1.6375
GBPCAD 1.5491, Last Week 1.5445


EURCAD 1.3187, Last Week 1.3130
NZDJPY 85.02, Last Week 86.23


AUDCHF 0.6658, Last Week 0.6632
NZDCHF 0.6015, Last Week 0.6632


Currencies not listed such as EUR/USD and GBP/USD trade approximately a difference of 100 pips to weekly close prices. JPY cross pairs trade in scatterbrain mode as differences exist in the 100 to 200 pips vicinity.


EUR/USD and EUR cross pairs are the best category to trade this week. EUR/CAD and EUR/AUD earns its high rank status due to oversold. Same for GBP/AUD and GBP/CAD. AUD/USD sits deeply overbought however 0.6971 lies just above current price.
USD/JPY big break remains at 132.00’s. DXY must drop further for USD/JPY to break 132.00’s.


EM


USD Vs EM currencies sits neutral to oversold for the week. USD/BRL targets 5.4117, watch USD/CZK 23.58 while USD/HUF, USD/ZAR, USD/TRY, USD/RON and USD/PLN remains deeply overbought short to long term. All contain a long way to drop for consideration to non overbought status.

Brian Twomey

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