EUR/USD: Short and long term

Brian Twomey Brian's Investment

EUR/USD long and short term as run through long term models reveals a massively overbought EUR and further upside contrasts to immense hurdles to advance higher.

For further upside, EUR/USD must break 1.1977 then the most vital 10 year average at 1.2180. The absolute top for EUR is located at 1.2527.

On the assumption 1.1977 breaks then the upward price path next important levels are as follows: 1.2073, 1.2216, 1.2302, 1.2359 then on to 1.2500's. Most vital in this series is 1.2302 because it represents a range break.

On the downside, EUR/USD is richter scale overbought from 1.1100's to 1.1400's. The trend changes to the downside on a break of 1.1501. To achieve lower levels, EUR/USD must break 1.1792 and 1.1785 then 1.1736.

As EUR/USD trades between its 5 and 10 year averages at 1.1293 and 1.2180, the vital mid point is located at 1.1736. EUR/USD remains the odd ball currency pair among the entire 28 currencies due to its trade at 10 year averages. The vast majority of currency pairs to include GBP/USD, AUD/USD and NZD/USD trade below 5 year averages.

As 1.1501 represents trend change, EUR/USD faces 3 hurdles at MA 1.1477 and vital range points at 1.1450 and 1.1427 then on to 1.1300's. EUR/USD's biggest impediment is the 5 year average at 1.1293 and a rising line. A rising line and a falling EUR/USD informs topside momentum is losing steam and shorts is the way forward.

EUR/USD is running on all Correlation cylinders to its cross pairs as follows: EUR/USD Vs EUR/JPY +99%, Vs EUR/NZD +78%. EUR/AUD is odd currency at -64% which means not only will EUR/AUD move together with DXY but negative correlations explains deep neutrality and non movements to AUD/USD. Deeply overbought EUR/NZD correlations to EUR/USD turned positive this week Vs deep negative over the past 2 weeks.

As written last week, DXY 10 year average is located at 89.22. Downside levels to DXY are located at 93.52, 91.98 and 90.56 then the 10 year at 89.22. A break higher at 93.52 then DXY is located between 93.52 to 95.70. A break of 96.39 at the 5 year average would experience significant upside momentum.

EUR/USD Vs DXY for both 10 year averages are located at 1.2180 Vs 89.22. And 5 year averages are located at 1.1293 Vs 96.39. Overall, 28 currency pairs are waiting on this resolution.

EUR/USD Vs NZD/USD correlates to + 95%. NZD/USD as the preeminent currency market signal pair due to the lowest exchange rate among 60 + currency pairs, contains a change of trend break point at 0.6493. A break lower at 0.6493 then automaticaly informs EUR/USD topside is done and heading much lower.

For the week, EUR/USD targets breaks at 1.1792, 1.1785 and 1.1736 to trade to 1.1600's.

Top trade for the week is short EUR/NZD, lower for JPY cross pairs, particularly GBP/JPY while lower for GBP/USD. GBP/NZD correlates to GBP/USD at +06 and will struggle for the week in search of direction.

AUD/USD remains neutral and NZD/USD and cross pairs are oversold. NZD/CHF long is the best trade for NZD while GBP/CHF is deeply oversold to match oversold NZD/CHF.

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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