Currency market: FX weekly commentary and EM
|Overall, a vast majority of currency prices for the past 2 weeks traded directly above and below significant averages. The trend and breaks to significant averages lacked uniformity among categories. EUR/USD, AUD/USD and NZD/USD broke below while the market waited on GBP/USD's resolution at 1.3694.
EUR/USD led the universe with a break below 1.1944. NZD/USD as bottom currency was next to follow then AUD/USD as middle currency however AUD/USD failed to trade to significant targets but instead sloshed around 0.7620's. Meanwhile, GBP/USD remained trading around 1.3800's yet a slow progress to current 1.3694. GBP/USD now at its 1.3701 close, reveals the moment of truth this week is here.
On the USD side, deeply overbought USD/JPY traded higher in a 196 pip range for the past 8 trade days from 110.96 to 108.99 while USD/CHF maintained presence around its significant level at 0.9240's. This week, USD/CHF closed at 0.9244 and 34 pips above vital break at 0.9210. Wide ranger and always good mover USD/CAD traded 129 pips in 9 trade days from 1.2647 to 1.2501. USD/CAD trades below vital 1.2681.
The 7 major anchor currencies as USD and non USD forced the hand to cross pairs as cross pairs also lacked direction and uniformity. Movements were subject to USD Vs non USD with hope to a resolution to significant levels to again experience true movements. The promise failed and now the vast majority to remainder 16 cross pairs all trade at or near significant MA's.
In days of old, a currency pair to trade at or near significant levels was described as neutral. Neutral meant a currency price could fly much higher or lower and a 50% chance on a higher or lower bet.
Present 16 currency pairs are dead on neutral and neutrality applies to a vast majority of EM currencies as USD/EM.
The problem with current neutrality is ranges for most all 28 currency pairs severely compressed this week. This means prices contain potential to trade around significant averages without upside or downside progress. Neutrality also means currency markets sit on the verge of massive breakouts. The breakout is in no doubt on the way however the question is when and in which direction.
Massive oversold GBP/CAD and deeply overbought EUR/CHF are hold outs to neutrality. GBP/CAD closed at 1.7160 and is heading higher this week while EUR/CHF closed at parity or 1.0000 and travels lower.
AUD/USD and NZD/USD share the same commonalities over past weeks as NZD/USD and NZD/CAD trade below vital levels while NZD/JPY and NZD/CHF trade above. Same AUD/USD story as AUD/CAD and AUD/USD trade below important levels while AUD/JPY and AUD/CHF trade above. AUD/CAD and NZD/CAD are oversold this week.
The last holdout is severely overbought CHF/JPY from its 118.62 close. Overbought applies to short and medium terms as lower CHF/JPY must break below 117.11.
JPY cross pairs remain overbought yet closing at lower levels for the past 3 weeks while significant averages are rising which means lower levels are on the way for JPY cross pairs.
GBP/USD and cross pairs all trade close to significant levels. a GBP/USD break lower at 1.3694 could easily take down GBP cross pairs.
EM vs USD
Currency pair hold outs to neutrality and compressed ranges are USD/BRL, USD/MXN, USD/RUB, USD/THB, USD/TRY, USD/ZAR and USD/INR.
Overbought USD/BRL from close at 5.6836 best short at 5.6885 and 5.6942 to target 5.6490 easily then 5.6264.
USD/MXN oversold from 20.16 close targets 20.42 and higher must break 20.48 to target 20.58.
USD/RUB overbought from its close at 77.39 targets easily 76.57 then 76.14.
USD/THB overbought from 31.46 targets 31.08 then 30.99. A break at 30.89 is required to travel lower.
USD/TRY severely overbought Lira from 8.1691 best short at 8.2251 and 8.2338 to target 8.0961 easily.
USD/ZAR Long 14.5952 and 14.5832 to target 14.7869 then 14.8348.
USD/INR overbought from 74.73 targets 73.91 easily then 73.69.
USD/CNY closed oversold at 6.5530. Higher targets easily 6.5926 then 6.6035 while break at 6.5489 targets 6.5271.
USD/RON vs USD/MYR. While USD/RON closed at 4.1353, USD/MYR closed at 4.1350. MYR crossed below RON. USD/RON targets 4.1476 then 4.1573. USD/MYR targets 4.1236 then 4.1177 from shorts at 4.1412 and 4.1441.
USD/DKK oversold from close at 6.2504 targets easily 6.2829 while break at 6.2446 targets 6.2255.
USD/HUF oversold from 300.42 targets 302.61 then 302.90. Break above 303.20 targets 304.39.
USD/PLN neutral from its close at 3.8075 targets lower at 3.7807 then 3.7685. Long 3.7807 and 3.7746 to target 3.8113.
USD/BGN the Bulgarian Lev
From close at 1.6436, Watch 1.6420. Lev heads to 1.6522 to or 1.6369 then 1.6318.
USD/ISK Iceland Krona
From close 127.48, best longs at 126.26 and 125.97 to target 127.68 then 127.97. Higher must break 128.55.
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