EUR/CZK and the 27.00 Floor


What’s interesting about EUR/CZK in light of the recent break of the EUR/CHF 1.2000 Floor is EUR/CZK since November 2013 has its own floor at 27.0 and set by the Czech central bank, the CNB. The object is to employ the exchange rate as the monetary policy tool to meet the 2% Inflation target, a target set since 2010. The 27.00 Floor will be maintained by the CNB by means to buy and sell Koruna’s or Euros.

The current 1 year Inflation CNB forecast is 1.5% and 2% in 3 years. Current Inflation reported November 2014 rose by 0.6% to 0.572 but fell to 0.08% in December. Current GDP is forecast to 2.3% and down from 2.4% due to weaker exports to Germany. The CNB’s Base Rate, the 2 Week Repo Rate was 0.05% in November 2012 and remains at 0.05% at last report.

EUR/CZK is forecast until January 2015 to 27.60 then a possible drop to 27.34 during 2015. EUR/CZK was Fixed at 27.79 last Friday by the ECB. My forecast reveals short term, EUR/CZK must clear 27.81 to move higher then next 28.14, 28.63 and 29.16. The lower end range reveals 27.05 must break lower to target 26.57. But the goal of the CNB is to maintain EUR/CZK at around the middle to upper 27.00’s. At EUR/CZK 27.79 is actually CZK/EUR 0.0359.

Brian Twomey Inside the Currency Market

EUR/USD and EUR Crosses

EUR/USD and EUR Crosses

The common theme between EUR/USD and among all EUR crosses is the positive correlations all around except and once again EUR/NZD. EUR/NZD for the past month since it dropped from its 1.5600 highs to break 6 year lows at 1.4900 has been a lost and floater pair as its prices roamed between revolving correlations between NZD/USD and EUR/USD. In the upcoming week, NZD/USD will be responsible for EUR/NZD movements.

EUR/CAD and EUR/AUD offers the best pip opportunities among EUR crosses this week because both are approaching big levels. EUR/CAD for example must break 1.3712 to head lower and its just below current 1.3846. EUR/AUD from current 1.4051 also approaches vital 1.3753 just below. Both EUR/CAD and EUR/AUD are oversold and in make or break mode. To consider its counterpart EUR/USD, its not the 5.6% Volatility at issue but rather price has varied 3.7% since the big breaks from 1.3300 and 1.2500. AUD/USD saw its bottoms at 0.8000’s at a 4.1% variation upon 0.9400 breaks and hasn’t been close to 0.8000’s since. My EUR/USD concern is we could be heading for a temporary bottom or a range bound condition.

EUR/USD. Previously mentioned 1.1760 now 1.1748 was a huge break because significant support is not seen until the ultimate bottom at 1.1103 and from current 1.1558, the bottom is 455 pips. Any rises during the week must clear 1.1568, 1.1612, 1.1638 and then a rough patch back to 1.1748 at 1.1689 and 1.1694. Below supports are seen at 1.1554, 1.1506, 1.1400 and 1.1389.

EUR/AUD. From current 1.4051, 1.3753 approaches below and must break to head lower. Along the way, supports lies at 1.4036, 1.4036 then on to 1.3897 and 1.3851. Above includes 1.4066, 1.4081, 1.4105, 1.4107, 1.4149 then next sell point at 1.4221. EUR/AUD is oversold.

EUR/CAD. The big break below from current 1.3846 lies at 1.3712 but current price is severely oversold. The current range lies between 1.4160 -1.4194 to 1.3712 below. As long as price remains below upper ranges at 1.4160 then any rises should see continued price falls. Points below: 1.3827, 1.3809, 1.3780 then on to 1.3712. Above points include a big break at 1.3890, 1.3909, 1.3950, 1.4160 then rough resistance at 1.4183, 1.4188, 1.4194.

EUR/JPY. From current 135.63, again as all EUR crosses, the big break for EUR/JPY lies just below at 132.80 with supports located at 135.12, 134.24, 133.65 and above we have 136.87, 137.84, 138.91 then on to big breaks at 140.97. EUR/JPY is trading within a range between 132.80 – 140.97.

EUR/GBP. From current 0.7633, big break looms below at 0.7541 and a break sees 0.7445 and 0.7389. Price must remain below 0.7713 and 0.7772 for any shot to break 0.7541. The range lies between 0.7541 – 0.7827. Supports below include: 0.7613, 0.7611, 0.7574, 0.7548. Above vital points: 0.7652, 0.7674, 0.7738, 0.7772.

The end result, EUR crosses are all approaching big points just below current prices and all crosses are oversold. Failure to break important points will see EUR crosses head higher. The first sign EUR crosses head higher is EUR is overbought Vs Cross counterparts. EUR is overbought Vs CAD, Overbought Vs AUD, Overbought Vs JPY. But the most pronounced overbought situation is EUR/CAD followed by EUR/AUD. EUR/AUD offers the widest ranges vs EUR/CAD.

Brian Twomey