DXY remains overbought at the 103.00 level throughout the week and has been noticeably overbought for the past five weeks, while EUR/USD temporarily traded as high as the 1.0930 level and remains oversold at the 1.0800 level this week. Ta. From the week on Sunday, EUR/USD needed to break at 1.0918 and 1.0958 to move higher and traded to 1.0930 before falling.
The currency market is defined by DXY and EUR/USD as diametrically opposites. Why are economic releases reported exactly the same for the United States as an independent nation and the European continent as a whole? The traditional United States and Europe released diametrically opposed economic announcements. For example, high inflation in Europe translates to low inflation in the United States. A high US GDP automatically reverts to a low European GDP. After that, EUR/USD and DXY trade oppositely according to economic announcements and trade in a wider range.
The consolidation of economic releases is a direct result of the economic slowdown, and there are fluctuations in market prices, the basis of which is the effective exchange rate index. It is considered an import-export and is of paramount importance to all economic releases due to its predictability of currency prices and insight into all economic releases.
The central bank has given up responsibility to the Bank for International Settlements to incorporate each country’s trade weight into each country’s exchange rate index. Note the new calculations for January 2023 and the same coefficients for each country.
Simplify. Exports = Trading Partner GDP X Effective Exchange Rate Index. Imports = Oil X Effective Exchange Rate Index. The final decision is the relationship between the prevailing market price and the effective exchange rate index. The overall decision is driven by the relationship of imports and exports to exchange rates.
Once national interest rates are unified in 2021/2022, integration into economic announcements will be the new economic order as countries become interdependent in trade.
The BIS recalculates effective exchange rate trade weights every three years, so the current 700 pips range since January will continue as the norm for the next three years.
1 week
Overbought from the current 103.00, DXY needs to break through 103.75 and 103.49 to target the mid-102.00s. For DXY he has to clear the 102.00’s to target the low 101.00’s and it’s very easy to go over the 100’s.
Overall, DXY will eventually challenge the 99.00 range and break through the 98.00 range.
For EUR/USD to target 1.1036, it needs to break through 1.0905 and then 1.0954. Next week we go long from target 1.0892 at 1.0830 and break at 1.0905 with overbought target at 1.0947. The ranges are 1.0905 to 1.0947 and 1.0830 to 1.0892.
To target GBP/USD 1.2794 you need to hold 1.2658 and 1.2635. Next week’s range is 1.2658-1.2794.
Next week’s USD/JPY range is 146.32-144.31. On a weekly basis, this week’s range is 146.34 to 144.33, or 201 pips. The range this week was 146.39 to 144.53, or ‘186 pips’, compared to 191 pips last week.
Next week’s USD/JPY short needs to break 145.36 to target a break above 144.00. The current 144.00 level represents a solid line and needs to break to target the 143.00 level. The past two weeks have been in the 144.00 second range.
USD/JPY breaks big at 141.94 target with breaks at 140.44 and 138.00. If the DXY falls from the overbought, USD/JPY will not only break above 144.00 but also challenge the 141.94 line.
EUR/JPY range next week: 158.76-156.75. EUR/JPY 156.00 is blocked.
EUR/AUD is trading at 1.6578 to overbought at 1.6962. A short from 1.6962 targets 1.6885, then 1.6732, then 1.6655. Long term targets for EUR/AUD are 1.6363, 1.6176 and 1.6060.
EUR/AUD will continue its short-only strategy as it will eventually break our target further below 1.6578.
USD/CAD is holding higher in DXY and both should trade lower. Long-term targets for USD/CAD are 1.3378, 1.3288 and 1.3188. Next week’s short is 1.3542 with a target of 1.3464. The lower bound needs a breakout of 1.3438 to target 1.3386 and 1.3369.
GBP/AUD is trading between 1.9243 and 1.8497, both overbought. Next week’s cautious short at 1.9732 targets 1.9610, 1.9549 and 1.9488.
GBP/NZD short next week at 2.1485 with targets at 2.1352, 2.1229 and 2.1086 at 2.1518. In the long term, the price will eventually break out of the 2.0819 line and reach our targets at 2.0726 and 2.0505.
AUD/USD traded oversold from the weekly chart, rebounding 86 pips from 0.6401. The AUD/USD at 0.6457 indicates that it is very oversold and we are targeting a break at 0.6581, so we hit this target by a difference of 0.6467, 0.6524 and 0.6553.
The GBP/CAD has been overbought this week from the weekly target of 1.7100. GBP/CAD fell 200 pips from 1.7316 to 1.7100 level. Next week’s short of 1.7280 targets 1.7101 and 1.7077.
To target 7404.87, the FTSE100 needs to stay above 7317.90. Below 7317.90, the target is 7230.93.
With the DXY heavily overbought, the overall forex market is in the same predicament as last week and will have to trade below the 102.00 level and wait for an opportunity to challenge the 99.00 level.
If the DXY falls, the best currencies to trade are short EUR/AUD, GBP/AUD, GBP/NZD, EUR/NZD, USD/JPY, GBP/JPY and EUR/JPY.
