Yellen press conference today after interest rate announcement. Don’t expect Fed Funds to move today. Both headline interest rate at 0.50 and Fed Funds at 0.37 trade comfortably between 8 and 9 year averages. Current positions between 8 and 9 year averages isn’t terrible, its comfortable. Below 8 year averages, 8 tough and rising supports exist. Headline must clear 0.82 from 0.50. Yellen has plenty of operational space but also ability to do nothing. Please Pay no attention to Dot Plots. Its not revealing, imparts zero knowledge, direction. Dot plots lacks purpose and is a distraction.
USD 10Y yield minus 2Y = 0.9873, 10 minus 3 month = 1.61 and OIS 0.014. US 10 V 3 month is to high while 10 minus 2 year is to low. Europe 10 minus 2Y = 0.24.
GDP is positive at 1% and extremely low but Q1 2015 was minus 0.2, and Q1 2014 was minus 2.9. Expect more upbeat Yellen today as Jobs while adding and not up to speed are growing. A dull dire Yellen would raise EUR/USD, upbeat down goes EUR. Why upbeat Yellen is due to positions of Fed Funds. fed Funds is currently balanced which means Yellan should at least give a balanced assessment. That’s a range situation. Balanced Fed Funds means good ranges, correct positioning between 8 and 9 year averages and not overbought nor oversold.
EUR/USD. Range today 61 pips, 27 short term. The top today is moderate which means EUR can travel higher. Big lines for today only are found at 1.1151, 1.1102 and further out 1.1219. All lines are falling. Point at 1.1204 is far out of bounds, look for sells in this area today on any wild Yellen spikes. Targets today are 1.1102 and 1.1100 and 1.1149. Ranges below 1.0868 and 1.0760. Above 1.1332. Ranges overall remain wide as markets are still adjusting to Draghi cuts. This takes time in Europe.
Another day or two for systems.
Brian Twomey, Inside the Currency Market, btwomey.com