G10, Crash, Trump: Levels, Ranges, Targets

Eonia Today minus 0.358, Aug 1 = -0.356, Jan 2 = -0.356, January 2016 = Minus 0.241. This is the manner how Draghi manipulates the money supply to his desire. Draghi’s caution is the level of the exchange rate and his ability to control it as the risk is an out of sync EUR. In the old days of wider ranges and central bank interventions, exchange rates were brought to acceptable levels yet it came at a price. Under today’s strict exchange rate controls, even a verbal intervention fails to move exchange rates to desired levels.

Glenn Stevens and AUD is a perfect example. Stevens verbal interventions resulted in a higher AUD everytime. A poor economic announcement dropped AUD temporarily yet AUD went higher. The central banks created the system of interest rate and money supply out of kilter then they created a failed system to harmonize the exchange rates to the money supply and interest rates. The central banks cannot stop an intended what I call the Statistical price path of an exchange rate. Central bankers may speak to their heart’s desire but the exchange rate must achieve and must fullfill its intended target. If Draghi or Stevens level of the exchange rate is unwanted, prayers to the forex gods can’t assist.

We’re starting to hear the words crash from many fronts. Jimmy Rogers, Marc Faber and a few from the business channels. Reported here was crash territory is upon us and 2018 will be a rough year.

Danielle DiMartino Booth in Fed Up states Auto delinquency rates is the premiere indicator. Currency default rates hover at 2008 levels based on quarterly June figures and defaults are rising. September is the next release. Her message is the crash is here as interest rates rose and wages remain stagnant. Yet view charts and realize high default rates were already upon us. Much has already been written on this topic . For Interested hit Experian and the American Bankers Association for deep statistics and graphs.

On the Trump front and related to the crash context. The Democrats, protests, impeachment is all designed to break Trump psychologically, to impair his agenda, to force him to address the overwhelmingly problems caused by the protests. Democrats wish to overwhelm the system and overwhelm Trump to the breaking point. Trump wins by a sledge hammer to stop the Democrats or loses to chaos. My bet is sledge hammer. Gold must be part of the portfolio.

EUR/USD. Break points 1.1773 or 1.1688.

GBP/USD break points 1.2844 and 1.2852 or 1.2918 and 1.2925.

EUR/JPY. 127.56, 127.72 and 127.88 or 128.41 and 128.69.

USD/JPY 108.94 and 109.10 Vs 109.47.

Brian Twomey

G10 and Trump Council

 

As Trump appeared set up by the few corporate names and Trumka from the SEIU gangsters, the belief is Trump saw this coming as he has maintained ability to remain one step ahead throughout his presidency. The early meetings with Trumpka and the corporate names had to determine loyalty questions. Trumpka was unquestioned as non loyal yet he was picked for the council. Was the set up actually a reverse as a means to reveal non loyalty to America by company resignations.
Disney for example is a command and control run company and was run this way since at least the 1980’s under Michael Eisner. As a corporate citizen, Disney fails miserably as they disappoint communities in any and all assistance. Money comes into Disney but never goes out.

The question is how many major American companies house corporate treasury departments outside the United States such as General Electric and others in Ireland. And when are they coming home to contribute to America. Is Disney located in Ireland and if so under high taxes and repatriations, chances are good Disney isn’t coming home therefore offered nothing to Trump’s council from the beginning.

View the loyalty question from F Roosevelt. Roosevelt lacked a chief of staff as the position wasn’t created until Truman and passage of the various Executive Office of the Presidency laws. Roosevelt was master at the palace intrigue as he never trusted himself so he tested loyalties from agency heads.

Are far right and far left groups protesting against each other. No, communism married fascism and Muslim Brotherhood to form one big power run by the Democrats. All funded by the Russians and Arabs. Protests will be much worse from here. Charlottesville was a warm up, a dry run. Recommended read to details on political thought is the Politics of Aristotle.

EUR/USD awaits 1.1673 as the next por of call. Longs must clear 1.1713, 1.1727, 1.1732 and big line at 1.1736. EUR boke bottom,
GBP/USD 1.2851 and 1.2859 determines 1.2843 and 1.2827 or above 1.2925.

 

NZD/USD. 0.7306 and 0.7333 above or 0.7301, 0.7292 and 0.7283.

EUR/JPY remains at its low end current at 1.2871, 128.87 then 1.2901.

USD/CAD 1.2601 or 1.2632.

 

Brian Twomey

Presidential Powers

 

Idealism is the belief in the way government supposed to function. This fantasy thought from idealists are the Trump haters as they see government size and power diminish by Trump’s actions. They are helpless to government as solutions to all problems and government as the sole organization to bring prosperity. Its a pure Marxian belief, pushed further by Lenin’s 1917 revolution, Wilson and hammered home by F. Roosevelt.

Yet for 100 years, idealism was treated as a political thought, a harmless competing political philosophy but read the Democrat Party e-mails and its found idealism devolved into government as a religion. Thought was turned into action by growing government for power, control and profits. Yet the slow moving thoughts were built upon Democrat majorities in Congress from Wilson to Nixon. Control the House of Representatives then control budgets.

The Realist are those that view the world for what it is in current context. The private sector and the genius of the people may derive and control their own economic destiny. See America from 1860 to 1912 to realize the idealists and government could never build America to that degree and prosperity.

The laugh is Presidential powers are found and limited in Article 2, Section 1 – 4. A President lacks powers and only controls the Military, Fed Government appointments, treaties and state of the union. Wilson was first to deliver the State of the Union message in Congress. Prior Presidents wrote a 2 page letter. Today, State of the Union is treated like the NFL superbowl yet its a waste of time to watch.

Executive orders is the newest presidential power yet they are harmless as the only purpose is to affect government as in for example addition./ elimination of an agency. Or Nixon’s addition of EPA.

Employ an executive order as a social justice tool as Obummer used widely and Kennedy did under Affirmative action then presidential power enters new territory. Employ executive orders as an economic tool as in Presidential commission on Manufacturing, commission on wages and any aspect concerning the private sector then new territory means control of economics and social justice in a 4 trillion economy.

Takeover Park Lands as in Slick Wille’s executive orders means even all land West of the Mississippi is owned by the Federal Government. Article 2 is then eliminated as meaningless and presidential power turns into President as King, Dear Leader, Kim Dung Un, Stalin. Yet all presidents since George H.W Bush are guilty. Not much is left for the Federal government to own as they control, Insurance, Healthcare, banks, student loans and their prize target is the Federal Reserve. America is heading towards empire rather than devolution of the Federal government and one person in a president can effect change by a stroke of the executive order pen. Article 2’s purpose was never to allow one person powers to this magnitude.

Eliminate Article 2 means the real powers of the United States vested in Congress as in budgetary powers from Article 1 Section 8 is severely weakened. Obummer never submitted a budget, congress never held hearings yet money was appropriated. Republicans never objected nor should they as their positions become jeopardized. Passage of legislation as in Article 1, Section 1 becomes a useless exercise. John Mc Cain’s cross the aisle to work with the other side becomes commonplace as political parties devolve into one party and Congressional purpose is kingly ratification. Say good bye to Article 1, Section 1 to 8.

First warning was elite and news media speak as left / right. Parliamentary governments or better understood as Coalition government spoke as left / right but never the United States because we are a Republic. Political debates spoke in party terms but never left /right. Powers in the United States as a Republic are given to government by the people and represented best in the House of Representatives.

To speak in left / right terms rather than party terms eliminates the people as party identification and lumps the political system alone as left / right divide. The threat is the right and few remaining Republican conservatives as the entire governmental system is pure left Socialist.

The masses traditionally always lost the game under the socialist plan as it favors the elites. But how can the masses know this as the last real Republican president was Reagan and he left in 1988. A person born in 1988 is today 29 and grew inside today’s social system and were never exposed to an alternative government view.Is wall street really greedy, cops no good, cell phone, computer and automobile tracking is okay, economic stagnation the norm.

Trump haters despite dangerous and psychologically imbalanced have reason to complain as Trump threatens their money, power and existence. The Trump questions are can he win and turn Federal government destiny or will the Democrats derail his plans. If Trump brings prosperity by tax cuts, will the Democrats be forced to back off. Is Trump like Reagan and only derail’s the Democrat plan for empire temporarily.

Brian Twomey

G10, Moments, Skew: Levels, Ranges, Targets

NZD and the RBNZ sets the trading standard for Asia because they are the first, because they are most aligned with USD interest rates and trading days, because NZD is and will remain the best signal to every currency pair. If NZD/USD breaks a Support / Resistance then the remainder follow. Next comes little brother AUD and truly a little brother. NZD is viewed not as a Commodity Currency, its a currency that sells commodities. NZD is a great pair to hit perfect targets, one of the absolute best. The RBNZ by far remains the smartest central bank on the planet in the design of economics, interest rates, currencies and overall market systems. The perfection ascribed to the RBNZ is astoundingly well deserved.

4 moments to the Standard Deviation to answer a few questions. The 3rd Moment is the Skew and to currency trading, its absolutely the worst calculation, the worst indicator. Academic papers and scholars wrote much about the Skew and the idea that the Skew remains constant. The Skew must remain a constant because the currency price is the 3rd instrument in the progression therefore the Skew can’t ever change. Its naturally built in as a constant. EUR/USD for example maintains a constant 0.2 Skew.

The Skew can’t drop because of its interest rate association. If the Skew wasn’t a constant, then the currency price wouldn’t maintain its deviation to other financial instruments. All the financial instruments associated to the currency price would trade on a 1 for 1 basis. That means markets don’t exist to trade.

I’m not sure what the Skew means for option traders, probably nothing as it doesn’t apply to currency prices. To technical traders that wish to test this concept then take a Z value to the Skew but don’t use a standard deviation because its to wide. Use the next best fit in the Standard Error. To understand the constant Skew further then look at Hazard Rates by Time minus Average divide by the Standard Deviation. What to see in the Skew is the range as the Hazard answers what is the Rate of failure, how fast / slow. It beats rate of change by miles.

USD news today is Imports and Exports. We’ll see the same old 50 year story, Imports beat Exports. Exports should be good against the low DXY yet Imports will beat Exports.

GBP/USD. Bottom for today is 1.2897 and currently GBP trades at its bottom. First above is 1.2905, then 1.2912, 1.2931. The big break is located at 1.2954. Should be good short point to targets again 1.2905 for today.

USD/JPY. Massive resistance at 110.95 and 110.92. At 110.48 is the break point to go higher. Watch 110.64. Below watch 110.23.

USD/CAD. Massive resistance at 1.2794 and 1.2797. Above CAD needs a break at 1.2752 for higher or 1.2723 for lower.

EUR/USD. Big break 1.1719 and above 1.1791.

NZD/USD break points 0.7310 and 0.7275

Brian Twomey

Interest Rate Corridors, Swaps and Yields

While interest rate corridors remains an insightful and important topic to currency prices, markets and monetary policy, to delve further into corridors on a per nation basis offers a far more comprehensive perspective.

Daily Interest rates in AUD, NZD, USD and GBP are not only low but statistically flat on the floor low. Statistically flat means interest rates contain problems in range, location and direction as the view inside current prices reveals a lost and wandering rate in dire need of input to force a meaningful direction.

GBP is most interesting because despite low, the BOE can actually maintain interest rates at current levels into the future. A drop brings interest rates to the lowest depths of lows to match AUD, NZD and USD. Yet a drop must be questioned to the effects on AUD and NZD as interest rates throughout nations are cemented tighter than glue. AUD and NZD interest rates lack ability to go lower.

The current debate inside the BOE to raise, lower or maintain will continue as the BOE must question severely oversold interest rates from monthly averages 1 to 10 years to daily low yet acceptable trading levels.

Fed Funds is severely overbought from a monthly average view 1 to 12 years yet the daily interest rate trade levels are extremely low. The reconciliation is to view levels and averages to ranges. The 10 to 2 year and 10 to 3 month averages are both the same at 1.76 to 1.78.

The spreads are both at 0.87. The spread factors as the current range and the overall range is 0.89 and 0.91 to 2.63 and 2.65. Topside levels bump against the 2.51 average at the 10 to 30 yields. The spread is 0.59 therefore the current range is 1.92 to 3.1. Then the 10 to 5 averages at 2.00 to 2.03 against a 0.42 range means 1.58 and 1.61 Vs 2.42 and 2.45. Ask is the Yield curve negative from 1.76, 2.00 and 2.51 or are ranges to low and problems from 0.89, 0.42 and 0.59.

Actual statistical ranges from 1.76 at 10 Vs 2 and 10 V 3 months equates to 1.43 to 2.08 or 65 points total and 33 below vs 23 points above. The actual 65 point range is far lower by 24 points than the current 89 point spread.

The 10 to 5 spread at 0.42 is actual 1.83 to 2.17 or 34 points total, 17 points above and 17 below from the 2.00 average. The 10 to 30 average at 2.51 and 0.59 spread factors to an actual range from 2.27 to 2.75. The actual range is 48 points or 24 points below vs 24 above.

Interest Corridors are maintained by trading daily interest rates at the extreme low end to protect bottoms, to maintain orderly function in respective markets but most importantly to offer an invitation at acceptable levels to trade a nation’s interest rates. The low end and invitation under new central bank policy tools sacrificed exchange rate movements to drive trading to interest rate markets as volume, liquidity and business in interest rate markets are far more larger than exchange rate markets.

Interest rates are now the new exchange rates and a domination in the market. A fierce competition developed and now exists against each nation’s overnight rates and this is the manner how interest rates became tightly bound together. Nations won’t allow an advantage over the next nation as a move in one nation’s interest rate is met automatically by an interest rate move in all nations.

Previously, interest rate corridors were wide enough to allow a harmonious existence between interest and exchange rates where the exchange rate even became preeminent. The methodology and practice shifted to interest rate corridors as the pre eminent mode to control exchange rates and levels. More importantly, interest rate markets are now professionalized to only the knowledgeable and possibly as a payoff to banks, corporations and money market funds but at the expense of exchange rate traders. Only the professional have access to true interest rate prices.

Exchange rates were far to volatile for this cohort as trade management became more than a full time job to include forecasting, hedges and the point of profit and loss to operations. Proctor and Gamble trades on any given day hundreds of currency pairs. Its far easier for Proctor and Gamble to trade an interest rate as 2 to 4 decimals places rather than 6 decimal places in exchange rates.

Exchange rates in the 1990’s moved 400 and 500 pips per day under wide corridors while today’s exchange rate markets experience barely 100 pip days on good trading days. EUR introduction experienced focus and institutionalization on overnight rates then Overnight Indexed Swaps were introduced to begin the focus on interest rates and away from exchange rates. Interest rate maturities began a slow rearrangement and elimination of certain maturities.. In 2015, the new interest rate program was introduced by central banks to solidify the narrow corridor. The final result is today’s complete focus on interest rates, away from exchange rates and narrow interest rate corridors.

Consider today’s typical 15 point interest rate channel. An interest rate trader only needs a few points to nicely profit. A 15 point channel for an exchange rate trader is extremely tiny and results in small movements. Fed Funds trades easily $100 billion per day while DX Futures on ICE traded 17,000 contracts or roughly $85,000. Australia’s OCR traded in USD millions 3423 Friday on a light volume day while AUD/USD traded barely 150 Futures contracts.

Why the channels is because interest rate traders want rate stability and non movements in borrow and lend rates in order to hold positions and manage money for years. While bottoms are known, upper channel rates are known far in advance as well.
Interest rate swaps for exchange rate purpose includes OIS, Forward interest rates, Basis and Fixed V Float. Fixed Vs Float is argued as essentially the same as OIS for illustrative purposes.

The CFTC’s Weekly Swap Report released every Wednesday states Gross Total Notional Interest Rate Swaps Outstanding in USD and in millions amounts to 236,388, 714 and as cleared trades includes 152, 545, 368 and 83,843, 347 uncleared. Interest rate markets are extremely active for current participants.

The Fixed -Float accounts for USD total 112, 661, 812, Forwards 32,281, 129 and OIS 32, 464, 172.

The Fixed Float by Currency factors to USD 40,930,622, EUR 29,777,558, GBP 7,182,562, JPY 8,722,091 and AUD 6,026,353.

Forward Interest Rates in USD 15,177,674, EUR 10,651,966, GBP 3,156,768, JPY 1,762 and AUD 1,198.

OIS in USD 11,488,263, EUR 10,953,068, GBP 3,242,478, JPY 275,932 and AUD 4,409,385.

Narrow interest rate corridors is seen in length of time in Swap trades starting from 0 to 3 months in Fixed V Float. Note how trades increase in time and duration.

Fixed V Float 0 to 3 months 1,525,083, 3 to 6 months 2,814,149, 6 to 12 months 9,422,743, 12 to 24 months 14,257,903, 24 to 60 months 23,821,183, and 60 + months 60,820,751.

Forward Interest rates 0 to 3 months 5,257,464, 3 to 6 months 7,587,996, 6 to 12 months 13,652,164, 12 to 24 months 5,229,999, 24 to 60 months 552,043 and 60+ 1,462.

OIS from 0 to 3 months 4,128,362, 3 to 6 months 8,051,810, 6 to 12 months 10,851,528, 12 to 24 months 5,355,161, 24 to 60 months 2,137,128 and 60 + 1,940,183.

For OIS perspective and context to weekly views, June 2011 OIS contracts outstanding totaled $3.6 trillion and turnover in the year to June 2011 was $6.6 trillion.

Overnight rates remain fixed in tiny ranges from day to day purposefully to allow the OIS connection to 90 day rates and to establish parties in a Fixed for Floating rate trade. One side borrows while another lends. One side receives payments while the other side pays.

In an OIS Swap, fixed interest payments are swapped vs a variable interest payment. The floating or variable interest is connected to the overnight rate hence again why its in the interest of the swap market for overnight rates to remain steady.
OIS is most important to interest rate views and vital to currency markets because its a short rate / short term financial instrument. OIS as well assists predictions in central bank interest rate rises and falls. Short rates drive markets and prices. Standard Interest Rate Swaps contain far longer durations and lacks the predictive powers and insights of OIS.

Traditional OIS informs immediately to market problems as an early warning because OIS rates rise. Yet low OIS rates informs healthy market functions. Trump, North Korea and possible war should’ve seen OIS rates skyrocket but OIS rates remain low and stuck inside its narrow corridors because of the large monies tied to its current rates.

Large amounts of the world’s money is channeled into narrow interest rate channels against the same old non move able daily interest rates. This system doesn’t allow nor does a need exist to move interest rates. Exchange rate movements suffer in OIS and Swap arrangements. Interest rate curve averages on any given day barely move 1 to 2 points to offer a non movement example. The risk is OIS rates jump higher due to crash, war or catastrophe and the vast amounts of money tied to OIS is lost as all the eggs remain in one basket.

GBP OIS rates Friday were 0.066, USD 0.155, AUD 0.19 and 0.33 for NZD. One aspect to GBP is OIS rates are not a target price for the BOE. AUD, USD and NZD is quite a different story as those rates maintain a high significance. However NZD remains the currency never to worry because the system, operation and function of RBNZ interest rates is smart, well thought and functions extremely well. The RBNZ is always prepared because they build protections against any world action. Remarkable brilliance in the RBNZ.

OIS rates are ready to finally move and the move contains potential to become significant as current rates in relation to its channels sit at polar opposite extremes. Due to narrow channels however, OIS could trade to a higher range and reach destinations slowly.

 

Brian Twomey

 

 

G10, Yellen, CPI: levels, Ranges, Targets

To address yesterday’s commentary further as we saw DXY drop yet again. Queen Yellen and monetary policy is directly responsible as interest rates and DXY are engineered, directed and manipulated rather than allow a free float. The political system and Trump lacks any responsibility as the current monetary policy dilemma lays directly on the doorstep of Queen Yellen.

As DXY drops, Gold priced in USD skyrocketed yet DXY failed to follow as is the norm. This situation speaks volumes to the Yellen program as DXY and Gold traditionally correlate in the high 80%. As well, severely oversold USD/JPY continues its drop.

The 4 trilion places Yellen inside a deep problem because interest rates should be far lower. The ECB and Draghi maintains the opposite effect to the Queen. The ECB’s overbought Money Supply should see a drop and higher interest rates yet European interest rates are maintained artificially low on purpose. The effect to Yellen and Draghi is the mispriced exchnage rate.
Luckily Queen Yellen is gone in February and cannot perform anymore lasting damage. Remember Bernanke. A recent statement in a panel discussion he stated he wanted to commit far more stimulus money. Yellen and Bernanke are dangerous because they are ideologically and unyieldingly committed.

CPI. Currencies are priced today to move. AUD/USD and NZD/USD however are awkward priced.

The progression of a currency price works as Money Supply, Interest Rates, Exchange Rates then economic announcement. The exchange rate is 3 times removed from its money supply foundation yet it is a derivative and derivative of the interest rate. Inside the Interest rate / exchange rate price by its ranges is the economic announcement, the 4th cousin in the progression. Levels, Ranges and Targets are known long in advance of the announcement therefore mo mysteries exist to a movement gone wild. Levels, Ranges and targets change everyday and no 2 days are the same. Are currencies priced to move today because the CPI release is seen as big movements by central banks or is wide ranges today the result of today’s numbers. The CPI release by itself is a small release and results in dead movements.

EUR/USD. Big line break point above 1.1809 then below drifts far lower to its break point at 1.1722. EUR/USD reaches 1.1722 by breaks at 1.1756, 1.1744, 1.1734, 1.1722.

GBP/USD. Same old GBP story. Break points are located at 1.2976 below and 1.2991 above. GBP then targets 1.2918 or 1.3050.

EUR/JPY. As usual, resistance is built into today’s prices at 128.72, 128.95 then 129.24. Below 128.14 and 127.96.

USD/JPY break points are located at 109.31 and 109.06. Above 109.31 then USD/JPY goes to upper decks as next break point is located at 110’s.

Brian Twomey

EUR/NZD Vs NZD/USD: Levels, Ranges, Targets

Here’s a picture of 1 year EUR/NZD Vs NZD/USD Vs NZD/EUR.  The noted point is EUR/NZD is the opposite pair and opposite Correlations to NZD/USD and NZD/EUR.

http://fxtop.com/en/historical-exchange-rates-comparison.php?C1a=EUR&C1b=NZD&C2a=NZD&C2b=EUR&C3a=NZD&C3b=USD&C4a=&C4b=&C5a=&C5b=&C6a=&C6b=&DD1=10&MM1=08&YYYY1=2016&C7a=&C8a=&C9a=&C10a=&C7b=&C8b=&C9b=&C10b=&B=1&P=&I=1&DD2=10&MM2=08&YYYY2=2017&M=1&btnOK=Go%21

More In Depth picture   http://fxtop.com/en/historical-exchange-rates-comparison-graph-zoom.php?C1a=EUR&C1b=NZD&C2a=NZD&C2b=EUR&C3a=NZD&C3b=USD&C4a=&C4b=&C5a=&C5b=&C6a=&C6b=&C7a=&C7b=&C8a=&C8b=&C9a=&C9b=&C10a=&C10b=&DD1=10&MM1=08&YYYY1=2016&DD2=10&MM2=08&YYYY2=2017&LARGE=1&M=1&LANG=en

EUR/NZD is currently overbought. Extreme sell points are located from 1.6205, 1.6250, 1.6339, 1.6336 and 1.6340, Long points 1.5905.

 

Quick daily Trade. Most important Break points below for longs 1.5893 and 1.5950, Above sell points 1.6108 and 1.6165,

The most bottom is located at 1.5948 and achieves on breaks of 1.5893, 1.5988, 1.5968 then 1.5948.

Current price 1.6145, sell Mortimer sell. You want break lower at 1.6108 as first target then 1.5979 and 1.5950.

 

EUR/NZD

 

338 day average = 1.5493

595 day = 1.5900

848 = 1.5801

1104 = 1.5934

1279 = 5Y avg = 1.5903

1358 = 1.5905

1615 = 1.6073

Current Price 1.6146

1876 = 1.6343

2132 = 1.6869

2387 = 1.7445

2641 = 1.7561

2896 = 1.7739

3154 = 1.7735

3413 = 1.7804

3667 = 1.7897

3923 =1.8039

4176 = 1.8220

4429 = 1.8368

4690 = 1.8450

4766 day = Jan 1, 1999 = 1.8487

 

NZD/USD

338 = 0.7116

595 = 0.6956

Current Price 0.7281

848 = 0.7281

Current price 0.7281

1104 = 0.7497

1279 = 5Y avg= 0.7603

1358 = 0.7620

1615 = 0.7695

1876 = 0.7649

2132 = 0.7554

2387 = 0.7431

2641 = 0.7450

2896 = 0.7377

3154 = 0.7336

3413 = 0.7293

Current Price 0.7281

3667 = 0.7216

3923 = 0.7072

4176 = 6898

4429 = 0.6753

4690 = 0.6670

4766 = 0.6644

 

Brian Twomey

 

G10, Yellen, Interest Rate Corridors: Levels, Ranges, Targets

From a set of failed Mortgages in the sub prime sector, the end result was not address Mortgages but allow the failure and stimulate by 1 trillion. then 2 and 3 to now 4 trillion. Ask yourself how adding 4 trillion to an economic system doesn’t crash the system. How can interest rates travel from 2.0 at the 2008 highs to 0.07 lows yet doesn’t hit deeply in negative territory. How does a 1.93 Fed Funds drop from Aug 2008 justify positive 0.07 under a 4 trillion stimulus. How does DXY hit 103 highs in December and January 2016 then drop to current 93 lows despite 3 interest rate rises.

The higher goes Fed Funds then the more DXY is strangled to travel higher as the interest rate channel compresses. June and December 2016 when Fed Funds was 0.41 and 0.66, DXY jumped higher and operated as any currency upon an interest rate rise. But 0.66 Fed Funds was the turning point as DXY on the upside didn’t have ability to climb as the interest rate corridor failed to allow it to rise. Queen Yellen then raised Fed Funds to 0.91 in March 2017 and the DXY rise was over from 103. Upon 2 rate rises to current Fed Funds at 1.16, DXY now sits 1000 pips lower at 93.

To demonstrate, Fed Funds at 0.91 when DXY was 103 revealed a corridor for DXY from 102.73 to 101.05 for a 168 pip range. DXY 103 was out of range and headed lower. If today’s DXY at 93.69 is viewed from 0.91 then the range compresses 156 pips from 93.69 to 95.25. The same 103 DXY from today’s 1.16 reveals a 39 pip range from 103.39 to 103.01. At today’s DXY 93.69 from 1.16 Fed Funds then the range compresses further to 17 pips from 93.81 to 93.88.

Queen Yellen’s program and the sudden enthusiasm to raise accomplishes the goal to lower DXY yet Yellen also knows to restrict the money supply is to see DXY travel far higher. This explains why Yellen is in excuse mode to rescind the money supply. If Yellen rescinds then look for the slowest drop on record

DXY is now operating inside a 20 basis point interest rate channel for months on end with focus on the downside. The 20 basis point channel corresponds to the current 17 pip DXY range. If Yellen can continue to strangle the interest corridors then she can raise again and continue to lower DXY. Its the have your cake and eat it too strategy yet this experimental strategy will one day see its end and it won’t end correctly.

As Queen Yellen killed the Corridors, she naturally forced EUR higher by osmosis. The telling aspect to the EUR rise is not only is EUR operating inside a 20 basis point corridor as well but its interest rates that will stop EUR rises because of the many resistance points built into interest prices.

What also explains how Yellen can hold 4 trillion yet raise is to hold the interest corridors in tiny ranges. The 4 trillion becomes unaffected. As long as money markets function correctly and profit is earned then Yellen can continue to practice unknown economics.

EUR/USD Big line above 1.1795 Vs 1.1679 below.

GBP/USD. Big lines above 1.3013, 1.3020 and 1.3048 Vs 1.2947 below.

USD/JPY. 110.12 Vs 109.85 and 109.50.

EUR/JPY. 129.74 and 130.20 Vs 128.77, 128.81 and 128.45 below.

 

Brian Twomey

G10 and North Korea: Levels, Ranges, Targets

And the effect North Korea has on the currency price? Big fat Zero. Since America’s Bummer allied to the Muslim Brotherhood by the 2009 Cairo speech, strengthened ties to Iran and adopted the TPP Trade deal, the world was placed on the war front over the past years.

If the Korean War negotiations as well as Slick Willie Clinton’s payoff to the North Koreans to allow the build of current missiles is the guide, one will note how the North Koreans are the best negotiators the world has ever known. They will bring the world to the brink then back down. Does anyone honestly believe the North Koreans would risk utter disaster by firing a missile. And especially since the North Koreans have been working on the current missile program since the 1950’s when the Korean War ended. Why not build missiles as the Russians then Chinese left the North Koreans as allies since the Korean War and the South Koreans remain enemies. The North Koreans are surrounded by enemies and weak alliances.

The Democrat Party again led America down the deep dark path to destruction. True to form, this time it was a foreign policy disaster as was the Iranian hostage crisis, Vietnam, WW2, WW1 and fear of the Chinese to not eliminate Pyongang. The Democrats must be making the world “Safe for Democracies’ as was the Wilson slogan.

The overall effect to the currency price will be another fat Zero, Zed. Did the currency price move when the North Koreans tested missiles the last 20 times.

EUR/JPY. I’m watching current break points at 127.90, 127.53 and 127.47. Breaks will see 125’s. Above break point is located at 131.49. Rough resistance area today is located at 129.65 and 129.71. Resistance remains built into current prices and EUR/JPY is far out of kilter to EUR/USD and USD/JPY.

EUR/USD. Break points 1.1713 Vs 1.1785.

USD/JPY above break point is 110.21 and below `109.86 and 109.69.

GBP/USD Break points 1.2978 and 1.3003 Vs 1.3037 and 1.3067. Not only is the BOE aware of North Korea by protecting GBP but GBP/USD is priced not to move.

 

Brian Twomey

Moving Averages, Counting Systems and Formulas

Moving averages or my term averages that move was first employed by hedge funds and central banks upon the 1972 free float. Sophisticated traders later adopted moving averages as a form of trading because interest and exchange rates began quoting as averages. Further, moving averages contain built in statistical components yet many types of calculations derive from a moving average. The derivation of numbers and which average to use in trading derived from ancient cultures long before Jesus Christ and represented as BC.

Today’s Arithmetic counting system is based on 0 to 9. This is 10 numbers and 5 is the middle number. The Hindu – Arabic number system derived today’s base 10 system. Today this is represented and termed the Geometric numeral system as 1, 10, 100’s, 1000’s, 10,000’s, 100,000’s. Notice the 5 multiple as the foundation but further note this Geometric system is where is derived the decimal system. Exchange and interest rates are based on the decimal system.

In the 6th century, a Hindu by the name Bahmagupta invented the numeral 0 and the Arabs spread this 0 to the western world. Arabs today term their number system Rakam-Al- Hind to represent the Hindu number system. The Mayans in the 4th century also adopted 0 yet again the Mayans only had 20 numbers to use as a counting system. Note again multiples of 5.
The Egyptians invented the Fraction system. They used 1 as the numerator. Thank the Egyptians for calculating today’s reciprocal exchange rates.

To read my Z Score book is to understand Biblical numbers and derivations. The Romans, Greeks and Israeli’s used numbers representative to their Alphabetic system and those numbers only contained about 20 numbers. Early counting systems matched numbers to symbols and the idea was to simplify. Again multiples of 5.

The number 5 is the foundational number to the modern world and its only natural markets were built on the number 5. Moving averages then should be built upon multiples of 5.

My moving average system contains averages as 5 days, 10, 20, 50, 100, 200 and 253 days. To account for holidays in every nation as well as actual trading days, 253 was factored as the average. New Zealand and the United States contains 253 yearly trading days. Further, 200 is an outlier number as a trading day therefore 253 was the numbered insight to 200.

A moving average factors overall to either a Standard Deviation or a logarithm. Logarithms are the percentages as EUR dropped 1%, 2% or rose 0.32%. Thanks to Karl Friedrich Gauss, Karl Pearson, Pierre Simon Laplace and Abraham De Moivre for giving the world the Standard Deviation, Correlation, Normal Distribution and Probabilities.

The trading world and moving averages begin with a Standard Deviation and 5 types of deviations exist as Standard Deviation, Standard Error, Standard Error of the Estimate, Mean average deviation and absolute deviations.

Deviations and moving averages spreads to Z Scores, T Scores, F Stats and Stanines. Stanines are Standard Nines and I believe its where Gann developed the Gann system of Nines. From deviations we go to Percentages, percentiles, Probabilities. Cumulative percentages.

From averages we to to Simple, Exponential, weighted, non weighted.

Correlations take calculations to R2. The BOE for example loves to calculate exchange rates by R2 and T Scores. They love to calculate Yield Curves by Variances.

Distribution of prices takes calculations to Standard normal curves, Degrees of Freedom, One and two Tailed distributions, Confidence intervals, Probabilities. and RHO.

Then we calculate Regression and Multiple Regressions. Regressions contain Residuals and the best chart on the planet.

A moving average is an old reliable indicator and contains many, many avenues to use in trading accurately. The key is choose your calculation and master it.
Brian Twomey

 

G10 and Sonia Reforms: Levels, Ranges, Targets

 

 

 

UK’s main interest rate termed Sonia was introduced in 1996/1997 as an average calculated rate. The new reforms proposes to recalculate Sonia as a Volume Weighted Median and the same as the Fed’s changes to the Fed Funds rate March 2016. View the Fed’s Dot Plot for a chart. The volume transacted is then calculated to a Median price and its the trade able interest rate.
The difference between the average and Median price is 2 basis points. Most affected is Overnight Index Swap rates or OIS. Subtract 3 month Libor from Sonia rates and an OIS rate is derived.

Monday August 7th, GBP OIS traded 0.0692, Friday August 4, GBP OIS rates traded at 0.0133, August 1, OIS traded 0.0739 and January 3 OIS traded at 0.1525. Corresponding USD on August 7 traded 0.1513, August 4th traded 1.04, August 1 OIS traded 0.1505 and January 3, OIS traded 0.3387.

Most basic to OIS are borrow and lend rates for banks. Current OIS rates are cheap and extraordinarily low. See AUG 7 GBP Vs USD OIS at 0.0692 Vs 0.1513, a spread of 0.0821.  Low rates overall informs a proper functioning bank system. Should stress or crashes hit markets then the OIS spread skyrockets. USD OIS in 2008 for example jumped to 3.65 and 5.0 for the UK. The narrower the spread, the better are market conditions to borrow and lend as monies exist to borrow and lend. When OIS is high, the cost to borrow and lend is to high. The worst of OIS is money shortages may exit. US dollars might be to costly to purchase.

As OIS rates jumped in 2008, Central banks had no choice except to drop interest rates to bring the banking system back to borrow and lend normalcy by lower OIS rates. Market stress and crashes are threats to the banking system. Stimulus remains the questionable venture as banking systems became flooded with money and allowed OIS rates and overnight rates to remain extraordinarily low over years. Banking systems learned how to operate within OIS rates in far smaller corridors today as opposed to the historic wide channels from previous decades.

Note for example Sonia’s 2 basis point proposed changes to today’s overall UK’s 20 basis point interest rate corridor.. At 20 basis points is quite high and normally runs about 10 to 15 basis points wide. Missing links exist to today’s GBP interest rates and it will affect GBP.

For further interest read Guy Debelle’s speech at the RBA’s on the Basis. See the RBNZ papers as the RBNZ researchers write with an understandable and easily explainable style to market concepts. Ironically, it comes naturally to RBNZ writers.

GBP/USD break points today remains 1.2909 and 1.2938. Long time friends and followers understand break points are 200 pip moves thereabouts.

GBP/USD today msut breaks are located at 1.3010 and 1.3076. A break of 1.3076 sees next 1.3087 and 1.3108 to be lucky. Below 1.3010, then 1.2999 and 1.2993 becomes next target points. My advice as GBP is missing its triggers is leave it alone.

EUR/USD Break points for today 1.1770 or 1.1843 then sees 1.1777 and 1.1772 below or 1.1910 above.

EUR/JPY rough spots above at 130.93, 131.01 and 131.17.

USD/JPY break points are located at 110.46 or 110.73.

 

Brian Twomey

G10 and NFP: levels, Ranges, Targets

Non Farm Payrolls at 201 was against many resistance points from 200 to 214. The break at 214 was a must to see 226. Non Farm at 201 broke the 1 and 2 year monthly averages as well as the 7 and 6 year monthly averages. At 201, it cleared the 6 year average at 200.83. From 183 expected, Non farm rose by 18,000 jobs yet lower than July’s 222.

Non farm at 201 performed as expected by the averages. At 201, it broke the 1 year and went to the 6 year and this move is highly normal from month to month. The big break was 226 and this point failed. Overall, NFP averages remain extraordinarily good for higher job gains over the months ahead. Again, 300,000 is easily achievable. The averages now reshuffle to form new targets for next month. No difference between a currency price Target and NFP target as both are the same creatures and driven by averages.

GBP/USD. Overall, Big break lines below are located at 1.2932 and 1.2906 then far lower for GBP. Slightly overbought from 1.2906 and overall nothing special regarding 1.2632. Nothing special regarding GBP overall as it needs input for further direction.

GBP today awaits breaks at either 1.3046 or 1.3065. Below 1.3046 targets, 1.3023, 1.3006 and a rock solid line at 1.2990. Above 1.3065 targets 1.3090’s and 1.3080’s. The big line break is located at 1.3122.

AUD/USD. Big line breaks above are located at 0.8038, 0.8170 and 0.8224. Below breaks are located at 0.7894, 0.7814 , 0.7791 and 0.7767. AUD as usual is in a rough location driven by uncertainties in the Majors currency price and more uncertain monetary policies.

Long points for today are located from 0.7894 to 0.7909 while shorts are found at 0.7974 against rough resistance at 0.7960 and 0.7966.

EUR/USD big break lines for today are located at 1.1826 and 1.1753. Big break line overall is located at 1.1406. EUR contains a serious range problem which means current price must move and short is the way. EUR/USD range problem is suspected to derive from EUR/JPY.

EUR/JPY is out of kilter in its price location as it trades far above EUR/USD and USD/JPY on a 1 year basis. USD/JPY is the problem as it must rise or EUR/JPY must travel far lower. The prevention higher for EUR/JPYis explained by resistance points built into its price daily for last few months. They want EUR/JPY lower. Solid supports overall are located at 127.84, 127.56 and 127.34.

Above for today, rough areas at 130.80’s and 130.90’s. Long points for today are located at 129.84 to 130.17.
USD/JPY. Wide territory exists from break points at 110.83 to 111.80. Not much changed in USD/JPY over the last week. Bottoms remain supportive at 110.19 and 110.12.
Brian Twomey

AUD/USD: MA’s

 

AUD/USD Break Points are located below at 0.7894, 0.7814, 0.7791 and 0.7767 Vs Above 0.8038, 0.8170 and 0.8224. Break points derive from short to long term averages at 337  to 4762 days. At 4762 days traces to January 1 1999,

AUD/USD is overbought from 50 to 253 day averages and are located from 0.7753 to 0.7554. Lower for AUD then becomes oversold at 5 to 20 day averages  from 0.7939 to 0.7955.

Below long point extremes are located at 0.7901, 0.7881 and 0.7828. The noted point is extremes bump against 0.7894 and 0.7814. Short point extremes are located at 0.8009, 0.8031 and 0.8050. Most important is 0.8038 at the 4175 day average and dates to about a 12 year average.

Friday’s Non Farm Payrolls forecast was sell 0.7990 to 0.8004 and actual top and reverse saw 0.7976 and just before the 0.7985 break point. Bottom long was forecast at 0.7926 and saw 0.7912. Bonus long at 0.7912 as AUD bounced to 0.7926.

Overall, AUD remains between vital break points from 0.8038 to 0.7894 and its status is not overbought nor oversold. I would focus on the downside due to severely overbought 50 to 253 day averages and the downside has miles to go before oversold becomes a concern.

Here’s the MA average line up.

337 day = 0.7545 overbought

593 day = 0.7465 overbought

846 day = 0.7831

1103 day = 0.8170

1279 day = 5 y average = 0.8477

1358 day = 0.8574

1614 day = 0.8871

1874 day = 0.8957

2130 day = 0.8915

2385 day = 0.8801

2562 day = 10 y average = 0.8805

2641 day = 0.8794

2894 day = 0.8697

3153 day = 0.8599

3411 day = 0.8508

3590 day = 14 y average = 0.8444

3665 day = 0.8405

3922 day = 0.8224

4175 day = 0.8038

4429 day = 0.7894

4688 day = 0.7814

4762 day = 0.7791 January 1 1999, 18 year average.

Despite 0.8400’s, 0.8800’s, AUD is bumping against the averages and is oversold yet this means light years of downside exist without significant breaks higher. The break begins at 0.8038 and 0.8170. Overbought for AUD begins at 0.7400’s, 0.7500’s and travels to 0.7700’s. The first break begins at 0.7894 and 0.7814.

AUD/USD’s usual problem is price location as its price is derived from the Majors in USD, EUR and GBP. Currently, USD, EUR and GBP are in uncertain flux from its own uncertain price and haywire monetary policies. AUD and NZD are the steady ships in the ocean.

Upper most for AUD/USD at 0.8957 Vs bottom at 0.7465 then contains an historic mid point at 0.8211. From 0.8915 to 0.7465, mid point is located at 0.8190.

 

Brian Twomey

 

 

G10 and NFP: Levels, Ranges, Targets

NFP at 183 expected contains massive resistance at 177, 173 and 172. From 183, that’s 6,000 and 10,000. and not enough to move the currency price. That means currency price ranges rather than breakout and volatility. Above, 226 and 247 are targets but along the way contains 200 to 214 then home free to 226 and 247, halfway is 236.

Overall, 50,000 from 183 above means currency price breakouts and volatility must be seen at 233. Below 233 then currency prices range. Below, 50,000 comes at 133. Do we see 133 against all the many supports points at 130’s. Doubtful. We could easily see an as expected forecast and range trades rather than big moves.

My forecast is NFP higher which means EUR/USD drops but quickly reverses and trades in a range. The central banks see range trades and prepared for ranging prices.

Thank respected Goncalo at fxstreet as NFP forecast plans to become regular month to month. Past forecast dating years were extremely close to perfect. Off the mark forecasts weren’t far off. Much work involved though yet nobody is doing the necessary forecast work.

EUR/USD. Big point break above 1.1920 and 1.1977. Below watch 1.1833 and 1.1817. If an as expected forecast then buy bottoms and sell tops. NFP above 233, look for EUR/USD much lower. If 130’s NFP then look for 1.1977 ish. Although I don’t see 1.1977.

GBP/USD. Above break points 1.3200 exactly and a giant break point at 1.3247 but not expected to be seen today. The way higher is located at 1.3172, 1.3184 then 1.3200. Below, 1.3105, 1.3093 and 1.3073.

AUD/USD. Above 0.7990 and 0.8004 Vs below 0.7944, 0.7939 and 0.7926.

NZD/USD signal pair to all Asia and insight to the majors. A fantastic, terrific currency pair. Above 0.7438 and 0.7477 Vs below 0.7421 and 0.7392 and 0.7382.

EUR/JPY. Above 131.14, 131.28 then the Gap to 131.89. Look for target at 131.44. Below, 130.46, 130.29 and 130.13. Look for longs at 130.13 to 130.29.

USD/JPY. This is a minor, minor currency pair. Why classified as major is because of the Inflation target, Yield curve experiment. Above 110.22 than gaps to 111.18. Should dead stop and reverse at 110.68. Below, 110.01 then 109.63 and 109.56.

 

Brian Twomey

NFP: Preview and Forecast

Non Farm Payrolls 183 expected Vs 222 previous is not only within the 50,000 range but is located just below the 1 year average at 186.50. Supports below begin at the 8 year monthly average at 160.23. Further supports begin from the 25 to 78 year monthly averages at 137 to 120’s. The overall Non Farm Payroll number is fast approaching massive bottoms and many supports. The immediate supports are located at 177, 173 and solid at 172.

Above 186.50 next comes 189.01, 194.25, 199.50, 200.83, 206, 209 and tracks to the highest point at 226. Once above 226 then the Non Farm number resides above every average and Median line from 1 to 78 year monthly averages. From 183 to 226, this means 43 thousand jobs.

Overall the averages are low, flat on the floor and highly oversold. First target is 247.59 then 266.71. Longer term targets are located at 350,000. From the averages alone, 300,000 is easily achievable. I’m looking for targets at 226 and 247.59 due because not only are averages low and oversold but recent data encourages a higher NFP longer term.

Continuing Claims appears stabilized at 1.95 to 1.96. Why follow Continuing Claims as an indicator is because the overall range is 50,000 and matches NFP’s 50,000. ISM Service remains above 50.0 yet as I read Welles Fargo’s analysis, job gains were broad based across all categories. Factory Orders reported July minus 0.8 and today forecasts higher at 2.9%. From minus 0.8 to 2.9 is a far margin which means news releases will be volatile for the first time in years.

GDP at 2.6 on the surface appears good but the overall report contained problems. Exports were good from a lower DXY but again Imports beat exports. Personal spending and Wages were lower, savings rate lower. Durable Goods at + 6% was the result of Aircraft parts and orders. Subtract Aircraft, Durable Goods was actually +0.1. The overall question to the latest economic releases is has the United bottomed and heading higher. On the surface without running the data, the answer appears affirmative.

Overall NFP’s and economic data contains political risks. Trump’s approval rating by reliable Rasmussen Polls are currently 38% and dangerously low. Traditionally, 30% is the Presidential threshold. At 30% and below, Presidential support from his own party disappears as well as policy support. Democrats will increase their attacks. Below 30%, Trump is vulnerable to Lame Duck status and no chance of passage to taxes, Immigration or any policies. Below 30%, look for the impeach crowd to gain support. Below 30%, economic confidence in Trump disappears.

China is currently running military exercises and this is dangerous as China counters current United States / South Korea military exercises. The message from China is we support North Korea. A shot fired in Asia brings a new dimension to economics and downward drift for the entire world.

 

Brian Twomey

G10 and Currency Markets: Levels, Ranges, Targets

If the daily currency price met the objective early in the period, then the day is done as the ability to make money is found in scalps. Trading looks like manic Mondays x 10. The entire currency price was completely restructured and a far different market formed. We may not notice it today as our world is in turmoil, politically, economically, socially, culturally. Turmoil and price is uncertain.

The restructure was designed for Europe trading to see the bulk of movements. Previous, United States saw the vast majority of the big movements. The new design is slightly lopsided. EUR/USD today dead stopped to 1.1868 but overall EUR/USD supposed to hit 1.1882 ish on a break of 1.1853. The big line is 1.1917. Not much upside movements left for United States trading.

EUR/USD needs new inputs to travel higher. If EUR/USD hit 1.1882ish then longs for the day would be finished in favor of a short only strategy. The central banks won’t make trading life easier as they did previous to the restructure.
Today, central banks force traders to work for the profits rather than say here’s your trade fellas. My writings has never been written. It will never be written because roughly 10% of the trading world understands, 90% don’t. Means 10% drive market prices. 10% I believe is kind. Take my words respectful. Most know everything about markets except the inner workings of a price, main ingredient. Not a website in the world is devoted to interest rates and its unfortunate.

Note 1.1868 hit on a news event. The new system supposed to see movements only on news events otherwise the currency price trades in tiny movements and is essentially dead and untouchable for a trade.

Most important to the new structure is mind the gaps and study ranges intently as this is what the original purpose of the new design entails. Ranges and Gaps remains the focus however. The Range trade is a gigantic topic because many avenues exist to factor a range. Study meteorology ranges to learn Tercile, decile, quintile, quartiles and others. Don’t try the high / low story.

Today’s EUR/USD Tercile is located at 1.1501 positive and 1.1222 negative. At 1.1501 is located an average line which informs 1.1500’s will hold for a long time in the future because a 1.1501 Tercile is a low low EUR/USD price.

New structure or old, the system of currency day trading was designed not to win. The most fascinating, challenging, interesting and enlightening view ever seen is through the prism of interest rates.

GBP/USD hit its break point at 1.3243, what remains is 1.3316 and below at 1.3178 as next break point.

USD/JPY hit 110.88 on 110.86 break point. What remains is huge Gap at 111.88. Below remains 110.55 and 110.22.

USD/CAD hit 1.2589 before the break point at 1.2591. What remains is 1.2629. Below break points are located at 1.2555 and 1.2517.
Brian Twomey

G10 and Healthcare: Levels, Ranges, Targets

Further follow up to healthcare. Single Payer if implemented would throw all insurance policy holders into Medicare and Medicaid, the 1960’s Lyndon Johnson programs passed under Congressional Democrat super majorities. Current unfunded liabilities for Medicare are running at $48 trillion ish, Medicaid is running at $87 trillion. So disastrous they practically stopped counting. And Obummercare fails to enter the equation.

1930’s Social Security passed under Roosevelt and Congressional Democrat super majorities and running yearly deficits at about $90 billion, $69 billion about in 2015. Unfunded liabilities are running at about 23.1 trillion. Total unfunded liabilities runs what + $100 trillion.

Stockholm Syndrome McCain rescued the system by a no vote. The yes vote for the masses and the economic system is for Obummercare to explode then disappear along with Healthcare Insurance and hospitals. All are owned by the Democrats under Obummercare. Mini clinics which are actually mini hospitals are beginning to appear in many states. Healthcare is heading in this direction as more and more clinics appear. Kansas reinvention is the perfect example.

The Kansas clinic maintains on time appointments along with a full slate of hospital equipment for every health test and a pharmacy. They don’t deal in insurance. Mode of payment is cash. Imagine a price list as $10 for colds and $5 for medications, $20 for Bronchitis, $100 for cancer, operations $500. Specialized healthcare is addressed at particular clinics. Healthcare lacks speed, a production line under stagnant volume.

Praise for Mcain? See the 1980’s Savings and Loan and 1990’s House Bank scandals.

Thanks to many comments on past articles and thanks for trade service inquiries. Come straight, honest and sincere then good chance for acceptance. Otherwise don’t bother. We trade 9 pairs successfully 24/7 , 365. The new edition is drop CHF in favor of USD/CAD.

Upcoming. EUR/USD V EUR/JPY V USD/JPY. The current market needs a closer inspection.

EUR/USD. Target on the upside is 1.1778 while bottomside longs are located at 1.1677 and 1.1669.

USD/JPY supports are located at 110.26 and 110.47. The upside hurdle is 110.74 and big break line at 111.57. Watch this area at 111.57 as the topside is rising. Yesterday for example the break was 111.42. A break of 111.57 sees next 111.98. USD/JPY is setting up for a good move in days ahead and deserves a closer view.

GBP/USD. Topside target is 1.3191 provided 1.3175 breaks. To see 1.3092 and 1.3075 then the break at 1.3110 comes first.
EUR/JPY massive resistance remains built into EUR/JPY’s current price at today’s 130.18, 130.29 and 130.58. We’re looking at 130.32 as target but may not see it today. Supports below begin at 129.39 and 129.24.

Brian Twomey

US Housing: A Complete Assessment

 

In past market corrections and crashes, Housing was the economic indicator to provide an early warning to economic upturns but 2008 was caused by Housing. Housing as a stand alone indicator must be viewed in relation to rentals and rental rates to determine an economic assessment as Housing supply and ownership appears inversely related to rentals. Most important is supply Vs rentals. Further, Housing is a worldwide phenomenon and affects all nations which means a problem and/or success in one nation experiences the same effects in other nations.

The other question to Housing V Rentals is overall Household Debt and recently mentioned in the RBA minutes as an overall economic concern. The current United States Household Debt is an equal issue as current Debt runs to 12.73 trillion, up 149 billion and +50 billion from the previous peak in 2008 as reported by the New York Fed. Mortgages as the main indicator rose 1.7% followed by + 0.9 in Auto Loans and + 2.6 in Student Loans. Credit card debt fell 1.9% this quarter. Two of the 3 main categories are backed by an asset class and Housing is the largest in the division.

Why not measure Auto Loans as an economic indicator as recommended by Danielle DiMartino in “Fed Up” is because loans are small and it fails to tie the nations together as does Housing for a larger economic connection. Same principle to Student Loans due to its nation specific focus.

When America’s Bummer hijacked Student Loans from the traditional domain of banks, the Federal Government became the exclusive lender and changed lending terms as well as added borrower categories. The Federal Government supplied 3/4 of Student Loans and mandated students pay 1/4. Students received 3/4 of an education and never graduated as most lacked ability to pay 1/4 of required classes to graduate. The result and not from official statistics is 44 million students owe $1.4 trillion in Student loans under an 11% delinquency rate.

Not only is $1 trillion a small part of the overall $12.7 trillion Household debt but Student Loans as a Socialist / Social Justice issue entered the presidential campaign as Democrats advocated Student Loan forgiveness and free college as policy in order to buy Democrat Party votes.

Housing policy in Australia and New Zealand placed higher down payments, 20%, on house purchases to slow Housing markets in Sydney and Canterbury. Mortgage rates in Australia on 5 year loans shot higher to 4.5%, New Zealand 6% Vs 3.9% in the United Sates for a 30 year Fixed rate Mortgage and 3.14% for a 5 year Adjustable Rate. What tightly binds the nations is interest rates and in this instance, closely aligned Mortgage Rates.

Historically, Slick Willie Clinton in 1995 renewed Democrat President Jimmy Carter’s 1978 Community Reinvestment Act against a Socialist/ social justice turn to reinvent communities to produce results. Banks doing business with Government were forced to lend inside newly created poor Red Line Districts and lend to any person with a job and small down payment as lending standards changed. No bank, Mortgage or lending company held the risky loans so sold the loans in packages. The result was not only the Housing crash in 2008 but Slick Willie would become the first Democrat to win a second term from the 1996 elections since Franklin Roosevelt in the 1930’s.

Homeownership rates skyrocketed from 63.8% in 1995 to 69.2% in 2008 and the highest level ever recorded from 62.9% in 1965 to 2017 in the current day. The current Homeownership rate from Q2 2017 is 63.7%, 0.8% higher than 62.9% in Q1 2017 and no difference from 63.6% in Q2 2016. In comparison, the Homeownership rate at the Great Depression lows in 1940 was 43.6%, 55% in 1950, 61.9% in 1960 and 65.3% in 1970. From 1960 to 2000, Homeownership rates ranged from 61.9% to 66.2%.
The current Median Asking Price for Vacant sale units as classified by the US Census is $177,200. The Ask Price in 1995 was $75,000 and $100,000 in 2001. By 2008, the Ask Price was $200,000 and more than double since 1995. Since 2008, the Ask price stabilized from $140,000 lows to current highs at $177,000.

The actual Median Sold price in January 2017 was $317, 400 and close to $332,700 in December 2016 and the highest recorded value since January 1963 at $17,200. The 53 year mid point from $332,700 to $17,200 is located at $174, 950. In 1995, Median sold prices hovered from January lows at $127,900 to $135,200 in October 1995. By the 2008 crash, the Median sold price rose to $221,000.

In January 1975, the US Census began tracking average prices in relation to Medians and this is where the House price is seen because average prices began skyrocketing above Median prices. In January 1975, the Median sold price was $37,200 in relation to the $39,500 average.

By January 1995, the Median sold price was $127,900 against the $147, 400 average. In August 2008 at crash time, the Median sold price was $221, 000 matched against an average price of $265,500, a difference of $44,000. The June 2017 Median sold price was $310, 800 and $379, 500 as the average price and a difference of $69,000. From current $379, 500 to $39,500, the mid point is located at $209,500. At $209,500 matches closely to the January 2009 Median sold price at $208,600.
The supply of houses, factored as houses for sale to houses sold, dived at the time of Slick Willie’s passage of the 1995 CRA. The supply informs how many months from for sale to actual sold on the market. The typical average is 5 months. Below 5 months means the Housing market contains more buyers than sellers and above 5 means more sellers than buyers.

The CRA passage dive went from 6.8 months in 1995 to 3.8 in December 1998 and 3.6 months by January 2003. By August 2008, House buyers disintegrated as the supply rose to 11.3 months and peaked in January 2009 at 12.2. In June 2017, the supply now stands at a balanced 5.4 months.

In Q2 2017, the Median Asking rent price stands at $910, up from $400 in 1995, $500 in 2000 and $700 in 2007. Rents more than doubled since 1995. Since 2008, rents ranged from $700 to $900. The Median for sale Ask price also ranged from current $177,200 to $140,000 lows.

The Rental Vacancy Rate in Q2 2017 stands at 7.3% which means 7.3% of rentals are vacant. In Q1 2017, the Vacancy Rate was 7.0% and 6.7% in Q2 2016. Outside United States cities, the Vacancy rate is 8.8%. The Q2 2017 Homeownership Vacancy Rate sits at 1.5% and down from 1.7% in Q1 2017 and Q2 2016. In the Southern United States, the Rental Vacancy Rate is 9% and Homeownersip Vacancy Rate at 1.8%.

In Q2 2017, 87.1% of Houses were occupied and 12.9% were vacant. Owners occupied 55.5% of houses and renters occupied 31.6% of the total inventory. Vacant year round houses stand at 9.8% and 3.1% are seasonal which means Fishing lodge type dwellings. Poor renters dominate the market.

In Q2 2017, House inventory stood at 135,546 and down from 136, 456 in Q1 2017. Vacant was 17,206 houses and 3,216 were for rent followed by 1,306 houses for sale.

Fred and the National Association of Realtors reports June 2016 existing home sales at 2, 110,000, dropped to 1,650,000 in December 2016 then rose to current 1, 960,000.

The 30 year Fixed Rate Mortgage in October 1981 stood at 18.45%, 9.20% in December 1994 and 9.15% in January 1995. In May 2000, the rate stood at 8.52 and 6.48% at the 2008 crash. The 30 year Fixed Rate Mortgage today just broke 4.00% to current 3.9%.

From 1 house for sale it takes from Permit to build on average 8 months, 9 months for Contractors and 1 year and 3 months for owners to build. From build to completion, it takes on average 5.8 months, 7.8 months for contractors and 11.5 months for owner build.

Main problem in House markets especially in fast growing areas is lack of Single Family homes. The vast majority of House demand is the Single Family home yet in many markets, Single Family Homes are non existent. Charlotte North Carolina and roughly within a 50 mile radius, the Single Family home for purchase is impossible. Further, Single Family homes in many areas are not slated to be built anytime soon. This leaves many home buyers as renters.

To view population movements, Sociological paths, movements to and from cities then view the 1925 Concentric Zone Theory authored by Parks and Burgess from the University of Chicago. Possibly one would understand the larger view to Housing.

 

Brian Twomey

 

 

 

EUR/USD, G10 and Healthcare: levels, Ranges, Targets

 

Healthcare now experiences the clash of the titans as 1960’s Democrat President Lyndon Johnson’s passage of Medicare under Congressional Democrat super majorities confronts America’s Bummer takeover of Insurance. The political perfect storm created by America’s Bummer remains.

Democrats want and always envisioned since the 1930’s under Democrat President Roosevelt Socialized medicine or to soften the words to convince the masses, Single Payer. Democrat takeover of Insurance married private sector insurance to Medicare.
The 50ish conservative Republicans remaining in Government today want Insurance separated from government. Remainder Republicans want a rearrangement of the Medicare / Insurance relationship which leaves Obummer’s healthcare law fairly intact. Meanwhile insurance in the private sector again means Insurance has a chance again for profits, to increase its policy offerings and to remain a viable entity over years.

If Insurance loses then Medicare and socialized medicine wins which means the masses receive a medical card and wait forever to cure healthcare ills. In the end, the masses won’t ever receive healthcare and it takes a view of the UK National Healthcare system as well as Canada to understand what’s ahead if Insurance loses.

If Insurance loses and Democrats win then 1/6 of the economy is controlled by Democrats in the form of revenue to the Democratic Party by the many interest groups to include hospitals, doctors, pharmaceutical, trial lawyers, public sector unions to name a few. For revenue, the Democrats are selling the masses ability to obtain healthcare. Wonders of the public Single Payer message vs true revenue intentions is the actual clash. Watch those Insurance stocks.

Overbought EUR/USD target today is located at 1.1743. Supports are located at 1.1667 and 1.1642.

GBP/USD. In the way of today’s target at 1.3148 is 1.3098 and 1.3134. Supports are located at 1.3069 and 1.3034.

AUD/USD watch the bounce at 0.7939 and also watch the target at 0.8005 and 0.8019.

NZD/USD big line break today is located at 0.7539 and not expected to hit. NZD/USD today is serious off kilter. Caution NZD.

EUR/JPY big line breaks today are located at 130.18 and 130.39 vs below at 129.51 and 129.18.

USD/JPY Mind the gaps between 111.16 and 111.97. Strong supports at 110.68 and 110.89.

GBP/JPY. Breaks at 144.72 and 145.10 means either 144.54 and bounce or 145.43 and 145.78 then the fall.
Overall, today’s exchange rates are misaligned which means good possibility for volatility.

Brian Twomey