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As written Sunday, CAD/JPY target at 103.24 traded to 103.35 lows from 106.00's and 300 pips. CAD/JPY is the middle currency pair that trades between AUD/JPY and NZD/JPY Vs EUR/JPY and GBP/JPY. CAD/JPY is the preferred currency to trade along with EUR/JPY and GBP/JPY.
For next week, CAD/JPY sits oversold , EUR/JPY doesn't have a clue to direction at 137.00's, GBP/JPY do or die at 162.06. AUD/JPY short next week at 93.00's and short NZD/JPY at 84.00's.
USD/JPY has been a dead issue for 2 weeks and stuck from 136.00's to 134.00's. Nothing more expected and the problem is seen from DXY.
DXY achieved severe overbought status this week at 106.00's and decided to travel 100 pips higher to more overbought at 107.00's. DXY higher is traveling 100 pips higher into more massive overbought week to week and caught inside 200 pip ranges. Higher DXY into overbought sends EUR/USD lower to trade massive oversold.
DXY and EUR/USD as FX leaders remains key drivers to overall markets as the distance between both are separated to extremes. Both must meet in the middle to normalize markets then decide proper normalized levels.
All markets as FX prices drive and dictate all markets. SPX traded 169 points this week, 200 points last weelk and 200 points 2 weeks ago. Speaks volumes to the DXY and EUR/USD overbought and oversold extremes.
SPX target this week at 3999 will struggle to achieve destinations. Today, any price above 3925 goes short.
AUD/USD. RBA raised July 4th and AUD/USD traded 132 pips range from 0.6894 to 0.6762. A change of interest rates today and in the future is not worth the discussion as the change is seen and traded inside the current price.
We're exposed to more public relations today than vital market knowledge, expertise and professionalism.
AUD/USD trades oversold from 0.6800's and targets low 0.6900's easily and struggles to upper 0.6900's.
Big winners over last weeks were EUR/NZD, GBP/AUD and EUR/AUD. All will maintain wide ranges and big winner status. All are recommended trades for the week ahead. All are deeply oversold to include GBP/NZD.
USD/CAD trades deeply overbought and finally but slowly breaking out of its dead range coma over last months. Normally a great currency, good mover and terrific profits but lately extremely dead. Watch EUR/CAD as the next highest currency price to USD/CAD at current 1.3160.
USD/CAD at 1.3000's vs GBP/USD at 1.1900's and 1100 pips is fairly high to extreme.
Overall currency prices trade at massive overbought and oversold extremes. This market condition is the worst and most dangerous to all market periods and impossible to hold. A turnaround will come and should hit violently.
EUR/USD, parity and ECU units
EUR/USD from 2008 highs at 1.6011 to 1.0160 lows traveled a difference of 44% yet a decrease of 36%. EUR/USD to Parity at 1.00 entails another 1% drop or a total at 37% from 1.6011. Per year, EUR/USD dropped 4.62%.
EUR/USD at 1.6011 highs aligned against USD/DEM as EUR/USD legacy currency at the January 1999 introductory rate at 1.6846 or DEM/USD 0.5936 Vs EUR/USD at 0.8613. DXY was 93.55 or 0.9344. EUR/USD increased from 0.8613 to 1.6011 at 85% or roughly 8% per year.
Since January 1972 and the start of the new 50 year cycle and the new experiment to align exchange rates with interest rates, EUR/USD traded below parity 84 of 600 months from 1972 -1973, 1982 -1986 and 2000 to 2002 during the 9/11 terrorist attacks on the World Trade Center.
Recall 1971 – 1972 and the Nixon revaluation to Gold. From 1982 to 1986 involved the Lourvre and Paris Accords to re-rate currencies to USD.
A particular worldly situational reset existed for EUR’s justification below parity.
EUR/USD transferred from Dem and all European currencies at 1:1. Below parity was never the intention, goal or purpose in 1999.
ECU and EUR
When the euro was introduced in January 1999, it replaced the ECU at par (that is, at a 1:1 ratio).
ECU linked to the European Monetary System?
The EMS was a limited-flexible exchange rate system that defined bands in which the bilateral exchange rates of the member countries could fluctuate.
The bands of fluctuation were characterized by a set of adjustable bilateral central parities and margins that defined the bandwidth of permissible fluctuations. This set of parities was called a parity grid as it defined parities for all combinations of the ECU constituent currencies.
The borders of the fluctuation bands were described by the upper intervention point and lower intervention point. Typically, the bandwidths were 2.25% to each side, with a wider margin for the Italian Lira.
After a currency crisis in 1993, the bands were widened to 15% on each side, but in practice the fluctuations were kept within a narrow band.
When a market exchange rate reached either of these intervention points, the central banks were compelled to support these rates indefinitely through open market operations (buying of weakened currency or selling of a strengthened currency). Some countries (notably Britain) initially did not participate in the exchange rate mechanism of the EMS. Britain participated actively in the EMS only for a short period.
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