We’ll stay with old friend EUR/CAD because it treated us so well over last weeks. We’ll continue to stick with EUR/USD because as I mentioned many times, it will outperform GBP/USD. And it has. USD/CAD has been good to us and volatile so we’ll stay with that trade. USD/CHF I calculated over many days both as USD/CHF and CHF/USD. CHF/USD is severely and sickly overbought but viewed against EUR/CHF and CHF/EUR, the overbought conditions in CHF/USD may be with us for a while so therefore USD/CHF may not perform well. The Swiss economy and currencies suffer from not only restoration from the 2008 crisis but a world falling apart all around them. When Europe went negative in deposit rates, it whacked severely the Swiss, Denmark, CZK and others. USD/JPY as was seen yesterday is a problem pair due to short ranges and partly explains why EUR/JPY has been pretty much dead in stasis conditions. USD/JPY should be performing at least half of what CAD is doing but it isn’t. I think the interesting view is USD OIS rates at 0.0001 and matches current USD Inflation. Now Libor minus USD Eurodollars we find 0.0006. Life is grand and a payoff for many many USD companies to borrow Libor and deposit money in USD accounts to earn the Eurodollar rates. The Eurodollar rate is 1 month, its far higher further out. Offshore USD is doing just fine so what would be the reason for Big Sis Yellen to raise, to assist savers? What about the tons of surplus funds in American banks as well as the Fed balance sheets. Further factual analysis is needed but I see a big trap facing Big Sis. She wants to continue failed and activist Keynesian ways but she risks deterioration of the system if she continues. The 2008 situation in my view wasn’t Extraordinary as defined in the 1913 Federal Reserve act to warrant actions taken. The Keynesians jumped on the opportunity and called it a crisis to change from 1980 Supply Side ways back to the demand side of keynesians. Seven years later, Stasis.
The commonality in our currency pairs is prices are mid range, no different in EUR/CAD. Asia will offer volatility. Note no stops, no charts in our trades yet every trade a winner. Its called understanding, full confidence, full conviction, full knowledge.
EUR/CAD. Bottom. 1.4696. Range break above 1.4918, Below 1.4500. Overbought sell point 1.4806 — 1.4822. Strategy. Longs above 1.4773, target 1.4806. Then reverse short to target 1.4788 and 1.4772 and below. Caution as prices are mid range. Points on the way up, 1.4773, 1.4789, 1.4806, 1.4822.
Shorts below 1.4772, Target 1.4734. Watch for reversal here to 1.4772 and higher.Break 1.4734 then next points on the way down, 1.4768, 1.4759, 1.4751, 1.4734, 1.4715, 1.4696 Bottom. Bottom holds then long again. 1.4734 must break higher to go long again.
CAD and more pairs on the way after I thank the Forex Gods.
Brian Twomey, Inside the Currency Market, btwomey.com