For the past 4 weeks, EUR/EM Vs USD/EM aligned as oversold, neutral, neutral, overbought and for the upcoming trading week, massive overbought or massive oversold.
EUR/USD began the week deeply oversold and shorts are impossible while USD/JPY and USD/CHF comply to deeply overbought as longs are impossible. USD/CAD began the week deep oversold yet CAD's week began trading just above a vital MA and in a horrible position.
USD/JPY overbought began last week from 110.30's as longs became contrary to correct trading.
Currency pair trade selection to EUR/EM and USD/EM is crucial to profits as the EM market lacks uniformity as EUR/EM and USD/EM.
What separates EUR/EM Vs USD/EM exchange rates is roughly 2000 pips and EUR/EM is always the higher currency to USD/EM as shown. From reverse exchange rates, the opposite is true as EUR/EM trades below USD/EM yet the 2000 pip range holds for reverse exchange rates.
A 2000 pip separation to EUR/EM and USD/EM is miniscule in comparison to traditional EM ranges and movements. EM currencies traditionally trade 8, 9, 1000 pip weeks and more for certain currencies. The problem for EM currencies over last months is ranges completely compressed to the point EM currencies look and trade as dead range G28 currencies, hardly a difference.
Its not unusual for USD and EUR to marry and trade in currency markets as close as kissing cousins in both G28 and EM markets. Lack of interest rate distance as the underlying to exchange rates for ECB and Fed interest rates is the main problem. Neither ECB nor Fed interest rates move anymore and this prevents movements to currency prices to force range compression.
Yet range compression to EM markets may reveal an early warning to big moves ahead as USD/EM and EUR/EM cannot co exist as the present situation.
USD/RON 4.2236 Vs EUR/RON 4.9497 contains EUR/RON as a higher exchange rate and both are massive overbought. Despite a 700 pips separation, RON and MYR are the better currencies to trade EM markets as both RON and MYR exchange rates begin with a 4 handle.
USD/CNY 6.3667 Vs EUR/CNY 7.5796, USD/DKK 6.3443 Vs EUR/DKK 7.4362, USD/MXN 20.0550 Vs EUR/MXN 23.5046, USD/ZAR 14.9641 Vs EUR/ZAR 17.5364.
USD/TRY 8.8836 Vs EUR/TRY 10.4120.
USD/SEK and USD/NOK contain exchange rates to begin with an 8 handle and the same exact currency as USD/TRY for triple trades.
A few exceptions exist to EM markets as worthy trades this week: USD/BRL overbought to oversold EUR/BRL and compliance to EUR/USD and USD for G28. Overbought USD/CZK Vs oversold EUR/CZK, overbought USD/HRK Vs oversold EUR/HRK. Overbought USD/KRW vs oversold EUR/KRW.
Problem pairs include PLN, MXN, HUF, MYR, CNY, RON, TRY and ZAR.
Further to the 2000 pip separation and overbought to oversold readings to EUR/EM and USD/EM. Reverse exchange rates factored to interest rates reveals the same overbought and oversold readings. Its impossible to trade the ranges as factored and both USD and EUR exchange rates are problems. Normally, by factor to reverse exchage rates, great trades exist for USD/EM and EUR/EM as ranges and vital levels are known in advance.
Take USD/CAD for example. Today's range by reverse exchange rates factors to 1.2554 to highs at 1.2682. The calculation is the result to ranges from USD/CAD to CAD/USD. This simople factor doesn't work for EM currencies as it normally does week to week.
EUR/EM and USD/EM normally factors as 2 distinctly separate ranges and trade able currencies for weekly trades.
Trading currencies and other financial instruments carries a degree of loss and possible loss of entire investments. Please managed your own risks, stop loss, and margins requirements.