Currency Market: FX weekly commentary

Brian Twomey Brian's Investment

AUD/JPY broke from its 85.00's close in the past 2 weeks at 85.11 and 85.05 to close lower at 84.16. Encouraging to future shorts is the break lower at 84.39 and 84.37 at the 10 and 15 year averages. For the past 2 months, AUD/JPY traded from 83.01 to 85.79 or 278 pips and 139 pips per month. AUD/JPY vital break is located at 83.27 and 77.37 for NZD/JPY.

JPY cross pairs remain tied to Correlation paralysis as USD/JPY not only Correlates +90% to JPY cross pairs but + 90% to anchor currencies, EUR/USD, GBP/USD, AUD/USD and NZD/USD. CHF/JPY correlates +90% to USD/JPY and minus 53% to USD/CHF. Overall JPY cross pairs will trade neutral for the new week and the same scenario as last week.

For USD/JPY maintains a negative correlation to USD/CHF at - 12%. USD/CAD correlates +48% to USD/CHF. USD/CAD and USD/CHF trade under current prices to represent a double trade although the correlation at 70 to 80% constitutes a better situation to fully trust.

USD/CAD vital break is located 1.2372 and 50 day average at 1.2345 while USD/CHF vital break is located at 0.9070 and the 20 day average is found at 0.9049.

Moving forward, USD/CHF is first priority to trade long as USD/CHF is oversold to all averages dating to 1998 while USD/CAD becomes secondary. USD/JPY must break lower at 108.08 for any serious price moves to its current deeply misaligned price. USD/JPY is not only perfectly neutral short, medium and longer term but not worth the trade effort.

Neutral USD/JPY while oversold USD/CAD and USD/CHF is derived from the BOJ Call Rates. High and lows Call Rates traded Friday at 0.986 to 0.925 then subtract for 0.06. Call Rates traded Thursday 1.001 to 0.93 then subtract for 0.07. Wednesday equates to 0.07. Fed Overnight rate 0.06 and this is not just a phantom number.

Cal Rates informed clearly, USD/JPY would close Friday at 108.90 and known at the close of Japanese markets. As exchange rates are glorified interest rates, neither the BOJ nor the Fed allows USD/JPY to trade correctly and at its proper levels. USD/JPY and anchor pairs under equal correlations highlights how closely nation interest rates trade against each other. Its up to the Fed to make a move as the world of trading is tied into current 0.06.

Look for 108.35 to hold for Monday and Tuesday and vital 108.27 to not break yet.

Informed last week, EUR/USD vital level at 1.2258. EUR/USD dropped from 1.2244 to lows at 1.2160 or 80 pips. While EUR/USD no longer qualifies as a problem pair to current price normalization after weeks in problem status, EUR/USD and all currency pairs suffers from severe range compression. EUR/USD big break for lower is located 1.2078 and the 50 day average is located at 1.2048.

EUR/CAD, GBP/CAD, AUD/CAD and NZD/CAD remain deeply oversold along with USD/CAD. No changes over many weeks.

EUR/NZD oversold last week forced overbought GBP/NZD higher. EUR/NZD this week maintains fairly neutral status to massive overbought GBP/NZD. Watch NZD/USD 0.7160.

Deeply overbought and problem pair GBP/AUD last week traded 300 pips higher. This is what problem status demonstrates.. Stay away . GBP/AUD this week remains deeply overbought while EUR/AUD sits at neutral.

AUD/EUR advises EUR/AUD trades 1.5820 to 1.5656 while AUD/GBP forecasts GBP/AUD trades 1.8385 to 1.8198.

EUR/USD vital levels for the week: 1.2028, 1.2049, 1.2078, 1.2117, 1.2186, 1.2255, 1.2324, 1.2461 and 1.2530.

USD/CLP and Copper

Chile is home to the largest Copper mines in the world and the greatest source of national revenue as it produces the world's Copper, particularly China as Chile's best customer over decades.

In 2020 according to Chile's Statistics Office, Chile produced 5.7 million tones against an estimated reserve of 200 million tones. Copper output however dropped for the past 10 months. March saw a 1.3% decline to 491,720 tones. Producers blame Covid 19.

USD/CLP jumped 283 pips last Monday from 697.05 to 725.36 while Copper last week fell 31 points from 4.7831 to 4.4731. If economic normalization appears then Copper heads higher while USD/CLP travels lower.

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.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

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Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

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XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.