A possible explanation why Fed Funds decides to drop to lowest depths as it did yesterday is due to USD market yields lacks a 60 day interest rate. Rates exists at 30, 90 and 180. Australia and Canada also lack a 60 day market interest rate. The UK lacks a 60 day interest rate while New Zealand offers a 60 day rate. For New Zealand, I always believed it was a time factor to consider since New Zealand times are out of sync with Europe and the US so the Australia and Asia connection had to factor to the 60 day rate. The interesting aspect to interest rate curves is they begin the day, any day overbought. That means market instruments to borrow and lend money also begin overbought. That includes currencies. If interest rate curves are compared to each other such as USD and Europe then one understands the small channels money is borrowed and lent. The Europe curve yesterday was 0.0110 while USD was 0.0117 and both overbought. Literally market instruments traded in a zone of 0.0007 which isn’t terrible but we didn’t see much movement in EUR/USD. Some days are factored for EUR/USD not to move so we must look to cross pairs instead. See anything exciting in those numbers. So the drop is blamed on a fluke? where nobody was interested in lending or borrowing money yesterday. New Zealand is the nation that always gains advantage because they have options at the 60 day to pick and choose where to borrow and lend.
USD/CAD ranged overnight 1.3216 –1.3251. My point mentioned at 1.3254 held as price ranged in a 35 pip zone. Doing nothing in CAD was a smart move. But it was seen due to its location, it wasn’t meant to move.
AUD/USD. Bottom. 0.6999. AUD/USD is priced to fall as the RBA is not moving the needle to see AUD higher. Rallies are meant to sell. Range break above 0.7058 and 0.7011, Below 0.6919. Overbought sell point 0.7047. Strategy. Longs above 0.7035, Target 0.7047.
Shorts below 0.7034, Target 0.7016 and a point that must break to see AUD higher to target 0.7034. Strategy is short below 0.6999 to target next 0.6959 then 0.6919 then 0.6894 and 0.6870.
Brian Twomey Inside the Currency Market, btwomey.com