If EUR/USD was reported yesterday for the full topside targets, the set up was 1.1664 and 1.1686. Next came 1.1744. The bottom most vital was located at 1.1606 and the EUR bounce began at 1.1626. What we knew about Queen Yellen yesterday early morning New York time was it didn’t matter one iota what she said as 1.1744 held then EUR/USD reversed. Queen Yellen was known and priced long in advance and the only number of concern was 1.1686 and 1.1606.
What’s special about Inflation targets is the protection of the bottom. As money supplies remain at far overbought and exorbitant levels, Inflation and Interest rates should be falling through the floor. This means purchased products should be extremely cheap because the currency must also fall. Money supplies up then interest rates, currency and Inflation all fall in unison.
Central banks and Queen Yellen must desperately protect the bottom against what should be a disinflationary world. Queen Yellen’s Fed Funds raise into an already overbought fed Funds was an added protection to protect the bottom. With bottom currently protected, the Queen is failing to return the money. We should be living in a race to the bottom world if sound economics was the proper practice.
In the Weimar Republic when harsh reparations were placed on the Germans, Germany had little choice except to add enormous amounts of money to the economic system to maintain the economic system. As money supplies spiraled higher then Inflation, Interest rates, German Marks currency and prices fell through the floor.
The German Mark went to worthless status yet prices for products were extremely low. The very few families that had German Marks piled those German Marks into a giant wheel barrow then took the wheel barrow to the few open stores to hopefully buy a loaf of bread and butter. Most could only buy butter or bread. Turnips was the most popular daily food for the masses for years. A German from those years would never consider eating a Turnip ever again. I retain today a few German Marks piled into those wheel barrows to buy bread.
Queen Yellen’s obligation is give back the money and stop risking the economic system for the 300 million. GDP and Inflation at 1% could easily fall to negative. Then what exists is Weimar Republic. Queen Yellen will be responsible yet Yellen can’t stop it if it began.
AUD/USD is a currency pair on the move for the first time in at least 1 year as the daily ranges maintain continuous expansion. The break points below are 0.8021, 0.8017 and 0.8002. AUD remains light years overbought and strategy should be sell rallies and don’t touch longs.
EUR/USD at current overbought 1.1706 has next support at 1.1686 on a break of 1.1707.
USD/JPY vital break points are located at 110.82 and 110.89. Topside break is 111.30.