Brian Twomey
Brian's Investment
The most interesting and defining currency market relationship this week is found between total opposites USD/CAD and GBP/USD.
GBP/USD ranged last week from 1.2897 to 1.3166 for 269 pips while USD/CAD traded 162 pips lower from 1.3320 to 1.3158. GBP/USD bounced from 1.2897 and just below our vital break point at 1.2759 as reported in last week's post. USD/CAD broke most important 1.3254.
Last week GBP/USD and GBP/CHF traded in tandem at 1.2900's then GBP/CHF traded 122 pips lower as highlighted from last week's posted trade. While GBP/USD bolted higher Wednesday to 1.3100's to trade in tandem to USD/CAD at 1.3100's. GBP/USD and USD/CAD both at 1.3100's is an impossible relationship to hold as either GBP/USD or USD/CAD must separate. GBP/USD held steady at 1.3100' s while USD/CAD traded higher to 1.3200's.
GBP/USD long term target currently resides at 1.3380. From GBP/USD's close at 1.3131, the target is 249 pips. USD/CAD's long term target is 1.2886. From USD/CAD's close at 1.3248, the target is 1.2886 or 362 pips. The imbalance and trending pair is clearly GBP/USD.
When GBP/USD traded from 1.2900's to its 9 year currency cycle bottom at 1.1900's, the drop was not only straight down to trade in deep oversold every week but without a meaningful correction. When GBP/USD broke its vital high / low point at 1.2700's, every week it traded higher against deep overbought. While GBP/USD trended from its uppermost highs and lows, USD/CAD since July traded a 300 pip range from 1.3000's to 1.3300's.
While USD/CAD's restricted price ranges are experiencing a severe compression to its averages and warns of a massive break out in order to trade again normally. GBP/USD averages and ranges traded and currently trades perfectly normal since July. The big mover historically is clearly GBPUSD Vs USD/USD and this was accomplished not by the market but by central bank design inside the exchange rate numbers.
Overall GBP/USD is overbought , GBP/CAD and GBP/CHF is overbought. GBP/AUD the favored long term short trade is overbought. its longer term averages from 50 to 253 day to bring GBP significantly lower and all are at or approaching its extremes.
No different in GBP overbought from the EM space as GBP/ILS and GBP/THB stand out as significantly overbought across the board followed by GBP/CZK, GBP/TRY, GBP/RUB, GBP/RON, GBP/MYR.
GBP/BRL stands out as oversold and GBP/ZAR, GBP/SEK and GBP/NOK fairly neutral while the following pairs are on the verge to overbought provided a price increase is seen as follows: GBP/PHP, GBP/PLN, GBP/MXN, GBP/INR, GBP/HUF.
Trades
For the week, USD/CAD from its 1.3248 close contains massive supports at 1.3161 and 1.3183. On the upside, USD/CAD must break 1.3249 and 1.3261 in order to travel higher. USD/CAD current price is fairly neutral.
GBP/USD higher last week cleared a significant resistance point at 1.2926. To trade significantly lower to 1.2600's, GBP/USD must break 1.2926, 1,2888 and 1,.2819.
The commonality to GBP/USD 1.2926 and ability for all GBP pairs to trade lower is GBP/CAD must break 1.7009 then 1.6986, GBP/CHF remains solid at 1.2700's, GBP/JPY 141.80 ahead of 139.26. GBP/AUD on the opposite side must break crucial 1.9400;s to trade higher.
USD/CAD will trade erratic this week and here's the trade
USD/CAD
Long 1.3224 and 1.3199 to target 1.3236.
Long above 1.3249 to target 1.3299. Must cross 1.3274.
Short 1.3299 and 1.3324 to target 1.3261. Must cross 1.3274.
Any price above 1.3324 is free trade short.
GBP/USD
Short 1.3148 and 1.3195 to target 1.2966. Must cross 1.3007.
Break 1.2926, targets 1.2872. Must cross 1.2901.
Any price above 1.3195 is a free trade and free money to add to shorts.
GBP/CAD
Short 1.7437 and 1.7469 to target 1.7046. Must cross 1.7373, 1.7309, 1.7244, 1.7180, 1.7116 and 1.7062
NZD/JPY
Short 71.50 to target 70.29. Must cross 70.83 and 70.49.
Short below 70.16 to target 69.48. Must cross 69.82
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.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.