If risk is balanced as Yellen stated then from a European interest rate perspective, the USD side is far to low and Europe too high. The USD far to low aspect offers EUR/USD solid supports at 1.0708 and 1.0667. On the far to high curve, EUR/USD break point is located at 1.0921 and overall range from 1.0921 to 1.0708 for a 213 pip trading range.
EUR/USD actual Range break points are located at 1.0711 below and 1.0875 to cut the actual range to 164 pips.
EUR/USD bottoms today are located at 1.0741 and 1.0739 but the major break point to see EUR/USD lower is 1.0750. Lower means 1.0750 to 1.0708 range. The day Trade Rep Navarro commented regarding EUR levels, EUR/USD was pushed above 1.0742 and allowed a continued rise. Today’s 1.0750 was yesterday’s 1.0742 and the 1.0750 line is rising . Overall two lines are driving EUR/USD 1.0750 and 1.0708. Every currency pair as Other Pair / USD share the same commonality.
AUD/USD rising 0.7510 drives AUD, 0.7194 drives NZD, 1.2554 Drives GBP. The risk pairs are well supported while USD/ Other pair faces tough resistance. The hold out remains USD/JPY at 112.07 and EUR/JPY at 120.48 and 119. 37. USD/JPY Breaks 112.07 allows EUR/USD a continued rise.
Above today, EUR/USD runs into a brick wall at 1.0848 and 1.0850. We’re looking to 1.0818 and 1.0821 as the day’s sell points. The bottom side is well supported at 1.0770 and 1.0765.
European interest rates maturities from 1 to 3 month trade below respective means while the full corridor is valued at 27 basis points and offers EUR slow slow movements ahead. The USD interest rate side hardly moved from the Trump Dollar and Navarro comments.
To Yellen’s same old tired story, risk is balanced yet she wants a raise. Maturing Treasuries will reinvest while she wants a raise. And then the data dependent line. Yellen can’t raise while reinvesting maturities nor can GDP and economic date materially improve. The interesting aspect ahead for Trump is the vast majority of Fed Board members are Keynesians and need replacement to supply siders to look longer term at any USD economic recovery.
Brian Twomey, Inside the Currency Market, btwomey.com