Inside the Currency Market: USD/JPY

Today was a further jump in US interest rates and much higher than yesterday. Libor skyrocketed from 0.1355 to 1.1365 in two days. Normally, it takes about 1 month to see Libor run that fast. Further interest rates trade way above 0.25. The message is Big Sis Yellen is raising Fed Funds tomorrow. I picked USD/JPY as the first case to determine what USD would do under a rate hike but what I found is USD/JPY stuck in ranges. I will report the details but I will also post our old reliable USD/CAD because its a much better mover and has potential to pay much more.

Viewed from the Libor example, the market since Tuesday has been moving towards a rate hike. So by the time of the announcement, the rate rise becomes old news. Between the Fed signaling effect and market pricing of the hike, the announcement will see limited volatility. Sure we should see maybe a 100 pip move but the signaling effect and market pricing forward, the volatility was taken away. Viewed from the recent New Zealand rate rises and falls, volatility wasn’t all that terrific but it was priced by the market long before. Upon announcement, all that’s left is address the level of the currency price.

USD/JPY. Bottom. 120.03. Range break above 121.00, 121.84, 122.75, Below 120.26, 118.43, 118.55. Monitor closely ranges. Overbought sell point, 121.55 but it assumes a rate hike so also look at 121.14 as overbought. Strategy. Longs above 120.65, target 121.14, 121.55. Then reverse short to 121.10 and 120.88. Points on the way up, 120.74, 120.84, 120.90, 121.14, 121.23, 121.39, 121.55.

Shorts below 120.63, Target 120.33. Watch here for reversal to 120.63. Points on the way down,120.58, 120.43, 120.38,120.20, 120.03 Bottom. Point 120.33 must cross to head higher.

Brian Twomey, Inside the Currency Market, btwomey.com

Inside the Currency Market: EUR/USD

EUR/USD target achieved at 1.1300 from 1.1227 and an 18 pip violation. I haven’t reported extensions due to price failures long before targets in last 3 days. Extensions this morning to offer context to 1.1319 were 1.1307, 1.1315, and 1.1330. We’ll know at the China open if extension violation has any significance. So far the answer is no. The mid section still dictates prices while the long end of the curve is barreling lower. This tells us on a longer term view, rallies are meant to sell and are corrective.

USD pairs coming in about an hour as data is released.

EUR/USD. Bottom. 1.1252, up 81 pips since this morning. Range break above 1.1347 and 1.1388, Below 1.1229. Overbought sell point 1.1385, Failure point 1.1351. Strategy. Longs above 1.1308, Target 1.1385. Then reverse short to 1.1346. At 1.1351, reverse to 1.1329. Points on the way up, 1.1313, 1.1318, 1.1326, 1.1334, 1.1342, 1.1351, 1.1358, 1.1368,1.1385.

Shorts below 1.1308, Target 1.1280. Watch here for reversal to 1.1308. Points on the way down, 1.1305, 1.1300, 1.1297, 1.1293, 1.1289, 1.1285, 1.1282, 1.1267, 1.1252 Bottom. Point 1.1280 must cross to go higher.

Brian Twomey, Inside the Currency Market, btwomey.com

Inside the Currency Market: EUR/USD

EUR/USD. Bottom. 1.1171. Range break above 1.1240 and 1.1332, Below 1.1214. Overbought sell point 1.1300, Failure point 1.1283, 1.1268. Strategy. Longs above 1.1227, Target 1.1300 then reverse short to 1.1263, Failure at 1.1283 then short to 1.1255. Points on the way up, 1.1236, 1.1244, 1.1252, 1.1260, 1.1268, 1.1283, 1.1300.

Shorts below 1.1227, target 1.1199. Watch for reversal here to 1.1227. Points on the way down, 1.1219, 1.1215, 1.1211, 1.1207, 1.1203, 1.1187, 1.1171 Bottom. Point 1.1199 must cross to go higher.

Brian Twomey, Inside the Currency Market, btwomey.com