USD/JPY Monthly Forecast and BOJ Preview

The best GDP quarter for Japan in 2 years was Q2 2014 as 1.6 printed from 2.0 Q1 then the down slide began to reach 0 in Q4 2014 and negative 0.9 and 0.7 in Q1 and Q2 2015. In Q 1 2016, GDP corrected to current 0.8.

Japan’s CPI negative Rate of Change at -0.4 quarter over quarters only matches Italy among the major nations at -0.3 and -0.1. CPI last reported negative 0.4 year over year and minus 0.2 quarter over quarter. Volatile food prices is clearly the main driver to CPI as the CPI Index reports 103.30 in all items but minus Food and energy then the index reports 101.6. A steel wall of resistance exists at 103.90 and 104.10, along the way to historic 40 + year highs and first ever seen CPI at 104.50 The bottom side at 100 and 101 represents a massive bottom and broke only a few times since the 1990’s. CPI range remains support at 100 to 101 and 103.90 and 104.10 on the topside.

Actual Inflation rates hovered between negative 0.1 to +0.5 since the early 1990’s. CPI will remain volatile in future quarters because overall CPI is at at its historic peak .

The Monetary Base rose May 28 from Y 3, 850,000 to current 4. 029,200. The Overnight Call Rate is not just oversold but to lower lacks any serious discussion as oversold achieved stratospheric levels from monthly averages 2 to 10 years. A drop in the Call Rate cannot sustain itself as the averages practically violates the laws of mathematics. The current Overnight Call Rate at minus 0.064 is actually positive 0.93 and trades just below the positive line in negative territory. Since the January cut by the BOJ, USD/JPY dropped from 121 and stands at current 102’s. The Call Rate trades above Europe Eonia, CHF Saron, DKK CD’s and Sweden’ Repo Rate yet below Fed Funds.

For the Call Rate to go higher and begin an uptrend, 0.01, 0.02 and 0.03 must break. Points 0.01 and 0.02 are the first lines of defense. The BOJ confronts 3 vital issues. CPI to high, GDP and interest rates far to low. Then comes the issue of USD/JPY far to low and JPY far to high. The bold move would be raise the Overnight Call Rate rather than embark on further stimulus that hasn’t worked for the past 8 years. Yet USD/JPY is low and oversold.

USD/JPY V DXY is a contained USD/JPY price near term. USD/JPY runs into a solid wall of resistance in the 106’s beginning at 106.80, 106.82, 106.96 then 107.14. Below exits solid supports beginning at 102.48, 101.61, 100.94 and 99.94. Reported points are all vital levels rather than everyday market supports and resistance.

To go higher, USD/JPY must break 102.48, 103.71, 105.59 then comes 106’s and many points in the 107’s from 107.14, 107.63 and 107.77. Above 107.77 then USD/JPY goes far higher.

USD/JPY current price at 102.01 is not only oversold but extremely low. Caution to shorts for the month.

Brian Twomey Inside the Currency Market, btwomey.com

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EUR/USD V DXY: Monthly August Forecast

Since October 2015 and 9 consecutive months, EUR/USD and DXY traded and continues to trade within 1 and 2 year monthly averages. The vast majority of financial instruments trade within 1 and 2 year monthly averages. What contains prices within 1 and 2 year monthly averages is both fundamental data and interest rates trade below 1 and 2 year monthly averages. US GDP at 1.2 lacks registration in monthly averages from 1 to 10 years, Australia CPI and the Trimmed Mean fails to register in averages from 1 to 10 years. Australia OCR and GBP Sonia trade below 1 and 2 year monthly averages.

What explains interest rates and fundamental economic data on the floor is high stimulus spending by central banks. EUR/USD for example negatively correlates to its M1 and M3 money supply at minus 44% at the 1 year average and minus 85% at the 18 month average. To stimulate further drops EUR/USD, interest rates and fundamental data. To stimulate further, confiscates price volatility, trends and decreases ranges. New Zealand failed to stimulate and its economy, interest rates and fundamental data is operating fine.

DXY began January in a 489 pip range from monthly averages 100.27 to 95.38 and 599 pips in February from 97.53 to 91.54. May saw a 438 pip range from 97.12 to 92.74. June ranges dropped to 290 pips from 96.87 to 93.97 while July’s 221 pip range from 96.80 to 94.59 was the lowest range every month since January 2016. In volatility terms, 221 pip ranges factors to 11.05 pips per day in a 20 day trading month. Reported last month was DXY actual ranges would be 215 pips. DXY traded 218 pips from 97.59 to 95.41 or 10.09 pips per day.

August 220 pip range in 1 to 2 year monthly averages trade between 96.78 to 94.58. The 220 pip range is actual from averages yet average ranges in DXY V EUR/USD factors to 333 pips and a first warning since December 2015 a range break is in development.

DXY first breaks below are located at 95.44 and 95.37 then a break of 94.58 would target 94.28, 93.88, 92.55 and 91.60. Above 96.78 targets next 97.93, 98.08 and 98.39. To see DXY 98.39, EUR/USD targets 1.0800’s.

EUR/USD in June contained from averages a 462 pip range from 1.1552 to 1.1090. July saw a 348 pip range from 1.1454 to 1.1106. Reported last month was 205 to 224 pip ranges for the month while actual EUR/USD traded 245 pips from 1.1190 to 1.0945. A monthly 245 pip range factors to 12.25 pips per day to assess volatility. For August, the 352 pip range is located from 1.1100 to 1.1452. The bottom is rising. Despite the 352 pip range, actual range factors to 500. August will be a volatile month as range breaks are expected.

EUR/USD at 1.1400’s runs into brick walls at 1.1352, 1.1381, 1.1398, 1.1406, 1.1418 and 1.1424. Why 1.1400’s is because its the location of the slowly descending trend line and explains why EUR/USD upside momentum dwindles by the month. The same story is found in DXY as both EUR/USD and DXY trade alongside each other below the trend line. From the current trend line, if EUR/USD breaks 1.1400’s then price will quickly see 1.1600’s and 1.1800’s.

EUR/USD bottoms are located at 1.1096, 1.1034, 1.0907, 1.0894, 1.0834. What changed EUR/USD dynamics was the break at 1.1100’s. To see EUR/USD lower over the month then 1.1104 must break yet for the month as long as EUR/USD rises, 1.1104 will rise to take price higher.

Overall, EUR/USD price rises are correction and lacks lasting trends.

Brian Twomey Inside the Currency Market, btwomey.com

EUR/USD V DXY: August Monthly Forecast

Preparing monthly forecast to post today,

95.53,96.20,95.88,93.05,94.58,98.22,99.65,98.75,100.21,97.02,96.48,95.85,97.44,95.66,96.99,94.71,98.66,95.32,95.00,90.65,88.41,87.02,86.05,82.78,81.52,79.81,80.40,79.53,80.25,79.72,81.40,80.19,80.66,80.26,80.32,82.14,81.54,83.38,83.40,81.81,83.17,82.00,79.23,79.87,80.16,79.99,80.03,81.22,82.71,81.75,83.13,78.85,79.14,78.79,79.42,80.52,78.49,76.31,79.08,74.17,74.04,74.64,74.70,73.11,76.07,76.92,77.86,79.29,81.27,77.46,78.94,83.25,81.66,86.28,86.67,81.99,81.29,80.44,79.65,78.22,74.94,76.47,76.86,78.22,78.45,80.42,79.43,84.78,85.89,88.15,86.46,82.15,86.70,86.34,79.36,77.50,73.42,72.80,72.95,72.72,72.17,73.75,75.28,76.70,76.17,76.46,77.62,80.75,80.66,81.69,82.25,81.30,82.66,83.50,84.43,83.43,82.85,85.11,85.68,85.02

1.1068,1.1228,1.1311,1.1339,1.1099,1.1092,1.0859,1.0877,1.0736,1.1235,1.1221,1.1139,1.0995,1.1213,1.1149,1.0779,1.0837,1.1349,1.1621,1.2331,1.2472,1.2672,1.2901,1.3316,1.3539,1.3592,1.3732,1.3812,1.3822,1.3658,1.3610,1.3703,1.3492,1.3634,1.3347,1.3309,1.3080,1.3188,1.2982,1.3026,1.2963,1.3359,1.3288,1.3119,1.2827,1.2974,1.2855,1.2399,1.2288,1.2526,1.2788,1.3161,1.3201,1.3224,1.2904,1.3179,1.3555,1.3706,1.3770,1.4343,1.4264,1.4388,1.4348,1.4441,1.3996,1.3648,1.3359,1.3220,1.3660,1.3897,1.3067,1.2894,1.2767,1.2208,1.2565,1.3405,1.3568,1.4272,1.4613,1.4911,1.4816,1.4561,1.4268,1.4087,1.4016,1.3650,1.3190,1.3049,1.2784,1.3238,1.3449,1.2732,1.3322,1.4369,1.4975,1.5769,1.5552,1.5557,1.5750,1.5526,1.4748,1.4717,1.4570,1.4683,1.4227,1.3896,1.3622,1.3715,1.3418,1.3511,1.3516,1.3241,1.3074,1.2998,1.3212,1.2881,1.2611,1.2730,1.2811,1.2683

GBP/JPY: Levels, Ranges, Targets

Today’s GDP for USD is forecast 1.8 from last 1.1 while 1.59 and 1.44 is my own targets. The 1.8 forecast must break significant points at 1.27, 1.78 and 1.79 to instill any bright economic recoveries. Yet bright economic recoveries at 1.8 places GDP overall in middle range from 1.79 to upper averages at 2.44 and 2.54. Below 1.78 then GDP remains at lower end of its ranges.

Why 1.8 is vital is because GBP/JPY correlates to USD/JPY at 94%. GBP/JPY is essentially a USD pair and will rise and fall with USD/JPY. The bottom end of the correlation is located at 68% and its lowest at 42% which means GBP/JPY and USD/JPY will remains partners for a long period in the future. A rise in GDP will see higher prices in USD/JPY and GBP/JPY.

What prevents GBP/JPY from rising is 103.71 in USD/JPY. For GBP/JPY to rise then 103.71 must break in USD/JPY. Currently GBP/JPY is built upon a base at 136.31. Current bottom today is located at 135.99 alongside significant points built into current prices 136.04, 136.26, 136.31, 136.36 and 136.39. Overall, the GBP/JPY price is on the floor and low. GBP/JPY 134.98 begins severely oversold.

The big point break above is located at 146.35 and channel top at 140.36. Only a break of 140.36 would see a run to 146.35. To move higher today, GBP/JPY must break 136.73, 136.75, and 136.85. Then targets become 137.04, 137.51 and overbought patches at 137.85 and 137.99.

Trade signals? Drop a line brian@btwomey.com

Brian Twomey, Inside the Currency Market, btwomey.com

AUD/USD and OCR: Levels, Ranges, Targets

As mentioned in previous posts, OCR and AUD/USD on a 1 year correlation calculates a stunningly low + 14% and + 80% from successive averages from 2 to 5 years. The RBA risks an unwanted rise in AUD/USD if OCR is cut from current 1.75. Further, if 1.75 is dropped , the best the RBA could achieve is 1.61 due because not only are current OCR averages far oversold but 1.61 begins oversold to the extremes. The persistent problem for the RBA is CPI as much as AUD/USD.

Headline CPI Vs OCR on a 1, 2 and 3 year monthly average basis correlates 52%, 66% and 47%. Trimmed Means Vs OCR from 1 to 3 years correlate 63%, 15% and 53%. Why + 15% low is because the current Trimmed Mean at 0.50 bumps against the 2 year monthly average at 0.55. What correlations mean is OCR at 1.75 contributes roughly 50% to CPI and worse at 14% from the 1 year monthly average in AUD/USD. OCR at current 1.75 is severely misaligned and far to low Vs AUD/USD and CPI. The lower goes OCR, the less it performs to its economic potential to contribute to CPI and AUD/USD.

GDP last at 2.7 and 2.5 is robust but yet again OCR contributes minus 23% and 11% on a 1 and 2 year correlation. GDP to AUD/USD correlates to minus 11% and +11% on a 1 and 2 year monthly average basis. A higher GDP drops AUD/USD.

GDP to headline CPI correlates to negative 35% and 39%. Possibly exports alone contribute to GDP as even Trimmed Means correlate to GDP at minus 35% and minus 0.08%. Current GDP at 2.7 is above the 2.4 and 2.2 monthly averages.

The near term focus for the RBA must be a sustained GDP at current 1.75 in OCR especially as GDP negatively correlates to CPI and more specifically because OCR is oversold and can’t be touched for the August 2 meeting. The only contribution seen from OCR overall is the negative relationship to GDP. A lower OCR may see a higher GDP however its a weak relationship and absolute fact as its main driver to GDP is spurious. Current OCR is not only low but it under performs economically. A further cut by the RBA sends the message to economics in Australia and potential recovery is on hold.

The correct positioning in correlations in CPI, AUD, GDP and OCR should be at least +70 to 80% to offer an idea how far off track, low and misaligned is current OCR. Economic drivers should be in harmony to see a robust economic situation and economic compatibility is currently missing.

OCR must break 1.93, 2.20 and 2.12 to consider higher levels. Lows in price extremes reveal 1.61, 1.50 and 1.37. Highs in the extremes reach 2.4, 2.8 and 2.9. Targets reveal 2.0 won’t break any time soon and remains rock solid resistance. Targets range from 1.82 to 1.97. OCR is oversold in all monthly averages from 1 to 10 years.

AUD/USD remains for weeks built upon a solid base at 0.7318. Just above 0.7318 lies solid supports at current 0.7468 and 0.7457. Both lines change by a few pips each trading day yet both lines held AUD/USD prices above for weeks in small ranges. Both lines must break to see any chance to 0.7300’s.

What decides AUD/USD’s downside fate is 0.7503 and 0.7578. Below 0.7503 then AUD/USD has possibilities to break 0.7468 and 0.7457. Above 0.7578 then AUD/USD begins a new uptrend with top channels located at 0.7774, 0.7736 and 0.7534 from current levels at 0.7500’s.

Overall, until 0.7804 breaks then further rises in AUD/USD must view as a correction in a longer term downtrend. Above 0.7804, a line that dates to 1999 then a serious and lasting uptrend begins.

Brian Twomey, Inside the Currency Market, btwomey.com

Trade Into Fed Decision

See afternoon Trades to Subscribers heading into FED Decision. The calls are perfect in all 7 currency pairs, A few specifics were excluded in exact targets but we remained inside the structure. Yet with currency market changes, we trade the structure.

GBP/USD

Most important 1.3169, 1.3187 and 1.3232

Bottom. 1.3034 and 1.3045. Achieves by 1.3078 and 1.3052

Upper Target 1.3161, 1.3151, Watch 1.3169

GBP/JPY

Most important Below 137.95, 137.76, Above 139.19, 139.37, 139.67, 139.85

Bottom. 137.87, 137.95, 137.76 achieves by 138.04 and 138.24

Upper target 139.07 and 139.11

EUR/USD

Most important 1.1008

Bottom. 1.0936 achieves by 1.0975 and 1.0956

Upper Target 1.0996, 1.1015 and 1.1018, Watch 1.1008

EUR/JPY

Most important 116.34

Bottom. 115.58 achieved by 115.99 and 115.78

Upper Target 116.58 Watch 116.34

AUD/USD

Most important 0.7469 and 0.7455, Breaks here then AUD much lower

Bottom. 0.7425 achieves by 0.7444 and 0.7434

Upper Target 0.7491, 0.7485 and 0.7479

NZD/USD

Most important 0.7067 and 0.7110, Most important 0.7110, a break then NZD higher

Bottom. 0.7010, achieves by 0.7028 and 0.7024

Upper Target 0.7070, Watch 0.7067

USD/JPY

Most important 107.17 and 106.95 V 105.23 and 103.71

Below 105.66, 105.44, 105.23, 104.98, 104.74, Target 105.23

Above 106.09, 106.30, 106.52, 106.73, 106.95

Trades speak for themselves,

Brian Twomey, Inside the Currency Market, btwomey.com

GBP/USD and AUD CPI: Levels, Ranges, Targets

Australia’s Trimmed Mean portion inside the CPI release rose as fore casted from 0.2 to 0.5 and sits at the 0.50 average and failed to break. Yearly Trimmed Mean at 1.7 remained and is not only far to high but its extremely overbought. Consider if the Trimmed Mean short term at 0.2 was oversold as reported then it had to rise but also it leaves the yearly Trimmed Mean in deeply overbought territory. The Trimmed Mean yearly now trades above headline at 1.0 and is a persistent problem for the next quarters ahead. The Trimmed Mean must fall below headline as a support to CPI.

For the RBA and its cut to OCR is so far not seen. What the last cut to 1.75 did for the RBA was leave OCR and AUD/USD at negative 14% correlations on a 1 year basis. The 2 to 5 year portion in averages is fine at 80% correlations yet 80% is extremely light. Under negative correlations, If the RBA drops OCR then it risks a persistently and unwanted higher AUD/USD over a long period in the future. What correlations reveal is OCR and AUD/USD are severely misaligned. Drop OCR then the misalignment deepens. Despite the 1% CPI and low, the RBA is severely stuck for now. To leave OCR at 1.75 then the RBA risks 0.7808 and 0.7888 at its top on a 1 to 5 year trend line. The bottom side on a 1 to 5 year trend line is wide open to see far lower prices yet what remains is the big breaks below at now 0.7468 and 0.7452.

GBP/USD today is built upon a base at 1.3074 and 1.3072 and today’s bottoms are located at 1.3067 and 1.3056. Further bottoms are supported and slowly rising by the day at 1.3029 and 1.3011. Any lower price especially in the 1.2800 and 1.2900’s is not only extraordinarily oversold but the overall GBP price is on the floor low.

The topside channel is located at 1.3340 and 1.3329 with a break to allow a run to the big average break at now 1.3673 from 1.3700’s in previous weeks. The point at 1.3673 is dropping by the day and can’t sustains any GBP rises. GBP/USD must break 1.3237 and 1.3257 to see any chance to 1.3300’s. Further, resistance is built into current prices from 1.3119 to 1.3191 specifically 1.3122, 1.3137, 1.3145, 1.3168 and 1.3191. Until the logjam is broke, GBP entered into range trading yet range trading inside wider intervals than its counterpart EUR/USD.

3 months into trade signals and we trade currently 7 pairs around the clock every week. I trade the pairs upon request and that means any pair on the planet can be traded. Exporters / Importers are also well served by my calls and analysis on a daily, weekly and monthly basis. I provide every need under the sun. If interested drop a line brian@btwomey.com

Brian Twomey Inside the Currency Market, btwomey.com

EUR/USD and US GDP: Levels, Ranges and Targets

USD GDP last at 1.1, 1.4 Q 4 2015 and 1.8 expected contains significant hurdles to rise above because 1.1 is far below all averages short and long term. As GDP continued its multi year slide, the averages followed. The point at 1.1 is not only extraordinarily low but the extremes in average prices are located at 0.58 and 0.36. A break at both levels then negative GDP becomes a distinct possibility. The rescue is 1.1 point is low, oversold and its only direction is up. The rise in GDP comes due because of oversold and not because of bright economic outlooks.

What holds GDP from further falls is exports exceeded imports, PCE was up, State and local government spending was up and residential fixed income rose. Under a Yellen threat to raise, housing, mortgage rates and renovations will remain volatile to lock in current rates before any possible rise.

The 1.8 forecast derives from the 3 year average. To rise from 1.1 then breaks must occur at 1.27 and a rough patch at 1.78 and 1.79. GDP averages lack uniformity. If 1.8 is seen then 1.78 and 1.79 become supports in future quarters but significant headwinds exist at 2.00, 2.01, 2.10 and 2.15 so the range becomes a tight 1.79 to 2.00. The immediate points are just the start to a long long road and many levels to see the upper average at 2.54, 2.60 and 2.70. Total ranges if 1.8 is seen would become 1.79 to 2.54, 2.60 and 2.70.

While 1.8 is forecast, targets in my estimation are 1.59, 1.44 and lows at 0.92, 0.81 and 0.75. The averages however are significantly oversold and a rise is expected. But the upper forecast is only derived from the 1 and 2 year averages because averages from 3 to 9 years lack the status as overbought or oversold. Those averages are middle range and could easily fly higher or lower. Failure to break 1.27 would impart an important commentary to any Yellen Fed Funds rise. Overall, 1.8 as well lacks any confidence to a rise.

EUR/USD is built upon a current base at 1.0976. The longer term base is located at 1.0413. A break of 1.0976 targets next 1.0955, 1.0885, 1.0847 and 1.0845. Today’s bottom is found at 1.0953.

Despite oversold, significant resistance is and has been built into current prices for many weeks. The two big breaks are found at 1.1113 and 1.1116 and down from 1.1153 and 1.1140 over past weeks. Both points are dropping by the day to drive EUR/USD prices lower. Under the assumption 1.1116 breaks higher then more problems exist at 1.1158 , 1.1189 and another falling line at 1.1234.

The next break point for EUR/USD is located at 1.1042 but again tough resistance is clustered from 1.1024 to 1.1032 and many points in between. The points mentioned from 1.1024 to 1.1032 is for today and again lies just above current prices. Tomorrow the numbers will change yet the cluster above remains due because its deeply ingrained inside EUR/USD prices for many many weeks. To drive through this cluster will take an event such as a far lower US GDP reading. EUR/USD contains problems in its inability to rise and its current price remains so low and travels downwards while oversold.

The current trading signals crew remains 3 months later and all are doing quite well everyday. All are eager to stay and none left. I keep it very small as a crew. I will open room for another 1 or 2 slots for interested persons. If interested brian@btwomey.com

Brian Twomey, Inside the Currency Market, btwomey.com

AUD/USD and CPI: Levels, Ranges and Targets

As currency market structural reforms emerge in current formats, EUR/USD is mestastaizing into the new AUD/USD to trade inside ever decreasing ranges while GBP/USD and GBP pairs will remain volatile inside wider ranges as current reforms unfold. Once complete in February 2017, GBP volatility will suffer.

By osmosis, the market and structural reforms now imposes on traders to become news traders and news forecasters as this is the only source to generate volatility. An as expected release will lack movement while those rarely out of sync forecasts will see tremendous volatility. The vast majority of trading movements and profit potential will be focused in Europe trading. New Zealand joined the reform movement by introduction of the 1 year bond while Australia remains a work in progress.

To understand Australia’s CPI is to focus on the Trimmed Mean portion of the release because it currently holds Australia’s present CPI at 1.3. In March, the Trimmed Mean was 0.2. Currently 0.2 is severely oversold and literally on the floor due because the nearest average break to see significant rises is 0.5500, 0.5541 and 0.65. The averages range from 0.5500 to 0.832 and provide rock solid resistance. Any rise in the Trimmed Mean is a correction until at least 0.5500 and 0.5541 breaks. Current targets range from lows at 0.37 to 0.48 highs with an average at 0.427. The Trimmed Mean for the quarter is forecast at 0.4 so as expected is a perfect approximation.

The Trimmed Mean forecast yearly at 1.7 however is far out of bounds and above far extremes from every average 1 to 9 years and is at the upper highs at the 10 year average that dates to the lower 1980’s. The peak is 2.2 and out of bounds begins at 1.62 and tracks lower to 1.2’s and 1.3’s. The Trimmed Mean must move and break 0.5500 and 0.5541 to see CPI higher over future quarters.

Australia’s CPI at current 1.3 must break to see the 2% target 2.04 then 2.33 and 2.50. Significant headwinds exists in the averages from 2.04 to 3.38 and many averages in between. Any rise in CPI is a correction unless or until 2.04 breaks.
The averages like Trimmed Means are all oversold. The forecast is 1.1 The lowest targets from 1.1 is 1.08 and 1.06. The highest targets begin at 1.2, 1.29 and track higher to 1.77. The average target is 1.42 and 1.44 at the 2.04 average. Any lows in CPI seen only leaves the averages much more in severe oversold territory. In a larger view, CPI at 1.3 is not only low but sits dead flat on the floor. The perspective in flat on the floor is derived from past 200 ish CPI quarters. Overll as seen from Australia, New Zealand and others is the potential for recovery is astounding as overall economies are at lowest lows and await the impetus to move to upward bounds.

For AUD/USD, bottoms are held by significant breaks at 0.7470 and 0.7463. Both hold AUD/USD moves to the downside for many weeks. A break of 0.7470 and 0.7463 targets next group of headwinds at 0.7425, 0.7418, 0.7411 and 0.7408. AUD/USD is built upon a base at 0.7218 and to see the downtrend gain speed then 0.7408 must break. Throughout the week, reported levels changes by only a few pips.

On the topside, 0.7500, 0.7525 and 0.7530 are tops of the channel and must break to see AUD target 0.7600’s. Levels all week changes only by a few pips. To see AUD reach far higher levels then 07804 must break. In the way to 0.7804 is a dynamic line and today reports at 0.7753.

New Zealand GDP: Levels, Ranges, Targets

New Zealand GDP at 2.4% is currently in an extraordinarily comfortable position inside constructed moving averages in successive order from 1 to 9 years. Averages range from 1.80 to 2.89 Current 2.4 mid point for example is located at 2.34. The last reported 2.4 however sits perfectly on a support / resistance point.

Yet the bottom is supported by 2.36, 2.25 and 1.80. The next topside points begin at 2.50, 2.58, 2.63, 2.70 and 2.81 and 2.84. The main driver to GDP is the 1 year oversold average at 2.89. The 1 year average for example won’t allow 1.5 to be seen or hold as it becomes far out of bounds. Only an outside event beyond New Zealand’s control would allow 1.5. The roughest point for GDP is located between 2.50 to 2.70 as 5 levels and averages provide significant headwinds.

Current 2.4 is above the 2, 3 and 4 year averages and below the 1, 5, 6, 7, 8 and 9 year. Despite headwinds between 2.50 to 2.70, all averages beside the 1 one year lack oversold or overbought status as 2.4 trades around the averages. While 1.5 is deeply oversold, 4.27 and 4.73 provide far overbought status.

To see GDP head to upper stratospheres then 3.05 must break higher. Overall, GDP is at the lower end of the range from 1.5 to 4.27.

Economically, as seen from CPI, Trade Ables V Non Trade Ables and GDP, the RBNZ lacks any reason to lower OCR.

From an NZD/USD exchange rate at 0.7000, NZD was introduced and free floated March 1985 at 0.4444. Since July 1996 or 20 years of monthly averages, NZD/USD closed above 0.8000 for 32 times and only since 2011. NZD/USD closed 99 months in 0.7000’s. NZD closed in 0.6000’s for 65 months and 47 months at 0.5000. NZD/EUR closed Friday at 0.6385, NZD/CAD at 0.9175, NZD/USD 0.7000 and NZD/AUD at 0.9374. The top heavy pairs are NZD/CAD and NZD/AUD. If exchange rates are the issue for the RBNZ and why the lower OCR statement then the target pair must be NZD/AUD as 13.00 billion of trade was conducted in the last year between Australia and New Zealand. Australia, Europe and China remain the big 3 trade partners in the last 2 years.

Brian Twomey, Inside the Currency Market, btwomey.com

New Zealand CPI and TradeAbles V Non Tradeables

When CPI indices were revamped in 1995 by all nations, New Zealand was not only the first and the model to follow by Inflation Targets but the unique Trade Able V Non Trade Able feature inside New Zealand’s CPI allows important commentary as to what products and services offer positive and negative contributions as well as to competitive aspects to New Zealand’s overall economy. The RBNZ follows closely and mentions quite often Trade Ables V Non in monetary policy statements because both feed through to Imports and Exports and exchange rate levels.

Petrol for example as a Trade Able was + 5.3% for the quarter yet down 7.7% and 7.0% compared to March and December 2015. Yearly Petrols were down 8.1% as its total contribution to the Trade Ables component. Yearly to the June 2016 quarter , Trade Ables were down 1.5%. New Houses as a Non Trade Able was up 2.1% for the last quarter and 3.3% yearly but + 5.6% as a Non Trade Able. Cigarettes and tobacco as Non Trade Ables were up 1.5% for the quarter and 9.4% yearly as its contribution to Non Trade Ables.

Trade Ables are defined by Statistics New Zealand as “goods and services either imported or in competition with foreign goods and services in domestic or foreign markets. Trade Ables lack foreign competition and normally defined as products and services contained inside Zew Zealand’s borders for domestic consumption. Trade Ables for the quarter rose 0.6% while non Trade Ables rose 0.3%. Yearly, Non Trade Ables rose 1.8% while Trade Ables dropped 1.5%. The Non Trade Able rise explains current CPI at 0.4% as Housing, Food, Tobacco and Petrol contributed the majority and holds current CPI at its lowset 0.4% reading in 16 years. Without the rise in all products, CPI would be much lower.

Specially designed moving averages were constructed to understand since 1986 the current view into CPI as the RBNZ raised recent concerns with current levels and offered to lower OCR. Secondly, the moving average construction remains perfect in CPI averages, targets, oversold, overbought and all necessary information.

CPI at 0.4 not only trades below every average but the path to the 2% target is literally many miles and many quarters away. The 1 and 2 year averages for example are 0.85 and 1.61. Above the 2 year, every average from 2 to 10 years in successive order are located at or slightly above 2.0. The 2% target is a solid rock of massive resistance.

To move higher, CPI must first break 0.75, 0.85, 1.20, 1.61, 1.65, 1.95 then 2.00. The 1 and 2 year averages offer targets at 0.18 and 0.32. Longer term averages from 2 to 10 offer the possibility to see CPI at 1% at the best of targets. From the 3 and 4 year, CPI goes to 0.57 and 0.92 and on to the highest target at 1.10.

CPI is low and oversold so by osmosis and the rise of Trade Ables, CPI should rise slightly higher over future quarters.
Trade Ables at quarterly 0.6 in designed Moving averages trades above every average dating to 2006. The most significant point is 0.09. Yearly though at minus 1.5% offers trouble because minus 1.5 trades far below all averages. The only positive development is targets track far higher over time to positive territory.

The opposite holds true for Non Trade Ables as 0.3 for the quarter trades below every average yet the yearly level at 1.8 trades comfortably above and in no threat to break below many many quarters in the future. The two key levels are 0.70 and 0.69. The distance from current 1.8 to 0.70 is many miles.

Non Trade Ables as an index at current 1341 as well trades well above its averages and is overbought. The key level is 1305.08 then next averages at 1258.12 and 1217.96.

Trade Ables as an index is oversold as much as Non Trade Ables are overbought. At current 1049, Trade Ables are below every average and the key levels to cross higher are 1071.91, 1074.63 and 1083.41. Targets reveal the averages won’t break anytime soon.

To see CPI higher, Non Trade Ables must rise. Two aspects to the Trade Able story. New Zealand for the past two years runs a surplus of 2.9 billion. Its 3 main markets are China, Europe and Australia with Australia as currently the biggest market at 13.0 billion based on year end March 2016 data. Dairy remains the largest export but current daily volumnes remain stable while prices are dropping. The current price projection for 2016/ 2017 is 4.25 yet break even rates for the average farmer is 5.25. The price at 4.25 is down from 2014’s peak at 8.40.

Brian Twomey Inside the Currency Market, btwomey.com

EUR/USD: Levels, Ranges, Targets

rrency markets contain two common themes: GBP/USD and its correlational relationship to its cross pairs is operating, for the first time in at least 1 year, perfectly. NZD/USD functions perfectly while AUD/USD and EUR/USD remain completely lost in its correlations. The best EUR/USD offers is EUR/AUD and EUR/NZD at + 54% and + 45% while EUR/JPY barely reveals a pulse at +23%. AUD/USD is negative minus 73% to minus 93% Vs AUD/JPY, AUD/NZD, AUD/CHF and AUD/CAD.

GBP and NZD volatility is terrific while AUD and EUR prices remain contained inside small ranges. Part of the NZD explanation is recent RBNZ introduction of the 1 year bond as part of its contribution to the overall structural adjustments by all central banks throughout the world. Rather than adjust New Zealand’s perfectly operational interest rate system as other central banks conducted, the RBNZ added another interest rate by 1 year bond issuance.

EUR/USD currently sits on a big base at 1.1001 and today’s bottom at 1.0962 and 1.0976. Not only is the EUR/USD price low and oversold intraday and historic but any intraday price drops are falling at significant oversold levels. Correlation is one explanation as EUR/USD lacks ability to rise without cross pair assistance. The monthly July forecast Vs DXY from 1.1106 also revealed a 205 to 224 maximum pip range range and 15 days into the month, EUR traded in the range. Coupled against correlation is significant price points to prevent EUR/USD rises.

Last week the big break for EUR/USD was 1.1153 with a must break at 1.1140 and 1.1141 to have any chance for a run to 1.1153. Today, 1.1153 is located at 1.1132, a 21 pip drop but built inside EUR/USD price is resistance at 1.1139 and 1.1140 then 1.1163. To see 1.1132 break then 1.1090 and 1.1119 are first hurdles. Failure to break above only sees 1.1132 decrease further in days ahead.

What prevents EUR/USD rises intraday is massive resistance built inside today’s prices from 1.1031 to 1.1039. A break above 1.1039 then a chance exists to see next 1.1066 and dead center inside the current range.

To offer what a low EUR/USD price means, any price from 1.0970’s to 1.0950’s reaches far extremes. A drop in the vicinity of 1.0970’s intraday cannot hold any gains and must rise to cross today’s base at 1.1001.

Overall, EUR/USD price is low and oversold yet massive supports and resistance points are built inside current prices to severely contain movements. EUR/USD has the ability to rise but lacks the impetus to move.

Brian Twomey, Inside the Currency Market, btwomey.com

Brian Twomey: JULY 18 Trades

Good until 2:30 am EST

GBP/USD

Most important 1.3346

Bottom. 1.3194, achieves by 1.3227 and 1.3208. Target below 1.3227. If break below then target 1.3208. 1.3227 must still cross to go long again. If 1.3227 holds, target 1.3261 line.

Upper target 1.3330 and 1.3321, Watch 1.3346, tough area here, look for short reversal in this area at 1.3320’s to 1.3330’s.

GBP/JPY

Most important 142.20, 141.11, below 138.25

Bottom. 139.51 and 139.32. Achieves by 139.86 and 139.68. First target 139.86 then 139.68 and bottom 139.51. If 139.86 holds, long to 140.22. If 139.86 breaks lower then 139.68 next target. Long from this lower area to 140.22.

Upper target 140.92 and 141.11

EUR/USD

Most important 1.1090 then 1.1111. Above 1.1090, enter into caution zone again as 1.1135 becomes big break.

Bottom. 1.1011,a achieves by 1.1039 and 1.1025. First target 1.1139 then 1.1025. Down here is reversal zone.

Upper target 1.1090, watch 1.1111.

EUR/JPY

Bottom. 116.49 and 116.43. achieves by 116.72 and 116.58.

Upper target 117.54 and 117.42

AUD/USD

Most important 0.7728 and 0.7450

Bottom. 0.7549 achieves by 0.7563, 0.7556

Upper target 0.7628, 0.7622 and 0.7616

NZD/USD

Big break occurred at 0.7105. Next big break below 0.7033, then later target 0.6951

Bottom. 0.7045, achieves by 0.7063 and 0.7054.

Upper target watch 0.7105. A break targets 0.7111. This 0.7105 is not regular everyday market break, its a big line break point.

Enters danger area.

Big break above 106.69. needs first break 106.04, 106.36 then 106.69

Below targets 105.40 then 105.08 and 104.76. Take the breaks in direction of trend

GBP/AUD: Levels, Ranges, Targets

GBP/AUD from 1.7386 close, to cross higher 1.7416 must break and reaches this destination by 1.7397, 1.7411. Above 1.7416 targets 1.7444, 1.7470 and 1.7497 The ultimate break for GBP/AUD is 1.7547. Then far higher. For now, any price below 1.7547 is an overall short.

GBP/AUD sits on a solid base at 1.7275 and 1.7247. Bottom for next few hours is 1.7299 and big break to see bottoms is 1.7337 and 1.7306.

Upper target if we catch a dive under or at 1.7306 is target 1.7337. The perfect entry would be 1.7275 to target back to 1.7337 with a must break of 1.7306.

Brian Twomey, Inside the Currency Market, btwomey.com

GBP/CAD: Levels, Ranges, Targets

GBP/CAD most important line from 1.7130 close to cross above is 1.7160, GBP/CAD reaches 1.7130 by 1.7141, 1.7155, 1.7160 then targets 1.7187 and 1.7233. Shorts overall is the way unless 1.7448 break higher. Then GBP/CAD goes much higher.

Why GBP pairs is because all GBP pairs correlate + 90% to GBP/USD. Means all GBP pairs running on all cylinders or specifically all travel together.

Problem all GBP pairs at near top to middle range channel. Means overall, we buy dips and sell rallies type of trading.

GBP/CAD bottoms. 1.7044, 1.7020, 1.6993. Should 1.6993 break then 1.6953. Ultimately, we want to long at bottoms here. Prefect long is 1.7020 to 1.6993 then we target back to 1.7080 and 1.7117.

The opportunity in GBP pairs is to see a dip based on Turkey because its overall implication to Europe.

We don’t begin the week until this evening so what we want are quick hits, don’t marry the trades until we see how hard they hit these lows.

AUD/CHF: Levels, Ranges, Targets

AUD/CHF from Friday’s close at 0.7446, sits not only on a solid base at 0.7134 but most vital break points lie just below at 0.7310 and 0.7263 then 0.7012. AUD/CHF overall is in an uptrend and a buy dips strategy would be the way to go for many days ahead. The upper most of the channel is 0.7583 and 0.7591. At 0.7446 though current price is dead center of the price channel as the bottom is located at 0.7373. A break of 0.7373 then means a run to 0.7310. Any price in the lower 0.7400’s specifically 0.7407 and 0.7403, I would look for longs. In the 0.7460’s to 0.7490’s I would begin to look for shorts. Most important is 0.7489.

AUD/CHF negatively correlates to AUD/USD at minus 83% and means AUD/USD and AUD/CHF will move counter to each other.

AUD/JPY and AUD/NZD: Levels, Ranges, Targets

The first problem in AUD/USD is correlations to AUD/JPY, AUD/NZD and AUD/CHF run minus 73&, Minus 81% and minus 93%. This means a long or short in AUD/USD will see opposite movements in AUD/JPY, AUD/NZD and AUD/CHF. In short, AUD/USD moves opposite AUD/JPY, AUD/NZD and AUD/CHF. Two weeks ago, AUD/CAD also had minus 90% correlations to AUD/USD. What changes correlations in all currency pairs is all must break significant points to allow AUD/USD a remarriage of its main trading pairs.

AUD/NZD from the close at 1.0651 sits on a big line break at 1.0614. This line deserves special attention throughout the week as the break below would see a significant downside move. First targets below 1.0569 and 1.0555. Then 1.0510 and 1.0450. Don’t look for 1.0450 anytime soon as AUD/USD would have to break 0.7808.

On the upside 1.0757 is a huge break point but again AUD/USD would need to break its big points at now 0.7477 and 0.7768. Overall the downtrend in AUD/NZD begins at 1.0513 and uptrend at 1.0713. Current 1.0614 is dead center of the uptrend and downtrend points. Current price sits on a solid base at 1.0205.

Upside points 1.0714, 1.0701. Watch 1.0675, 1.0681 and 1.0683 as big breaks to travel higher.

AUD/JPY. From Friday close at 79.47, big break points are located at 79.63 and 80.34. AUD/JPY just broke 79.63 so next downside targets are 78.85 and 78.75 then 78.44 and 77.97. Again don’t marry the 77.97 target anytime soon as AUD/JPY sits on a big solid base at 76.14. Further, 76.14 means AUD/USD breaks an important line at 0.7808. AUD/USD 0.7808 means much higher on a break.

Break above at 80.34 only achieves 80.94.

Upside points are many. 79.69, 79.71, 79.84, 79.93 thn 80.34 and 80.94.

Brian Twomey, Inside the Currency Market, btwomey.com

GBP/USD:

Bottom Target Signal

1.3369 1.3516 1.3437

1.3270 1.3377 1.3338

1.3198 1.3325 1.3265

1.3099 1.3200 1.3166

1.3066 1.3204 1.3132

Dates not known or times, Serves for last week

USD/JPY: Levels, Ranges, Targets

In the lower 100’s, USD/JPY faced solid supports at 100.01 and 99.76 yet USD/JPY’s climb had to clear above 103.74 for any impetus higher as it traded dormant inside a wide 373 pip range. The vital break at 103.74 achieved to now place USD/JPY inside a smaller 288 pip range between 103.74 to next big break point at 106.62. On the assumption 106.62 breaks higher then ranges compress yet again to 86 pips as the next hurdle to cross is located at 107.48. The new range becomes 106.62 to 107.48.

In a larger view and as is found in EUR/USD, GBP/USD, EUR/JPY, GBP/JPY and others, currency prices are not only on the verge of vital and important breaks but those vital break points causes current prices to trade in no man’s land without an actual trend direction.

In USD/JPY below, trend down begins at 103.97 but 103.97 bumps against must clear 103.74. An uptrend begins at 109.28 but bumps against 107.48. If 107.48 clears then 180 pip range is located between 107.48 to 109.28. Overall 107.48 allows USD/JPY to become located in no man’s land again only this time on the other side of 106.62.

If 106.62 clears, built inside the price structure is tough resistance at 106.83 and 106.88 then 107.05 and on to 107.48. USD/JPY 106.62 drives current prices and decides lower or higher. The path to 103.97 is worse as first clearance is located at 105.29, rough supports at 104.63 and 104.30 then 104.13 and on to 103.97. Overall, the range current is 265 pips from 103.97 to 106.62 and as mentioned 288 pips from 106.62 to 103.74.

Brian Twomey, Inside the Currency Market, btwomey.com

GBP/USD: Levels, Ranges, Targets

Two stories emerge from current prices, the vast majority of our currency pairs are at or near significant break points and to state the best technical analysis terms, those break point levels are danger zones for currency prices. What occurs at my stated danger zones are not only ranges compress but its imperative to watch the most significant points to determine if a break will be seen to further assess if prices drop or travel higher. At significant break points, prices lack trend until a distribution is established. Today’s uncertain EUR/USD for example is either 1.1178 or 1.1089, EUR/JPY is either 121.22 and 121.65 or 115.46. Well here’s EUR/USD in the danger zone at 1.1153 and EUR/JPY at 117.87. Further, USD/JPY is either 103.72 or 109 and the list goes on. Best aspect to the story is volatility is here and will remain.

The GBP/USD story is much clearer than its EUR counterparts as its prices are viewed from its most significant break above at 1.3780. GBP/USD currently trades at the top of the price channel between 1.3416 and below 1.3325. Above 1.3416 then GBP enters danger zones between 1.3438 to 1.3734. GBP lacks trend therefore for the days ahead, its best to trade break points.

To travel higher for example above 1.3416 then next points are located at 1.3438, 1.3461, 1.3507, 1.3598, 1.3689 and 1.3740.
Lower means breaks at 1.3325, 1.3243, 1.3218 and 1.3089. Any price from 1.2900 to 1.3000’s at current juncture then longs is the way. Shorts at 1.2800 to 1.2900’s lacks any serious consideration. To offer what lower means. Last evening bottom overall was located at 1.2527, today the overall bottom skyrocketed to 1.3284. Why 1.3200’s is due to middle ranges. Below then price moves to oversold while above, price not only achieves overbought but the top of the channel and caution for 1.3416.

For today, Bottom is located at 1.3198 with breaks to see bottoms at 1.3231 and 1.3214. What lies just below the 1.3198 bottom is 1.3130. Most significant break points below for today is 1.3325 and 1.3308 to send prices back to 1.3200 again.

As noted from the significant jump from 1.2500’s to 1.3200’s, GBP/USD and all GBP pairs will remain the best trades because it offers the greatest volatility.

Brian Twomey, Inside the Currency Market, btwomey.com