Currency markets this week will be driven predominantly by JPY cross pairs as all are oversold and all are heading higher. Due to beginning weekly positions to USD Vs Non USD pairs, all fail to drive nor lead currency markets this week.
Because JPY cross pairs serve its function in currency markets as attachments to respective USD Vs Non USD pairs, JPY cross pairs will lead USD Vs Non pairs this week. Higher EUR/JPY is the same statement and position as EUR/USD higher. Why is because JPY cross pairs are the exact same pairs as USD Vs Non USD.
AUD/JPY and GBP/JPY are normally natural leaders every week to currency markets due to widest weekly ranges and because GBP/USD can’t live in currency markets without GBP/JPY positive correlations. AUD/JPY ranges are naturally wide every week due to the broadest interest rate differentials among all central banks and because AUD/JPY serves historically as the premiere indicator to risk reversals because of wide interest rate differentials.
An RBA possible slash to interest rates brings an interesting dynamic to AUD/JPY as RBA interest rates traditionally survives in traded Australian markets as exact opposites to Fed interest rates and complementary though smaller ranges.
The BOJ and JPY interest rates to ranges and maturities track exactly as the ECB interest rates to trade in tiny ranges and ranges less than RBA interest rates. RBA interest rate maturities complement the RBNZ but RBNZ contains far wider ranges than all 8 central banks. A possible cut to RBA interest rates brings AUD/JPY trading ranges to much smaller movements than exists today.
Due to interest rate situations, ranges for all currency pairs continue to compress. One aspect to why is because the vast majority of currency pairs are trading at or extremely close to respective ranges. Normally this situation warns to big moves and breakouts ahead however central bank messages to retain interest rates to no changes and trading at current levels may mean a more permanent condition.
Daily overnight interest rates for all central banks haven’t changed since June. Fed Funds at 0.09 was reported nearly every trading day since June. The same situation exists for all central banks to hold overnight rates at the same levels every day.
This brought a whole new dynamic to ranges in all Currency pices as ranges severely restricted. Currency prices trading within ranges against lack of movement to interest rates means the currency price is in sync to its central bank interest rates. Either the interest rate or the currency price must move in order to expand currency price trading ranges.
the same metric to interest rate / currency prices is found within currency pairs. GBP/USD Vs USD/CAD prices contains a 400 pip spread yet ranges flattened. EUR/NZD Vs GBP/NZD spreads at 1800 yet ranges are contained to 1800 pip spreads. EUR/USD Vs EUR/JPY contains 400 pip spreads. And 300 pips for NZD/USD Vs NZD/JPY. And this list goes on and on to ranges.
Despite compressed ranges, price paths are correct for most pairs.
The last condition a trader wants is currency prices trading at its ranges because it means the currency price is correct. Trading a correct price inside tight ranges fails to see movements and doesn’t earn money. Trading and best money earned is derived from an incorrect currency price and not correct is the quite common position for currency prices traditionally.
Despite JPY cross pairs as leaders this week, all lack range movement ability. EUR/JPY remains the best pair followed by AUD/JPY. And CAD/JPY as usual represents the worst JPY cross pair.
EUR/NZD and GBP/CAD both remain deeply problem currency pairs however this week both are deeply oversold and represent quick pips on easy trades. Same scenario for NZD/CHF and GBP/CHF as both lack range ability. AUD/CHF is a far better pair to trade as ranges and price paths are clearly defined for entries and targets.
EUR/USD, GBP/AUD and USD/CAD are best pairs as ranges are widest among all 18 currency pairs traded every week. The problem is beginning locations are not ready to trade on the Sunday open.
For election trading as in past elections, movements will be seen in 20 and 40 pip intervals. Trump wins Texas and 20 and 40 pips. Dementia Joe wins Nevada then 20 and 40 pip moves. Trump or Dementia Joe wins then up to 100 pip moves and in one direction. Moves for USD and Non USD pairs will be best pairs to trade.