Inside The Currency Market: FX this week – EUR/USD remains deeply oversold

Brian Twomey Brian's Investment

EUR/USD fell 295 pips 2 weeks ago and in 3 days while EUR/USD traded a 122 pip range last week. Higher for EUR/USD must break 1.2025, 1.2028 and 1.2038 to target the range from 1.2038 to 1.2590. EUR/USD averages are moving lower and against a higher EUR/USD price, however EUR/USD remains deeply oversold as EUR/USD barely corrected from the 295 pip fall.

GBP/AUD dropped 266 pips last week and 163 pips for EUR/AUD. GBP/AUD as mentioned last week would lead the way to EUR/AUD and AUD/USD. GBP/AUD vital break at 1.8216 and oversold from the 1.8269 close will lead the way again this week to EUR/AUD and AUD/USD. We're looking for longs and short to AUD/USD.

Overall ranges remain severely compressed into week 5 for a vast majority of the 18 currency pairs traded weekly. For the most part this represents trade opportunities as entries and targets are more responsive to shorter ranges. it means possibly doubling up on lots traded to increase weekly profits with a higher accuracy rate.

Ranges for GBP/USD and USD/CAD are compressed from normal levels however overall ranges are good and better than most currency pairs. GBP/CAD begins the week deeply oversold and may mean GBP/USD and USD/CAD trade neutral until GBP/CAD works off oversold and settles into a normal price again.

Higher for GBP/USD must break 1.3922 but also note GBP/CHF trading above 1.2667. If GBP/CHF breaks below 1.2667 then GBP/USD will gain speed to trade much lower.

JPY cross pairs remain fairly neutral for the week and the same story for the past 3 weeks. Short only strategy remains for the next 500 and 600 pips until CHF/JPY achieves target at 114.00 and 115.00's. Overall averages are moving lower and against higher for JPY cross pairs.

USD/JPY again begins week 2 overbought and matches overbought USD/CHF as USD/JPY's counterpart. USD/CHF is the better trade short. USD/CAD as the opposite pair from USD/JPY and USD/CHF begins the week oversold and we are long as usual every week over the past 4 weeks. DXY from the close at 91.81 trades between 91.57 and 92.89. Below 91.57 then range becomes 91.57 to 90.24.

DXY defined is an invention created in 1998 upon EUR/USD introduction. Prior to 1998, the premiere currency of Europe was the German Deutsche Mark as DEM/USD and it was traded against USD/JPY, USD/CHF and USD/CAD. But each European nation prior to 1998 had their own currency.

USD/CHF at its 0.9166 close and DXY from 91.79 reveals DXY as the dominant USD currency within the USD space based on Correlations yet both are the exact same currency. USD/CHF then serves its purpose as a proxy or surrogate to DXY.

The DXY introduction offered an extra support or resistance point alongside USD/CHF when both are employed as forecast currencies to exchange rates and other financial instruments such as Gold, stock indices and commodities.

Not only is NZD/USD oversold but also oversold is EUR/NZD and GBP/NZD. This relationship can't and won't work well together. GBP/NZD will dictate direction upon the resolution to 1.9588 from the 1.9620 close.

AUD/CHF and NZD/CHF never big movers but good trades this week against an overbought USD/CHF while CAD/CHF will follow CAD/JPY short this week.

Oversold EUR/CAD from the 1.4667 close to travel higher must break 1.4852 and 1.4968 and lower must break below 1.4545 and 1.4453. Current range is located at 1.4545 to 1.4852.

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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