FX Weekly: USD/JPY weekly trade, EUR/USD targets, Fed and interest rates

Currency markets are heading for a good trade week. EUR/USD begins the week oversold and targets 1.1383 and 1.1394. The 5 year average and a rising weekly line is located at 1.1530 and targets 1.1098. A brick wall for EUR/USD exists at 1.1527, 1.1530 1.1540. Yet the lines are rising to offer a continuous long only strategy.

While the Fed proposes many raises to infinity, Fed Fund averages from 1 month to 30 year monthly averages range from 0.08 to 2.4605 highs, a spread of 2.3805. The long term rate or the natural/ neutral rate of interest from 1800's Economist Knut Wicksell is located at 1.3905. Inflation at the 2% target factors the natural rate at 1.4405. Averages to 30 years are fairly neutral as not overbought nor oversold.

The question to many raises are central banks prepared to match Fed raises, will the Fed send exchange rates vs each central bank to extreme deviations Vs each other.

Its been 90 years since the Currency Wars of the 1930's. Then it was an economic and export war to undervalue by competitive devaluations the currency price vs nation counterparts to gain export and economic advantage. GBP as the leading currency was the target exchange rate  and barely survived most prominently by France and the French Franc.

See The Gold War: The Story of the World's Monetary Crisis by Ian Davidson and Gordon Weil, 1970. Not only a fascinating read but an imperative lesson  in the modern day to maintain interest rates in sync from central bank to central bank in order to maintain smooth and functioning markets otherwise markets risk extreme volatility and the beginnings of another currency war. After 90 years, markets are due.

No changes to GBP/USD as the following levels hold: 1.3384, 1.3446, 1.3599, 1.3676 and 1.3753. Last week's GBP/USD lifted from 1.3585. GBP/USD's problem higher is a severe  overbought GBP/JPY and targets lower prices at 153.00.

 The same story to AUD/USD and AUD/JPY, NZD/USD and NZD/JPY, EUR/USD and EUR/JPY. GBP/JPY is the leader and overbought enough to drive not only JPY cross pairs lower but GBP/USD. AUD/JPY, NZD/JPY and EUR/JPY sit fairly neutral to overbought. Nothing exciting to movements to AUD/JPY, NZD/JPY or EUR/JPY although this week we stand clear and cautious to AUD/JPY.

NZD/USD massive resistance exists at 0.6811, 0.6828 and  0.6859. NZD/USD's 5 year average is located at 0.6828 and a massive break. If NZD/USD broke above the 5 year average and sustained then all currencies will break 5 year averages NZD/USD as the bottom most exchange rate and signal currency influences all currencies for direction.

USD/CAD no changes from last week. Levels for the week hold at  1.2644, 1.2652 Vs 1.2832. CAD/CHF is in much better position to move and assist USD/CAD movements. AUD/CHF is the leader to CAD/CHF and NZD/CHF and GBP/CHF leads EUR/CHF.

EUR/NZD stands this week dead last in the 19 currency pair trade rankings to favor instead GBP/NZD. GBP/NZD maintains a short only strategy. Expected is GBP/NZD higher this week as NZD/USD trades near its 5 year average. GBP/NZD targets low 2.0200 to upper 1.0100's.

USD/JPY.

Week 13 begins at 1738 pips profit from weekly trades as the 2nd leg trade last week completed from 114.84 to 115.25 for 41 pips and 102 pips fron the first leg. Total 143 pips on a 107 pip range and 36 extra pips.

USD/JPY medium term targets are located at 113.39 and 112.34 and hold short only trade strategies.

USD/JPY Weekly Trade

Short 115.57 and 115.64 to target 114.76. Long 114.76 to target 115.37. Or Short below 114.40 to target 113.67. Long 113.67 to target 114.03. USD/JPY 114.40 is expected to hold this week yet the trade is offered just in case.