USD/CAD: levels, Ranges, Targets

 

 

 

Canada’s yield spreads run 1.1, 0.70, 0.39 and 0.38. Viewed from OIS rates at 0.20’s all day long, rates trade below the furthest 10 to 30 spreads. The key to CAD’s OIS rates is long ago Canada extricated itself from Libor as was the new practice for many nations so to focus on internal systems to price exchange rates. The sidebar issue to Libor elimination is it explains why exchange rates no longer move in perfect unison. USD/CAD today will move big but all other nation exchange rates won’t follow. The glue that held nations in check together was Libor.

If CAD headline interest rates are viewed from 2 years out at 0.83 then a raise from 0.50 to 0.75 is viewed as a one and done. As much as I viewed this issue, I don’t see the multiple hikes over time as one bank on this site reported yesterday.More fake news possibly from the market people. I honestly can’t stomach these people.

Most importantly, I don’t see a valid reason why the BOC should raise. My CAD expert friend at Thomson Reuters reported yesterday, USD/CAD dropped 4% since the last meeting and Terms of trade for Canada improved. Canada lost on the Lumber issue but overall its not the big mover for Canada exports in Oil, Automobiles and Car parts.

Viewed from the USD triggers that move USD/CAD and from its current oversold condition, CAD/USD is heading lower and good prospect for further export gains. The level of the current exchange rate appears not as the raise issue but rather economics. Yet Inflation at 1.3 and GDP on the floor over the past 4 Quarters is question for hold rather than raise. Unless the raise question is arrest Inflation now and contain it over time. When Carney went to the BOE, he left Poloz with a sincere disaster.

Thomson Reuters prices 95% shot Poloz raises. I see 50 / 50 and on the edge.

Interested, 43 exchange rates as well as Levels, Ranges and targets were posted on my blog, including USD/ASIA in light of North Korea and Chinese dominance to the South China Sea islands and islands that don’t belong to China based on past treaties.

USD/CAD. Topside sell points 1.2948, 1.2979. Today’s range point exists at 1.3011. Bottom side 1.2826 is solidly oversold then 1.2834 and 1.2868.

The perspective at 1.3011, extreme prices are seen from 1.3037 which means 1.3011 will be a tough break. Longer term, a 591 and 335 day averages are located at 1.3148 and 1.3182 then comes 1.3191. An 847 day average exists below at 1.2587 yet for today, 1.2600’s inits extremes won’t allow 1.2587 to break anytime soon.

 

Brian Twomey

BOC

BUZZ-Look for BoC to soften the blow of a hike

Jul 10 11:24am By Peter Wadkins

Traders have already discounted a BoC rate hike on Wednesday, with odds at 95.64 on Eikon’s BOCWATCH, so the bank’s task afterward will be to soothe market concerns about what comes next since financial conditions have tightened in the run-up to the meeting and the loonie is crimping terms of trade. Gov Poloz’ recent comments bolstered the view that the BoC will press ahead [nL8N1JV3HN] with a 25bp rate hike despite USD/CAD’s 4.75% fall and oil’s 16-17% drop since their May 24 meeting. Some pundits think it may be a mistake [nNRA446mxm]. Poloz’s rationale is to head off inflation 18 months to 2 years from now, which is a hard sell considering stubbornly low inflation rates in the developed world. One-Yr Canadian BA rates have jumped 40bp since Sr. Dep. Gov Wilkins tipped the market on June 12th that a rate hike was coming later this year. Soothing comments will be the order of the day on Wednesday.

 

http://www.ifrmarkets.com/sites/default/files/imagecache/ifrrewriteimgpreset/7-10-2017_10-39-31_AM.jpg

BOC

http://www.ifrmarkets.com/sites/default/files/imagecache/ifrrewriteimgpreset/7-10-2017_10-39-31_AM.jpg

 

 

BUZZ-Look for BoC to soften the blow of a hike

Jul 10 11:24am By Peter Wadkins

Traders have already discounted a BoC rate hike on Wednesday, with odds at 95.64 on Eikon’s BOCWATCH, so the bank’s task afterward will be to soothe market concerns about what comes next since financial conditions have tightened in the run-up to the meeting and the loonie is crimping terms of trade. Gov Poloz’ recent comments bolstered the view that the BoC will press ahead [nL8N1JV3HN] with a 25bp rate hike despite USD/CAD’s 4.75% fall and oil’s 16-17% drop since their May 24 meeting. Some pundits think it may be a mistake [nNRA446mxm]. Poloz’s rationale is to head off inflation 18 months to 2 years from now, which is a hard sell considering stubbornly low inflation rates in the developed world. One-Yr Canadian BA rates have jumped 40bp since Sr. Dep. Gov Wilkins tipped the market on June 12th that a rate hike was coming later this year. Soothing comments will be the order of the day on Wednesday.

Yield Curves

 

While the current USD yield curve is inverted, the same inversions are found in yield curves for Europe, UK, New Zealand, Australia and Canada. The Japanese yield curve is positive while the Swiss yield curve is inverted but not to the extent of USD, Europe, Canada, Australia and New Zealand.

The case for inversions were derived from spreads in 10 to 3M Vs 10 to 30’s then middle portions from 10 to 5’s and 10 to 2 years. The question to measurement emanates from the 3 month interest rate. The Swiss for example in the all important 3 month libor views an inverted yield curve while in 3 month vital Debt Register Claims, the yield curve is Flat. Since Saron trades directly in relation and close to 3 month Libor, Libor was clearly correct.

The yield curve from German 3 month rates clearly shows a correct up slope yield curve in relation to the 10 to 30 spreads but a deep dip in 10 to 5’s and 10 to 2’s. Correct is to view 3 month Eonia to see the European yield curve inversion. Yet the deep dive in 10 to 2’s and 10 to 5’s is still seen.

The overall purpose for yield curve views is an economic perspective rather than a currency trade. European yield curves to trade EUR/USD is an absolute futile experiment. Measured against spreads to other nations is more inane. Same for GBP and the UK, Australia and New Zealand.

USD. 10 to 3 month = 1.35 Vs 10 to 2’s = 0.98, 10 to 5’s = 0.44 and 0.54 at 10 to 30’s. Overall, 1.35, 0.98, 0.44 and 0.54. From 10 to 30’s to 10 to 3m = 81 basis points. Fed Funds trades 1.16. A further Yellen raise, inverts the yield curve further.

GBP. 1.09, 0.98, 0.62 and 10 to 30’s = 0.64. From 10 to 30 and 10 to 3 month = 64 basis points. Bank Rate is current 0.25. GBP interest rates trade below yield curves yet Europe is the opposite as Interest rates trade above yield curves. How the UK /Europe union lasted is astounding. GBP is far more closely aligned to USD. Current GBP interest rates trade miles below yield spreads. A good case for a raise yet a raise inverts the overall curve further.

CAD. 1.1, 0.70, 0.39 Vs 10 to 30’s = 0.38 for an overall 72 basis point spread from 10 to 3 month and 10 to 30’s. Canada Bank rate is 0.50.

AUD. 1.06 or 1.28 from OIS rates then 0.90, 0.52 and 0.27 from 10 to 15 year for a total of 79 basis points. RBA interest rate is 1.50.

NZD. 1.12 then 0.93 and 0.32 at 10 to 5’s. OCR current is 1.75.

Japan. -0.82, -0.81, -0.87 and 10 to 30’s = 0.80. Negatives translate as 0.18, 0.19, 0.13 Vs 0.80. Call Rates traded last 0.95, Tibor at 0.0081 and Euroyen 0.0080. View Tibor as 1.0081 and Euroyen as 1.0080.

CHF. 0.74, 0.26, 0.48 and 10 to 30’s at 0.38 for a total of 36 basis points. Swiss interest rate is minus 0.75 or 0.25.

Current GBP Inflation at 2.9% runs above the 2.0 target yet lower GDP in the last 4 quarters to Q3 2016 ran 0.2, 1.8, 1.9 and 1.8. GDP was viewed as Real GDP against annual percents.

USD Inflation at 1.9 experienced lower GDP at 1.2, 1.0, 0.8 and 1.0.

Japan Inflation at 0.4 experienced higher GDP at 1.2, 1.0, 0.8 and 1.0 to match USD.

NZD Inflation at 2.2 experienced higher GDP at 3.0, 3.1 and 3.0. NZD has problems however as Employmenet rate is 4.9% and its Current Account Deficit runs minus 3.1 as a percent of GDP.

AUD Inflation at 2.1 and the low end of the 2 to 3% range experienced higher GDP at 2.2, 2.4, 2.4 and 2.7. AUD interest rate is 1.50.

Brian Twomey

USD/ASIA: Levels, Ranges, Targets

 

In light of North Korea, Chinese aggression in the South China Sea islands. How’s Asia currencies doing.

 

USD/CNY. From 6.8055 close, above break points 6.8330, 6.8343 and 6.8603 Vs 6.5730. Outright buy from Range indicators. Current price is oversold and severely far to low and seen from severe range problems. Nothing exists inside the current price except a lost wandering, random price.

USD/HKD. From the 7.8122 close, Break points 7.7930, 7.7862 and 7.7705. USD/HKD is miles upon miles overbought, Outright sell signals from range indicators. So severe are range problems, USD/HKD cannot sit in its present location. A big big move is ahead.

USD/KRW. From close at 1153.78, Break points 1143.68, 1130.06, 1124.97 and 1101.80. Outright sell signal from range indicators. Overall range is okay. Overbought.

USD/MYR. From close at 4.2990, break points are located at 4.3257 and 4.3397, far below at the 14 day average or 3143 days is 3.4982. USD/MYR is in good shape overall in range conditions and its price is neutral to oversold. Bank Negara was and remains a smart, smart central bank.

USD/PHP. From close at 50.579, Break points, 50.1792, 49.9558 and the 14 year average at 46.2330. USD/PHP is far far overbought and Range indicators reveal outright sell. Overall range conditions are okay.

USD/RUB. From close at 60.3850, Break points 58.8224, 57.3962 and 5 year average at 48.8276. The 14 year average is located at 36.7158. Currently overbought and outright sell on range indicators. Overall noise to range is okay.

USD/SGD. From close at 1.3824, break points 1.3914, 1.3921 and 1.3455 Vs 1.4310. SGD is oversold and lower means more oversold. Overall however this currency pair is in good shape.

USD/THB. From close at 34.109, Break points 34.2986, 34.3196 and 33.6061 at the 14 year average. Near term overbought, long term the Baht price is on the floor oversold and has much room higher to run.

USD/INR. From close at 64.625, Break points 64.5968 Vs 65.0225. The 5 year average is located at 62.2854 and 8 year average at 56.2499. Nothing special in INR. Range sell signal is close. Overall, USD/INR is in good shape.

 

Brian Twomey

CAD/CHF, CAD/JPY and CHF/JPY: Levels, Ranges, Targets

CAD/CHF Break points 0.7397 and 0.7343, Currently overbought. Outright sell from Range indicators.

CAD/JPY. Break points above 89.18, 89.94 and 90.27, below 85.09 and 83.12. Outright sell from range indicators. CAD/JPY is miles overbought from 85.09 and 83.12 as well as all averages from 5 to 253 day.

CHF/JPY. Break points 115.02, 113.22 and 111.24. CHF/JPY is also miles overbought and outright sell from range indicators.

 

Brian Twomey

USD/CAD, USD/CHF and USD/JPY: Levels, Ranges, Targets

USD/CAD is not only miles oversold but USD and CAD yield curves are inverted. As will be seen in today’s feature, yield curves are inverted in EUR, GBP, USD, AUD, NZD, and CHF. In JPY, the yield curve flat lined. No telling if the BOJ experiment works or will prove fruitful in the future. Based on past experiments, the BOJ current run fails miserably.

USD/CAD. Break points 591 day average 1.3148 and 335 day average = 1.3182. Then 1.3206 and 1.3402. Below 1.2600. Better longs than shorts in USD/CAD. Also, USD/CAD is the big USD mover in relation to USD/JPY and USD/CHF. USD/CAD beats USD/JPY by easily 10 pips in daily movements and 20 pips Vs USD/CHF.

USD/CHF. Break points 0.9768, 0.9840 and 0.9907 Vs 0.9524. Currently oversold. Extreme sell points 0.9682, 0.9714 and 0.9826 and 0.9841. Informs 0.9768 has a shot to break but 0.9840 holds. Extreme long points 0.9604, 0.9541, 0.9536 and 0.9502.

USD/JPY. Break points 112.33 and 111.38. USD/JPY is miles overbought from break points and short term averages. I can’t stress enough our economic world, trends and every market movement on the planet is dictated by the relationship in EUR/USD, EUR/JPY and USD/JPY.

Extreme sell points 114.31, 114.62, 114.91 and 115.00. Extreme long points 112.48. A break at 111.38 then comes 110.75 and 109.45.

 

Brian Twomey

EUR/USD and Cross Pairs: Levels, Ranges, Targets

 

EUR/USD is not only overbought currently but any rises travels to further overbought. In 5 of the 7 currency pairs in the EUR/USD complex, range indicators offer outright sell signals. EUR/JPY is miles overbought and will lead the way lower for EUR pairs. EUR/JPY overbought is consistent to overbought GBP/JPY and outright sells in NZD/JPY and AUD/JPY.

EUR/USD. Break points 1.1133 and 1.1009. Must breaks here to see far lower prices. Extreme sell points 1.1439 and 1.1491. Extreme long points 1.1295 and 1.1245. Upon 1.1133 break then next comes 1.1004 and 1.0986.

EUR/JPY. Break points 127.84, 127.32 and 125.06 Vs 131.52, Currently miles overbought, outright sell from Range indicators.

EUR/CHF. Supports and break points 1.0870 and 1.0830. Overbought and outright sell from range indicators. Consistent to GBP/CHF as big move is ahead yet AUD/CHF and NZD/CHF are fairly neutral. Blame the SNB as they hold their currency pairs in tighest ranges. My thought are the SNB won’t allow EUR/CHF to break vital supports.

EUR/CAD. Break points 1.4756, 1.4706, 1.4578 and 1.4325. Nothing special in EUR/CAD and not consistent to oversold AUD/CAD, NZD/CAD and GBP/CAD. To understand EUR/CAD, it can be a “funny” pair at times because the Correlations to EUR/USD constantly revolve from negative to positive and vice versa. Currently, its neutral.

EUR/NZD. Break points 1.5586 and 1.5505 Vs 1.5893. Break points consistent to NZD/EUR. Nothing special in EUR/NZD.

EUR/AUD. Break points 1.4720 and 1.4616 Vs 1.4890 and 1.5389. Outright sell in Range indicators while averages are more overbought than oversold.

EUR/GBP. Break points 0.8627 and 0.8712. Miles overbought as usual and outright sell from Range indicators. I don’t nor ever liked EUR/GBP because daily pip movements are purposely restricted.

 

Brian Twomey

 

 

 

GBP/USD and Cross Pairs: Levels, Ranges, Targets

 

GBP/USD. Break points 1.2778 and 1.2760. Extreme sell points above: 1.2995, 1.3105, 1.3161, 1.3170. Below extreme long points 1.2857, 1.2715 then descends upon a break at 1.2778 and 1.2760 to 1.2537 and 1.2492. Widest extreme range 1.3370 to 1.2200’s.

GBP/JPY. Break points 143.53 and 142.18 Vs 157.41 and 158.80. Currently overbought and outright sell on Range indicators.

GBP/CHF. Break points 1.2478 Vs 1.2556. GB/CHF is screaming for a big move due to the range pressure on current price.

GBP/CAD. Break points: 1.6873 and 1.7104, Currently oversold and outright buy from Range indicators. Oversold and outright buy remains consistent against AUD/CAD and NZD/CAD.

GBP/NZD. Break points 1.7800 and 1.8070. Currently oversold. GBP/NZD is the granddaddy mover among currency pairs.

GBP/AUD. Break points 1.6942 and 1.6897.

GBP/EUR. Break points 1.1593 and 1.1480, Currently oversold, outright buy from Range Indicators. Break points translate to EUR/GBP at 0.8625 and 0.8710.

 

Brian Twomey

NZD/USD and Cross Pairs: Levels, Ranges, Targets

 

NZD/USD. Significant points 0.7237, 0.7180 and 0.7064 Vs 0.7450 and 0.7615. Range indicators offer outright sell. Extreme sell points above 0.7315 and 0.7356 Vs 0.7237, 0.7218 and 0.7201. Terrific currency pair, moves well, responds as AUD/USD perfectly to targets. The RBNZ’s system of interest rates is just perfect and no need to ever change.

NZD/JPY. Break points 80.66, 80.14 and 78.68. Currently overbought and matches to overbought in AUD/JPY as AUD/JPY and NZD/JPY are the same pairs. Outright sell in range indicators and also matches to AUD/JPY.

NZD/CHF. Break points: 0.7012 and 0.6950 Vs 0.7233. NZD/USD and NZD/CHF are same pairs and move in unison so Double trade. Same deal as AUD/USD and AUD/CHF. Fairly neutral for NZD/CHF and same as AUD/CHF.

NZD/CAD. Far oversold and a big move is ahead for NZD/CAD. Oversold in NZD/CAD matches against AUD/CAD. Outright long on Range Indicators and also matches AUD/CAD.  Break points: 0.9465 and 0.9479 Vs 0.8914.

NZD/EUR.   EUR/NZD Opposite correlations to NZD/USD, long in NZD/USD is short in EUR/NZD and vice versa. NZD/EUR break points 0.6417 and 0.6451 Vs 0.6303 and 0.5781. Translates to EUR/NZD at 1.5583, 1.5501 Vs 1.5865 and 1.7298.

EUR/NZD Break points 1.5893, 1.5586 and 1.5505.

 

Brian Twomey

AUD/USD and Cross Pairs: Levels, Ranges, Targets

 

Long time friends and followers know the story. Offered are the most significant break points for each currency pair and breaks result in about a 200 pip move in 1 to 3 days. The break points are perfectly calculated from my Moving Average system and backed by more Statistics than anyone would need to inform a trade decision. I simply backed Statistics against further Statistics to ensure never to be wrong. WE’ll start with AUD/USD and AUD Cross pairs.

 

AUD/USD. Significant break points 0.7563 and 0.7533 Vs above 0.7790. The level at 0.7790 is an MA dating to January 1999.

Overbought begins at 0.7619 then 0.7626 and AUD is done at 0.7635 to 0.7649. The bottom must break 0.7592 to challenge 0.7563 and 0.7633. AUD at extremes are located below at 0.7538 and 0.7518. Above extremes begin at 0.7682 to 0.7720. The averages are fairly neutral at the zero bound and explains the wide variation to extremes. Focus for trades overall remains on the downside as I see an eventual break at 0.7563 and 0.7533.

Economically, AUD is holding its own as GDP over the past 4 years remains solid at the 2.0 to 2.5% range while Inflation also remains steady at 2.1% inside a 2 to 3% range. GDP reported as Real Gross Domestic Product and annual percentages. Australia remains challenged however in overheated Housing markets, low wage growth  and employment. The RBA has easy ability to lower OCR from current 1.50 yet I don’t see the RBA using the hammer approach by a 1/4 point drop. A drop to 1.40 possibly but it doesn’t appear from the July 4 statement OCR changes are warranted yet.

The RBA under the expert tutelage of Philip Lowe remains in the process to revamp its interest rates as was done by many central banks over the past year. Lowe is quite able as well as Guy Debelle to lead the RBA and Australia.

Australia commodities to watch, Iron Ore, Coking Coal and Natural Gas. Never forget Australia’s traditional Wool industry and exports.

AUD/JPY. Break points 89.07, Vs 86.18, 85.74 and 84.95. Currently overbought and Range Indicators currently issue an outright sell signal. Normally AUD/JPY and AUD/USD share negative correlations. A long in AUD/USD is a short in AUD/JPY and vice versa.

AUD/CHF. Same pair as AUD/USD and same movements. AUD/CHF and AUD/USD allows a double trade. Break points are located at 0.7413 and 0.7387. AUD/CHF overall is neutral and coincides with AUD/USD.

AUD/CAD. Severely oversold and range indicators agree with an outright long. Longs are confirmed by NZD/CAD’s oversold condition. Break points 0.9911, 0.9986, 1.0096  Vs 0.9682 and 0.9527.

AUD/NZD. Break points 1.0535 and 1.0667. Oversold but not by much. Range indicators offer an outright long.

AUD/EUR. The best pair for AUD/USD direction. Break points 0.6796, 0.6803 and 0.6846 Vs 0.6578. Currently oversold. Translates to EUR/AUD at 1.4714, 1.4699, 1.4607 and 1.5202. EUR/AUD break points: 1.4720, 1.4890 and 1.5389 Vs 1.4616.

 

Brian Twomey

 

 

 

Fed and ECB Share Responsibility for latest bond Tantrum

 

From my long time friend Peter Wadkins of Thomson Reuters. Peter enters his 46th continuous year in Fx trading from all levels, including head of Treasury for 10 years at New South Wales bank. Peter was on the CME floor in 1983 when AUD began its free float. Remarkable career and from a good, honest, decent god fearing person.

 

COMMENT: Fed and ECB share responsibility for latest bond tantrum

Jul 7 6:34am By Divyang Shah

LONDON, July 7 (IFR) – If you look at the absolute change in benchmark bond yields then on this basis alone the current ECB-inspired taper tantrum is worse than the Fed taper tantrum of 2013. The absolute change in 10-year Treasury yields eight days after Bernanke’s testimony to Congress on 22 May 2013 was around 20bp, which is a lot lower than the 32bp gain in 10yr Bund yields since Draghi’s Sintra speech last week. (The percentage changes are even higher, especially for EGBs)

This is history and looking forward the potential for a more violent adjustment in bond markets is high, but for now central banks are unlikely to be too concerned. There are four key differences between the ECB taper tantrum and the Fed taper tantrum of 2013.

First, it’s not just about QE. When the Fed was shifting gears the market was aware that the gap between QE taper and rate hikes was large. In contrast, the ECB has been trying to contain the debate over sequencing and whether its negative deposit rate can be hiked during the tapering process. The market certainly believes this is possible, attaching a high probability that the ECB will have a less negative deposit rate by the end of 2018.

Second, the bias from major central banks on policy has also shifted. The BoC has been busy preparing markets for a rate hike as soon as its July meeting, the Norges Bank and Riksbank have both dropped their easing biases, and the Fed has been willing to talk about Quantitative Tightening (QT) despite downward surprises on inflation. The backdrop is one of change when it comes to global central banks and has been a surprise.

Third, Fed QT is likely having as important if not more of an impact on markets as the ECB’s tapering desire. Remember that the ECB is talking about reducing the pace at which its balance sheet rises, while the Fed is talking about reducing its balance sheet. The default explanation has been to point the finger at the ECB for the rout in bonds, but the Fed should not be ignored.

Fourth, the market has retained its bias toward investing in bonds over equities. Positioning in the bond market has extended further since 2013, with more sovereign debt trading at lower negative yields and curves a lot flatter. Equities might have rallied but this has been one of the most unloved rallies in history. The potential for a positioning adjustment is greater than in 2013.

For now, bond markets are moving largely as one would expect when policy expectations adjust, and as long as this adjustment is orderly central banks will not modify/delay their plans. While central banks are cognisant as to how markets behave, they worry more about maintaining easy policy at a time when deflation risks have ebbed considerably, risk taking and animal spirits are once again exuberant, and there have been strong cumulative gains in growth/labour markets. Loose monetary policy is at risk of overstaying its welcome. Divyang.Shah@tr.com /db/kl/jb

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NFP and G10 Trades: Levels, Ranges, Targets

 

50 year period ends, by crash or new market formations such as Bretton Woods in 1944, always experience since 1694 the greatest prosperity and boom times to remain at least 10 years. The window from start to end is 12 1/2 years. Prosperity is all encompasing as everybody on the planet prospers, markets trend nicely, threat of wars are gone and peace reigns. Current economic experiments by central banks supposed to fail in this last period. But it brings renewal later. Now is time to watch Gold trades over the long haul. A recommended read for market methodologies is the great investor from yesterday, Barnard Baruch. He knew periods as well as Gann. But periods are biblical from 49 years.

What the relationship in EUR/USD, EUR/JPY and USD/JPY informs is predictions for when crashes will occur, when prosperity begins and it predicts every market price on the planet from stock markets to bonds to currencies, interest rates. Its the all encompassing insight to world markets.

And again Non Farm Payrolls Range is 50,000, established in 1939 when the release began. Certain months maybe 49,000 or even 51,000 but 50,000 is solid. NFP inside the 50,000 interval then prices range. Outside then bottoms and tops break. Today’s number is 179,000 so range is 129,000 to 229,000. Range trades mean long bottoms and sell tops comfortably. Sadly, amongst all the analyst, nobody will enter the required data to forecast NFP correctly. Its easily by now 1000 numbers then calculations. Forget weekly hours or average earnings as those numbers haven’t moved in 78 years of Non Farm.

EUR/USD is miles overbought from averages 20 to 253 day. EUR/USD price currently is not only far to high but its setting up for the big fall. Its the range indicators to inform EUR/USD heads lower but overbought averages agree. Inside Current EUR/USD price is lost. Statistically, its called randomness. It can’t handle much higher. Its the opposite effect to recently reported AUD. AUD had to climb to relieve the range pressures. Same principle to EUR/USD but in the opposite direction. EUR/USD contains far more range movements than AUD so it didn’t take much higher for AUD to see normalcy again. EUR/USD can travel a bit more than AUD so it achieves overbought for days at times.

Here’s trades and again daily trades as the central banks trade the exact same levels, ranges and targets.

Big break line above is 1.1457. Watch the break below at 1.1373 then the bottom at 1.1357.

AUD/USD. Sits at dead center neutral. The big break line below is located at 0.7562 and 0.7534. Break here then far lower for AUD. Above overbought begins at 0.7618 then travels to scary overbought at 0.7634. Any price is this area is open game for shorts.

NZD/USD as the market signal pair sits in the same predicament as AUD. Big break lines are located at 0.7237 and 0.7178 then 0.7061. Range indicators reveal sell signals are here so sell tops.

Remember the British Tradition statement for currency pairs. Check out the most miserable currency pair on the planet to define its follow of the British tradition. What’s the British tradition, build supports and resistance levels to contain movements. The BOE are masters at containment. Its why EUR/USD is a far better currency pair to trade because its pure and movements are allowed.

Range break today 0.9746, big break line at 0.9770 then 0.9842. Today’s levels working down, 0.9655, 0.9647, 0.9624 then 0.9597. USD/CHF is far oversold so despite its contained disaster, long bottoms.

USD/JPY topside is located at 113.88, 114.32 and 114.77. Below 113.30.

EUR/JPY breaks above 130.18, 130.31, 130.62 and 130.94. Below Watch 129.18.

Poorly constructed GBP/USD at 1.2946 and 1.2975 defines either 1.2896 or 1.3026. The British way and here to remain forever without change. Money market traders have a field day while the exchange rate remains contained.

GBP/JPY. 146.65 or 147.23 defines either 147.23, and 147.56 or 145.28 and 144.99. GBP/JPY is far overbought while GBP/USD is dead neutral like its British cousins AUD and NZD.

 

Brian Twomey

 

EUR/USD, FED and Crashes: levels, Ranges, Targets

 

Upon the 2008 crash, EUR/USD for the month of August lost 1021 pips from 1.5621 to 1.4569 but by October, EUR/USD dropped 3200 pips. Bernanke and the Fed then lowered Fed Funds 50 points, purchased $1.2 trillion in Treasuries, 1.2 trillion in Mortgage securities and 100 billion in Agency debt. Meanwhile, EUR/CHF dropped 3500 pips in 15 minutes and GBP/USD 3000 pips in 3 hours upon the Brexit vote. Stimulus and bond purchases never entered the lexicon. Treasury purchases were done at $75 billion per month yet Yellen refuses to give back $60 billion per month until the Queen sees fit to do so.

Its an imperative to watch the EUR/USD, USD/JPY and EUR/JPY relationship moving forward as the 3 currency pairs will inform long before when the crash will come and how horrific it will be. Its coming and Yellen will lead the charge.
If Bernanke would’ve allowed the market to correct itself in 2008 as all markets do upon any crash event, economics and markets today would’ve been just fine. The 1997 / 1998 crash was also seen from miles as was the EUR/USD and EUR/JPY rise as well as the USD/JPY fall. The next crash is different and will be worse because its engineered by faulty economic and market assumptions.

Measured by historic 50 year market periods since the BOE in 1694 and 1695 for Scotland, 2008 was not only forecasted miles before the actual event but 2018 is the next vital inflection point. Economic life doesn’t improve from today’s vantage point as the 50 year market measures perfectly predicted every market crash, recession and every new market period since 1694 such as Gold periods, 1972 Free float, Bretton Woods 1944, 1908 Knickerbocker bank.  The accuracy is not only stunning but what’s coming can’t be stopped because we are in the last period of the free float with only a short time to go before it ends. One can argue its ordained by Leviticus and Jubilee periods.

EUR/USD big break lines today are located above at 1.1370, 1.1400 and 1.1430. EUR/USD is miles overbought done at 1.1452. Below, 1.1300 is big line break and EUR/USD is done at 1.1283.

GBP/USD breaks above are located at 1.2954 and 1.2975 and 1.2996. Below 1.2954 then 1.2924.

GBP/JPY must breaks are located at 146.26 and 146.61. Targets then go to 145.79 or 147.06 and 147.51.
Brian Twomey

 

Fed Statements 2008, 2009 and 2010

Note 2009’s release as the Fed Purchased $300 billion in Treasury securities in 6 months. The Fed Purchased $750 billion in Agency Mortgage backed securities to total $1.25 trillion for the year. The Fed purchased $100 billion in Agency debt for a $200 billion total. By 2010, the Fed purchased an additional $600 billion of Treasury securities at $75 billion per month.
The Discount Rate was lowered 50 points to 1 to 1/4 percent, today its 1.75.
As easy as the monies were given, appears impossible for Yellen to give it back.
Interesting to read statements since 2008 to find nothing changed.

Release Date: October 29, 2008

For immediate release
The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 1 percent.

The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures. Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit.

In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate in coming quarters to levels consistent with price stability.

Recent policy actions, including today’s rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, and San Francisco.
Release Date: March 18, 2009

For immediate release
Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of evolving financial and economic developments.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Release Date: November 3, 2010

For immediate release
Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits. Mr. Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.

 

Brian Twomey

EUR/USD and Cross Pairs: Levels, Ranges, Targets

Fed Funds closed Monday at 1.06 and 10 points lower than the traditional 1.16 closes since the Fed;s last raise. Fed Funds continues to see 2 to 3 days per month when it takes a massive drop. Massive to today’s standards. Monday’s drop explains USD/JPY rise as partly higher ISM and lower Fed Funds. Today, Fed Funds must righsize but this comes at a time when markets were closed yesterday and today is FOMC statement release. Volatility focus today will be on USD as USD must lead the charge to re price the markets.

The big break point for GBP/USD is located at 1.2902 then comes 1.2883, 1.2867 and bottom at 1.2851. Here’s where the BOE steps up to stop GBP/USD as a line was inserted at 1.2850. This is a big move and means much for GBP’s downside.

GBP/JPY as a clearer example sees break points at 146.13 and 146.44. Both points mean GBP/JPY heads to 145.55 or above at 146.82 then 147.21. Below for GBP/JPY must breaks are located at 145.92 and 145.73 then comes 145.55. Again the object is to contain GBP/JPY in order to assist the stop in GBP/USD. The deceptive aspect to both GBP/USD and GBP/JPY is on paper and based on daily pip movements is volatility looks terrific. In actuality, GBP is a dead pair in movements.

GBP/JPY’s counterpart in EUR/JPY is out of alignment to its respective pairs in USD/JPY and EUR/USD on a 1, 2 and 3 month basis. On a 1 year scale, EUR/JPY is far out of alignment. To rightsize, EUR/USD must severely fall or USD/JPY must rise substantially. Out of sync EUR/JPY signifies its current price is far to high. The correct positioning for EUR/JPY is location between EUR/USD and USDJPY. Out of alignment means EUR/JPY must trade to its proper location.

Any wonder then why resistance is constantly built into EUR/JPY’s price everyday for many weeks. Today’s points are located at 128.92, 129.07, 129.42 and won’t be seen 129.77. Rises in EUR/JPY will be slooow grinders. Below 127.57 holds EUR/JPY for today.

EUR/USD is out of bounds overbought at 1.1453 and 1.1460 and oversold at 1.1316. At 1.1324 is big line to 1.1316 and above at 1.1394.

Brian Twomey

GBP/USD, GBP/JPY, BOE: Levels, Ranges, Targets

 

 

 

UK interest rates currently trade at the lowest depths on record. On record means since the BOE began in October 1694 when even then interest rates began trading at 6%. The BOE is in uncharted territory at a 0.25 Bank Rate and explains why the raise, don’t raise conundrum exists on the BOE Board. The BOE doesn’t have ability to raise nor to lower as lower risks negative interest rates. The BOE can’t go negative interest rates because its the home to the largest bond market offerings in the world. Vast majority of nations come to the UK to offer bonds and this is why the UK is “Home to Currency Trading”.

London was always known as the center to raise money for many nations, especially those many nations pegged exchange rates to GBP. Australia and AUD wouldn’t exist today without ability to raise money in London in the late 1800’s and early 1900’s. Australia for many years was once pegged to AUD/GBP and this exchange rate was vital to its existence. Australia was created as a nation due to AUD/GBP and London ability to raise money. Negative interest rates would limit ability for nations to finance monies through nation’s bonds as well as Currency Bonds.

The BOE operational interest rate system is solid and expert as the BOE never revamped nor will ever revamp their interest rate system as most nations accomplished over the past year. A revamp is not needed. What’s needed is the UK’s economic house must to come to order because current interest rates are dangerously low. The BOE is working desperately hard to insert interest rate floors to protect the downside from falling further.

The further BOE conundrum is GBP/JPY must be contained because its most vital to GBP/USD in positive correlations. The last event the BOE wants is to see GBP/JPY lose control then GBP/USD is open game.

While intent focus and writings remains on the BOE board to glean information, the place to watch is the MPC Board that oversees the BOE. The BOE Board is nothing in comparison to the overseer MPC Board’s power to take immediate action.

The vital downside break points for GBP/USD are located at 1.2884 and 1.2887 followed by 1.2942. Above a tough line exists at 1.2957 then 1.3012. The range point is located far above at 1.3123. The BOE remains to contain GBP/USD inside a 1.2300 to 1.2800 range with focus on the upside.

GBP/JPY downside points are located at 145.63 and 145.60. Upside 146.43 must break to target 147.04 and 147.19.
Brian Twomey

Inflation Vs Fed Funds and GDP V Unit Labor Costs

 

Stagflation in the 1970’s were characterized when Inflation rates traded above GDP and in 6 years of the 1970’s decade, Inflation traded above Fed Funds. Fed Funds began 1970 at 5.0 and ended in 1979 at 13.00 while Inflation hit 1970 and 1971 lows at 3.3 and 3.4 then 13.3 in 1979. Inflation traded above Fed Funds in 1970, 1974 to 1977 and 1979. GDP began Q4 1973 at + 3.8 then contracted to minus 4.7 by Q1 1975. From 1973 to 1975, 5 quarters were negative. Central banks raised and lowered interest rates to contain inflation and failed as Inflation tracked above and below Fed Funds.

From 2008 to current day, Inflation traded above Fed Funds and GDP for the vast majority traded below Inflation. Inflation since 2014 trades higher than GDP and Fed Funds.

Stagflation is defined as Inflation rates above GDP or prices trade higher than output. Wages Vs Productivity is a good measure however more detailed is divide total Labor Income by GDP to derive a Unit Labor Cost figure. The operable word is Cost as the measure to produce GDP output answers are Wages to high, low or just right. From 2007 to 2011, Unit Labor Costs were negative 0.7, dipped to minus 9.1 in 2009 and 2010 then positive 0.6 in 2010 to 2011.

In Q 1 1974, Unit Labor Costs hit 70 year highs at 12.7, Fed Funds was 9.75, GDP went severely negative at minus 0.5 yearly growth rate and Inflation was 12.00 %.

Canada’s example is perfect to highlight the United States as Unit Labor Costs in the US and Canada are both hovering at 1.1% lows.

Canada’s Full time Hourly Wage is CAD 27.56, Inflation at 1.6 for April and 1.3 on its newly revised CPI Trimmed Mean basis. The Interest rate is 0.5 and GDP reported June 30 was 0.2 and Minus 0.9 in Manufacturing.

March and February reported GDP at 0.5 and 0.1 followed by January, December 2016 and November 2016 at 0.6, 0.3 and 0.5. Subtract the percentages from GDP and actual from January went from 1,709, 965 to current 1,723, 201. Essentially no change in 6 months in GDP and the US example is the replication of Canada.

The volatile release historically is Unit Labor Costs and GDP while the drivers are Inflation and Fed Funds. Higher Inflation and Interest rates historically fails in the normalization question and leads to low GDP and asks, are we heading to 1970’s Stagflation.

Brian Twomey

USD/CAD and USD

To all the many new friends and followers, to long time friends and followers,  thank you. I’m finishing Fed Funds V Inflation and GDP. All in relation to Unit Labor Costs, its fascinating.

 

USD/CAD is highly oversold. USD/CHF is highly oversold. USD/JPY is not oversold nor overbought. Its just sitting listless. USD/MXN also sits listless. USD/NOK is ready for a giant move. USD/SEK is massive oversold. Not much happening in USD/ZAR.

Above USD/CAD breaks are 1.3145 and 1.3147. At 1.3145 = 592 day average while 1.3187 = 335 day average. Then comes 1.3291 and 1.3434.

In the BOC just released Business Surveys, looks like Poloz at the BOC not only want to raise, but he may be forced to raise. Housing is on Fire but another reason to raise is not seen.

 

Brian Twomey