EUR/USD: Levels, Ranges, Targets, German Yield Curve
For the German 10 year yield, its top heavy in relation to Eonia by at least 30 basis points. Negative is a factor of the overall Silvio Gesell plan and negative interest rates. The 10 year adversity is part of the component what negative means and its development to negative is actually healthy and attests to a market performing perfectly. If Eonia was higher then the 10 year lacks ability to go negative.
Overall, the entire German yield curve is supportive of European interest rates and typical of the German system. Negative at the 10 year should be viewed as a healthy and positive economic sign as Euros adjust to the new negative scale from positive.
If the ECB continues to follow Gesell as they are currently performing perfectly then the potential to build an economic powrhoiuse is absolutely astounding. What takes time throughout this process is dead market prices. If prices had ability to range wider then adjustments would occur much faster.
Yields from 1 to 5 year trade far below Eonia and supports European interest rates on the downside. Viewed in this context, its understandable why Draghi is on hold as he doesn’t have a reason to cut again. Viewed from the larger context, CHF, DKK, and SEK interest rates trade far below Eonia and are literally on the floor. Anymore ECB cuts risks the economies of CHF, DKK and SEK. The location and distance of yields 1 to 5 years are actually just perfect. The yields are low yet supportive. Higher Eonia sees yields 1 to 5 year higher but not expected long into the future.
The 9 year yield is also top heavy by about 30 basis points. Drivers of EUR/USD are the 5, 6 and 7 year yields and held in tiny channels. Mentioned many times is the FED containing prices in small channels but the ECB shares as much guilt for containment. If each central bank contains its own prices then yields and market prices V each other reveal as much containment. The EUR V USD 2 year spread is minus 1.32, 5 year minus 1.62, 10 year is far wide at minus 2.62. Spreads should trade equal to its counterparts on the positive interest scale.
The big EUR/USD base is located at 1.0801. Current price is again dead on the floor shortest terms but fighting far overbought longer term. If Draghi continues to follow Gesell and European economic begins to turn positive, EUR/USD has ability to fly higher to upper decks.
EUR/USD Bottom. 1.1162. Achieves by breaks at 1.1190, 1.1176 and Bottom 1.1162.
Vital points above 1.1435, 1.1346, 1.1321, 1.1281, 1.1238 to 1.1230, don’t trade between 1.1230 to 1.1238.
Bottom points, 1.1170, 1.1104, 1.1119, 1.1051, 1.1032. Monthly average 1.1090. Day 11 and 200 pip ranges held.
Upper targets 1.1266, 1.1247 and Failure point 1.1227.
For days ahead, EUR/USD must break and hold above 1.1239 and 1.1228.