EUR/USD and ECB: Structural Changes

Mentioned long ago the July 1st changes to EUR/USD instituted by the ECB and the structural changes to lead EUR/USD to trade in small ranges similar to AUD/USD. The day is here and EUR/USD appears to be now AUD/USD. The difference between AUD/USD and EUR/USD currently is AUD/USD trades daily pip ranges at 38 for weeks upon weeks while EUR/USD trades 56 daily pips. GBP/USD graduated from 67 daily pips to now 57. GBP/JPY graduated to 59, 2 pips above GBP/USD. EUR/JPY graduated to 57 and 1 pip above EUR/USD. NZD/USD is 39.

The new central bank approach to currency prices is institute double bottoms. For example, EUR/USD double bottoms today are 1.1069 and 1.1060 with the big break at 1.1090. AUD/USD double bottoms are located at 0.7467 and 0.7442 with big break at 0.7476. GBP/JPY bottoms are located at 133.39 and 133.28 with with breaks at 133.67 and 133.61. The big break points are the new support points added to not allow prices to travel further to see bottoms.

Then above movements are held in tiny increments. Upper points today for EUR/USD is first 1.1144, 1.1146, 1.1148, 1.1153 then 1.1155, 1.1158, 1.1165 then 1.1172. Under this built in pressure, maybe EUR/USD can see upper targets at 1.1190’s, highly doubtful.

The changes to currency prices are wholesale and permanently structural. The ECB in my estimation is aligning the EUR/USD price to gold since the new price structure now aligns to the Gold price. But which Gold price is the question, USD or EUR. The main purpose for the ECB for now is to stop movements and voaltility in EUR/USD pairs, so far so good in their mission.

I always viewed this development as phase two in the Silvio Gesell plan to go negative interest rates. To see fruition in economics then control of the interest and exchange rate must be part of the plan, at least that is how Gesell views exchange rates in the “Natural Economic Order”. Then the ever larger question yet to be answered is are currency prices moving to the gold standard. This appears to be the case but this will take time as changes for the ECB began July 1 yet expect all central banks to adopt the exact same control currency price and align to gold approach.

Brian Twomey, Inside the Currency Market,