A number of reasons to assign a Fair Value estimate to GBP/USD at 1.5600’s. The first is the new periodic start to current 4th quadrant began with the 2008 crash and fall for GBP/USD at 1.8600’s. The comporable 3000 pips from 1.5600’s to 1.8600 on the downside is found at 1.2600’s. Secondly, the 5 year average at 1.5671 is massively oversold and as much as the 200 day average. In relation to 1.2600, last Friday”s Carney comments installed a floor in GBP/USD at 1.3000 and 1.3100 and for the past week, GBP built a solid and rising base at 1.2974 as of today. Lastly, the channel top for July is located at 1.6101 and 1.6069. In order for price to see channel tops then GBP/USD must cross 1.5445, 1.5500’s and 1.5670’s.
With respect to DXY and GBP/USD, the bottoms for July are found at the DXY V GBP/USD 9 and 10 year lines at 1.3052 and 1.2961. Only the 9 and 10 year averages are in range and offer the first upside targets at 1.3683 and 1.3746. In order for GBP/USD to find inside any respective shorter term range then price must cross higher at 1.3816, 1.3894, 1.3991, 1.4012 and 1.4177. The current 2 year monthly average at 1.5133 sees first inside range at 1.4821 to offer how far GBP/USD fell from Brexit.
Not only does GBP/USD trade below every monthly average from 1 to 10 years but it trades below the 15 and 16 year averages to offer further context.
The average of the ranges from 1 to 10 year monthly averages is located at 748 and 601 pips. To exclude the 1200 and 1500 wide ranges from 9 and 10 year averages then actual ranges are found from 581 to 571. From GBP/USD 1.3200’s, bottoms would be located at 1.2700 and 1.2600 and the upside at 1.3700’s and 1.3800’s. Any upside to GBP/USD will find a reluctant follower in EUR/USD as those range pips are located at 205 and 224 pips with a big break point from monthly averages at 1.1454.
The monthly strategy is rather than short due to severe oversold but long any and all drops
Brian Twomey, Inside the Currency Market, btwomey.com Contact: email@example.com
GBP/USD currently price is built upon a base at 1.2974 and coincides to GBP/JPY at 133.11. Today’s bottoms in both pairs are found at GBP/USD 1.3198 and GBP/JPY at 135.41. Intervals are wide for both pairs due because daily GBP/USD pips are valued at now 67 daily but more importantly monthly GBP/USD V DXY ranges are located at 500 to 600 pips and twice easily the range pips of EUR/USD. GBP/USD contains for the month of July the best volatility at 600 range pips and 67 daily.
GBP/USD next most important break above is located at 1.3270 and coincides to EUR/USD at 1.1157 and 1.1165 as well as GBP/JPY 136.64. GBP/USD, GBP/JPY and EUR/USD are on the verge of big must breaks to go higher.
GBP/USD next big break point overall is found at 1.3398 and 1.3317 to target next vitals at 1.3562 and 1.3572. GBP/JPY next vital breaks are loacted at 137.46 to target 139.25 and 139.15. Overall, GBP/JPY supports in the 135.00’s are many and massive from 135.09 to 135.55.
What’s holding GBP/USD and GBP/JPY progress higher is EUR/USD at 1.1157 and 1.1164 as well as EUR/JPY stuck between 114.48 and 114.15 with bottoms in both at 1.1084 EUR/USD and 113.74 EUR/JPY. The current driver today to determine direction is EUR/USD as GBP/USD will fail to see upper targets at 1.3201, 1.3298 and 1.3289.
Brian Twomey, Inside the Currency Market, btwomey.com, contact firstname.lastname@example.org
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OCR at 1.75 is currently below every monthly average from 1 to 10 years. To understand the current low position in OCR, extreme bottoms are found at 1.69, 1.47, 1.42 and 1.12 although 1.12 is not only ever expected but 1.12 places 1.69, 1.47 and 1.42 at far richter scale extremes. Further cuts by the RBA can only take OCR to 1.69 and 1.47 but it informs the economic situation in Australia is much worse than previously anticipated particularly in the Trade Ables V Non Trade Ables as both are Australia’s measure of overall production and exchange rate levels.
The RBA is not expected to move OCR particularly as it lacks our criteria to move. Viewed from July 2006 and well beyond, the RBA generally moves OCR in May and November and December because budget years occur around June and July. The RBA moved OCR in July 3 times since 1990 and those years were 1997, 1996 and 1993.
The RBA moved OCR once in June. In the past 10 years, the RBA moved OCR 5 times in May, 6 times in November and 3 times in December. The common theme for the RBA is to move OCR in 6 month intervals starting from May to November and December. The only times to move OCR other than May, November and December is to not follow the normal patterns and hold the market guessing. Only on rare economic occasions such as June, October and December 2012 would the RBA cut in successive order.
For OCR to head higher and have any chance at normalization again, breaks must occur at the 1 year monthly average at 1.96, 2.00 and the 2 and 3 year averages at 2.16 and 2.28. Then the range becomes 2.28 to 2.49 with the next big line to cross at 2.50. Current OCR is oversold and any moves lower only forces more oversold in all averages from 1 to 10 years. If OCR ever breaks 1.96 and 2.00 then its the first sign the RBA normalizes again although not expected any time soon.
Like UK’s Sonia, OCR natural interest rate equilibrium is found at 2.86. Overall, OCR is not only low but current levels are literally on the floor. Targets begin at 1.87, 1.91, 2.01, 2.03, 2.09, 2.12, 2.23 and 2.39. Undr such oversold the RBA is not expected to lower OCR again.
Brian Twomey, Inside the Currency Market, btwomey.com contact email@example.com