Draghi on hold is the result to alternatives to CHF, GBP, DKK and SEK as those interest rates trade below European rates and are literally on the floor near zero. Negative interest rates contain bottoms at zero.
Added is non negative interest rate nation GBP. Anymore Draghi cuts will force the BOE to move.
Further, the entire Draghi story in interest rate cuts is not about economics at this stage, its systemic as two years later into negative, the cuts haven’t produced any promises and the ECB is rolling out huge changes July 1. Now is not the time for Draghi to move interest rates further.
The interest rate game these days by central banks is compress not expand the channels between and among nations. To understand how this plan operates, I constructed a 10 nation, 9 year interest rate index and published results, findings, explantions, and the way forward in trades. The overall plan is garner control over M1, the exchange rate and severely limit volatility. On NFP day for example, today’s EUR/USD pip range is 49 pips and down about 7 pips from yesterday’s range. Central bank policies today are in uncharted territory, never before seen and far from the tradition.
EUR/USD Bottom today, 1.1099, note monthly average 1.1090 contains big break. For NFP trade, any price below 1.1099 look for longs. Price achieves 1.1099 by breaks at targets 1.1127, 1.1113, 1.1108 then bottoms 1.1099. A break of 1.1090 is not expected but next 1.1084, 1.1044, 1.0988. Any price below 1.1099 becomes oversold.
Big break points above today, 1.1164, 1.1173, 1.1221, 1.1223, 1.1292. Monthly average break 1.1552. Above 1.1292 is not expected but next big break points exist at 1.1372, 1.1382. Both points perfectly in line against Forward trend lines, today at 1.1381.
Upper targets, 1.1168, 1.1188, 1.1212. The NFP trade is any price above 1.1212, begin to look for shorts. Above 1.1212, comes next 1.1225, 1.1239, 1.1252. All this not expected today as 1.1221 and 1.1223 presents tough resistance and must break to see higher over coming days.
Monthly averages found 1.1090 to 1.1552, current price is oversold on the day and at bottom of the range.
Brian Twomey, Inside the Currency Market, btwomey.com