On January 12, the ECB’s Parity Curve traded 1.0344 and EUR/USD at 1.0866 or a difference of 522 pips. EUR/USD traveled 166 pips higher to 1.1032 then dropped 497 pips to 1.0535 lows. EUR/USD’s drop coincided to a fall in the Parity Curve to current 1.0159 and a difference of 376 pips from 1.0535 lows.
In Percentage terms, EUR/USD traded 103.44% Vs 108.66% and current 101.59% Vs 105.35% lows.
The parity Curve informs EUR/USD’s range from 1.0711 to 1.0378. RUR/USD first break higher must clear 1.0568 then comes 1.0619, 1.0669 and 1.0745 and 1.0784.
At the Sunday night open, EUR/USD will trade 1.0551 to 1.0536. DXY is expected to trade 105.33 and 105.18.
The Week
Friday’s Inflation moves offered a clear delineation to overbought USD and oversold EUR, GBP, AUD and NZD.
Overbought EM includes USD/CNY and a target at 6.9432 then 6.9298. USD/INR and targets 82.47 then 82.32. Massive overbought USD/ILS and targets 3.5830 from 3.6649. USD/NOK targets 10.2655 from 10.3667. USD/ZAR targets lower at 18.0995 on a break at 18.2787.
DXY below contains many averages to break at 103.00’s and above at 106.98, 107.38 and 107.80. DXY higher targets 105.55 then 105.63. DXY is not only overbought but short is the exclusive trade available. Friday’s move above 104.90 to 105.32 was extraordinary.
Overbought USD/JPY targets 135.00’s beginning first at 135.93 then 135.37. USD/JPY’s move lower coincides to EUR/JPY’s target at 141.00’s and GBP/JPY at 159.00’s. GBP/JPY’s first break is located at 162.01 and EUR/JPY at 142.36.
Overbought USD/CAD conforms perfectly to severely oversold CAD/MXN. Higher CAD/MXN targets easily 13.6947 from 13.5122. Not working for USD/CAD is CAD/JPY vital 100.33 and the open at 100.26. Higher CAD/JPY trades against overbought counterpart JPY cross pairs, especially GBP/JPY and EUR/JPY.
GBP/USD and GBP cross pairs in the GBP universe are the shining lights this week. GBP/AUD is not only overbought but complies to overbought EUR/AUD. Overbought GBP/NZD agrees to overbought EUR/NZD.
The GBP/USD strategy all week is long drops. Above 1.2024 then targets middle 1.2100’s easily. GBP/CHF requires a break at 1.1238 and assists to GBP/USD higher.
Brian Twomey
BRIAN TWOMEY ON TRADING 