EUR/USD, USD/JPY, BOJ: levels, Ranges, Targets

EUR/USD within the last 3 hours broke below yesterday’s reported 1.0915. New focus to the downside today is located at 1.0837 and much daylight. A break of 1.0837 is crucial as 1.0806 and 1.0779 awaits. Below 1.0779 then longs are finished. We’re looking for 1.0850’s to stop EUR/USD downside then a bounce. On the upside, 1.0972 contains the overall break point to target 1.1000’s. Not likely as EUR/USD remains overbought.
USD/JPY as a complementary pair contains supports for today at 113.09 and 113.17 Vs topside breaks at 113.82 then the challenge to 114.36. JGB 10 trades today around 0.99, 1.02 yesterday and a far distance to the 0 goal.
At 1.02 and 0.99 to offer definition to Accomodative policy, JGB trades above the negative 0.1 Complementary Facility where reserves are paid. Overall question for the BOJ is another lower rate to further negative on the way. Further accomodation by the BOJ and improved data from USD could potentially send USD/JPY light years higher. The 10 year yield is not only far to high but misplaced in terms of JPY’s Libor and overall interest rate curve. Both the Libor and Interest rate curve provide current supports to the 10 year JGB. This explains why the BOJ own 40% of the JGB market at the 10 year and why the yield fails to drop but instead rose since 2016. The overall Yield Control program at $USD 731 billion per month may be too expensive a risk.
On the CPI front, JGB purchases and accomodative policy had intended effects to raise the monetary base with hope CPI rises alongside the higher base. Since yield control September 2016 and JGB purchases, the Monetary Base saw a substantial slide to current lowest levels since September 2016. The Japanese view its bottommost interest rates as Call Rates minus Year v Year in CPI growth rates. The current number is running at + 0.14 while the Comp Facility exits at 0.9. A wide swath of territory exists for the BOJ to lower interest rates. More on Yield Control later.
GBP/USD is fairly contained today from 1.2888 and 1.2919 Vs upside breaks at 1.2953 and 1.2983. Longer term averages for interested from 50 to 253 day remain far overbought. At 1.2983 is a far drop from yesterday’s 1.3016. Overbought longer term informs a sell rally approach.
Brian Twomey, Trade Service open for interested, brian@btwomey.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s