Currency market: EUR/USD, GBP/USD, JPY, AUD, NZD and cross pairs

Brian Twomey Brian's Investment

Currency markets this week are driven by middle currencies GBP/USD, AUD/USD and associated cross pairs while top and bottom currency pairs EUR/USD and NZD/USD remained trapped in tiny ranges.

GBP/USD began the week above vital 1.3357 followed by Sunday's reported levels at 1.3357, 1.3441 and 1.3459. While GBP/USD appears to have broken 1.3459 to trade higher, the average at 1.3459 traveled higher as GBP/USD rose. GBP/USD this week was caught in a trap however higher price vs higher averages warns to eventual drop as GBP/USD must correct lower.

The GBP/USD line up remains as 1.3165, 1.3357, 1.3442 and 1.3484. The level at 1.3459 traveled 25 pips higher and GBP/USD eventually broke to trade 1.3503. Shorts remain as current GBP/USD targets a break at 1.3442 to then 1.3407 then 1.3368.

GBP/USD main price driver is 1.3357 as GBP/USD is far to low in the vicinity of 1.3357. GBP/USD this week traded 115 pips.

GBP/JPY against an +85% correlation to GBP/USD naturally traveled 229 pips higher. GBP/JPY at 155.00's sits massive overbought and just below a multi year range top; at 157.00's. GBP/JPY is the lead driver to GBP/USD lower. GBP/JPY overall began the current upmove from 148.00 and traded 700 pips higher. Miles of downside exist yet to trade.

AUD/USD

AUD/USD traded as GBP/USD. AS AUD/USD traded higher then averages at 0.7255 and 0.7260 rose to eventually stop AUD/USD's climb. Vital breaks for higher are now located at 0.7260, 0.7268 and 0.7307. AUD/USD targets mid to lower 0.7100's. The main driver to a lower AUD/USD is deeply overbought AUD/JPY.

USD/JPY short at 114.72 traded to 115.21, off 40 pips from entry and a Christmas gift to free money. USD/JPY began the week overbought and offered an extra 40 pips to downside profits. Longer term, USD/JPY is overbought from 101.00, 109.00, 110.00's, 112.00 and 113.00's. USD/JPY is overbought across the board.

DXY traded not only weekly lows to 95.77 but a break at 95.25 then USD travels lower on a deep slide and assists to USD/JPY's 110 target.

EUR/USD and cross pairs

EUR/USD's range and neutrality problem is located in a deeply oversold EUR/CHF, overbought EUR/JPY and dead ranges to EUR/CAD, EUR/AUD and EUR/NZD.

EUR/NZD contains a correlation dilemma to EUR/USD at +42% and +10% to NZD/USD. EUR/NZD higher is prevented by NZD/USD at 0.6841, 0.6854 and 0.6890. EUR/USD is free to travel higher to target now 1.1418 and 1.1435 however the correlations to EUR/NZD prevents cross pair assistance particularly EUR/NZD and EUR/JPY.

EUR/NZD's buy drop strategy targets 1.6520 then 1.6637 and just head of big bvreak lines at 1.6760 and 1.6772.

Despite an 84% correlation to EUR/USD, EUR/CAD to move higher must break 1.4531, 1.4557, 1.4693, 1.4722 then 1.4800's. EUR/CAD offers no assistance to a higher EUR/USD.

EUR/AUD is trapped between 1.5475 to 1.5733, 1.5749 and 1.5787. The positive to EUR/AUD and long drop strategy is correlations to EUR/USD at +81% and +67% to AUD/USD. Long term, nothing exciting exists to EUR/AUD except to range trade.

The true insight to EUR/AUD is richter scale overbought to AUD/EUR and overbought is enough to assist to lower AUD/USD.

USD/JPY cross pairs and correlations

JPY cross pairs remain deeply overbought to include CHF/JPY. For CHF/JPY is massive overbought from every average dating to 1999, overbought to 5, 10 and 14 year averages, overbought to shorter averages from 5 to 253 day.

CHF/JPY correlates to USD/JPY at 97% and is the best assist to a lower USD/JPY. Great long term short.

USD/JPY negatively correlates to EUR/JPY -69%, AUD/JPY +17%, NZD/JPY -19% and +43% to CAD/JPY.

Next week's trade and lazer focus is GBP as the best category to offer best trades and most profits.

Author

Brian Twomey

Brian's Investment

Brian Twomey is an independent trader and a prolific writer on trading, having authored over sixty articles in Technical Analysis of Stocks & Commodities and Investopedia.

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