Non Farm Payroll job gains at 273 was significant enough in my estimation for Yellen to raise Fed Funds. What would the EUR/USD look like under such a 25% hike scenario to 50% based on headline benchmark differentials.
Viewed from 1.0850 under current differentials, range lines are found from 1.0321 – 1.1948, then 1.1134 becomes the vital point to beat above. Viewed from a Fed Funds rise, ranges substantially increase to 1.3064 – 1.1477 with an average line at 1.2270.
Viewed from 1.0750 under current differentials, range lines become 1.1287 – 0.915, an average line at 1.0218. Under a Fed Funds rise, the average line becomes 1.1696 as again ranges substantially increase from 1.3975 – 0.9417.
From Fed Funds at today’s 0.12 close then from 1.0850 range becomes 0.9982 – 0.9065, an average line at 0.9523. Under a positive Eonia then the ranges expand with an average line at 1.1469.
From 1.0750, a positive Eonia average line is found at 1.1363 and normal circumstances the range becomes 0.9890 -0.8965, an average line at 0.9427.
Fed Funds traded today at 0.35 so from 1.0850 the range becomes 1.2477 – 0.9364, an average line at 1.0920. positive Eonia average line becomes 1.2368.
From 1.0750, the range becomes 1.2362 – 0.9259, an average line at 1.0815. From positive Eonia, the average line becomes 1.2254.
Yellen Fed Funds rise would substantially expand trading ranges yet EUR/USD ranges would drop much further.
Brian Twomey, Inside the Currency market, btwomey.com
From 1.0750 then