Money supplies

 

As month end approaches and monthly positions adjust, central bankers first priority is check money supplies as they are constrained by not month end but the 35 day Maintenance Period instituted by the United States in 1979. The 35 day Maintenance Period then carried over in 2000 to a central bank meeting every 35 days. Forward Guidance as next priority allowed the central banks to inform all is fine and the news conference validates the various economic scenarios.

Prior to the build in stimulus and money supply concentrations by central banks, overnight rates free floated as market determinations rather than the new tool to hold overnight rates in tiny ranges. A bank in deficit at end of day had to buy currency to balance while a surplus bank sold currency. The overall supply of bank money at day’s end determined if the overnight rate reported higher or lower and in turn affected other market interest rates. Interest rates and money supplies back then as today held an adverse relationship. By week’s end, the central bank then added or subtracted monies to maintain a balanced money system.

Under stimulus, the system shifted  More later

 

Brian Twomey

 

 

 

 

 

 

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EUR/USD Vs EUR/AUD V AUD/EUR: Levels, Ranges, Targets

 

EUR/USD Vs AUD/USD  correlations from a 1 year perspective currently  runs +90%, 50 day at +94% and 20 day at 94%. In August and the same time as last month in exact time frames, EUR/USD to AUD/USD Correlations ran 97%, 93% and Minus 25%. EUR/USD Vs AUD/USD relationship ran by the 20 day average over the past month and went from deeply negative to solidly positive correlations. The relationship is now solid which means longs and shorts are solidly aligned.

EUR/USD to AUD/EUR correlations from a 1 year perspective currently runs minus 97%, 50 day at minus 24% and 20 day at +85%. In August, correlations ran minus 93%, minus 81% and minus 66%. The 20 day average was responsible over the past month as driver to the EUR/USD Vs AUD/EUR relationship and the current association is positive.

AUD/USD Vs AUD/EUR runs 1 year correlations at minus 94%, 50 day at +0.09 and +97% on the 20 day. In August, Correlations at the 1 year ran +48%, 50 day at +54 and +55 at the 20 day. While the 1 year and 20 day relationship strengthened positively, the 50 day correlations experienced a severe drop.

EUR/AUD Vs AUD/EUR correlations from 1 year run perfectly negative at 1.0, 50 day at minus 99% and perfectly negative at the 20 day at minus 1.0. This relationship is absolutely perfect as a long in EUR/AUD is a correspondent short in AUD/EUR. A short in EUR/AUD is a perfect long in AUD/EUR. This relationship has been running negative over many many months and the association runs as its intended purpose historically.

What changes a correlation is a significant break point and for the past month, the break point was the 20 day average. Longer term and to mark a periodic or wholesale market change then the 10 year average must be viewed.

To understand the EUR/AUD and AUD/EUR relationship is to view current prices, positions and ranges. AUD/EUR at high 0.6690’s trades 2.2 to 2.3 times EUR/AUD at 1.4900’s.

EUR/AUD daily range movements based on European interest rates is allowed a traditional wide 75 pip daily movement or 150 pips overall. EUR/AUD is actually the driver pair to AUD/EUR because of this allowable wide movements and because of its higher price at 1.4900’s. The second factor is EUR/USD cross pairs are always traditionally priced in larger daily point range movements to move farther and wider than EUR/USD.

AUD/EUR is quite a different pair as its daily point movements are located at 34 pips or 68 pips overall. AUD/EUR is a contained currency pair purposefully by the RBA to not only restrict its movements but its restriction is accomplished by holding range point movements below AUD/USD. Current daily AUD/USD is running at a whopping 41 pips or 82 pips overall. Traditional AUD/USD for many many months has been running at 38 to 39 daily pips. At 41, AUD/USD broke its range. This is quite rare especially for AUD as the RBA holds AUD/USD in tiny ranges when economic turmoil rules the day. Its how the RBA and AUD/USD is able to weather all economic storms since AUD gained the free float advantage since 1983.

If however the RBA didn’t hold AUD/EUR tight then EUR/AUD prices would fly far and wide on a daily basis. Also note AUD/EUR at 0.6600’s Vs AUD/USD at 7900’s. AUD/EUR is priced below AUD/USD from 1.1 to 1.2 times. The import why the RBA must control AUD/USD to AUD/EUR is because Iron Ore and Wool is priced everyday in AUD/USD terms. The RBA wants AUD/USD priced correctly for purchase and export terms. Iron Ore is most vital because only China and Australia set Iron Ore prices.

Overall AUD/USD is crucial at its vital break points at 0.7877 then 0.7817. Its significantly lower or higher for AUD/USD based on 0.7877.

EUR/AUD is also at a crucial break point just below at 1.4859 and 1.4839. At 1.4859 is most vital as the 10 year average is located at 1.4860. Does it break.

AUD/EUR vital break points are located at 0.6730, 0.6741 and 0.6816. This translates to EUR/AUD at 1.4858, 1.4834 and far below at 1.4671. For the next few days at least, AUD/EUR will stop EUR/AUD from the 1.4859 break.

 

Brian Twomey, Inside the Currency Market, brian@btwomey.com. To go far deeply into the currency market on a broad range of topics, twbrian.wordpress.com. The blog doesn’t nor will ever earn money and its safe.

 

Brian Twomey

 

 

 

 

 

EUR 21 Pairs: Levels, Ranges, Targets

 

Following are most vital break points for EUR pairs as well as 24 hour ranges to accommodate interested in quick day trades. As mentioned in USD pairs, the 5 year average is in focus and within striking distance of current prices. Same scenario for EUR/USD as the 5 year average lies just above current price.

Viewed from EUR/USD, rises in current price become overbought quickly as EUR sits on its base of supports at 1.1687 and 1.1609. The 5 year average at 1.2067 then becomes severely challenged to break higher. Further, Noise and Signal indicators inform EUR cannot handle much higher. EUR’s main conundrum as a current exchange rate price is European interest rates are out of sync to the exchange rate. The same phenomenon is seen in AUD and OCR and the speculation is all nations are experiencing the same dilemma as interest rates between nations share exact similarities, rates and maturities. The difference between nation interest rates is nations align interest rates to each other so not to allow a gain in advantage. Think a Chess match as volatility is eliminated in market prices to allow the system to remain tightly bounded. In the 1930’s currency wars, focus was strictly on exchange rate advantage while 2017 focus is interest rates. The unknown question is the effect interest rate nation have to Repo rates and Repo rate nations such as ZAR, TRY, SEK, RUB, TRY,

 

EUR/USD Break point supports 1.1687 and 1.1609. At current 1.1600’s was 1.1100’s in June as EUR/USD broke higher and trended to 1.2000’s 3 months later. The 5 year average is located at 1.2067. The 24 Hour Range is located from 1.1848 to 1.2059 and 8 pips below the 1.2067, 5 year average. Further, the immediate range break for the next day is located at 1.2086. EUR above faces massive resistance.

EUR/JPY = Break point supports 129.69 and 128.71. Ironic, 5 year average = 128.71. Further, 253 day average and 200 day at 124.54 and 125.52 are currently far overbought. 24 Hour range = 133.11 to 134.95.

EUR/CHF = Break point supports 1.1304 and 1.1187. 5 year average = 1.1454. 24 Hour Range = 1.1324 to 1.1686.

EUR/CAD = Support 1.4679, Resistance 1.4787. 14 year average = 1.4565. 24 Hour Range 1.4671 to 1.4873. EUR/CAD price is misaligned in present location and a big move is ahead.

EUR/NZD = Supports 1.6105 and 1.5925. 5 year average = 1.5922. 24 Hour Range 1.6203 to 1.6345 and 1.6428.Nothing special in EUR/NZD as current price is fairly balanced and middle range.

EUR/AUD = Supports 1.4864 and 1.4830. 10 year average 1.4860. 14 year average 1.5354. 24 Hour Range 1.4933 to 1.5141. A favorite pair to trade against AUD/EUR.

EUR/GBP = Resistance points 0.8895 and 0.8937. 10 year average 0.8253. 24 Hour Range 0.8803 to 0.8925.

EUR/ZAR = Supports 15.3862 and 15.2061. 5 year average 14.2865. 24 Hour Range 15.7387 to 15.8771 and 15.9569.

EUR/SGD = Supports 1.5906 and 1.5868. 5 year average 1.5905. 24 Hour Range 1.6003 to 1.6225.

EUR/THB = Supports 39.0780 and 38.9321. 5 year average 39.9172. 24 Hour Range 39.3273 to 39.8724

EUR/SEK = Resistance 9.5560 and 9.6062. 10 year average 9.3584. 24 Hour Range 9.4911 to 9.6227

EUR/RUB = Supports 68.2898 and 67.9836. 5 year average 58.7876. 24 Hour Range 68.4858 to 69.4351. EUR/RUB is vastly oversold.

EUR/PLN = Supports 4.2618 and 4.2437. 5 year average 4.2307. 24 Hour Range 4.2454 to 4.3043. EUR/PLN is vastly oversold and a big move is head.

EUR/NOK = Resistance 9.3882 and 0.3254. 5 year average 8.6277. 24 Hour range 9.2765 to 9.4051.

EUR/MXN = Supports 21.0215 and 20.7640. 5 year average 18.5559. 24 Hour Range 21.0956 to 21.3881.

EUR/KRW = Supports 1322.3497 and 1314.1300. 5 year average 1339.6912. 14 year average 1411.6560. 24 Hour Range 1347.0509 to 1441.4414.

EUR/INR = Supports 75.2671 and 74.6001. 5 year average 75.2740. 24 Hour Range 77.0298 to 78.0976.

EUR/ILS = Supports 4.1562 and 4.1293. 5 year average 4.4780. 24 Hour Range 4.1546 to 4.2123

EUR/HUF = Supports 307.8770 and 306.6438. 5 year average 305.7317. 24 Hour Range 308.3853 to 312.6598 and 314.3418.  big is coming to EUR/HUF.

EUR/HKD = Supports 9.1243 and 9.0681. 5 year average 9.3646. 24 Hour Range 9.2839 to 9.3655 and 9.4126.

EUR/DKK = Supports 7.4390 and 7.4378. 5 year average 7.4519. 10 year 7.4502. 14 year 7.4498. 24 Hour Range 7.4028 to 7.4679 and 7.5055.  EUR/DKK contains severe range problems. This pair isn’t ready for breakout but rather the risk is absolute explosion.

Of 21 EUR pairs, 18 pairs are strongly supported.

To understand EUR as a risk pair, CAD/ZAR is the premiere indicator to determine ability to take on market risk. No better opposite currency pair exists to measure EUR than CAD/ZAR.

CAD/ZAR is well supported while EUR/USD is also well supported. CAD/ZAR supports 10.4827 and 10.2856. The 5 year average 10.0007. The CAD/ZAR  and EUR/USD relationship must break by either EUR far higher to break its 5 year average at minimum or CAD/ZAR must fall light years lower. The relationship further informs how tight are markets prices.

 

Brian Twomey

 

 

 

 

 

 

 

 

20 USD Pairs: Levels, Ranges, Targets

 

Following are most vital break points for USD pairs. Breaks at respective points will see price accelerations in the direction of the break. Also 24 hour ranges are posted for day traders interested in quick trades. The commonality to all currency pairs is trade around 5 year averages therefore 5 year averages will report to understand the price context.

My arsenal of currency pairs total 476 with ability to view prices from 1 day to Jan 1999. Most vital is every currency pair is backed by more moving average statistics than anyone would need in a lifetime but Stats were built in for price  protection. I can see any day from today to 1999 and view Stats and vital data. Everyday requires a click and voila, the trade decision is made within seconds to minutes. The sidebar to mounds of Statistics is not all Stats work in currency trading. Must be careful in chosen Stats as this imperative results from 5 years running this system.

The second system for day and 24 hour trades is a pure interest rate system. Like the above system, its accuracy is perfect to the exact pip and in use for about 3 years. Most important aspects to the currency price is Levels, Ranges and Targets. Levels are trad able points and significant to a small degree. The range is by far most vital as a range break means higher or lower with a price acceleration because of its support and / or resistance properties. The target is the target. A market target price was found 200 years ago, in 1898, by Knut Wicksell. The market structure of prices in all financial instruments was also the result of Wicksell and won’t ever change as long as markets trade.

USD/DKK . Break points above 6.4108 and 6.3735. The 5 year average is located at 6.2291. The 24 hour range to run through US traded markets are located at 6.1928 to 6.2487.

USD/MXN. Break points above 17.8898 and 18.0056. Oversold from the 5 year average at 15.5963. 24 hour range  = 17.6615 to 17.7845 and 17.8312. Watch Tie and Cete rates as they drive MXN.

USD/JPY. Vital supports 111.01 and 110.88. Approaching overbought from 111.01. 24 Hour range = 111.56 to 113.15. Context to 113.15 as Range breaks are located at 113.16 and 113.67. See overbought as range point comes to focus.

USD/CNY = Above 6.7082, 6.6552 and 6.8304. Below at 10 year average 6.5543. 24 hours range = 6.5430 to 6.5887 and 6.6031.

USD/CHF = Support 0.9638 and 0.9677.  5 year average = 0.9522 and 10 at 0.9856. 24 hour range = 0.9649 to 0.9734.

USD/CAD = Resistance above 1.2574 and 1.2746. 5 year average = 1.1926. 24 hour Range = 1.2266 to 1.2375.

USD/SGD = Resistance above 1.3616 and 1.3671. 10 year average = 1.3421. 24 Hour Range = 1.3381 to 1.2501.

USD/ILS = Resistance above 3.5567 and 3.5574. Currently oversold, good quick day trade. 24 Hour Range = 3.4744 to 3.4986 and 3.5056.

USD/THB = Resistance above 33.4571 and 33.5450. 5 year average = 33.2226, 14 year average = 33.6013 and 10 year = 32.6847. 24 Hour Range = 32.9135 to 33.2363.

USD/CZK = Resistance above 22.4605 and 22.5263. 5 year average = 22.4216. 24 Hour Range 21.6931 to 21.8443 and 21.9088.

USD/SEK = Resistance above 8.1876 and 8.2814. 24 Hour Range 7.9293 to 8.0028

USD/PLN = Resistance above 3.6515 and 3.6573. 5 year average = 3.5402. Zloty highly oversold. 24 Hour range = 3.5547 to 3.5795 and 3.5863.

USD/HKD = Resistance above 7.8066 and 7.8110. Massively overbought from 5 year average at 7.76. 24 Hour Range = 7.7697 to 7.7937 and 7.8419

USD/HUF = Resistance above 263.80 and 264.32. 5 year average 255.91. Highly oversold. 24 Hour Range = 257.9438 to 259.74 and 264.0264.

USD/ZAR = Supports 13.1638 and 13.0967. 5 Year average 11.9969.

USD/INR = Supports 64.4236 and 64.2663. 24 Hour range 64.5804 to 65.3594. INR contains a serious range problem. The big move coming.

USD/RUB = Resistance above 58.1660 and 58.8223. 5 year average 49.9892. 24 Hour Range = 57.2461 to 57.6447 to 57.8871

USD/NOK = Resistance above 7.9885 and 8.0935. 5 year average 7.2530. 24 Hour Range = 7.7858 to 7.8159 to 7.8335.

USD/KRW = Supports 1131.6239 and 1132.0720. KRW vastly oversold. 24 Hour Range = 1127.4544 to 1203.0075.

USD/MYR Resistance above 4.2540 and 4.2698. 5 year average 3.6969. 24 Hour Range = 4.1764 to 4.2141.

 

Brian Twomey

 

 

 

 

G10, Deabt and Taxes: Levels, Ranges, Targets

 

Heraclitus taught the world “the only constant is change”. FX in year 2017 remains the same decades later as the experts are few yet the need is astoundingly great.

The DXY story, America and the political system as well as the economic implications are found in the OMB quote below.
“Between the first year and last year of the Obummer administration (2009 – 2016), the federal debt rose 46.6% from $11.9T to $17.4T. During the same time period, GDP rose 14.8%.”

“As a percentage of GDP, the debt rose from 82.4% to 105.2%. Debt growth outpaced GDP growth by 31.8 percentage points.”
“On average, the debt increased at a rate of 5.8% per year.” (Office of Management and Budget).

Corporate tax rates remain at the lowest levels in 75 years while Payroll FICA taxes at 7.5% remains fairly constant over decades. CPI is a misdirection as debt, 30,000 regulations and no wage or job growth added to American problems as corporations start of empire outside the United States by holding $3 to $5 trillion outside American borders.

America’s problems are deep and structural, mostly due to political dictatorship over 8 years. A win by Hilarious is questionable as to how much deeper dictatorship would’ve taken America and how much more debt would’ve been added. As a result, make America great again may take decades.

The “middle class” business category at $75 and $100,000 pays the same amount of taxes today as it did 38 years ago. Business formation and sustained profitability remain severely challenged. Imports exceeded Exports for 45 years as a positive trade balance hasn’t been seen since the early 1970’s. Policy prescriptions must encompass a deep tax cut and a drastic reduction of government otherwise America will continue a slow death to rot from the center.

EUR/USD must break 1.1961 to travel lower.

GBP/USD must break 1.3512 or 1.3548 above to travel higher.

EUR/JPY above remains challenged as resistance points are built into present price at 134.28 and 134.34. Below watch 133.61 and 133.44 for any bounce today.

Brian Twomey

Trump and Corporate Tax History

 

Trump entered the presidency with a budget deficit of minus $443 billion and a deficit of minus 2.6% as a percent of GDP. Current GDP is $17 trillion. The budget deficit factors as Total Receipts at $3.21 trillion and Outlays of $3.65 trillion. A Total 91% of Receipts are derived from taxes and breaks down as 49% individual taxes, 11% corporate taxes and 31% as payroll taxes.
In 2018, GDP is expected to rise to $17.4 trillion against Total receipts of $3.37 trillion and Outlays of $3.76 trillion. The expected and smaller deficit at minus $3.92 billion represents minus 2.3% as a percentage of GDP.

In 2019, GDP is expected to rise to $17.8 trillion against Total Receipts of $3.47 trillion and Outlays of $3.93 trillion. The expected rise in the deficit at minus $465 billion represents 2.6% as a percentage of GDP.

In 2020’s Presidential election year, GDP is expected to rise again to $18.2 trillion against Receipts of $3.61 trillion, Outlays of $4.05 trillion and a deficit of minus $443 billion. A deficit of minus 2.4% as a percentage of GDP is expected.

The majority of 2017 spending is slated as 36% to Social Security, Unemployment and Labor, 28% to Medicare and Health then 15% to Defense. A total of 28% goes to Health and Human Services, 23% to Social Security, 14% to Treasury and 13% to Defense.

In 2017, $2.56 trillion are Mandatory programs and $1.08 trillion for Discretionary spending. Mandatory programs are already codified by law and government revenues must fund those programs. This means $2.56 trillion is locked and politicians from either party can’t touch or redirect this money. Discretionary money is used by a President to spend at his desire. For 2017, 49% is slated for defense and remainder monies goes to other Federal Government agencies such as Agriculture, Veterans Benefits and Energy and Environment.

In 1970, Discretionary spending was $404 billion against Mandatory programs at $195 billion. In 2017 against Discretionary Spending at $1.08 trillion, mandatory programs total $3.14 trillion. The total 2017 budget is $4.22 trillion against a deficit of minus $443 billion.

The greatest share of government revenues since 1940 derives from Payroll and Individual taxes and both have risen steadily. Corporate taxes decreased substantially since 1980 but dropped overall from the 1940’s. Franklin Roosevelt from 1936 to 1939 was the worst enemy to the Corporate Tax as he charged a Surtax on undistributed Corporate profits from 7% to 27%. The tax rate hovered from 12.5% to 16% on the first 25,000 then taxed higher on increased revenues. The US Federal government traditionally taxes Corporations on taxable income and not on profits.

“Between the first year and last year of the Obummer administration (2009 – 2016), the federal debt rose 46.6% from $11.9T to $17.4T. During the same time period, GDP rose 14.8%.”

“As a percentage of GDP, the debt rose from 82.4% to 105.2%. Debt growth outpaced GDP growth by 31.8 percentage points.”
“On average, the debt increased at a rate of 5.8% per year.” (Office of Management and Budget).

The % of GDP concept began under Hoover in 1930. Hoover was the best friend to the Corporate tax from Teddy Roosevelt to Trump. The two least favored presidents to the Corporate Tax were easily Woodrow Wilson and Franklin Roosevelt. Hoover ran a $7.75 billion Surplus against a positive 0.8% of GDP in 1930.

The present Corporate tax rate is 35% and held from 1993 to present day. The misnomer to current political debates is failure to account to the brackets which began under Franklin Roosevelt in 1936.

From 1909 to 1936, Corporates tax rates hovered from 1% to 13.75%. In 1936, a 15% Corporate tax rate was assessed on taxable incomes of $40,000 or $6,000 owed. In 1938, a corporate tax rate of 19% was charged on $25,000 or $4750.

From 1993 to present day, tax rates and brackets line up as follows and using highest tax rate bracket was factored to actual money owed.

1st $50,000 = 15% or $7500

$50,000 to $75,000 = 25% or $18,750

$75,000 to $100,000 = $34% of $34,000

$100,000 to $335,000 = 39% or $130,650.

$335 to $10 Million = 34% or $3,400, 000

$10 million to $15 Million = 34% or $5, 100,000.

$15 Million to $18,333,333 = 38%.

Here’s ironic. 15 to 18 was not reported on amount owed because the result calculated to the devil’s numbers and/ or mark of the beast. As a christian believer, I’m not writing the numbers.

The rate structure is designed so corporations with $18,333,333 or more face an effective tax rate of 35% on the entire amount of taxable income.

In 1993 under Clinton was added $18,333,333 while $335,000 was the highest bracket under George H.W Bush from 1988 to 1992.

From 1940 to 1978, the top tax bracket was $25,000 to $50,000. From 1942 to 1949 at the $50,000 taxable income bracket, tax rates ranged from 38% to 40% or $19 to $20,000 owed. As a percentage of GDP, 38% to 40% represented negative 29.6%.
The $25,000 bracket survived as the top rate from 1950 to 1974 against tax rates from 52% to 48% and represented a tax charge from $12,000 to $13,000. The $50,000 bracket became the standard yet from 1975 to 1978, the tax rate was 48% or $24,000 owed. From 1979 to 1983, $100,000 became the top tax rate bracket.

For comparison to the current 1993 to 2017 standard, 1979 to 1983 was the top bracket at $100,000 and 46% tax rate to represent $46,000 taxes owed. From 1984 to 1986, $1,405,000 was added as a bracket at a 46% tax rate for a charge owed at $674,400. In 1987, the tax rate was raised to 48% and a charge of $562,000. From 1988 to 1992, $335,000 was the top bracket at a 34% tax rate for a charge of $113,900. The top bracket today is 18,333,333 against the lowest at $50,000 and Corporate tax rates from 15% to 34%.

Exemptions in the tax code began in 1896 when McKinley defeated William Jennings Bryan in a heated contest. Mckinley offered and received a $5,000 exemption and this standard held from 1896 to 1912. Wilson rescinded the exemption to zero from 1913 to 1917. Republicans Harding and Coolidge reinstituted the Exemption to $2,000 from 1918 to 1927 then Hoover upon Presidential win in 1928, raised the Exemption to $3,000.

For context, the top tax rate from 1910 to 1914 was 1% against zero brackets. From 1915 to 1919, Tax rates ranged from 1% to 10% and 10% to 12.50% from 1920 to 1924. From 1909 to 1936, tax rates ranged from 1% to 13.75% against zero brackets. Brackets began under F Roosevelt in 1936 and remains the standard today. The only question and debate is actual Tax rates inside each bracket.

For budget context to Tax rates, Teddy Roosevelt’s 1909 budget receipts were $10.5 billion against $11.5 billion outlays for a $1 billion deficit. In 1901, Roosevelt had a $1.35 billion surplus and by 1908, a deficit of minus $997 million. From 1789 to 1849, the United States had a $1.36 billion surplus. From 1850 to 1900, the United States had a deficit of $18.6 billion.

For comparison to the Reagan tax cuts in the 1980’s as much debate will focus on the ‘Reagan Revolution”, not much has changed since the 1980’s corporate tax except to add higher tax brackets under higher rates. Current tax rates are at their lowest levels since the 1940’s and against six brackets. The higher six bracket category began from 1984 to 1986 and remains the standard today. Reagan’s Revolution began in 1981 under a $6.57 trillion economy and ended in 1988 at $8.38 trillion for a $1.81 trillion gain. How much is attributable to the corporate tax is unknown particularly when tax rates didn’t change under the lower four tax brackets. Reagan began in 1981 with a deficit of minus $165 billion and minus 2.5% of GDP and ended in 1988 with a minus $252 billion deficit against minus 3% of GDP. From 1930 to 2017, + or minus 3% of GDP is a fairly standard historical average although Obummer and Franklin Roosevelt broke the average at minus 8% to 10% of GDP.

From 1979 to 1981:

The 1st $25,000 at 17% factors to $4250.

$25 to $50,000 at 20% factors to $10,000

$50 to $75,000 at 30% factors to $22,500

$75 to $100,000 at 40% factors to $40,000.

1982

The 1st $25,000 at 16% factors to $4,000 and $250 reduction from 1981.

$25 to $5,000 at 19% factors to $9,500 and $500 reduction from 1981.

$50 to $75,000 at 30% factors to $22,500 and remains the same from 1981.

$75 to $100,000 at 40% factors to $40,000 and remains the same from 1981.

1983

The 1st $25,000 at 15% factors to $3,750 and $250 reduction from 1982 and $500 from 1981.

$25 to $50,000 at 18% factors to $9,000 and $500 reduction from 1982 and $1000 from 1981.

$50 to $75,000 at 30% factors to $22,500 and remains the same in 1981 and 1982.

$75 to $100,000 at 40% factors to $40,000 and remains the same from 1981 and 1982.

1984 to 1986

The first $25,000 at 15% factors to $3750 and $250 reduction from 1982, $500 from 1981 and no change from 1983.
$25,000 to $50,000 at 18% factors to $9000 and $500 reduction from 1982, $1000 from 1981 and no change from 1983.
$50 to $75,000 at 30% factors to $22,500 and remains the same from 1981 to 1983.

$75 to $100,000 at 40% factors to $40,000 and remains the same from 1981 to 1983.

$100,000 to $1 million at 51% factors to $510,000 and a new category.

$1,405,000 at 40% factors to $562,000 and a new category.

The commonality from 1981 to 2017 in the first $25,000 bracket was unchanged as the 1st $25,000 at 15% factors to $3750 yet $50,000 at 15% factors to $7500 or $3750 X 2.

The $75,000 category is undefined from 1993 to 2017 as it brackets to either 25% or $18,750 and at 34% factors to $25,500. From 1979 to 1986, the $75,000 bracket factored to either 30% or 40% and represents a tax owed at $22,500 or $30,000. A declaration of small reduction at $75,000 is appropriate.

The $100,000 category from 1993 to 2017 at 34% or 39% factors to either $34,000 or $39,000. From 1979 to 1986, the $100,000 bracket at 40% and 51% factors to either $40,000 or $51,000.

The question for the unchanged or slight reduction status in the lower brackets from 1979 to 2017 is the effect to the small business and Sub Chapter S Corporations. The tax burden remained the same in 38 years from 1979. The line of demarcation is located at $75,000 and $100,000 as those brackets are not only undefined but they determine a higher or lower tax rate.
The tax impact to larger corporations such as GM, IBM and Exxon from 1988 to 2017, for the most part remained consistent from the 35% rate.

The question to not only repatriations but Trump and Mnuchin stated money outside the US accounts for roughly $3 to $5 trillion. For context, Europe’s M3 Money supply stands at 11,654 billion, the Chinese spent 187,841.00 billion in the 2017 budget and Japan spends roughly 830 billion USD per year based on its latest 2017 budget. Money of this magnitude must assume the amounts were invested decades ago and possibly since the higher tax rates in 1987. As American entities, companies are taxed at current rates on what the IRS states is Worldwide income but only when the money is repatriated. American companies deduct or claim a foreign tax credit to offset taxes paid in other nations.

Not only is the Trump proposal to lower the top corporate rate to 15% from 35% but repatriated money will be charged a one time tax of 10% in exchange to exclude the current year’s tax liability. Paul Ryan and the House Republican proposal is to tax accumulated foreign earnings at 8.75% on cash and cash equivalents and 3.8% on other profits. The payments would be spread over an 8 year period. The proposal simply taxes untaxed foreign cash. Sub Chapter S corporations and Pass Throughs would be charged a flat tax.

The Territorial System proposal would allow the foreign nation to tax the American company and exclude taxes owed in the American system. The idea is to exclude the double tax from America and the overseas nation. The question of repatriation would be eliminated as overseas corporate monies are then allowed to float freely across borders. The question then is the competition and bidding wars between nations to institute the lowest tax in order to retain the particular company within its borders.

 

 

Brian Twomey

 

 

 

 

G10 and Currency Spreads: Levels, Ranges, Targets

 

GBP/USD on my blog posted Saturday, GBP/USD trades between the 81 day average and 596 day from 1.2925 to 1.3792. GBP/JPY trades between 81 day at 143.39 and 595 day at 156.76. GBP/CHF was also highlighted for interested as I wrote GBP/CHF was set for a big move and couldn’t maintain its current position. Of all GBP currency pairs, GBP/CHF provided the signal to a big move and it led the way.

GBP/USD big line today is located at 1.3579 and below at 1.3496 while GBP/JPY levels are located at 151.39 and 150.60. Meanwhile and most important is GBP is now light years overbought and not supported by current prices, nor interest rates nor the split BOE board, nor Carney and further fantasies. Not an ounce of evidence in money markets says raise and this is day 3 of GBP’s rise. Stated many times, GBP interest rates are dangerously low and GBP prices are extremely low. Carney came to the BOE as a star as he left the BOC and Canada in good shape. Years later, Carney languished, adopted stimulus, saw GBP and interest rates dead on the floor. No excuse exists to this behavior from any nation.

CZK and ZAR currency pair spreads on news announcements skyrocket to 5000 pips and 1000 to 2000 for ZAR. The spreads exceed the actual daily movements and on many, many days. The 5000 pip spreads justify possibly because from today’s USD/CZK break points from 21.9931 to 21.8026 exists 1900 pips. From an overall perspective, 2178 pips exists from bottom to highest point break.

Why wide movements is because nations such as SEK, South Africa TRY, Latvia, Lithuania, Estonia, Iceland, Russia, are not interest rate nations but are Repo Rate nations. Repo Rate nations are vastly different to interest rate nations but Repo rates are designed for wide currency pair movements. Mexico isn’t a Repo Rate nation but its system is similar and designed for wide movements.

Why the insatiable interest in EUR. EUR is a pure currency pair, not a hybrid, allowed to move and trend. Many, many traders are EUR/USD only traders. Its a smart move. Trade EUR/USD is to trade the 2 top currencies of the world. Traders are actually trading the world to borrow a cliche. Here’s the question. Name another currency pair with the same spreads as EUR/USD that is not affected by EUR/USD moves. The pairs exist but only a few.

GBP shot 400 pips higher but no other pair followed. Welcome to the Libor elimination effect and the single nation control to currency prices. In the old days, all currency pairs would’ve followed and volatility would’ve skyrocketed. Fortunes were made in the old days, today however be selective on currency pair choices. How is it, USD/JPY went higher but USD/CAD went lower. Currency prices uniformity was taken from the market.

Break points below, and to restate, my trades, break points, targets were fully inspected and passed by the best out there.

EUR/USD Break 1.1949, targets 1.1968. The brick wall today is located at 1.1977 and 1.1972. Below 1.1949 targets 1.1876.

USD/JPY. Today’s brick wall at 111.19 and 111.15 broke to 111.32. This is located from 110.73 and 111.65.

EUR/JPY must come back to 132.77, then 132.55, 132.41 and 132.34

USD/CAD 1.2119 vs 1.2150 and above 1.2182.

Brian Twomey

G10 and Immigration: Levels, Ranges, Targets

Interesting quote from Democrat Pat Mc Carran and Co author of the 1952 McCarran – Walter Immigration act.

 

However, we have in the United States today hard-core, indigestible blocs which have not become integrated into the American way of life, but which, on the contrary are its deadly enemies. Today, as never before, untold millions are storming our gates for admission and those gates are cracking under the strain. The solution of the problems of Europe and Asia will not come through a transplanting of those problems en masse to the United States. … I do not intend to become prophetic, but if the enemies of this legislation succeed in riddling it to pieces, or in amending it beyond recognition, they will have contributed more to promote this nation’s downfall than any other group since we achieved our independence as a nation.

Trump’s first cardinal sin was deal with Democrats while the greatest sin was sell America by DAACA in return for a promise by Democrats to deal on tax cuts. As soon as DAACA arrangements are passed, look for the Democrats to renege on tax cuts.
The Democrat plan is House the 1 million new voters in Republican Congressional districts to dilute the Republican vote and ensure a Republican won’t ever see a winning election. Democrats performed the same operation in Minnesota with 25, 000 new Somali’s, Republican East North Carolina and South Carolina to offer a few of many examples. Decades will pass before Minnesota ever sees a Republican elected. Don’t be surprised to see DAACA people in Paul Ryan’s District as he would be the best target. Democrats as well were busy with Obummer’s Muslim Brotherhood resettlements in Republican districts.

A few more Senate seats for Democrats then Trump, tax cuts and America remain in dead stasis mode for years to come. Of 1 million DAACA people amounts to about 1.5 milion new Democrat votes. Democrat focus will be on tax raises to pay our new found American friends to resettle and ensure the vote. The news media will assist by human interest story after human interest story. Here’s Hector from Guatemala with 7 children, blah blah. If the Democrats ever gain power again, they will take America down as McCarran stated.

What’s wrong with DXY, remember the few articles on overbought Fed Funds, On Natural rate of interest. Fed Funds needs a serious drop, not raise.

Few trades

EUR/USD below break points 1.1847 and 1.1825. Bottom is protected today by 1.1789.

GBP/JPY is at break point at 147.44. On the way down, breaks are located at 146.90 and 146.48.

AUD/USD rough spot and overbought at 0.8064 and 0.7995 below.

EUR/JPY, same story here as resistance points are built in at 131.57 and 131.65.
 

 

G10 and Fxstreet 1 year: Levels, Ranges, Targets

1 year at fxstreet and the results are miles of ground covered. Least read articles, least interested for readers = Interest rates, interest rate corridors, Money supply, GDP targets, NFP targets and methodology, Market structure and reforms, stock market indices.The very foundations of trading, understanding and profits are rejected. Further, BOJ comprehensive assessment.

Unknown : politics, Obummer, crooked Democrats, regulations, Yellen as most dangerous person on earth because she believes in stimulus as her god as much as the crooked Democrats believe government as their god.

Widely read: trades, trades, trades. EUR/USD interest is insatiable and must post for views. Veer into a CAD/MXN or say GBP/CHF then X amount of readers disappear. Many traders are 1 pair traders such as AUD and NZD. Don’t lose SEK and NOK traders and JPY cross pairs. More widely read = WTI , Gold and yields. Current money manager interest = Asia currency pairs.

If a reader trusts your trades then methodology is least concern.

Remember the 3 AUD pairs hit perfect targets on NFP day, neither does anyone else. Correct in EUR V DXY monthlies. Always ahead of the curve, none of this 3 reasons delirium. Readers were warned about stop out kimgs, famous, market persons and fraudsters. Popularity is not sought as I know I’m then on the low scale. Fortunes are made from outside the market not inside.

Articles were learned, informed and taught much. So a few concepts needed google searches by readers. Its how I became a trader, hit targets, found understanding, foundations and concepts. Central bank papers teach much, academics not so much although researchers such as Dr. Brunnermeier from Princeton offers FX brilliance. Do most want to learn.

Most articles were posted for my own interest, follow if you like. The 14 year goal has always been learn and grow to streamline, improve, find easier and better roads. We found it but remain always in search of and continue tests. The example is the 24 hour ahead range and other non mentionables. I write when its fun. When not fun such as today and when all the written articles look and say the same old blah without an informed concept then its utterly boring. JPY is a least understood currency but I don’t see it.

Quick new concept, system backtest. Ask my 50 year market trader/ system tester friend John Hill at futurestruth.com about back tests. Do you allow the system to run for 1 or 2 years backwards and if the results are profitable then the system passes inspection. Most say yes but all are dead wrong. Ask how many times John Hill has been in court since 1980 to defend this concept and protect traders from crooks. The backtest requires a multitude of tests against time and market scenarios. This concept requires many months as I know due to a current system.

If the back test proves profitable, what does that say to the forward test. How do tests measure against real money both dollars and cents. Then define profitable. What is profitable in terms of money management. Below high 80’s accuracy then back to the drawing board you go. If a system passes intense John Hill rigor then the system is valid.

Few trades, break points for higher or lower.

EUR/USD Must break 1.2020 Vs 1.1947.

USD/JPY 109.67 and 109.92 Vs 110.25.

EUR/JPY. Below 130.90 then hello 131.61, 131.43. Above must cross 132.34.

GBP/USD 1.3276 or 1.3327.

Brian Twomey

EUR/USD MA’s: Levels, Ranges, Targets

The EUR/USD position from Friday’s 1.2012 close is the approach to the 5 year average at 1.2074. At current 62 pips away from the average, USD/JPY faces the opposite corollary as 72 pips from the 107.82 close lie just below its 5 year average at 107.10. EUR/USD and USD/JPY both share the same space on the 18 year historic scale as both trade between averages 1104 day and 5 year at 1279 days.

 

The current EUR/USD range is located from the 5 year at 1.2074 and 1104 average at 1.1918. Above 1.2074, next comes 1.2096 at the 1359 day average, 1.2105 at the 4688 day average and 1.2219 at the 4432 day. The longer term 4000 day averages crossed above averages from the 3923 day to converge and rest just below the 1359 day. The same phenomenon is seen in USD/JPY. The many resistance points are many and massive and begins with 1.2074 at the 5 year and 1.2096 at the 1359 day. A break of 1.2074 represents not only a huge level but it signifies EUR is heading far higher over time.

The 18 year mid point is located from 1.2969 to 1.1051 at 1.2010. EUR/USD below 1.2074 then the mid point is located at 1.1562 and just above the 81 day average at 1.1515. Above 1.2074 then the mid point is located at 1.2521. The significance to an 81 day average is not only is it above the 75 day mid point from the 50 and 100 day but much FX activity in Forward and Hedge trading takes place at the 81 day so its level is crucial as an indicator.

Lower EUR/USD must break below 1.1918 at the 1104 day to next target 1.1624 at the specially designed average then the mid point at 1.1562 and 1.1515 at the 81 day. Only a break at the 849 day average at 1.1442 signifies EUR/USD is heading far lower to 1.1067 and 1.1051.

Most important average overall is the 10 year at current 1.2950. This average was 1.3200’s at the time of the 2008 crisis. A 10 year average is a demarcation line to represent a period over the long term. The break for example at 1.3200’s informed EUR/USD was heading lower but it would remain lower over many years. It remains the current average to contain any EUR/USD price rises as corrections against the longer term down trend that began in 2008. If 1.2950 ever broke above then EUR/USD enters a new multi year period and it heads miles higher.

A noted point is USD/JPY was represented by the 1105 average while today’s EUR/USD by the 1104 average. The system updates everyday. The 850 day yesterday is today’s 849.

81 day average = 1.1515

XXX = Specially designed average = 1.1624

337 day = 1.1051

594 = 1.1067

849 = 1.1442

1104 = 1.1918

EUR/USD close 1.2012
1279 = 5Y = 1.2074

1359 = 1.2096

1616 = 1.2335

1874 = 1.2481

2131 = 1.2678

2386 = 1.2810

2562 = 10Y = 1.2950

2642 = 1.2969

2897 = 1.2968

3153 = 1.2899

3411 = 1.2885

3590 = 14Y = 1.2844

3668 = 1.2813

3923 = 1.2644

4177 = 1.2413

4432 = 1.2219

4688 = 1.2105 = Jan 1, 1999

Brian Twomey

USD/JPY MA’s: Levels, Ranges, Targets

USD/JPY longer term averages from the 4178 day to 4787 crossed above shorter averages from 1360 day to 2643 day. The longer term averages sit from 105 to 106’s.  From USD/JPY’s close at 107.82, the 5 year average provides next support at 1017.10 then the 4787 day at 106.50, 106.26 at the 4689 day and 106.07 at the 4432 day. Only on a break of 106.07 is USD/JPY cleared for 105.67 and 105.42.

To understand the massive and many clusters of supports from 107.10 to 106.00’s is the 18 year mid point  location at 105.67. The location at 105.67 coincides to the 4178 day average. Viewed from the 113.29 highs to 107.10 lows, the mid point above is found at 110.19. USD/JPY is currently at massively oversold levels and the break from 107.10 downwards won’t be easy. Further, a break of 107.10 changes the 18 year mid point to 102.57. Breaks at the 107 and 106’s for USD/JPY represents a wholesale change.

The first major break at the 337 day average is located at 109.16 then the 1105 day at 110.08, 110.29 and the 81 day at 110.93. The noted point to 110.29 is it represents a specially designed moving average. The overall range in USD/JPY is found between 107.10 to 110.08. Only on a break of 110.93 is 112.92 up for consideration as well as the top at 113.29.

As central banks  restructured prices in currency and other associated markets, 24 hour ranges factored ahead become predictable. For Monday trade, USD/JPY will range from 107.27 lows to 108.76 highs. In the way of 108.76 is a range point at 108.30. A range point in currency trading is far more vital than a trade able level and a target. The next vital break at 107.10 is protected.

While the BOJ remains committed to bond buying stimulus against its yield control policy to contain the 10 year yield as well as negative interest rates, the proposed Consumption tax slated for October 2019 is a warning.  All past Japanese economic experiments failed as a result of an economic tax. In the 1980′ to 1990’s, the Sales tax impaired the recovery. In 2010 and 2011, the 10% Sales and 10% Dividend tax impaired the recovery. In 11 Japanese economic experiments since the 1940’s, the tax failed to see the economic experiment come to fruition.

As a result, GDP for fiscal 2017 based on BOJ forecasts are slated for 1.5 to 1.8, then 1.1 to 1.5 for fiscal 2018 and 0.7 to 0.8 for fiscal 2019. Fiscal years for the BOJ are located in budgets years from April to April.

 

The overall problem to USD/JPY is its associated averages lack uniformity and certain averages are misplaced such as 109.16.

81 day average = 110.93

XXX = 110.29 = Special average

337 day = 109.16

595 = 113.29

850 = 112.92

1105 = 110.08

USD/JPY current close 107.82

1279 = 5y = 107.10

1360 = 105.42

1616 = 101.20

1875 = 98.85

2132 = 98.05

2643 = 99.61

2897 = 101.17

3153 = 102.24

3412 = 102.61

3669 = 103.26

3924 = 104.37

4178 = 105.67

4432 = 106.07

4689 =106.26

4787 = 106.50 = Jan 1, 1999

 

Brian Twomey

 

 

 

 

GBP/JPY MA’s

GBP/JPY closed at 142.29 and now approaches an important break point at 142.35 then comes 143.39. The 18 year mid point is located at 156.65. From the 5 year average at 159.50 to 140.45 lows, the mid point is located at 149.97. GBP/JPY should see good moves in the upcoming weeks.

 

GBP/JPY close 142.29

XXX average = 142.35, = Special designed average

81 day average = 143.39

GBP/JPY close 142.29

337 day = 140.45

595 = 156.76

850 = 163.10

1105 = 162.81

1360 = 157.37

1616 = 152.29

1875 = 149.52

2132 = 149.29

2387 = 151.17

2643 = 158.35

2897 = 164.21

3153 = 167.33

3412 = 169.73

3669 = 171.27

3924 = 172.38

4178 = 172.86

4432 = 172.39

4689 = 172.57

4787 = 172.97

 

Brian Twomey

GBP/CHF MA’s

 

Following are MA’s from 81 day to 4787 day. The 18 year mid point is located at 1.5871. From the 5 year average at 1.4179 to 1.2458, the Mid Point is located at 1.3318. The signal inside current price remains highly elevated and it means a move is coming. A move means the current range cannot hold and must break out.

Most central banks employ stimulus to buy their own assets, bonds and FX but not the SNB as they buy and sell other nations assets, bonds and FX. This methodology contains on purpose CHF.  While highlighted here is GBP/CHF, all pairs containing CHF are experiencing the same Signal / Range problem. The SNB has always been a smart central bank but if smart means containment of CHF prices then so be it as the SNB could care less about CHF traders. When the SNB stops the purchases and comes to their senses or the market imposes their will on CHF then CHF will see a move like nobody ever saw.

What the averages reveal from overall currency pairs is how low and beaten down are prices due to the 2008 crisis. Worse is prices never recovered, 9 years later and against all the faulty stimulus experiments. Possibly, low and beaten down was the overall plan.

81 day = 1.2474

XXX = 1.2464 = Special designed MA

GBP/CHF close 1.2458

338 day = 1.2689

596 = 1.2518

851 = 1.2941

1106 = 1.4099

1360 = 1.4235

1617 = 1.4211

1876 = 1.4390

2133 = 1.4693

2388 = 1.5093

2643 = 1.5836

2897 = 1.6517

3154 = 1.7024

3413 = 1.7440

3670 = 1.7793

3925 = 1.8104

4178 = 1.8467

4432 = 1.8835

4690 = 1.9190

4787 = 1.9279 = Jan 1, 1999

 

Brian Twomey

GBP/USD MA’s

Following are GBP/USD MA’s from 81 day to 4787 day. Most vital break points over next days and weeks are 1.2925 and 1.2908.  Currently price is far overbought from break points. The historic 18 year mid point is located at 1.4716. From the 5 year average at 1.4936 to 1.2908 lows, the Mid point is located at 1.3922. GBP/USD 1.2900’s provide massive supports from averages 10 to 100 and range from 1.2995 to 1.2924.

81 day = 1.2925

XX = 1.2908 = Special MA

338 day = 1.2880

GBP/USD current close 1.3196

596 = 1.3792

851 = 1.4432

1106 = 1.4810

1360 = 1.4979

1617 = 1.5128

1876 = 1.5208

2133 = 1.5304

2388 = 1.5442

2643 = 1.5888

2897 = 1.6174

3154 = 1.6302

3413 =1.6475

3670 = 1.6524

3925 = 1.6465

4178 = 1.6337

4432 = 1.6239

4690 = 1.6228

4787 = 1.6229 = Jan 1, 1999

 

Brian Twomey

 

AUD/USD: MA’s

 

Following are Moving averages dated from the 81 day to 4767 day and dates to Jan 1, 1999.

Most important above 0.8053, 0.8124 and 0.8238 Vs Below 0.7905, 0.7820, 0.7799 and 0.7740.

The mid point from the 81 day to 4787 day is 0.8205.

81 day = 0.7740

338 day = 0.7573

896 day = 0.7468

851 day = 0.7799

AUD/USD Close = 0.8054

1106 day = 0.8124

1360 = 0.8534

1617 = 0.8831

1876 = 0.8942

2133 = 0.8920

2388 day = 0.8787

2643 = 0.8790

2897 = 0.8698

3154 = 0.8601

3413 = 0.8513

3670 = 0.8413

3925 = 0.8238

AUD/USD Close 0.8054

4178 = 0.8053

AUD/USD Close 0.8054

4432 = 0.7905

4690 = 0.7820

4787 = 0.7791 = January 1, 1999

 

Brian Twomey

G10 and Draghi: Levels, Ranges, Targets

 

EUR/USD traveled 969 pips since June from 1.1122 to 1.2091 and the explanation to EUR/USD’s rise is not found in Trump as any may believe but rather in the European Money Supply.

European M3 is growing from 4.5% to 5.0% and from July’s M3 at 11,654 billion that means roughly 571.046 million and a range from 11,082 to 12,225. Last time this issue was visited, M3 was severely overbought at 12,000’s and targeted 9,000 to 10,000 and lower 11,000’s.

June M3 was 11,650 and May was 11,608. The EUR/USD rise is most explained by M1 as Currency in Circulation and Deposits were off 9.1% in July, from minus 9.7% in June. May was unchanged at 9.3%. What was off was the rate of growth in M1 as May began at 7476 and rose to 7532 in June and 7554 in July. Why July is Money Supply figures are reported for the previous month as the release is to sensitive for real time releases.

Overall M3 from January at 11,436 to July at 11,654 is an addition of 218 million in 8 months or roughly 27 million per month.
The restriction of the money supply is a positive development to explain EUR/USD rise from June yet EUR/USD rose strictly by the excghange rate as interest rates faied to follow and support the rise. EUR/USD is now massively overbought and interest rates flat on the floor. Flat on the floor means interest rate curves lacks a signal and informs the interest rate is sloshing around and going nowhere. Inside the interest rate price is zero, nothing. The analogy of the lost ship is apt. Yet the Interest rate should be much higher than current 0.64.

If Draghi’s economy is as rosy as he states then price indicators in GDP and Inflation must rise. This means interest rates and the EUR/USD can travel much higher from current levels. Draghi won’t have a choice except to raise to support the recovery. The question is if as we;ve seen this story before over the failed 9 years of stimulus and economic dreams.

If Draghi restricts stimulus purchases from $60 to $40 then a further EUR rise is supported . The greatest risk for Draghi is the exchange rate to travel far hgher out of control before he sees GDP and Inflation higher. Furher, if the exchange rate travels higher without interest rate support then the economic reality will come to an end and the exchange rate wil drop like a rock. The exchange and interest rate together is currently far out of kilter. This must be aligned first beforte Draghi can think bullish economically.

From the USD side, if Trump passes the proposed tax cut then USD’s current position on the floor should see a recovery. The tax cut severely challenges Draghi as Europe and USD are designed as total competitive opposites. One side must win while the other side loses. One side’s GDP and exchange rate will rise while the other side falters. Further, both Draghi and Yellen propose restriction of stimulus and its bullish for both USD and EUR.

While Draghi is feeling as confident as a movie star after a 9 year hiatus, he like Yellen has challenges ahead and the road won’t be easy.

EUR/USD is approaching its 5 year average at 1.2075 yet EUR/USD is far overbought from the 50 and 253 day averages. As EUR/USD climbed since June, the rise dragged AUD and NZD prices higher. Draghi and Yellen;’s decisions contain implications out side Europe and the US. AUD/USD overbought is in the stratosphere and longs are not recommended.

The breaks for EUR/USD are located at 1.2101 above and 1.2027 below. Below 1.2027 then comes 1.2003 while above targets 1.2095 and 1.2128. What Draghi created in EUR/USD is larger ranges in which EUR may travel. If ranges in EUR expanded then its natural to see USD ranges restrict an this is the case.

USD/JPY must breaks are located today at 107.33 and 107.71.

USD?CAD breaks are located at 1.2038 and 1.2081 Vs 1.2103 and target to 1.2153 on breaks.

Brian Twomey

G10, Trump Debt and Budgets: levels, Ranges, Targets

 

In the United States, government fiscal years begin October to October. This means a budget must pass by October or the Federal Government is broke and lacks ability to spend money. Every government since United States beginning passed a budget in October. Then America’s Bummer decided he would eliminate a budget and ask Congress to pass X amount of money in a Continuing Resolution.

By Congressional abdication in this constitutional violation of Article 1, Section 8, Congressional budget hearings were eliminated as well as budget appropriations. How much is the budget, where the money is appropriated , to which agency and what program is unknown for 8 solid years. Yet the debt limit was raised every year for the past 8 years. This means more money was spent every year. Most important to Congressional Budget hearings are the words I swear under penalty of Perjury.
Trump’s Budget director Mulvaney has been working on a budget for October passage since January as somebody must know how much money has the Federal government spent in 8 years and the accountability to the money.

Trump’s raise the Debt Limit deal with the Democrats broke the budget yet again by extending the Debt Limit to December. The overall Cardinal Sin every Republican president made since Eisenhower except Reagan is don’t ever deal with a Democrat, understand their overall economic and military threat to America and realize any dealings are Democrat set ups to disaster. A Democrat in power never dealt with a Republican while a Democrat out of power begs for a seat at the table. A colossal Trump mistake is give the Democrats the seat yet Trump has been ahead of the curve so must watch as Trump’s move maybe part of strategy.

What the Democrats received are monies to agency programs, programs slated for elimination in my opinion as the $20 trillion debt must be slashed. If the numbers are correct , the current deficit is $600 billion, an increase in billions of $1.0623 and roughy 3% of GDP. The new budget will increase defense spending from $150 billion to almost $230 billion as America’s defenses are extremely low. Naval ships at 136 is severely down from the highs under Reagan at about 230.

Just as exchange rates and money supplies are vital nation to nation as nations must remain competitive to each other, budgets and spend programs are an abdication to Congressional responsibility. Next on the budget list for November is Europe, Australia and New Zealand budgets passed in the summer and Canada in March. The UK is slated for February. The how much question is unknown for nations as they all align budgets to USD.

EUR/USD above exists 1.2019 as today’s top and 1.1958 and 1.1885 below.

EUR/JPY faces yet again massive resistance at 130.45, 130.50 and 130.81 and below at 129.39.

USD/JPY must decide 108.95 and 108.60 or 109.20.

GBP/USD is currently at day’s highs at 1.3085 and 1.3114 Vs below 1.3016.

Brian Twomey

G10 and Draghi: Levels, Ranges, Targets

Fed Funds Friday on NFP day closed at 1.07. Normally, Fed Funds closes 2 to 3 times per month far lower than normal 1.16. Last month was the first time when this pattern failed after nearly a 1 year long stretch. Fed Funds must normalize again. What 1.07 means is USD and USD currency pairs are affected. How much means USD pairs are off by at least 5 pips. What’s off is support and resistance levels.

What we know about Draghi and QE is European interest rates not only operate in tiny channels but interest rates are severely oversold. European interest rates are low, artificial, contained and should be far higher. European money supplies are far overbought and should be much lower.

Overbought money supplies places upward pressure on interest rates as money and interest rates share an adverse relationship. Restrict money then interest rates naturally travel higher. But Draghi wants more QE to add to an already overbought money supply. It doesn’t matter how much Draghi purchases because overall it means a drop in EUR and all EUR pairs. Not an ounce of bullishness exists to Draghi’s QE policies as all economic indicators from GDP to confidence will drop dramatically over time.

Draghi’s dilemma is not in the fantasy QE will bring economc prosperity but he risks interest rates traveling much higher. The greatest risk in higher interest rates is EUR pairs higher. One mistake by Draghi then interest rates and EUR skyrocket. Then Draghi and Europe are finished. Draghi will be looking for the next Marshall Plan.

In a world heading for War, outside influences from war, a missile, a more horrific terrorist attack would force European interest rates higher. Draghi won’rt be able to stop skyrocket higher interest rates as interest rate markets will impose higher rates for Draghi. Draghi knows he should do nothing on the QE front as we are dealing with Economics 101 from Community College.

EUR/USD is contained today from 1.1869 to 1.1927

GBP/USD targets are located at 1.2977 and 1.2998.

EUR/JPY faces massive resistance at 130.47, 130.71 and 130.96.

USD/JPY contained from 109.16 to 109.61.

USD/CAD must break 1.2376 then next comes 1.2417 then higher.

Brian Twomey

ECB: Negative Interest Rates, QE and Draghi

 

 

Draghi’s negative interest rate intention in 2014 encompassed two original goals. The first was to force money away from bank accounts and sit idle. The second goal was to pressure money into investments by house purchases, real estate, equities. company formation. How is Draghi doing after 3 years of negative rates and what are the prospects.

Wages in July reported 1.6% and higher than 1.4% in June 2016 yet below 1.8% in January 2017. In June to September 2014 when the ECB went negative, Wages were on the floor at 1.4%. Since 2008, Wages went negative. A rise from 1.4% to 1.8 % for context means a $10.00 per hour worker earned $10.14 and rose to $10.18.

European Wages since 2008 saw their best days at 2.5% in 2015 and 2016 when Core Inflation hovered at 0.8 to 1.0%. Wage earners win when Wages trade above CPI as CPI is a price indicator and answers can Wage earners afford goods, food and essentials.

Core CPI prices at 102.06 trades just below first ever highs at 102.47. CPI reported last at 101.71. The 2% target at Core’s 102.06 translates to 2.0412 and 2.0342 for CPI. In 2008, Core CPI was 90.0 and 98.0 in 2014 when the ECB went negative. Took 6 years for Core to gain 8 points on the index from 2008 to 2014 and 4 points in 3 years. Core CPI currently trades far above CPI.
Real GDP in 2009 was minus 4%, 2% in 2010 and minus 1% in 2012. From 2011 to 2014, GDP as a percentage traded below USD and JPY. Since 2014 when the ECB went negative, GDP traded between USD and JPY. GDP last reported 0.6, 3.0% for USD and 1.0% for Japan. Europe now trades again below USD and JPY. The big line for GDP to cross is 2%.

 

Contributions to GDP since 2011 include mostly Financial and Insurance, Information and Communications. Next comes Professional, Scientific, Technical, Administrative and Support services.

GDP is far below Gross Fix Capital formations as investments peaked in 2015, the same time when Wages were at 2.5% and CPI at 0.8. Overall, Ireland leads the way in all categories of GDP from investments to low taxes while Greece remains the lowest GDP contributor and Germany remains competitive.

Exports beat Imports from 2009 to 2011, flat lined then skyrocketed in 2013 to current levels. Exports however in June 2017 at 3.9% were lower than + 6.2% in Imports. The Trade Surplus narrowed to 26.6 billion to 28.9. Germany leads the way with a Current Account Surplus and 3 year 2016 average at 8.1 billion.

The European balance sheet is lower than the FED, BOJ, BOE.

The purpose of negative interest rates was to stop the rate of growth on the positive side of the interest rate. As interest rates crossed from positive to negative, longer term interest rates naturally followed lower into negative territory.

A bottom on the zero side is known as minus 0.0 and the top side is located at + 0.0. Negative interest rates from overnight to longer term then created a tiny channel in which to operate. This means the overnight rate has been stuck at tiny ranges because it doesn’t have room to move. The interest rate curve actually flattened.

The current Deposit rate is minus 0.40 and not far from minus 0. The interest rate can’t go below minus 0.0. What minus 0.40 means is European interest rates are at the lowest possible depths. Draghi’s option to lower is almost impossible not only because of the lowest bound but also because a drop sends CHF, SEK, NOK and DKK interest rates directly on the minus 0.0 threshold.

To add QE to the negative scenario ensured by a sledge hammer effect that interest rates would remain at the lowest depths. As bank accounts failed to pay interest, its was natural to believe the path of money must travel into investments and force GDP growth higher. Negative interest rates strengthened Daghi’s hand on the QE front as he was able to operate inside the small corridors and ensure he wouldn’t see interest rates travel higher.

The intended investment money as well as QE went directly into money markets to trade interest rates for purposes to earn yields on monies. Volumes in money markets and interest rates skyrocketed as a result. The further result to negative interest rates and small corridors is Money is Circulation dropped dramatically which means money velocity remained stagnant. The same old yet dwindling supply of money is sloshed around daily to earn yield.

What flattened and what corridors mean is the distance from borrow to lend rates is extremely narrow. Assess what Wage earners receive when money is invested in a money market mutual fund. The overall purpose to go negative was a forced lending policy as the cost of money is cheap but the borrow side lacked ability. Plenty of lenders but few takers.

To understand the money Supply / demand and interest rate relationship see demand and supply curves and the shifts against interest rates and when QE is added or subtracted.

The exchange rate performed as expected in an interest drop scenario, it went lower from 1.37 to 1.03 over 4 interest rate cuts in a 3 year period.

The EUR/USD is now at 1.2000 due because its economic data slightly beat USD as both are in contention for best of the worst data. The Yellen Vs Draghi scenario is how to relieve the pressure on QE, return interest rates to market appropriate levels and bring the economy back to normal. Both are inside a colossal jam but born by their own false strategies.  Further to 1.2000 is Europe’s corridor is bumping against USD interest rate corridor.
Brian Twomey

View Khan for primer on Money Supply, Demand and Interest rates