FX weekly: CAD/ZAR, BOJ and 14 currency levels

Anchor currencies normally lead cross pairs in breakouts from relentless range compression as has been the case for the past 5 and 7 weeks. The opposite held true  last week as anchor pairs remained trading in tiny ranges while cross pairs exploded, broke ranges and vital levels.

EUR/USD for example traded 123 pips Vs EUR/AUD 321, EUR/NZD 329. GBP/USD traded 168 pips to GBP/NZD 435 and GBP/AUD 391 pips. AUD/USD was the winner last week at 180 pips and while NZD/USD at 154 pips beat EUR/USD at 132 and maintained ground Vs GBP/USD.

Anchor currencies remain trapped in small ranges for next week. EUR/USD for example trades 1.0876, 1.0897 to 1.1061. EUR/USD trades overbought this week at middle 1.0900's and 1.1061 represents far extremes to current ranges.

EUR/USD for January traded lower by 194 pips. EUR/USD trades oversold to upper averages and long is the only way forward however not much excitement exists to EUR/USD trades.

The ECB's Economic projections for December forecasts EUR/USD to trade 1.0800;s from 2024 to 2026 and down from 1.0900's from September's Economic reports.

EUR/USD vs DXY vs CAD/ZAR

Many weeks, EUR/USD Vs DXY reveal a tight or range relationship. The next best currency for evaluation is CAD/ZAR as EUR/USD's perfect opposite.

CAD/ZAR serves as a perfect evaluation to EM currencies.

CAD/ZAR trades deeply overbought from 14.1662 and targets 14.0208 easily. CAD/ZAR informs long drops to EUR/USD while DXY reveals a range week.

Best EUR cross pairs to trade are shorts to EUR/NZD and EUR/AUD.

Long term targets EUR/AUD, EUR/NZD, GBP/NZD, GBP/AUD

EUR/AUD final target 1.6025. Achieves by 1.6399, 1.6233, 1.6142, 1.6025. EUR/NZD final target 1.7346. Achieves by 1.7688, 1.7486, 1.7430, 1.7346. Trade 465 pips.

GBP/NZD final Target 2.0097. Achieves by 2.0636, 2.0443, 2.0199 and 2.0097. Trade 649 Pips.

GBP/AUD final target 1.8653. Achieves by 1.8953, 1.8747, 1.8707, 1.8653.

EUR/NZD final target 1.7346. Achieves by 1.7688, 1.7486, 1.7430, 1.7346. Trade 465 pips.

Among wide rangers, +2000 pips to targets.

GBP/USD ranges from 1.2602, 1.2619 to 1.2790. AUD/USD ranges from 0.6577, 0.6607 to 0.6775. NZD/USD trades 0.6133 to 0.6282.

Best trades overall for the week are short massive overbought USD/JPY to 146.00's and JPY cross pairs. Next trades are short wide rangers GBP/AUD, EUR/AUD, GBP/NZD, EUR/NZD. Best 2 currencies: GBP/NZD and GBP/AUD.

BOJ

No changes to interest rates are expected as no reason exists to adjust. The BOJ Effective Exchange Rate Index runs normal 5 points to Spot USD/JPY and Interest rates runs about 6 points. No need to adjust nor disrupt this balance by an interest rate change. An entire set of circumstances exits to BOJ interest changes.

The BOJ's only care and concern is Exports then GDP and Inflation and the correct exchange rate to accomplish positive Exports. Wages are irrelevant and 3 times removed from the family of Exports, GDP and Inflation.

The slight BOJ problem is Imports and Exports from the latest release. Monthly Imports 2.0 Vs Exports 1.6. Imports above Exports. Yearly is fine as Imports 3.9 Vs Exports 5.5. All nations are the same to monthly imports and exports as nations are on the verge of economic success or massive failure.

Current imports and exports reveals no BOJ intervention. We will hear BOJ comments but again pay no attention. The BOJ requires a lower USD/JPY to allow Imports and Exports to right size. USD/JPY happens to trade deeply overbought at 148.00’s.

Current inflation at 2.6 from the JGB yield curve trades between the 20Y and 30Y yields while the target at 2.0 is forecast at the 15Y yield.

15Y = 2.196 = Inflation Target

20Y = 2.475

Inflation 2.6

30Y = 2.773.

USD/CAD begins the week oversold and joins oversold EUR/CAD and overbought GBP/CAD.

GBP/JPY targets easily 185.00's and 159.00's for EUR/JPY.

Overall best trades are short wide rangers, USD/JPY and JPY cross pairs.

EUR/EM

EUR/RON trades overbought. The EM currency market is as dead as G28 currencies.