Brian Twomey
Brian's Investment
Overall currency markets trade at far extremes into week 3 as the USD V Non divide grew much wider. The divide affects EM currencies as all trade to richter scale maximal extremes. The trend to current EM extremes is the result of G28 currencies particularly EM interest rates as EM interest rates allows for wider movements than G28 currencies.
Nations are classified as interest rate and Repo rates as main headlines. Repo rate nations include ZAR, TRY, SEK, NOK, CNY as all are afforded wider movements due to Repo rate distances while remainder nations classify as interest rates.
While the USD V Non gap retains wide distances, this situation actually represents enormous trade opportunity as downside and upside achieved low of lows and highs of highs.
EUR/USD begins the 3rd continuous week deeply oversold and price trades just above the 5 year average at 1.1480. Break below 1.1480 targets 1.0990.
EUR/USD price path above 1.1480 is highlighted by 2 vital points: 1.1739 and the 10 year average at 1.1960. Above 1.1480, EUR/USD contains a 259 pip trade range. Oversold EUR/USD matches richter scale overbought USD/CHF, USD/JPY, CAD/ZAR and EUR/EM.
Oversold in the EUR/USD complex is equated to EUR/CHF, EUR/CAD, EUR/NZD and EUR/GBP. Recall the post to 5 year averages. EUR/CAD broke below the 15 year average at 1.4554 and 10 year at 1.4481 to trade 1.4412 lows.
EUR/CAD higher is required to break above both averages otherwise, the target stands at 1.3638 however massive oversold EUR/CAD is forced higher by averages from 1.4700's to 1.4900's. Current EUR/CAD target for the week is located at 1.4629 and against a decent trade range.
GBP/CAD is located in a similar situation as EUR/CAD. GBP/CAD's 5 year average at 1.7056 broke below to achieve 1.6967 lows. Failure to break above 1.7056 targets 1.6613 however deeply oversold GBP/CAD averages from 1.7100's to 1.7300's forces GBP/CAD higher to target 1.7159.
Oversold AUD/CAD trades safely below 5 and 10 year averages at 0.9500;s and 0.9700 while NZD/CAD trades deeply oversold for the week and between 10 and 15 year averages at 0.8433 to 0.8820.
GBP/USD's 5 year average at 1.3069 achieved target last week at 1.3617. USD/CAD as GBP/USD perfect opposite achieved target at 1.2642 from the 5 year average at 1.3065. and deeply oversold USD/CAD trades 200 pips below. USD/CAD trades between the 5 and 10 year average from 1.2199 to 1.3065 while GBP/USD trades from 1.3069 to 1.4291 at the 5 and 10 year averages.
Best GBP trades this week as follows: GBP/USD, GBP/JPY and GBP/CAD while GBP/AUD for the second week holds no promise as its position remains horrible. If the trade isn't easy for guaranteed pips then its not worth the trouble to struggle through a trade.
GBP/EM
GBP/EM sits deeply overbought for the week except for GBP/CNY, GBP/NOK and no excitement to GBP/ZAR. Massive overbought applies to GBP/BRL, GBP/CZK, GBP/DKK, GBP/HRK, GBP/HUF, GBP/KRW, GBP/PLN, GBP/RON and GBP/TRY.
NZD/JPY is again excluded from trade consideration while NZD/USD and NZD/CAD begin the week deeply oversold. NZD/CHF was dropped from trade examination this week to favor NZD/CAD. AUD/CHF and CAD/CHF are better trades and should outperform GBP/CHF.
NZD/EM
Oversold as NZD/EM is found NZD/CNY, NZD/MYR, NZD/NOK, and overbought NZD/DKK, NZD/HUF, NZD/KRW, NZD/PLN, NZD/RON and NZD/TRY.
Overall Mixed bag for NZD.
AUD/USD contains nothing special for the week and the same story as last week. AUD/USD's main problem is its mis position to AUD/EUR. This leaves AUD/USD rangebound.
Oversold USD/CAD Vs overbought USD/JPY, USD/CHF and CHF/JPY begins the weekly alignment. USD/CAD again remains add ball currency into week 3.
Oversold USD/CAD complies to richter scale overbought CAD/EM and the same situation as last week. USD/CAD's problem and the overall USD Vs Non USD conundrum is the EUR/USD and USD/CAD relationship as both spread 900 pips, 2000 to USD/CHF and DXY. The gaps must close. Overbought CAD/JPY and CAD/CHF assists to USD/CAD longs.
USD/CAD remains a higher performer for the past 6 weeks and this week won't disappoint.
CAD/EM
From extreme overbought, CAD/EM trades are the same as last week except oversold CAD/BRL is added.
CAD/BRL targets 4.3416, CAD/DKK targets 5.0944, CAD/HUF targets 245.59, CAD/KRW targets 952.19, CAD/MYR targets 3.3325, CAD/PLN targets 3.1469, CAD/RON targets 3.3906, CAD/SEK targets 6.9503 and CAD/ZAR targets 11.8437.
USD/EM Vs EUR/EM
Both USD/EM and EUR/EM begins the week deeply overbought except oversold USD/CNY and EUR/CNY. USD/MYR and EUR/MYR, USD/NOK and EUR/NOK, USD/SEK and EUR/SEK. USD/ZAR and EUR/ZAR however both are close to vital breaks to rip open the USD Vs EUR divide.
USD/CAD Weekly Trade
1st Leg
Long anywhere or 1.2450 to target 1.2553
2nd Leg
Long above 1.2581 to target 1.2637
3rd Leg
Short 1.2637 to target 1.2600
4th Leg
short 1.2553 to target 1.2506.
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.
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