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FX weekly – Currency market

Brian Twomey Brian's Investment

DXY not only remains massive overbought at 104.00's and trades inside 200 pip ranges from 102.00's to 104.00's for the past 3 weeks but the EUR/USD and DXY line of demarcation is located at 1.0600's. AS DXY traded higher into the 104.00's in dead ranges, EUR/USD consolidated at the lows in compressed ranges.

The only possibility for a EUR/USD and DXY crossover occurred in the period from 1999 - 2002. A near 100% probability exist for DXY and EUR/USD not to cross as the crossover represents a massive change to all markets.

EUR/USD trades oversold and at the bottoms while DXY trades overbought and at the top. The EUR/USD long term target remains 1.1047 while DXY must trade to minimum 102.00's and hold in order for average lines to form above the 102.00 price.

EUR/USD higher must break above 1.0875 and 1.0945 to target 1.1047. The line at 1.0945 is expected to hold this week.

GBP/USD as a follower currency to the EUR/USD and DXY relationship, suffered and traded to lows from the EUR/USD and DXY struggle. As GBP/USD traded lower, ranges became compacted.

GBP/USD also trades at the oversold lows and must break 1.2622 and 1.2667 to target middle 1.2700's.

EUR/USD and GBP/USD requires higher prices to hold in order to create wider trade ranges. GBP/USD closed Friday at 1.2585 and 1.2576 last week. GBP/USD is required to trade an improved performance rather than the past 2 week consolidation.

GBP cross pairs all begin the week oversold however the best GBP/USD could achieved this week is low 1.2700's. As a result to GBP/USD tiny ranges this week, GBP cross pairs are expected to trade continuations lower for the 2nd consecutive week.

GBP/AUD below 1.9600's targets again low 1.9400's. Longer term, overbought GBP/AUD targets 1.8999 and 1.8744.

GBP/AUD Correlates to GBP/USD at +76% and - 94% to AUD/USD. For RBA, the AUD/USD and GBP/AUD relationship represent great trades.

EUR/AUD longer term targets 1.6380 and 1.6190. EUR/AUD's big break for lower at 1.6581 trades 110 pip from current 1.6691 weekly open.

GBP/NZD from August 24, GBP/NZD shorts next week at 2.1485 and 2.1518 targets 2.1352, 2.1229, 2.1086. GBP/NZD below 2.1104 targets 2.1044 then 2.0984. When 2.0864 breaks then targets become 1.0700's easily.

GBP/JPY is expected a continuation lower to 182.00's. GBP/USD and GBP/JPY correlations remain at + 82% and +98% to USD/JPY. The JPY cross pair dilemma is located in the months long Correlations.

USD/JPY ranges this week from 145.23 to 147.24. USD/JPY 144.00's are blocked for this week. EUR/JPY trades 159.00's to 156.00's.

The USD/JPY and yield story is back in focus. Don't fall for this trap nor the USD/CAD Vs Oil fiction. USD/JPY moves 100 pips while yields move 1 point. No meaning exist here.

YCC holds within 0.87 to 1.63 and 13 points above the 1.50 band. The speculation is the relaxation of 1.50 is an Inflation story as was the previous adjustment from 0.25 to 0.50. The BOJ correctly forecasted higher Inflation and adjusted the bands in anticipation to Inflation.

The August / July reports from the BOJ expects Inflation at 2% then much higher over time.

Naoki Tamura speech

Tamura hails from Kyoto in northern Japan. The northern economic conservatives of Japan on the BOJ board lost voting power and majorities to the dominant South in the 1868 Meiji Restoration. And never to control the BOJ or Japan politics and governments ever again as once existed from 794 to 1868.

Tamura's speech last week was typical of the northern conservatives as they don't agree with Monetary Easing, YCC, negative interest rates or the past 100 years of southern BOJ economic experiments.

Despite Tamura's bold words to end monetary easing, YCC and negative interest rates, the words fall on deaf ears.

Oversold AUD/USD targets again 0.6500's and NZD/USD 0.6000's.

USD/CAD not only trades at the top but the top has been in place since 1.3600's and 1.3500's. Higher DXY forced USD/CAD into compressed ranges. USD/CAD must trade lower to create trade ranges. The first big break for lower at 1.3478 targets 1.3200's.

USD/EM

Massive overbought USD/CZK targets 22.2152 from 22.3770. USD/HUF targets 353.0979. USD/SEK targets 10.9422

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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