FX Next Week

Since March, GBP/JPY from 158.00’s traded to 186.00’s and 2800 pips in 21 weeks. GBP/JPY traded 15 weeks higher and lower to minor corrections in 6 of the 21 weeks. GBP/JPY completed a 2500 pip currency cycle in 5 months, an extraordinary event as normal markets would trade a currency cycle in 1 year.

DXY at 103.00’s trades above the 50 year monthly average at 99.00’s. GBP/NZD traded 1800 pips higher in 13 weeks or 600 pips per month Vs 4 minor corrective weeks. EUR/AUD traded 1200 pips straight up in 10 weeks from 1.5800’s without correction while GBP/AUD traded 1400 pips.

USD/JPY traded 1700 pips in 5 months or 21 weeks. Meanwhile EUR/USD, GBP/USD, AUD/USD, NZD/USD trade in tiny ranges week to week from oversold to oversold. USD/CAD is a lost soul trading without a clue.

Market prices are trading in profound abnormality and the aberration is seen in correlations. USD/JPY led wide range currencies higher to massive overbought levels by Correlations at current + 99%. EUR/USD and GBP/USD assisted wide range currencies by correlations at +87% and +74% for EUR/USD.

The correlation problem compounds when USD/JPY correlates to GBP/USD at +87% and +79% to EUR/USD. As GBP/USD and EUR/USD trades in microscopic ranges, USD/JPY assumed market leadership to trade onward and upward and allow wide rangers to fly higher to Richter Scale overbought.

GBP/JPY continues to trade the months long correlations to USD/JPY at 98% and 94% to GBP/USD. Overall, GBP/JPY trades at the 38, 39 and 40 year monthly averages from 184.14, 187.24 and 190.87 at the 40 year.

March is where the current 5 month period began and long term trades from January ended. Currency prices in March were settled, in ranges and required direction.
The end result from March is currency markets assumed deeply married prices by correlations. The correlation marriage must and will eventually end in divorce to allow markets to again trade normally.

The overall problem to abnormal markets is not USD/JPY, wide rangers or correlations. The problem is DXY is to high and must trade lower. DXY dead ranges since March allowed present currency prices to trade non normal.

When DXY gets moving to trade normal ranges, wide rangers will correct much lower, USD/JPY will trade miles lower and the Correlation marriage will end.


DXY next week trades from deep overbought at middle 103.00’s to oversold middle 102.00’s. The range is about 100 pips. The larger range is the same 4 week parameters from middle 103.00;s to 101.00’s.

The Best trades over next weeks: EUR/AUD, GBP/AUD, GBP/NZD, EUR/NZD, GBP/JPY, EUR/JPY, USD/JPY. All offer 5 and 600 pips to corrections and this is just the start. EUR/AUD for example contains a big line break at 1.5900’s and 1100 pips from the current price.

Oversold EUR/USD must break 1.0926 to trade higher, GBP/USD must hold above 1.2650 to trade upper 1.2700’s.

Overbought USD/JPY targets 144.50 then 143.00’s. Overbought GBP/JPY targets 184.59 then 183.00’s.

Brian Twomey

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