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XAU/USD

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Currency market: FX next week

Brian Twomey Brian's Investment

EUR/USD in January 2020 traded 1.2359 and DXY 90.44 or roughly 3300 pips. The EUR/USD Vs DXY distance was to wide for the market to allow further EUR/USD highs and DXY lows. The reversal to EUR/USD shorts and DXY longs began.

Along the way to EUR/USD shorts and DXY longs were 2 vital crossovers at 1.0800 and 1.0300. The EUR/USD break below the 5 year average at 1.0800's targeted 1.0300's. Since 1.0300's was the first EUR/USD V DXY crossover, EUR/USD traded to 0.9500's for an additional 1300 pips. When DXY crossed over EUR/USD at 108.00 allowed DXY to travel 700 pips to 114.00's.

In 2 years, EUR/USD traded 2800 pips lower to 0.9500's or 2800 pips at 1400 pips per year while DXY traded to 114.00's from 90.00's at 1400 yearly pips.

As EUR/USD dropped from 1.1275 highs in July and DXY rose from 99.00 lows, the next and fourth historic EUR/USD V DXY crossover is upon us at 1.0600's.

Currency markets trade in a precarious yet rare situation by a EUR/USD and DXY crossover. From 1999 to January 2003, EUR/USD traded below DXY. The only crossover ocurred in 2003 when EUR/USD traded above DXY to become a 20 year permanent fixture to markets. This situation remained until DXY and EURUSD crossed at 1.0300's and 1.0800's.

EUR/USD traded deeply oversold and DXY overbought at the 1.0300 and 1.0800 crossover yet most vital was the crossover as this began a new trend. The current possible crossover at 1.0600's is a replica of 1.0300 and 1.0800 as EUR/USD trades massive oversold to DXY overbought.

The essential ingredient to markets is distance as EUR/USD and DXY. No such concept as distance exists today as markets and trade ranges for all financial instruments trade daily minimums. Markets simply died as traders wait for the EUR/USD V DXY resolution. More importantly, statistical ranges compressed to the point of a EUR/USD and DXY marriage.

The immediate efftects are to anchor currencies since DXY and EUR/USD are classic anchor currencies. Cross pairs are secondary as anchor currency movements are responsible for cross pairs moves.

Note weekly overbought USD/JPY vs oversold GBP/JPY and EUR/JPY. JPY cross pairs lack a clue to direction as certain days JPY cross pairs exceed USD/JPY and other days, JPY cross pairs outperform. USD/JPY although overbought trades its correct ranges daily and weekly and is a well functioning currency.

EUR/AUD sits at 1.6522 and waits for the next move and the same as GBP/AUD at 1.9112. GBP/NZD and EUR/NZD merged into 300 and 400 pip ranges. EUR/CAD and GBP/CAD as middle currencies in the distribution are natural small range currencies and is disregarded to the EUR/USD and DXY crossover. EUR/CAD and GBP/CAD will continue as small range movements.

Markets are forward traded instruments and never trade the hear and now in the pesent as all financial instruments trade for tomorrow and long into the future. The current market price is always wrong and explains why never trade it. Its traders greatest mistake.

EUR/USD Vs DXY separation is mandatory to create functioning markets again and this warrants concepts to a big move is upon us.

Not only is the crossover most vital but DXY trades above 50 year monthly averages at 99.00's which means EUR/USD trades near its 50 year monthly average.

USD/EM reveals massive overbought for a vast majority of currencies. The end rersult to a EUR/USD V DXY crossover for this round should be extremely shallow.

Weekly

The trade strategy remains long deeply oversold EUR/USD and short massive overbought DXY, USD and USD/JPY.

Best trades are found in EUR/USD, GBP/USD, USD/JPY, EUR/AUD, GBP/AUD, EUR/NZD, GBP/NZD.

Oversold EUR/USD targets 1.0667, 1.0839, 1.0913 and 1.1001.

GBP/USD First target is located at 1.2351. Then the break at 1.2445 to target 1.2600's.

USD/JPY waits for the break at 144.87 to target 143.02 and 135.51. Disregard speculation to BOJ intervention for at least 2 weeks. Exports were positive for July and August and September is also expected to reveal afirmative numbers.

USD/JPY targets 148.73 and 148.38. USD/JPY 147.00's are blocked for next week. Longs remain impossible as USD/JPY trades extreme overbought from 116.00's to 144.00's.

GBP/NZD trades 2.0622 and 2.0684 Vs bottoms at 2.0272, 2.0261 and 2.0152. At current 2.0400's, GBP/NZD trades perfectly neutral. Higher must break 2.0684 yet not expected anytime soon.

EUR/NZD trades 1.7878 to oversold 1.7532.

EUR/AUD 1.6524 is the magic number for higher and lower while GBP/AUD 1.9119 signifies higher or lower.

Wide rangers daily trade 100 pip days and best short to accumulate pips while the EUR/USD V DXY resolution materializes.

AUD/USD and NZD/USD trade at Richter Scale oversold. Ranges severely compressed however longs provide pips and profits.

GBP/JPY trades deeply oversold just above its vital line at 180.29. This line is dropping to inform the break is not expected. This week, GBP/JPY traded 100 pips to the line and next week begins at 139 pips.

Oversold EUR/JPY 155.84 for lower. Low 156.00's are blocked for next week while middle 180.00's are blocked for GBP/JPY

USD/EM

Massive oversold USD/PLN target 4.1626 while overbought USD/CZK targets 22.9144. Overbought USD/DKK targets 7.0030. USD/HUF targets 364.21.

USD/NOK and USD/SEK trades fairly neutral while severely overbought to USD/RON targets 4.6670.

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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