FX Weekly

The vast majority of Friday’s moves were the result of significant average breaks rather than a response to a 30,000 miss to NFP. EUR/USD’s 132 pips Friday was fairly balanced at 66 pips above and below its vital point. EUR/USD led the way in order for GBP/USD, AUD/USD and NZD/USD to trade higher and trade above significant averages. Without vital breaks, NFP’s trade result was the typical 50 pip move.

Every Central Bank has their own particular YCC as 3M to 10 year yield rates. The difference from the BOJ is they purchase 10 year JGB’s at the 10 year or 3 month to maintain strict control of the 3M to 10 year range.


Without accounting for yield curve inversions, 3 month to 10 year spreads run as:


Treasuries = 4.63 to 5.45 or 82 point range.
USDJPY 0.816 to 1.92 = 1.10


GBPUSD = 5.354 – 6.297 = 0.943
AUDUSD = 5.33 – 5.717 = 0.387


USD/CAD 6.04 – 4.83 = 1.21
NZD/USD 6.38 to 6.64 = 0.26


CHF sits completely off the radar as 1.7% Inflation for October balances against Exports exceeds Imports every month since 2012. The review ended at 2012 without an urgency to continue. The United States is a vital export nation however the Swiss trade with a long list of nations around the globe.


USD/CHF traded 132 pips last week Vs DXY at 241 and EUR/USD’s 230.
The SNB completely overhauled the interest rate system from 2019 to 2022. Inflation at 1.7 matches the most vital Saron Rate and replaces 3M Libor. For future Inflation releases, Saron is the target rate.


The Sight deposit rate = Saron + 50 and minus 50 basis points. A Threshold factor was added to ensure USD/CHF trades within the context of Saron + and minus 50 basis points. Saron last at 1.70 minus the 10 year yield at 1.09 offers 61 points.


Not only was the SNB’s Trade survey re adjusted but the SNB stands ready to intervene anytime. The communication to intervention was broadcast throughout all SNB’s publications.


The SNB’s message is USD/CHF and CHF cross pairs will forever trade in tiny ranges.


The Week


JPY cross pairs begin the week overbought and GBP/JPY, AUD/JPY and NZD/JPY will lead the way. AUD/JPY targets easily 95.92, NZD/JPY 88.31 and GBP/JPY 183.77. All are minimum targets.


AUD/USD achieved the 0.6500 target from October and November lows at 0.6300’s. AUD/USD is challenged to move higher by 2 averages at 0.6700’s and 0.6900’s. Next higher targets are located at 0.6685 and 0.6755.


AUD/USD ranges from 0.6442 to 0.6764.


EUR/AUD and GBP/AUD begins the week oversold. Higher for EUR/AUD must clear 1.6579 and 1.9105 for GBP/AUD. EUR/AUD contains easy ability to trade to 1.6200’s and 1.8700’s for GBP/AUD over next weeks. Lower by 200 pips allows AUD/USD to challenge 0.6764.


EUR/USD targets next 1.0781, 1.0806, 1.0887 and 1.0979. Long term targets reported October 7 = 1.0709, 1.0831, 1.0909 and 1.1001. EUR/USD traded 1.0500’s October 7.
For the EUR universe, overbought applies to EUR/CHF, EUR/JPY and EUR/CAD.

EUR/NZD ranges this week and EUR/AUD trades deeply oversold.


GBP/USD Long term targets previously posted : 1.2460, 1.2552 and 1.2668. GBP/USD traded lows for October and November at 1.2000’s.


GBP same story as EUR/USD. Overbought GBP/CHF, GBP/JPY, GBP/CAD while GBP/AUD trades oversold and GBP/NZD ranges.


Oversold USD/JPY contains easy ability to target 150.50. Lower must clear 147.29. CHF/JPY 167.00’s also trades easily and 163.00’s must break to trade many miles lower.
GBP/CAD and EUR/CAD overbought is added overbought to AUD/CAD and NZD/CAD.
USD/CHF and CHF cross will continue to range trade.


Overall markets are back to range trading for the week without significant breaks expected.


EUR/EM


EUR/HUF and EUR/PLN trade oversold for the week while EUR/RON begins the week overbought. Watch EUR/CZK for shorts at 24.3767.


Both EUR/PLN and USD/PLN trades deeply oversold which means refrain from trading PLN. The same situation exists to USD/BRL and EUR/BRL.

Brian Twomey

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