FX next week: GDP vs inflation

Brian Twomey Brian's Investment

The short GBP/NZD and EUR/NZD trades from November 12 are each running +500 pips for a total of +1000 pips. GBP/NZD lows achieved 2.0493 from 2.0900 highs and EUR/NZD traded 1.7734 from 1.8282 on November 12. Trade duration was 14 trade days.

GBP/NZD targets November 12 = 2.0596, 2.0280 and 2.0161. EUR/NZD targets 1.7872, 1.7580, 1.7483 and 1.7428. GBP/NZD and EUR/NZD targets are just getting started and remains in a short only strategy.

GBP/NZD at 2.0500's trades oversold and higher must cross above 2.0711. EUR/NZD also trades oversold and must break 1.7965 to travel higher.

As highlighted last Thursday, currency prices traded in severe range compressions and required a breakout. GBP/USD offered the breakout above 1.2556 and EUR/USD above 1.0877.

Anchor pairs or non USD as EUR/USD, GBP/USD, AUD/USD and NZD/USD now trade comfortably in 200 pips ranges while cross pairs trade in 400 pip ranges. Overall a great situation for trades next week.

GBP/USD trades 1.2566 to 1.2782, EUR/USD 1.0877 to 1.1059, AUD/USD 0.6524 to 0.6757 and NZD/USD from 0.6027 to 0.6255.

While Non USD currency prices trade comfortably within current ranges, lower averages are massively overbought to inform not only to adopt short only strategies but topside ranges will hold.

Non USD currencies require a correction before heading higher.

GBP/AUD below 1.9131 targets 1.9040, 1.8791 and 1.8734. Targets to 1.8700's will take weeks to achieve as oversold begins at 1.9044.

EUR/AUD Longer term target 1.6303 and 1.6100's. EUR/AUD trades oversold and higher must break 0.6596.

USD/JPY broke a significant level at 147.56 and traded to 146.68 lows. USD/JPY next targets 145.10 and 144.48 on a break of 146.33. Targets at 145.10 and 144.48 are easily achievable next week.

USD/JPY long term targets remain 146.07, 138.01, 133.26 and 129.72.

USD/JPY continues to run +90% correlations to JPY cross pairs.

GBP/CAD trades deeply overbought and traded this week in a `1.7100 to 1.7200 range. GBP/CAD contains breaks lower at 1.7087, 1.6974 and 1.6868. GBP/CAD is contained yet trads massive overbought.

EUR/CAD and AUD/CAD remain in massive overbought territory and both wait on leader GBP/CAD to break 1.7087 to trade lower levels.

GDP vs inflation vs imports and exports

GDP at 5.2% trades above Inflation at 3.2. Actual Real GDP trades 2.1 Vs 3.2 Inflation. Add Import prices declined 0.8 percent Vs Exports fell 1.1 percent. The GDP and Inflation relationship is headed for a breakout in the next 6 week cycle. Inflation currently trades deeply oversold and overbought GDP.

USD/CHF trades deeply oversold along with CAD/CHF while CHF cross pairs as usual trade right at significant points. The CHF story hardly changes week to week.

GBP/JPY approaches overbought at middle 187.00's and targets 185.65 then 185.27.

NZD/JPY trades deeply overbought while EUR/JPY, CAD/JPY, CHF/JPY and AUD/JPY trades shorts for next week.

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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