Inside the Currency Market: EUR/INR, USD/INR

The current Repo rate in India is 7.25%, down from 7.50% in March 2015. The down slide in the Repo rate began in April 2012 when 8.00% was the top rate. The current Repo rate trades at 7.14. Inflation based on the June report is currently at 6.09% and up from 5.75% May 2015. The RBI is charged with maintenance of Inflation and provide reserves to the financial system. The aspect of reserves is what allows an interesting management system since Cash and money ratios is heavily monitored. The RBI likes to see fairly tight cash ratios. Its why yields and particularly interest rate spreads from top to bottom maintain barely a 1% range. Due to narrow ranges, the RBI likes to hold its exchange rates in tight spreads. The most important pairs to the RBI is USD, GBP, EUR and JPY.

EUR/INR. Bottom 69.02. Range break above 70.03, below 68.68. Overbought sell point 69.71. Long at 69.02. Current price trades between the 70.03 – 68.68 range, 69 pip range.

USD/INR. This pair is in a similar situation, tight ranges and far from significant breaks. Bottom 63.51. Range above 64.47, below 62.56. The trading range is located between the bottom at 63.51 and top at 64.15, 64 pips. Until range breaks are seen, both INR pairs will trade in small ranges.

Brian Twomey, Inside the Currency Market, btwomey.com

Inside the Currency Market : AUD/USD & AUD/NZD

AUD/USD. Bottom 0.7312. That’s 22 pips lower since last night’s 0.7334 bottom. Ranges below 0.7324 and 0.7275. Watch the bottom point at 0.7312 as 0.7324 must break below to achieve that target. Ranges above 0.7373 and 0.7423. See ranges are now tightening up since the RBA decision as mentioned. A cluster exists at 0.7348, 0.7349 and 0.7350.

Strategy. A break of 0.7450 targets overbought sell point at 0.7370 and range top at 0.7373. A break below 0.7348 targets range bottom at 0.7324 then 0.7312 on a break lower at 0.7324.

AUD/NZD. Bottom 1.1233. Range break below 1.1251 then 1.1177. Above 1.1402. Overbought sell point 1.1323, target 1.1290. Break of 1.1290 targets range bottom at 1.1251 then 1.1233 on a break. A cluster of points exists at 1.1289, 1.1290, 1.1291. Resolution of these points decides AUD/NZD direction. From 1.1323, then 1.1301, 1.1291, 1.1290, 1.1289, Then range target 1.1251 and bottom at 1.1233.

AUD Employment is due.

Brian Twomey Inside the Currency Market, btwomey.com

Inside the Currency Market: EUR/USD

Last night’s AUD trade performed perfectly but the bottom was missed by 2 pips. I mentioned bottom at 0.7332, price dead stopped at 0.7334 and headed straight back to our target at 0.7370. It was a good round trip trade despite 0.7344 range point in our way. In future trades, I want to outline more round trip trades where we hit bottoms and tops then reverse to profit like 100 pips on the full round turns per currency pair trade. EUR/USD however never saw its intended bottom at 1.0810. It dead stopped at 1.0848 from our sell point at 1.0873 and it ranged in the 1.0848 location for hours. As I analyze the comparisons in the trades, EUR/USD to travel to 1.0910 meant AUD had to go down further and break the cluster at 0.7331, 0.7332, 0.7334. I will monitor these situational types in the future so never to fall into that trap again. NZD posted this morning performed as written but my post was late.

EUR/USD Bottom 1.0812, last night Bottom 1.0810. Overbought Sell point 1.0890 – 1.0962. I cannot help the wide variations, its in the numbers. I will outline the points in between as sell points. First 1.0890, 1.0893, 1.0913, 1.0921, 1.0937. The first focus sell point 1.0913. Most important sell point focus 1.0913. What’s happening is ranges are opening wider as was seen this morning in NZD. The full range is 1.0695 – 1.0975 then 1.1039. Note our sell point at 1.0913 and above are all below the range at 1.0975.

Strategy. Sell 1.0913 as first focus. Points on the way down, 1.0893, 1.0890, 1.0872, 1.0866. Shorts must break 1.0869 and 1.0867 to target the range bottom at 1.0812. So far a tough bottom here for 2 days so don’t marry exact target.

AUD/USD Next and AUD/NZD

Brian Twomey, Inside the Currency Market, btwomey.com

Inside the Currency Market: NZD/USD

Ask yourself this question. I’ve known Aunt Sally for years but do I really know Aunt Sally. Now review Aunt Sally’s finances and how she spent, saved and purchased items based on overall earnings. Only then would one know and understand Aunt Sally and extraordinarily well. Aunt Sally was known previously based on patterns but did we understand those patterns, were patterns interpreted well enough to form a correct assumption. I relate Aunt Sally’s story to markets. I once thought, stated and wrote that Central banks knowingly, willingly and purposefully manipulate their currency price. This statement is not only wrong but far off the mark. I now view banks and central banks as caretakers of the economic system that they are charged to manage correctly. The economic / financial system is completely formulaic but formulas that apply in different ways to different systems because no two systems are the same. Each economic/ financial system has a quirk that is far different from the next nation’s system. That means the currency price will be different from nation to nation. Its what forms markets as what we do is take advantage of the arbitrage, the quirks between two systems. The currency price is nothing more than a formula applied by central banks daily. But the formulas that represent the complete system are enough to protect the currency price so to be able to use it in the caretaker capacity. Big Glenn Stevens has been talking down the NZD price for many many months but the market didn’t respond. Why? It can’t right away, its impossible and its impossible for one person to have that much power over a 40 billion system. Big Glenn Stevens would have to manipulate the daily formulas in his favor to see NZD fall right away to the levels he intended many months ago. That manipulation if he applied it would probably earn him a jail cell or psychiatric facility because he would collapse the NZD system. What connects this world today and each economic system is an interest rate. Its the same principles and commonalities that has held for thousands of years. What today means is the new generation of economic systems based on interest rates. Prior systems was the currency price viewed as Silver and Gold yet currency prices still respond perfectly to the Gold, Silver price. View interest rates based on the old old principles, Rate of Interest. Interest rates can’t be defined any further except as interest rate or rate of interest.

NZD/USD Bottom 0.6506. Overbought sell point 0.6567 – 0.6576. Range 0.6800’s — 0.6100’s. NZD is not anywhere near a range break.

Strategy. Sell 0.6567 – 0.6576 to target 0.6538 then a break to target 0.6506. On the way down from 0.6576, next 0.6567, 0.6559, 0.6550, 0.6547, 0.6544, 0.6538.

More trades posted around 1 this afternoon, EST

Brian Twomey, Inside the Currency Market, btwomey.com