A Gap applies to a Sunday night open when the currency pair is severely overbought or oversold. The amount of pip movements depends on the degree of overbought or oversold. The purpose to the Gap open is to allow a currency price to begin the week in neutrality and to permit the currency pair to align to its counterpart currencies. A weekly trade holds the same principles as a daily trade as the price begins in neutrality and holds a fair chance to rise or fall.
Gap risk. No such concept exists to risk. Gap risk is opportunity for free money. The following currencies from 28 are subject to Gap opens: Short GBPCAD, EURCAD, NZDCAD, NZDJPY, GBPAUD. Long AUDNZD.
AUDCAD barely meets the requirements to overbought as does its massive overbought counterparts but because AUDCAD resides in the same family, AUDCAD will follow short to its family members yet not for the same amount of pip movements.
USDCAD fits into the equation by deeply oversold as USDCAD sits on its big break point at 1.3328 to target lower at 1.3236. The relationship to USDCAD and cross pairs is CAD = CAD. The current period to market trading is the 2nd side to the currency pairs drives and moves in unison. Examples include CHFJPY = USDJPY, EURGBP = GBPUSD. A currency pair is an equal opposite yet tilted to one side based on the period to market trading. The foundation is EURUSD DXY.
Prior to 2008, the 1st currency drove and was responsible for all movements. The 2 sides and places seen is by Math as Correlations and bounded residual plots to Simple Regression. When the 2nd side to currency pairs drive markets, ranges are suppressed and wider under the first currency pair side. Seen most specifically to EURUSD and USDJPY.
DXY V EURUSD
The target last week at 105.05 traded to 105.34. DXY traded directly to target and never looked back and actually traded from oversold to more oversold. EURUSD traded the opposite path from starting the week at overbought to trade higher overbought to 1.0481.
DXY this week 107.81, 108.34 then the brick wall at many averages at 109.00’s and 110.00’s. DXY is supported at 106.30 and 105.67. The weekly range is about 200 pips.
EURUSD is well supported at 1.0157 and 1.0186 Vs 1.0376 or 190 pips. EURUSD target this week is 1.0215 and up from 1.0136 from last week. EURUSD traded lows to 1.0272. By trading to overbought 1.0481, EURUSD averages rose and DXY averages remain on the slow, slow downslope.
Currency markets this week are defined as 200 pips then add 50 – 100 pips for cross pairs and the week is established.
DXY from 106.67 and 114 pips = 107.81. EURUSD at 1.0322 to 1.0376 = 54 pips. DXY from 106.67 and 105.67 = 100 pips. EURUSD from 1.0322 to 1.0186 = 136 pips.
EURUSD last week traded 211 pips and 189 for DXY. At 200 pips for this week, currency markets are tight and defined by compression of averages. Either markets breakout and offer wider trade ranges or 200 defines markets for a long time into the future.
EURUSD close Friday is expected at 1.0254.
EURUSD, EURJPY, EURCAD, NZDJPY, NZDUSD, EURAUD, AUDUSD, CADJPY, AUDJPY, USDCAD, USDJPY, AUDCHF, CADCHF, NZDCHF, EURNZD.
Best trades: : EURUSD, EURJPY, EURCAD, NZDJPY, NZDUSD, EURAUD, EURNZD
GBP Best: GBPCAD, GBPAUD, GBPUSD, GBPJPY, GBPCHF
Easiest trades first for maximum pips then next set of easiest trades followed by trades of no interest or trades that require much figuring and factoring.
AUDUSD sits as least favored as 0.6659 decides AUD plus AUD just doesn’t have a clue which way to travel and the same applies to AUDJPY and AUDCHF. NZDUSD is the better trade.
USDJPY 139.44 to 140.29 or 141.15 and 142.01. Least favored USDJPY but we have 5 days of day trades to guarantee profits.
GBPJPY begins the week overbought and its shorts for JPY cross pairs. AUDJPY is least favored while GBPJPY, EURJPY and CADJPY remain preferred.
GBP shorts favored all week.
Due to DXY short ranges, SPX and stock markets will suffer from small moves this week. SPX traded 127 pips last week and much the same is expected this week.
XAUUSD will follow EURUSD lower and target 1744.
Overall, another range week and the same as last week.