What explains the late afternoon rallies is Fed Funds closed at 0.08 and off from 0.14 closes in the past three days. Prior to the past three days closes, Fed funds closed at 0.15 everyday since August 14th. A close at 0.08 doesn’t warn of impending problems rather its just typical for Fed Funds to see a drop of this magnitude. I reviewed tons of Fed Funds data from daily, weekly and monthly averages going back 30 years and on many occasions only to find that one day like today that doesn’t make any sense. Fed funds could rise and rise for long periods then the drop appears. Fed Funds then continues on its path for long periods again then the one day appears to see the drop. I never understood why this phenomenon exists but it does. A central bank would never, ever answer a question about interest rates. The interest rate is the heart to every nation and every nation’s funding abilities and markets. When writing Inside the Currency Market, I sent questions to the BOC regarding the discrepancies between Corra and the Overnight Money Market Finance Rate. They couldn’t answer so they sent the questions to Carney upstairs who was the head of the BOC then before he transferred to the BOE. I’n still waiting for an answer.
EUR/USD Longs from 1.1275 to target 1.1313 saw Dead Stop 1.1318 then reverse. EUR/CAD severely overshot target. The range top was found at 1.5047 while the base top was 1.5026. The trade was long from 1.4846 to just under 1.4930. Price Dead Stopped at 1.5004. Note the constant at 73. Now EUR/CAD is severely overbought and working its way short as intended.
I worked out USD/CAD but I’m skeptical about this trade. Price at 1.3250 must clear 1.3254 then it should travel to its Channel top at 1.3310. Tough points above at 1.3324, 1.3301, 1.3367 are rock solid unless Asia changes this scenario. Bottoms are found at 1.3103. What decides USD/CAD fate is 1.3254 above and 1.3230 below. Now 47 pips exist from 1.3254 to 1.3301 while 221 pips exist from 1.3254 to bottom at 1.3103. To see 1.3103 then 1.3170 must break. I will reprt again USD/CAD at the China open.
By the way, thank you sincerely and respectfully European Union and Belgium for views and constant support. Also thank you very much DKK and NOK.
Brian Twomey, Inside the Currency Market, btwomey.com