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