Last trade this morning, short 1.1268 saw lows 1.1156 and break of Bottom 1.1211. What is 1.1156, Bottom range point 1.1155. Many apologies to not report 1.1155. Many details go into these forecasts and its my rush to hurry to get trades out that I may miss a detail.
Note how fast EUR resumed its down trend from high 1.1700’s. Its what the ECB wants, a lower exchange rate. This was part of the Strategy last September 2014 when they adopted negative Deposit rates. Lower exchange and interest rates leads to higher GDP, Inflation over time. Yet allows exports to fly out of Europe and a lower exchange rate for the first time in Euro history becomes a good for the Eurozone. This is the thinking by the ECB. Plus the ECB continues to amass a surplus of capital as they continue QE to buy bonds. CPI isn’t a problem now although the goal is to slate CPI higher over time. CPI is the protection to allow surplus funds to accumulate, A falling CPI with high surpluses risks deflation in line with Germany after WW 1. Think about life then when it took a wheelbarrow full of German Marks just to buy a stick of butter. The surplus funds become a hindrance in light of falling prices. See how this works. CPI is the ECB protection and must come higher to protect the funds. Further central banks still remember the 1970’s when CPI was 20%.
EUR/USD. Larger Range is found 572 pips, 636 and 643 pips currently. These numbers mean EUR/USD 1.1168 – 1.1622 and 1.1113 – 1.1559. Tons of resistance points exist in the 1.1300’s starting at 1.1336, 1.1338 and travels to 1.1392 at the highs. Below 1.1112 then ranges become 1.1112 – 1.0540, 1.1112 – 1.0476 and 1.1112 – 1.0547. The direction is lower and a sell rallies approach from current time to almost eternity especially if the ECB stumbles along the way as is always the case for central bankers. Lofty goals and policy prescriptions / proscriptions by central banks never come to fruition. Don’t look for an interest rate rise anytime soon and as well the ECB says CPI won’t meet target until middle 2016.
EUR/USD. Bottom 1.1112. Range break above 1.1258, Below 1.1078. Overbought sell point, 1.1226 – 1.1254. Strategy. Longs above 1.1169, Target 1.1226. Then reverse short to 1.1254. Points on the way up, 1.1173, 1.1199, 1.1226, 1.1282.
Shorts below 1.1167, Target 1.1140. Watch for reversal long here to 1.1167. A break of 1.1140, then lower we go. Points on the way down, 1.1155, 1.1142, 1.1140, 1.1126, 1.1112 Bottom.
Brian Twomey Inside the Currency Market, btwomey.com