EUR/USD V USD/JPY: Levels, Ranges, Targets

Despite a negative 84% Correlation longer term and negative 94% daily view,  USD/JPY V EUR/USD  lacks price drivers in correlations as the story since Feb 23 is failure to break vital points to cause  severe range compression.

The larger EUR/USD range compressed from 524 pips Feb 23 to current 509 while USD/JPY dropped from 457 to current 447 pips. Why compression is found in EUR/USD failure to break not only its 10 year average at current 1.2817 but the many break points from 1.2817 to 1.2894.

USD/JPY's break point remains the 5 year average, now at 109.78. Overall, USD/JPY from its 5 to 14 year average retains a range from 109.78 to 103.00 while EUR/USD  1.1963 to 1.2817 is trapped between its 5 and 10 year averages. Failure to break from current ranges caused averages to compress week to week.

USD/JPY's break point to travel higher is now 108.31 and down 147 pips from 109.78 on Feb 23rd while EUR/USD's current break point at 1.2209 rose 47 pips from 1.2160 on Feb 23. USD/JPY's close at 105.95 is 236 pips from 108.31 and EUR/USD from its close at 1.2287 is 78 pips from 1.2209. Last week's EUR/USD's 112 Vs  USD/JPY 166 from break points were fairly balanced while USD/JPY this week is far off kilter and should lead the way higher.

USD/JPY break points below are located at 105.32, 105.22 and 104.66. USD/JPY's price remains just above neutrality longer term and low, oversold and flat on the floor from the daily view. Oversold means from 105's to 103's and 100's and no change from the last 4 weeks.

A break at 104.66 then 104.01 becomes the next target and a run to the 14 year average at 103.00 on breaks of 103.93, 103.09 then 103.00. Only an outside event from the BOJ or FED would see 105.22 and 104.66 due to a low and oversold price. First price extremes are seen from 104.33 and 103.34. The range bottom for example at the 5 year average at 109.78 and 105.22 are located at 101.79 and 100.74 therefore 103 will hold in the near term.

From 108.31 and the close at 105.95 is out of range and USD/JPY must travel higher to 106.32 and above. A challenge to 108.31 then 108.61 must break 107.48. The way higher from 105.95 must break 106.17, 106.21 then 106.62 to target 107.48. Severe caution is warranted at the 5 year average at 109.78 then 109.95 as USD/JPY's price becomes far to high in the shorter term. Higher and breaks at 108.31 and 109.78 is not expected to break and will take more weeks to allow the averages to agree. The maximum price above 109.78 is located at 113.78 and targets more realistically longer term are located at 110.74, 111.59 and 111.89.

EUR/USD break point at 1.2209 would challenge lower levels at 1.2165, 1.2149, 1.2081, 1.2033 then the 5 year average at 1.1963. Below 1.1963 opens the flood gates to 1.1757 and far lower to massively overbought 1.1400's. What holds 1.1963 from breaks anytime soon is the 1.2209 range bottom at 1.2041. A break of 1.2209 then targets 1.2041 and 1.2033.

Higher EUR/USD must break 1.2310, most important 1.2318,  1.2358 and 1.2377. Above 1.2377 then challenges 1.2406, 1.2516, 1.2520, 1.2665 and 1.2721. At 1.2700's is not expected nor the 10 year average at 1.2817 as 1.2209  upside extreme price is located at 1.2713. The point at 1.2377 is a great target and reverse short for the week.

Overall EUR/USD price longer term is far to high but a bottom is close while intraday EUR/USD sits at its 4 week neutral position. Neutral means sell rallies and long the bottoms until breaks are seen.

Overall, EUR/USD from 1.1963 to 1.2817 is not expected to break anytime soon nor is USD/JPY 109.78 or 103.00. The 4 week story remains the same as failure to see breaks means further range compression and next week the same report may be written.

While Trade and Wars is the latest longer term economic topic, here's a perspective from the US Trade Representative.

96% of US Imports are Industrial, means Non Agriculture. From the United States Trade Representative data, on a Trade Weight Average basis 2.0% represents the average Tariff on Industrial Imports. Yet 50% of all Industrial Goods enter the United States Tariff free.  China for example as assistance to its opening in 1988 was granted Most Favored Trade Status in 1992 which means China goods enter the United States Tariff Free. Most Favored Trade Status is granted to friends and allies yet Tariff Free is never granted to United States Exports as harsh Import duties are assessed.  Not sure trade and war belong in the same sentence.

Washer Example.

From 2012 to 2016, domestic producers of Washers operated in deficit due to South Korea LG and Samsung Washer imports through Mexico. Tariffs were assessed on South Korea Washers so LG and Samsung moved production to China and to export Tariff free from China. Tariffs were placed on Washers from China then LG and Samsung moved production to Thailand and Vietnam and again Tariff free.  Harsh duties, 50% tariffs were assessed so LG and Samsung plan production factories in South Carolina and Tennessee.