GBP/USD and Sonia: Levels, Ranges, Targets

When Sonia and Gilt Repos were last visited, the post explained the new BOE interest rate arrangements and presentation from its website redesign. Did the BOE really hide its most vital 3 month interest rate. Its impossible to do so nor can the BOE eliminate the 1 and 2 week Sonia rate because Sonia is the borrow rate and Repo the lend rate.

Why the 1 and 2 week Sonia rates at 0.36 are meaningless for the shortest term is because of the zero effect to the exchange rate as GBP/USD trades at 1.4000’s. The significance of the bottom is Sonia 3 month bottomed Aug 2017 at 0.31 and rose to 0.44 today for a mid point at 0.3750. Repo 3 month bottomed at 0.24 Aug 2017 and rose to 0.4950 for a mid point at 0.3675. The borrow low, lend high scenario juxtaposed Aug 2017 and GBP/USD went on a 1500 pip romp from 1.2800 to 1.4300’s and stopped just before 1.4400’s. A juxtaposed position is an MA crossover.

What is most vital to the story is not only the new presentation of interest rate charts over many years but the top question must be addressed first.

Wide territory in Sonia existed from 0.49 to 0.585 and this territory must factor as 0.5018, 0.5137 and 0.5375. But obviously we are at the longer end of the constructed curve and this is meaningless to the exchange rate. Today’s 0.49 factors as GBP/USD at 1.4285 and 0.5018 factors to 1.4398 while 0.5137 factors to 1.4512 and 1.4740 at 0.5375.

At today’s 0.45, GBP is well factored at 1.3949 but this represents a range point and a more vital break than an everyday trade able level. Therefore, today’s bottom is factored to 1.3958. Today’s 0.36 factors to 1.3038 and 0.44 to 1.3805 and no assistance.

Three range points exist above at 1.4093, 1.4109 and 1.4141 therefore the topside rises to 1.4141.

My presentations from 3 years of intense interest rate calculations are Levels, Ranges and Targets. Levels are trade able points that must trade in order for a price to move to its destination. A range point is vital to the life of a continuation in prices and Targets are just as the word implies. The Range is the most important, most misunderstood yet most fascinating to the currency price as a range break even by a 1 pip violation implies whether a price will continue on its present course or reverse in the opposite direction.

Today’s GBP/USD target is 1.4141 then it begins to drift to 1.4109 and 1.4093, 1.4062, 1.4033 and 1.4024.

Mush time was spent on GBP and Sonia therefore next posts I’ll demonstrate NZD and AUD.

Brian Twomey

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EUR/USD and G10: Levels, Ranges, Targets

 

Following are significant break points, MA’s dating to Jan 1999

 

EUR/USD 1.2046, 1.2079, 1.2135, 1.2194, 1.2280, 1.2357, 1.2435, 1.2486, 1.2674, 1.2699 and 1.2569. 5 Year average 1.1998, 10 and 14 year averages 1.2852 and 1.2853. Trend far lower requires breaks at 1.2036 and 1.1998.

NZD/USD 0.7145, 0.7258, 0.7262, 0.7277, 0.7318, 0.7339, 0.7394, 0.7410, 0.7418, 0.7428, 0.7435, 0.7499 and 0.7588. Lower for NZD must break 0.7200, the 5 year average, 10 and 14 are located at 0.7277, 0.7499 and 0.7428.

USD/JPY 105.45, 106.19, 106.62, 107.87 then 109.32, 109.58, 111.30, 111.58, 111.71, 112.47 and 113.95. 5 year average 109.40. To travel higher then 111.26 must break to target 112.47.

GBP/USD  1.3617, 1.4039, 1.4075, 1.4112, 1.4185, Then above 1.4331, 1.4477, 1.4550, 1.4586, 1.4623 and 1.4734. 5 year average 1.4734. Traend change short must break 1.3622

GBP/JPY 148.90, 149.12, 150.13, 150.46, 150.58, 151.41, 152.80, 153.77, 154.98, 159.32 and 160.45. The 10 year average 152.80, and 5 year is 160.82. Trend change lower must break 151.45.

EUR/JPY masses of supports exist below from 127’s to 131’s. Break points 130.41, 130.79, 131.06, 131.40, 131.46, 131.54, 133.48, 133.83. Then 136.20 and 136.54. Trend change lower must break 133.83 and 14 year average 131.56. EUR/JPY is massively oversold and well supported.

 

Brian Twomey

AUD/USD and USD/AUD Vs EUR/AUD Vs AUD/EUR

  AUD/USD, USD/AUD V EUR/AUD and AUD/EUR significant Break points dating to Jan 1999
                                   AUD/USD
  0.7878 break changes trend to down. Break Points 0.7878, 0.7950, 0.7988, 0.8116, 0.8128, 0.8144, 0.8172, 0.8228, 0.8297.
 0.8228 = 5 year average. AUD/USD from 0.7878 to 0.8297 equates to USD/AUD  from 1.2693 to 1.2052 and a long long way to 1.2052 as this drop to see AUD/USD higher means USD/AUD must drop 641 pips Vs an AUD/USD rise by 419 pips.
 Life between AUD/USD and USD/AUD ranges about 200 pips therefore best to view 0.7878 to 0.8228 as 350 pips for AUD/USD and USD/AUD at 1.2693 to 1.2153 for 540 pips. The actual range between AUD/USD and USD/AUD is 190 pips. If AUD/USD breaks 0.7878 then far lower, alternatively a break at 0.8228 represents far higher.
           At AUD/USD 0.8116, the range is actually broad at 0.9065 to 0.8116 for a mid point at 0.8570 but the way to view 0.8570 is by the 14 year average at 0.8470 because 0.8116 is an average line dating to 2001.
 Overall AUD/USD faces significant breaks shorter term and is currently overbought while USD/AUD is oversold short term. For the week, watch 0.8128 as this equates to the 5 year average for USD/AUD at 1.2303. At USD/AUD 1.1637 represents the 10 year average at AUD/USD 0.8593 then the 14 year at USD/AUD 1.2017 equates to AUD/USD at 0.8321.
 Until AUD/USD breaks 0.8128 and 0.8228 then the current rise must be viewed overall as a correction.
   AUD/USD targets on a break of 0.8228 are then 0.8297 and 0.8321. AUD/USD is below its 5, 10 and 14 year averages at 0.8228, 0.8470 and 0.8762 at the 10 year. USD/AUD is above 5, 10 and 14 year averages at 1.2303, 1.1637 and 1.2017.
   Current AUD/USD trades at its 42% point and warns AUD/USD is in do or die mode.
                     AUD/EUR
   Break below 0.6545 changes trend to down. Break points 0.6427, 0.6444, 0.6452, 0.6487, 0.6529,
   Above 0.6532, 0.6545, 0.6592, 0.6604, 0.6640, 0.6690
  0.6604 = 14 year average. At 0.6427 to 0.6604 equates to EUR/AUD 1.5559 to 1.5142.
         Current AUD/EUR trades at its 88% point and warns a significant drop is upon us.
                       EUR/AUD
  Break 1.5279 changes trend down. Below 1.5009, 1.5130, 1.5241, 1.5279, 1.5323, Above 1.5348, 1.5411, 1.5500, 1.5608, 1.5691, 1.5699, 1.5738
 1.5323 – 14 year average. From 1.5130 to 1.5738 equates to AUD/EUR 0.6609 to 0.6354. EUR/AUD at 1.5323 equates to AUD/EUR 0.6526 and Friday close was 0.6525.
   The AUD/EUR and EUR/AUD combo is a terrific manner to trade as EUR/AUD contains about 73 daily pips and AUD/EUR at 33 daily pips. If a trader knows how to trade this combo and its quite easy, AUD/EUR provides supports to allow EUR/AUD to travel higher while EUR/AUD provides supports to allow AUD/EUR to travel higher. Both AUD/EUR and EUR/AUD bounce from each other’s exchange rates to allow for longs and shorts in each pair for an easy double trade and many pips per trade.
                     Brian Twomey,

GBP and BOE Top 10: Levels, Ranges, Targets

A new category reported by the BOE: Top 10 most interested exchange rates for January 2018.

In order of appearance to include current break points and 5 year averages

GBP/AUD 1.7234 and 1.7274, 5 Year averages 1.8003

GBP/HUF 350.65 and 349.19, 10 year average 352.61

GBP/DKK 8.38 and 8.39, 5 year average 9.17. DKK remains a severe problem currency pair as Noise inside current prices is astronomical.

GBP/EUR. 1.1278 and 1.1271. Another severe problem pair.

GBP/HKD 10.42 and 10.56, 5 year average 11.44

GBP/JPY 155.11 and 153.66

GBP/NOK 10.84, 5 year average 10.80, 10 year average 10.16, 14 year average 10.65

USD/CHF 0.9726 above and 5 year average 0.9556, 10 year average 0.9805

GBP/CHF 1.3140 and 1.3131, 5 year 1.4043

GBP/USD Break points 1.4049 and 1.3449, 5 Year 1.4748

Note USD/CHF, GBP/CHF and GBP/USD. Outlier USD/CHF is a currency pair Triangulation and normally as in the old days of exchange rates is an arrangement for trade across border connotations. Today, arrangements are quite different as banks now report, offer and trade Reciprocal exchange rates to eliminate Triangulations.

In the Triangulation, GBP/USD is created from USD/CHF and GBP/CHF. USD/CHF is created from GBP/USD and GBP/CHF.

As stated in previous posts, the common theme in today’s currency prices is trade at or near the 5 year average

 

Brian Twomey

EUR and G10: Levels, Ranges, Targets

USD/JPY current price trades at 20% and is extremely low. Noise ratios inside the current price confirms USD/JPY lacks movement and variation. USD/JPY must move higher.

USD/JPY break points derived from Jan 1999 are located at 109.32, 111.25, 111.60, 111.65, 111.80, 112.67 and 113.95. 0.7257. Most vital for significantly higher is 111.80. USD/JPY cleared its 5 year average at 109.32.

EUR/USD trades at 40% and EUR/JPY at 61%. GBP/USD and GBP/JPY confirms at GBP/USD 66% and GBP/JPY at 88%. A long road down exists for GBP/USD and GBP/JPY. Previous posts stated GBP and NZD pairs would see best volatility for 2018.
EUR/USD break points from Jan 1999 are 1.2049, 1.2079, 1.2134, 1.2197, 1.2278, then 1.2438 and 1.2483. EUR/USD cleared the 5 year average now at 1.1992.

EUR/JPY Offers massive supports from 133.00’s to 127.00’s dated to Jan 1999. EUR/JPY cleared its 5 year average at 130.31. Current supports located at 133.69 and 133.31.

GBP/USD next significant break is located at 1.4049, dated to Jan 1999. Its 5 year average is located at 1.4740. The big break below is located at 1.3441.

GBP/JPY cleared the 10 year average now at 152.90. Above next comes 153.66 then 155.11. Below 150’s are many and massive at 150.69, 150.41, 150.31 and 150.28. Most vital for lower to 148’s is 150.69. GBP/JPY and GBP/USD are traditionally double trades as Correlations always ran high.

NZD/USD at 64% reveals again how vital NZD represents the universe of currency pairs as most vital signal pair. NZD at 64% is miles to high, NZD/JPY at 14% is miles to low and NZD confirms AUD/USD on the border line at 45%. AUD/JPY at 24% and extremely low confirms NZD/JPY as far to low as well.

To understand the true Antipodean nature to AUD/USD and AUD/JPY as well as NZD/USD to NZD/JPY is to understand not only confirms as AUD/JPY and NZD/JPY far to low but Correlations traditionally run negative to AUD/USD and NZD/USD.

NZD/USD break at the 14, 10 and 5 year averages are located at 0.7276, 0.7428 and 0.7503. Higher for NZD/USD must break 0.7317, 0.7338, 0.7397, 0.7409 and 0.7428. Below breaks begin at 0.7257, 0.7142 and 0.7089.

AUD/USD’s 45% borderline confirms as AUD/EUR at 87% and NZD/USD 64% is seen in EUR/NZD at 1.08%. The confirming pairs to lower AUD/USD is AUD/JPY to low and AUD/EUR far to high. The reverse scenario is seen in NZD/USD as NZD/USD is far to high, NZD/JPY far to low and EUR/NZD to high.

AUD/USD break points are located first at the 5 year average at 0.8237 and trades below and is in the same position as NZD/USD. AUD higher means breaks at 0.7992 and 0.8113 then the 5 year average at 0.8237. Below breaks begin at 0.7947, 0.7846 and 0.7825. Most vital for significantly lower is 0.7825 otherwise lower may mean correction.

EUR/AUD break points are located at 1.5319 and 1.5350. Below breaks begin at 1.5282, 1.5243, 1.5131, 1.5012 and 1.4863.

AUD/EUR break points are located above at 0.6544, 0.6592, 0.6604, 0.6639, 0.6689, 0.6735, 0.6744 and 0.6774. At 0.6604 represents the 14 year average then 10 year at 0.6829. Below breaks begin at 0.6531, 0.6528 and massive supports in 0.6400’s to start at 0.6486.
Brian Twomey

EUR, GBP, Sonia Rate Curve

As the BOE rearranged its website, much changed yet much remained the same.

The first major change to affect interest and exchange rates is to hide the 3 month interest rate. The most important interest rate on the planet for 200 years to effect every market price is now hidden from public view. This is the same scenario as saying to market participants, we hid the gold and we won’t reveal the location. Certain central banks hide main interest rates to force market people to subscribe to a not needed and overpriced Bloomberg or Thomson Reuters.

The BOE methodology is to force Repo rates as trade vehicles rather than Sonia as the dominant interest rate. Traditionally, UK interest rate traders were forced to construct 2 separate interest rate curves in Repo and Sonia. By elimination of Sonia’s 1 week, 2 week and 1 month interest rate, Repo rates 1 week, 2 week and 1 month must replace the lost Sonia Rates. This move is smart for the BOE because past days when UK markets were volatile, traders had to factor or estimate to use Sonia or a Repo rate.

What becomes most vital for interest rate traders is rather than the BOE to show actual 3 month Sonia, 3 month Repo and 6 month Repo is to reveal the chart with the actual rates. The BOE on its own volition would never reveal this information.
The BOE today and over the past week for a medium term view protects the bottom side interest rate by 3 month Sonia and 6 month Repo at 0.44 and 0.445. Both rates should remain solid easily over the next 1 week to 2 weeks. Only a Brexit scenario would change both rates.

For the shorter term and for today’s perfect accuracy to trade GBP currency pairs, Sonia at 0.4615 and Overnight Repo at 0.46 protects interest and exchange rate bottoms.

The true expertise to trade interest and exchange rates is found in the new trade method of estimation. Estimation is forced upon traders against the new BOE methodologies. Yet estimation for certain central banks was always standard operating procedure. NZD and USD are most profound in estimations while the RBA rates are offered as is to view a few examples.
Estimation means to note the distance from 3 month Repo at 0.49 and 6 month Sonia at 0.585. This distance at 0.0950 is wide enough to encompass the area from the UK to NY. A GBP trader to use this distance in today’s trade would lost every penny and every Pfennig in their account.

Use 0.5137 and 0.5375 as insertions to cover the distance and then use 0.585 as the anchor to the end of the curve. Some traders to be smart and protect trades would possibly want to also insert 0.5018. For GBP traders in any GBP currency pair, 0.5018 is not required. Yet 0.5018 may require insertion to trade FTSE. The insertion depends on the financial instrument. UK interest rate traders however would also note to use 0.5018 requires a substitution. In this instance, replace 0.5018 against 0.475 and the trade will be just fine. The alternative is possibly replace 0.49 with 0.5018 once the overall 0.49 to 0.585 distance was covered.

For the longest term view, distance in Sonia must be covered from 0.585 to 0.775.

As I live everyday over the past 3 years inside Central bank interest rates, the BOE intent is to control an out of control exchange rate and at the same time coordinate UK distance to match USD. This means 0.125 vs 0.32. Tough job for the BOE.

 

The new methodologies forced GBP/USD ranges higher by 2 pips. This may seem minimal but its huge development. GBP/JPY ranges remain the same which informs USD Vs Non USD currency pairs are most traded yet the market struggles is the fight as USD Vs non USD as the dominant trading theme.

GBP/USD Break points today are located at 1.3854, 1.3897, 1.3916, 1.3938, 1.3960 and 1.3987. At 1.3987 is a range point and most important to the topside as a violation means GBP higher.

GBP achieves 1.3854 by a break at 1.3872 then 1.3854 and 1.3837.

EUR/USD Today break points 1.2247 then 1.2232, 1.2214 and 1.2201.

 

Brian Twomey

EUR/USD

 

 

5 Day 4 1.221050 0.005089 -0.245628 1.215961

Above 5 day average,  SD, Z Score, Target

Below averages, SD, Z Scores, Targets

10 Day   1.209450   0.012342  0.838600  1.221792

20 Day  1.205173   0.010942   1.336776   1.216115

50 Day  1.192479   0.014068   1.942067   1.206547

100 Day   1.182820  0.015029  2.460576   1.197849

200 Day  1.178716    0.017536   2.342838   1.196252

253 Day   1.165282   0.030378   1.794654   1.195660

 

 

0%  :  0.674 1.205730 1.181404
60%  :  0.842 1.208762 1.178372
68%  :  0.9945 1.211514 1.175620
70%  :  1.04 1.212335 1.174799
80%  :  1.28 1.216666 1.170468
85%  :  1.44 1.219553 1.167581
90%  :  1.645 1.223253 1.163881
95%  :  1.96 1.228937 1.158197
98%  :  2.33 1.235614 1.151520
99%  :  2.58 1.240126 1.147008
3.0 1.247705 1.139429  

 

 

 

Above = Left Side Positive side, Confidence Intervals. 2nd Column of exchange rates = Minus Confidence Intervals.

 

Brian Twomey

10 V 2 Year Yields: Levels, Ranges, Targets

The 10 year yield close at 2.55 trades directly below 2.58 and its next break point at the 10 year monthly average. What’s driving the 10 year yield is the rising and now skyrocket overbought 2 year yield. What will drive the 10 year higher and align the 2 and 10 yield curve steepener correctly is a drop in massively overbought conditions in the 2 year.

The 2 year yield from the 2.002 close is not only massively overbought from simple monthly averages 1 year to 10 but seen in the 2 and 10 relationship as the 2 year far exceeded its upper range points. Consistent in the simple average Vs 2 and 10
The 2 year must trade back to its most immediate range points at 1.64, 1.31 and 1.23 to 1.25. At 1.64 and 1.48 are first achievable targets to align the distribution of averages. Lower for the 2 year must break the 1 year monthly average at 1.4242. Then the overall range from the 1 and 2 year becomes 1.4242 to 1.1229. A break of 1.1229 then the next 3 year monthly average is located at 0.975. Current 2 year yield trades above all monthly averages 1 to 10 year.

If monthly averages fail to gain speed and rise then the 2 year may easily see a challenge to the 1.4242 break longer term.
The 1, 2 and 3 year monthly averages are main drivers as all 3 averages Correlate to the 10 year at 32%, 85% and 67%. The 5 year average just turned negative while remainder averages Correlate from 11% to 28%.

The 10 year at 2.55 trades between the 10 year monthly average at 2.58 to the 9 year at 2.43 followed by the 8 year at 2.33 and 1 year at 2.32.

The 10 year is far overbought from the 1 year average and mid range to oversold against remainder monthly averages 2 to 10. From averages 1 to 4 year and V the 2 year, the 10 year should trade back to its range points to 2.49 and 2.41.

The next break points and consistent with range tops Vs the 2 year are located at 2.56, 2.67, 2.87, 3.01 and 3.11. The problem with a higher 10 year short term is extreme prices are located at 2.54, 2.61, 2.97 and 3.11. The point at 3.11 is also uppermost in range points in the 2 and 10 relationship. Above 3.11, the 10 year falls outside its range and cannot hold.

Below, a cluster of supports for the 10 year are located at 2.32, 2.21, 2.17 and 2.07. Overall, 1.74 to 1.96 in the longer term provides bottomside ranges. To understand how solid are lower 1.74 to 1.96’s in bottom range points, Fed Funds closed at 1.42 everyday in the past 18 days since the last Fed Raise. Fed Funds provides support and allows the 10 year to eventually move higher.

The 10 year shortest term needs a correction and to remain above the 9 year at 2.43 in order to break higher at the 10 year average at 2.58. Current averages are oversold from the 5 to 10 year monthly averages. Its a matter of time before 2.58 breaks and the 10 year trades to 3.0’s. What takes the 10 year higher is higher Inflation coupled with a higher stock market as bond prices will then drop, particularly over time against recession to the Fed QE program.

Last time the 10 year recorded a monthly average at 3.0 was one time in Dec 2013 then June 2012.

The 2 year yield volatility is capable to take the 2 year lower easily as the 10 V 2 year range is located at 0.25 against a 0.35 average while the 2 to 10 year range is located at 0.49 against a mean of 0.37. The current 10 to 2 spread runs at 0.54 and should eventually widen 24 basis points to 0.78 and allow the 10 year higher and rightside the overall yield curve.

 

Brian Twomey

 

EUR, China, Treasuries: Levels, Ranges, Targets

From last available TIC data in Oct 2017, China’s Treasury holdings in Billions remain as stable as ever over many, many years. Current Treasury holdings in Billions are 1189.2, up from 1049.3 in November 2016. Japan is the next largest holder of Treasuries and again nothing changed over many years. China and Japan were always the largest holders of Treasuries. Dating to 2008, China and Japan holdings barely moved.

Japan holdings are in Billions 1093.9, up from 1090.8 in December 2016. Of the 34 nations as holders of Treasuries, in Billions 6349.4, up from 5953.0 in November 2016. Of the 34 nations, T Bills account for in Billions 332.2 and 3746.9 in Bonds.

The United States holds $9.9 trillion in Foreign Securities as of End 2016. In Equities are $7.1 trillion, $2.4 Trillion in Bonds and $0.3 trillion in short term bonds. The next annual and Quarterly reports are due Jan 18.

China is a fake news report concocted by market participants to waste a day. The real story to Treasury holdings are found from purchasers in the Cayman Islands. The Cayman Islands as a nation category was added in 2016 and today accounts for in billions 269.9 , up from $250.4 billion in March 2017. Purchases increased steadily over the past nearly 2 years. The Cayman Islands must be analyzed as Venezuela, Iran, Cuba, Hezbollah and other American enemies.

Outside China and Japan, no nation of 34 represents a threat nor ability to move Treasury yields in a significant way. Yet China lacks ability overall. The 10 year Volume reported by the CME at 362, 182 for the March Contract. In $ terms, that’s 1,810,910,000.0

China’s Trade Deficit with the US for all 2017 in Millions is Minus 344, 419.3 while China’s Goods deficit for 2016 ran Minus 347, 016.0, up from 367 in 2015.

China’s threat to America and the world is not only its intelligence and patience but Gold Holdings at 59.24 million ounces and equates from 1300 to $77, 012.0. Treasuries overall are a small story to Gold Holdings.

USD/CNY Correlates to DXY and negatively correlates to EUR/USD. Positive Correlations explains why USD Gold and not Gold in EUR terms.

Monday was EUR and CFTC data. By Thursday, the info is meaningless and disappeared. Currencies in Futures contracts trade Money supplies and explains the CFTC data as the ECB reports weekly money supply data then CFTC weekly reports fall in line to overall money supplies. If contracts are factored to Money supplies, the CFTC data is quite small yet reveals little to an overall EUR trade.

EUR/USD break points 1.1998, 1.2052 and 1.2130 Vs 1.1852. Break 1.1852 then far lower goes EUR.

USD/JPY break Points 111.17, 111.36, 111.79 and 112.45. The 200 day average is located exactly at 111.95.

AUD/USD Break Points 0.7842 and 0.7941.

GBP/USD 1.3466 and 1.3364.

 

Brian Twomey  btwomey.com brian@btwomey.com

EUR, GBP, USD/JPY, JPY Crosses: Levels, Ranges, Targets

The only significant upside break for GBP/USD dated to Jan 1999 is located at 1.4755. When GBP/USD broke 1.3200’s and 1.3300’s then massive and many break points were created to contain the downside. And as usual to contain movements. From an interest rate perspective, the current GBP price is extremely low. Most significant break points for GBP/USD are located at 1.3466, 1.3363 then 1.3311. Most important are 1.3466 and 1.3363 as breaks here would ensure a lower GBP however slow the price will travel.

What contains GBP/USD is not only its own price but GBP/JPY and GBP/JPY remains the driver to GBP/USD. GBP/JPY most significant break points are located at 153.09 and 150.34 and 150.13. Most important is 150.34 and dropping. 153.09. Recall last posts, 153.09 was 153.45 and 153.43.

EUR/USD and EUR/JPY remain in the same circumstances as GBP/USD and GBP/JPY. The EUR/USD break points are located at falling 1.1999 and 1.1854 then 1.1801. Most important are 1.1999 for higher and 1.1854 to travel lower. From interest rates, EUR/USD price is miles to high. Miles to high asks the significant question will Draghi lower interest rates. Between interest rates to high and QE, Draghi is playing with fire. Draghi’s has 2 options, lower interest rates or drive EUR/USD far far lower.

No significant break points exists on the upside for EUR/JPY dated to Jan 1999. All EUR/JPY significant break points are all supports located from 133.00’s, 131.00’s, 130.00’s and the supports continue to 126.00’s, 118. About every 200 pips exists a support point all the way to 126.00’s to 118.00’s. Most significant break points are located at 133.35 then 133.10. EUR/JPY is highly oversold.

What drives EUR/USD is EUR/JPY. What drives GBP/USD is GBP/JPY.

Continue to monitor USD/JPY like a laser bream as a far more signigicant move is ahead because USD/JPY current price location cannot sustain itself. USD/CHF remains in the same position, its price must move. USD/CAD is fine.

Only far higher for USD/JPY and USD/CHF relieves current price pressures. A 114 and 115 price in USD/JPY relieves pressures but problems remain. USD/JPY is easily a buy dips currency pair as supports are many and strong down to 110’s and 109’s. The break points are located at 112.49, 112.79 and 113.93. If USD/JPY doesn’t begin to trend higher then we will see an explosion higher.

 

Brian Twomey

EUR/USD and Regulatory Reform: Levels, Ranges, Targets

The extraordinarily economic rosy scenario in the Fed statement was the result of 2 aspects: Tax cuts and severe reduction in Regulations. Regulations pertain to 225 pages and 5620 Regulations. Trump mentioned in the campaign BUY America and this is the point where regulatory cuts began. BUY America resulted in a Regulation to only American construction material is accepted in all Federal government construction contracts. The Buy America is as the phrase states, America for America.

The Economic Development Administration within the Commerce Department began the long review of Regulations for the purpose to eliminate agencies, cut government budget and size, eliminate Regulatory duplications, eliminate business regulatory burdens and streamline Government Grants for faster approvals. Most interesting is for the Federal government to work closely with the states to ensure Federal monies reach the states much quicker.

One example is the EDA is working with states to clean inner cities against the burdens of crime for the purpose to build and or rebuild for investment purposes sections of inner cities that became war zones. Further is Trump’s Infrastructure plan to rebuild roads, highways and byways, tunnels, bridges. Only $200 billion is slated for Fed government expenditures to the states so states may enter in Public Private / partnerships in an overall $1 trillion infrastructure plan. The Fed government in this instance provides the initial capital and the states decide their own methods.

By regulatory reduction of fees to the United Motor Carrier Association, enhanced economic activity will be seen in transportaion of goods by motor carriers, truckers, Freight brokers, freight forwarders and leasing companies.
Under the Veterans Administration, regulatory burdens were reduced for all workers assigned to military veterans from Home Health Aides to hospitals.

Trump is working agency to agency to eliminate all regulatory burdens. In the last 90 days, 5509 regulations were eliminated while so far 892 Regs are scheduled for elimination in the next 90 days.

After the Economic Development Administraion completes its recommendations, the agency is slated for elimination.
Under the International Trade Administration in the Commerce Department, India, South Korea and Taiwan were found to illegally dump below fair market prices polyester Staple Fibers. China is selling Stainless Steel sinks under fair market value. Countrvailing Duties were placed on Argentina and Indonesia for Dumping biodiesel fuels. Nations in unfair trade practices are targets for fees and fines.

Once a regulation is enforced or eliminated, only a vote by Congress under the 1996 Congressional Review Act can stop or revisit a regulation. Current Democrats fail in majorities to even consider a vote therefore Trump has a free hand in regulatory reforms. More will be written in days ahead on further regulations.

EUR/USD Break points 1.1999 and above 1.2109.
USD/JPY break points 112.75 and 112.46.
GBP/JPY remember 153’s?. Break point is now 153.14.
AUD/USD break points 0.7842, 0.7941 and 0.8008.

Brian Twomey

EUR, DXY, Interest Rates, Forward: Levels, Ranges, Targets

USD 10 minus 3 month spread = 1.02, 10Y minus 2y = 0.51, 30Y minus 2 = 0.85 and current OIS = 0.27. Where is Queen Yellen and DXY.

DXY is explained by the 10Y minus 3 month at 1.02 as this represents in markets past, present and future the domestic interest rate. At 1.02, its the same old tired Yellen game, build a bottom before a raise but don’t dare create wide distance from bottom to a new raise. The game is wait until the bottom rises to sufficient distance then raise, if raise is the plan and if the bottom rises. The Queen’s consummate focus on bottoms lacks any ability to see and project forward. Fed Funds closes since the last raise at 1.42 means a 40 bps distance. This distance is miles to wide for the Queen.

Project 40 points to AUD, NZD, GBP and EUR and 40 is actually at barely 20 points. At 1.02, Yellen is killing DXY and forcing by osmosis, EUR, GBP, AUD and NZD higher. Until 1.02 rises, EUR, GBP, AUD and NZD goes higher. At 1.02 in years past under normal market prices, 1.02 should be around 1.42. The Queen’s new Repo rate deal is forever containing lower interest rates to move higher as interest rate traders at the lower rates are doing just fine. This means 1.02 doesn’t have a need or reason to move

Let’s perform the correct projections 5 years forward and we see from 1.02 to 1.10 is DXY from 92.17 to 92.77 from current 91.73. From current rates to exclude 1.02 then further resistance is built into current DXY from 93.22 to 95.04. Yellen’s story is to build resistance against a higher DXY.

At 1 to 5 years forward, let’s look at range breaks at 90.82, 89.93, 89.07 and 88.22. Its a painfully slow mover in DXY to kill it lower but slowly. Bond yield rises only further ensures more resistance to DXY rises. This explains why EUR skyrockets on Fed Rate rises. The Queen is playing the game backwards on a far different plane than what was normal in years past. Greenspan was the last to play the market game straight.

EUR/USD break points 1.2003 and 1.2114.
USD/JPY. Break points 112.71 and 112.45
AUD/USD 0.7847 and 0.7792.
NZD/USD. 0.7147 and 0.7061.

Brian Twomey

G10, AntiPodean, Forward Points: Levels, Ranges, Targets

As a word, Antipodean is most specifically referenced to New Zealand as British explorer Capt John Cook founded New Zealand and Australia in the 1800’s. Antipodean was first attributed to New Zealand as the time zone to Cook’s founding of New Zealand’s Southern Islands was a complete opposite to Greenwich Mean time in the UK..

The term’s reference historically grew to refer to opposite, but opposite to something as in land by antipodes, opposite distances, opposite family members. Australia popularized the word in the late 1950’s to refer to distinctive Art drawings. New Zealand’s well known pharmaceutical company is known as Antipodean Pharmaceuticals. In Currency trading, Antipodean refers to AUD and NZD yet opposite in currency pair definition lacks understanding unless opposite refers to USD. Or possibly opposite refers to the original purpose as in opposite to England.

Possibly Antipodean refers to NZD Dairy Auctions and no price movements in NZD.

The BOE redesigned its website consistent to many other Central banks. So far, no trading information was eliminated but don’t bet the house on it.

Canada redesigned its website and eliminated Forward Points. A trader must now factor their own Forward Points. Refer to EUR/USD and my reference to 1.1991 and the perfect target hit by trading Forward Points.

Forward Points are most vital to currency trading because traders can hit perfect targets without even a simple math calculation, chart or graph. Forward Points simplifies trading but simplifies in terms to streamline time. Time is most vital in trading because the 5% experts beat 95% of traders by 20 and 30 pips quicker than most traders realize they were beat. This is the factor of the computer and the post 2008 world as much information was long lost in the process. The computer actually became an enemy to trading.

AUD/USD. Break points 0.7842 then 0.7940 and 0.8009. Below,0.7791 and 0.7733.
NZD/USD. Break Points above 0.7135 and 0.7274 at the 14 year average. Below 0.7053 and 0.7017.
EUR/USD Break points 1.2005, 1.2116 and 1.2211 then 1.2400’s.
GBP/JPY Watch 153.21 at the 10 year average.
USD/JPY. above 112.49 and 112.67.

Brian Twomey

EUR/USD, Minimum Wages: Levels, Ranges, Targets

The Democrats answer to Trump tax increases in Blue states is to propose Minimum Wage increases as in the assumption a raise will rise above price increases. Price increases always far outpaces wages and actually hurts the intended low Wage Earner targets. But the expected price increases will add a massive burden to all wage earners.

If the Democrats believe in the false dichotomy Wage increases would allow a benefit to Wage earners to pay a higher tax then we’re looking at more economic destruction in the Blue states. Much has been written on the Seattle Minimum Wage rise example as not only was employment reduced but house and overall price increases skyrocketed.

The Public Relations aspect to the Democrats is claim Wage Rises assist the poor but Democrats true goal is states will be forced to increase government spending against higher prices. The poor Wage earners remain outside Democratic purview of concern. Union workers will experience higher dues an this dues money goes directly into Democrat Party pockets to support reelections.

Currently, 18 states propose Minimum Wage rises. Further, Republicans control 34 state governors and 26 states are both dominated by Republican governors as well as state Legislatures. Only 15 state Governors are controlled by Democrats.
Alaska by the Trump Tax cut will begin oil drilling in Anwar. The Alaska legislature is supported by 14 Republicans Vs 6 Dems in the Senate and 21 Republicans Vs 14 Dems in the House. The current Governor is an Independent. Anwar drilling is mandatory by law and it appears little Dems can do to stop drilling efforts especially when the vast majority of Alaska voters are Republicans.

EUR/USD. Break points 1.2004 vs 1.2128, 1.2211 and 1.2266. Then comes 1.2400’s.
GBP/JPY trades top of the vital range point at 153.24, below is located 149.83
USD/JPY. Broke big points at 112.64 and 112.58.
NZD/USD wide range from 0.7043 and 0.7274
AUD/USD supported by 0.7736.

 

Brian Twomey