EUR/USD V USD/JPY : Levels, Ranges, Targets

As EUR/USD and USD/JPY head into week 6, range compression remains the story as EUR/USD’s overall range dropped from 524 pips Feb 23rd to 505 this week while USD/JPY’s longer term range dropped from 447 pips to current 438.

EUR/USD’s 505 pip range means this week’s larger range is located from 1.1821 to 1.2825 and March 10, the range was 1.1802 to 1.2828. This week’s USD/JPY larger range is located from 109.54 to 100.77 and March 10, the range was 109.74 to 100.73.

Neither EUR/USD nor USD/JPY wider ranges failed to materially change over 6 weeks. Constriction at the wider ranges causes compression at the short ranges as EUR/USD and USD/JPY trade aimlessly over 6 weeks. Failure to break significant points is a slack explanation part of the story.

EUR/USD 1.2800’s remain blocked particularly 1.2807 at the 10 year average and 1.2841 at the 14 year average. Why failure at 1.2800’s is because averages at 1.1200’s, 1.1400’s and 1.1700’s achieved astronomical overbought. Those averages remain overbought into week 6 but as EUR/USD continues to range trade at current lower levels, skyrocket overbought is fast losing its status and moving to normality.

USD/JPY was and remains deeply oversold at 113.00’s, 111.00’s and 110.00’s while the downside over the past 6 weeks was severely blocked at high 104.00’s to lower 105.00’s. USD/JPY downside this week is severely blocked at 105.16 and 104.69 but both are the lower break points this week to challenge its deeply oversold 14 year average, now at 102.99.

EUR/USD’s past few weeks report was its price is to high and must adjust lower and it performed as written. This week however EUR/USD is forming a base and the same base reported in AUD/USD. USD/JPY is severely afflicted with uncertainty as it desperately wants higher levels but lacks ability at its break points therefore USD/JPY fails to lead the way this week in favor of EUR/USD.

Higher EUR/USD must break 1.2323, 1.2360 and watch closely the sell point at 1.2385. If EUR/USD travels above 1.2385 to the next break point at 1.2402 then short to 1.2385 and below.

Watch 1.2319 as 1.2319 represents the last level to the most vital break at 1.2231. If EUR/USD is forming a base to travel higher as it appears then 1.2231 will hold and EUR/USD moves higher to the upper 1.2385’s. EUR/USD is challenged at 1.2231 by 1.2208 and a break targets 1.2158, 1.2153 and 1.2077. A break of 1.2231 will see 1.2077.

Overall, EUR/USD still must travel lower before an upmove begins.

USD/JPY to travel higher must break 106.61 and most vital 107.71 to target 108.77, 109.19 and the 5 year average at 109.86. From the close at 106.28, USD/JPY travels higher to challenge 106.61

Lower USD/JPY means 106.21, 106.16, 105.28 then 105.16 at the break point. Long on any price drops to 106.61 is the overall strategy as 105.16 holds.

Overall USD/JPY range 107.71 to 105.16 and EUR/USD 1.2231 to 1.2385 and 1.2402.

 

Brian Twomey

AUD/NZD: Levels, Ranges, Targets

AUD/NZD historic tops are located at 1.3575 in September 2000 and 1.3793 in March 2011 while historic bottoms achieved 1.0406 in December 2005 and 0.9973 in April 2015. For AUD/NZD to trade to its 1.1883 mid point, the 5, 10 and 14 year averages must break at 1.0899, 1.1775 and 1.1621.

AUD/NZD’s current price at 1.0600’s is not only flat on the floor historically but it must trade to its multi year range point at 1.0964 then the larger range becomes 1.0964 to 1.1775. Most vital to this scenario is the 5 year average break point at 1.0899 to move significantly higher to not only 1.0964 but to achieve a far more comfortable trading range longer term from 1.0899 to 1.1776 and shorter range from 1.0899 to 1.1370.

AUD/NZD at 1.0600’s and lower is impossible to trade short because its oversold both from a historical and daily view, its price is low and outside range boundaries. Oversold means lower price extremes are located at 1.0526 and 1.0467. Above, AUD/NZD contains easily a potential to challenge its 5 year average at 1.0899 as overbought begins at the range point from 1.0934 to 1.0964. Higher will take time but higher for AUD/NZD is the only trade.

To move higher, AUD/NZD must break its most vital point at 1.0760 then 1.0838 and clear sailing to the 5 year average at 1.0899. Overall break points to 1.0760 are located at 1.0643, 1.0719, 1.0737 and 1.0745. From 1.0760, next comes 1.0773, 1.0779 then 1.0838.

Most volatile points higher are located at 1.0770, 1.0772, 1.0777, 1.0790 and 1.0814.

For the shortest term trade and match the 100 pip trade criteria, the target is 1.0719 and 1.0737 and the overall strategy is long any drops and never consider short.

EUR/AUD at the time of Wednesday’s post hit its highs at 1.6192 and so far touched 1.5982 for a 210 pip and ongoing gain. EUR/GBP 0.8797 to 0.8733 gained so far 64 pips.

Brian Twomey

EUR/USD and G10: Levels, Ranges, Targets

EUR/AUD since yesterday’s top at 1.6191 dropped 167 pips to 1.6024, EUR/GBP from 0.8797 and on the approach to 0.8823 dropped 63 pips to 0.8734. EUR/AUD and EUR/GBP contains plenty of downside. USD/JPY from 104.71 and Sunday’s open profited 100 pips at 105.74 on a strict target trade. After USD/CAD dropped from 1.3140’s to 1.2800’s and below reported 1.3092, USD/CAD all week roamed dead inside 1.2800 to 1.2900’s.

Only the easy trades, the market given trades are taken and the rough price points are reserved to the market. USD/CAD is an excellent example. More long term trades will post.

USD/CAD contains a problem at its 1.3092 top Vs break points below at 1.2777 and 1.2665. At 1.2777 is required to see CAD gain downside speed as it sits in slight overbought territory.

EUR/USD downside break is located at now 1.2226 and not much movement at 1.2226 all week. A break lower then the larger range becomes 1.2226 to the 5 year average at now 1.1959.

USD/JPY to move significantly higher to target 109’s must break 107.79. A 107.79 break will see EUR/USD lower and 1.2226 breaks lower. A break by both pairs will see terrific volatility and a far better high/ low direction to USD/JPY V EUR/USD especially after a 6 week range trade.

EUR/JPY remains the wild card in the USD/JPY V EUR/USD mix as it must break 131.74 to move significantly higher yet the 14 year average sits at 131.54.

GBP/JPY trades above its most significant break point at 149.39.

NZD/USD now trades below its vital break point at 0.7224 and NZD should begin to drift lower over days ahead.

AUD/USD price sits flat on the floor and only 0.7500’s remain then AUD/USD leaves its range to trade in the outer limits. Most important break point above is located at falling 0.7779. A break higher at 0.7779 will see 0.7900’s in quick time.

GBP/USD remains above its breaks points at 1.3865 and 1.3811 and only a break lower would result in a new downtrend. Overbought begins at 1.4215 to 1.4265.
Brian Twomey

EUR/AUD: Levels, Ranges, Targets

What explains current price volatility is the vast majority of currency pairs trade around 5, 10 and 14 year averages. EUR/USD and USD/JPY for example trades between its 5 and 10 year, EUR/JPY trades around its 5 and 14 year, GBP/CAD is a 5 to 14, CHF/JPY is a 5 to 10., AUD/NZD and AUD/CHF are both challenging respective 5 years.

Then comes volatility in relation to currency pairs in the same universe such as GBP/CAD and GBP/AUD trade between 5 and 14 years while the remainder GBP pairs to include GBP/USD trade below 5, 10 and 14 year. Volatility in the GBP case is an alignment or possible misalignment issue.

Trade around 5, 10 and 14 year averages from a price perspective and on a smaller scale experiences volatility because certain price points encounter radical changes in the numbers. Markets attract to the price points as they offer best gains and if trading the price point entails sending a price to non normality or outer limits then price structures must adjust.

EUR/AUD broke above its 14 year average at 1.5315 in February and bolted 800 pips to 1.6161. EUR/AUD not only left its range tops from 1.5738 and 1.5710 but EUR/AUD’s price is far to high and its massively overbought from 1.5500’s to 1.4600’s. EUR/AUD retains the same range top position as EUR/GBP, USD/CAD and AUD/USD as the complete oppposite as AUD/USD is literally on the floor and awaits the spark to skyrocket higher. Part of AUD/USD deep bottom is explained by stratospheric EUR/AUD.

Overbought means EUR/AUD extreme prices are located at 1.6517, 1.6499, 1.6382 and 1.6248. The topside is severely blocked and its impossible to trade EUR/AUD long.

Longer term EUR/AUD must trade lower inside its range to 1.5533 and below. The 14 year average at 1.5315 offers a tough break and EUR/AUD could easily trade between 1.5533 to 1.5315. Overall EUR/AUD lacks a comfort zone unless 1.5315 breaks lower because EUR/AUD is overbought, outside ranges, high price and EUR/AUD wide movements are naturally built into its price.

Overall to travel lower, EUR/AUD must break 1.5787, 1.5738 and 1.5710. Upon a break of most vital 1.5710, EUR/AUD targets 1.5695, 1.5686 then on to 1.5500’s. From 1.5300’s to 1.5500’s, EUR/AUD becomes oversold, risks another bounce and informs how rough is the 1.5315 break. The daily perspective informs EUR/AUD must break 1.5979 to trade inside its daily range. EUR/AUD 1.5700’s to 1.6000’s will see its best volatility at 1.6013, 1.5968, 1.5923, 1.5856 and 1.5781.

EUR/AUD movements are extraordinarily wide both from a long and short term perspective and this explains by no other choice why analysis is viewed over wide ranges.

Brian Twomey

EUR/GBP: Levels, Ranges, Targets

EUR/GBP represents 12 pairs posted in 8 days and all pairs posted performed to the exact expectation as written and the result for each pair was minimum 100 pips. EUR/NZD was a round trip as overbought sent EUR/NZD 100 pips lower to hit mentioned support then a 100 pip bounce higher to upper point.

Trade targets were held 1 to 2 days at most. AUD/USD for example took 2 days to finally achieve 0.7750. The current USD/JPY 104.71 long from Sunday’s opening profited at 106.74 as 105.18, 105.19 and 105.30 broke above today. A vital point exists today at 106.78 so we take easy points and leave struggle areas to the market.

USD/JPY longs from the prior week achieved 106.32 then 106.60 in 1 day on Monday. EUR/USD yesterday went long as mentioned at 1.2360 and bolted past my mentioned 1.2405 but the extra 50 pip gain was positive. GBP/USD struggled at 2 attempts and 15 minutes to break mentioned 1.4196 then achieved 1.4244.

EUR/GBP longer term contains serious problems as 0.8700’s represents 300 pips outside its range. Longer term, EUR/GBP is overbought, its price is miles to high and should trade back to 0.8497 and below. The daily view confirms the longer range perspective. The longer term range problem informs if ever a market implosion strikes the markets then EUR/GBP shorts are first consideration as a deep dive will be seen. EUR/GBP just needs the spark.

Until EUR/GBP trades below 0.8497 then its price will retain the status as far to high and overbought. At 0.8500’s and throughout all 0.8500’s, EUR/GBP volatility will achieve extraordinary status. When, not if, EUR/GBP trades below 0.8497 into 0.8300’s then a comfortable and wider movement trading range will develop from 0.8400’s to 0.8100’s. Why a dead range exists today especially to move higher is EUR/GBP lacks ability to move higher and EUR/USD as well as EUR cross pairs hold EUR/GBP in slow movements and dead ranges.

Why volatility at 0.8500’s is because the 10 year average exists below at 0.8330 and a break represents a wholesale market change and the break won’t come easily.

The current wider EUR/GBP range is located from 0.8760 to 0.8477 and 0.8497. EUR/GBP in the longer view trades miles above and top of its multi year range. Only 2 break points exists above and those are located at 0.8823 and 0.8835. If ever both points break higher then EUR/GBP leaves its multi year range to trade in the outer limits. The similar situation was seen in USD/CAD at 1.3092 and CAD/JPY at 80.44. A lost price is a market gift as was the CAD examples and explains the 200 + pip move in each pair.

What holds EUR/GBP from its impending deep drop is its daily trading range and today located from 0.8876 to 0.8768. At 0.8876 provides reinforcement to assure 0.8823 and 0.8835 won’t break anytime soon. Shorter term over weeks and months, the daily trading range continues to protect 0.8823 and 0.8835 from its break and this situation won’t change anytime soon unless an extraordinary development hits the markets.

The 0.8760’s in days ahead provides first break points then 0.8618 and into volatile 0.8500’s. The trading strategy is obvious as its impossible to trade 1 pip long in EUR/GBP. Until EUR/GBP trades back to its normal reality then shorts only provides the only strategy.

 

Brian Twomey

GBP/USD: Levels, Ranges, Targets

GBP/USD’s 3105 pip June 2016 Brexit fall from 1.5012 to 1.1950’s in Oct 2016 sent GBP/USD into not only massively oversold but an impossibility to hold at drastically lower levels. In the larger price scenario, Brexit was a minor event as GBP/USD was inside a larger correction from November 2007 highs at 2.1100’s. Brexit was the assist to allow GBP to embark on its continued downtrend and to achieve a 9 year bottom at 1.1950.

EUR/USD was in a similar situation June 2008 at 1.6000 peaks. The 2008 crash was the impetus to send EUR/USD on a 9 year downtrend to 1.0300 lows in January 2017. EUR/USD and GBP/USD peak prices were the telling story and events sent both on its corrective course lower. Both GBP/USD and EUR/USD completed its 9 year mission and now trade in a giant correction mode.

The moment of truth and big decisions are here for GBP prices as GBP now finds itself in a trading range against vital break points to decide if correction mode is complete and GBP heads lower or will GBP continue its larger correction higher.
Vital break points inside the larger price scenario are located at 1.5229 and 1.5287. A break above informs GBP heads far higher but along the way is stiff resistance at the 5 and 10 year averages at 1.4690 and 1.5406.

The price at 1.4196 becomes most important as a break above signifies GBP enters a trading range from 1.4196 to 1.6262. At 1.4196 is actually a short term target price and the inflection point to align the larger distribution in overall prices. This means above 1.4196, GBP/USD embarks on overbought status as it travels higher and short targets become 1.4196.

Current GBP/USD prices however are far to high in terms of neutrality positions long and short term but at 1.4196 is not only important as a range point but high volatility will be seen. Further volatility inflection points are located at severely low 1.4044 to 1.4015, 1.3997 to 1.3962 to represent 1.3962 as high and 1.3997 low. Then 1.3826 to 1.3892 as both skyrocket high.

GBP/USD achieves full neutrality at 1.3588 and becomes low and flat on the floor at 1.3498. Overall, above 1.4196 to 1.5229, GBP/USD travels to a trading range and normalizes at neutrality and this includes the 5 year average at 1.4690. Neutrality concepts entail long lows, short tops over sustained periods.

Above 1.4196, next break points are located at 1.4249, 1.4398, 1.4431, 1.4548 and the 5 year average at 1.4690. Most vital over next weeks are 1.4431 and 1.4548.

GBP/USD to travel lower must break rising lines at 1.3826 and 1.3781. The main point break to travel lower and challenge 1.3826 is located at 1.3950 then comes 1.3883. Why 1.3826 and 1.3781 represent extremely rough break points is because 1.3826 is protected by 1.3803 and 1.3781 is defended by 1.3748. The area from 1.3748 to 1.3826 is forming a massive cluster of supports. The explanation to the cluster is below 1.3748 then GBP/USD falls off a cliff as the next most vital break point is located at 1.3350. At 1.3350 explains why 1.3500’s are extremely vital as a break and range point.

Below 1.3748 and not expected anytime soon unless implosion strikes, next comes 1.3727, 1.3673 and 1.3565.

Current GBP/USD trades between its wide, wide ranges from 1.4055 and 1.4052 to 1.3597 and 1.3510. Current GBP/USD from 1.4100’s trades outside its ranges and must travel lower to 1.4055 and 1.4052. Lower and outside ranges informs GBP/USD range point at 1.4196 represents a huge challenge short term.

Despite Brexit as described by a minor event in the life of GBP overall prices, the damage created by Brexit is clearly seen in deep contexts particularly when GBP/USD traveled to 1.1950. At 1.1950 added far more injury to overall prices than Brexit alone.

At 1.1950 created extraordinarily wide ranges both short and long term inside a long long climb to a normalized price. To describe current 1.4100’s, the top channel is located at the 14 year average at 1.6380 and the top price overall is located at 1.6418. GBP/USD overall retains a huge potential to trade considerably higher over time as the break points at 1.3800, 1.3700 and 1.3300 represents the bottom floor in the larger view of prices.

 

Brian Twomey

 

 

EUR/USD V USD/JPY: Levels, Ranges, Targets

The current range compression showdown between EUR/USD and USD/JPY continues into week 4 from Feb 23rd as EUR/USD’s larger range from 524 pips dropped to today’s 505 while USD/JPY’s 447 pip highs collapsed to today’s 442 pips. From last week, EUR/USD’s range lost 4 pips from 509 while USD/JPY forfeited 5 pips from 447. The week 4 story is failure to break significant points hence the reason for range constriction.

EUR/USD’s larger range is located from 1.2825 to 1.1815 and this range moved down 19 pips over the past 4 weeks while EUR/USD trades between its shorter range at the 5 and 10 year averages from 1.1960 to 1.2812. Upside 1.2800’s remains blocked by 1.2833, 1.2841, 1.2870 and 1.2895 to explain the drop in upper range points. As EUR/USD falls, upper range points drop.

Any chance to challenge 1.1960 then EUR/USD must break 1.2211 and 1.2211 is a 55 pip drop from 1.2166 Feb 23rd but to offer validation to respective break points, 1.2211 was once the vital 1.1100 break dated June 2017.

Must break points this week for higher and lower EUR/USD are located from 1.2320 to 1.2360. The 1.2360 and higher problem is EUR/USD leaves its range above 1.2364. At 1.2211 must rise in order to see the next level at 1.2405 and a good short point.
Below 1.2320 comes next 1.2315, 1.2308 and 1.2281. At 1.2281 must break in order for 1.2211 to target below 1.2176, 1.2162 and 1.2150.

USD/JPY as was the case last week will lead the way higher. USD/JPY’s larger range is located from 109.61 to 100.76 and trades between its 5 and 14 year averages from 109.82 to 102.99. Higher for USD/JPY to target its vital break point at 107.94 must trade above 106.62 and 107.02. Lower targets 104.00, 103.49 and 103.09.then 102.99. Most vital is 103.09.

The shorter range is located from 104.65 to 105.19. Why USD/JPY leads the way higher is because it trades outside its range and must travel higher to 105.87 on a break of 105.18, 105.19 and 105.30. EUR/USD 1.2320 corresponds to 105.19 while 105.30 translates to EUR/USD 1.2296 and above the break at 1.2281. Caution is warranted.

USD/JPY longer term trades above neutrality and flat on the floor in the daily view while EUR/USD’s current price longer term is far to high but a base is forming.

Despite a 1 pip difference from 105.18 and 105.19, USD/JPY radically changes its ranges and its relationship to neutrality above 105.18. This means the break above 105.18 and 105.19 will see USD/JPY skyrocket higher as was the case last week when it was written USD/JPY must travel above 106.32.

EUR/USD will see its best volatility at 1.2320 and 1.2281. Overall for the week, EUR/USD travels lower while USD/JPY higher.

Brian Twomey

 

AUD/USD: Levels, Ranges, Targets

Two vital points drives AUD/USD, 0.8260 and 0.7797. Three weeks ago, AUD drivers were 0.8264 and 0.7813. AUD/USD upper averages in 3 weeks dropped 4 pips from 0.8264 and 6 pips from 0.7813 and this explains the slow grind drop in AUD/USD over 3 weeks.

Yet overall AUD/USD’s major conundrum presently is it lacks a wide enough range to see the drastic moves and its challenged by oversold conditions as well as its relationship to break points.

AUD/USD from lower 0.7700’s on the daily front below 0.7752 is out of range and must travel to 0.7752 and above. Longer term, AUD/USD is far off kilter to its 0.7836 range. Both vital AUD/USD drivers at 0.8260 and 0.7797 are highly oversold. Any prices lower in AUD/USD drives oversold to extreme prices.

Extreme prices means 0.7662, 0.7684 and 0.7707. AUD/USD in overnight Asia traded to its extreme at 0.7684 then bounced to current 0.7623. AUD to travel lower to extreme prices as well as an off range situation means AUD trades in a severe danger zone.

EUR/USD in many instances contains characteristics to travel in severe oversold or overbought market scenaruios while AUD is forced to move based on EUR/USD and its EUR/USD to throw AUD off kilter and most especially seen in current severe oversold AUD/EUR.

When last written in regards to AUD at 0.7800’s was stated a big move was on the way as AUD was forced to trade at either 0.7600’s or 0.8300;s as deep pressure was built into AUD’s price as the EUR/USD cause. As the upside for AUD was blocked by 0.7800’s and 0.7900’s as well as EUR to retreat lower, AUD lacked a choice except to move lower against severe oversold prices.

From the current daily perspective, a big AUD base is in formation. A base derives from not only oversold and off range but only 2 points exist to the downside and those points are located at 0.7682 and 0.7573. Below 0.7573, AUD moves off the charts. No mystery in severe oversold at 0.7684 materializes as a break of 0.7682 means AUD dtops off 109 pips to 0.7573.

AUD/USD as well is challenged by a higher move as must breaks to travel higher are located at 0.7792, 0.7797, 0.7817 and 0.7859. Above 0.7859 then challenges the 5 year average at 0.8153 but also above 0.7859, AUD ranges would widen further and allow for a more comfortable trading range.

Overall AUD ranges in days ahead are located at 0.7792 and 0.7797 Vs 0.7682 and against a strategy to long on price drops especially at the extremes until better trade conditions materialize. AUD is severely caught between off kilter ranges, oversold and a wide range EUR/USD far from its significant break points.

 

Brian Twomey, trades available long and short term for interested, brian@btwomey.com

 

EUR/NZD V NZD/USD: Levels, Ranges, Targets

 

EUR/NZD and NZD/USD maintains its traditional monthly and yearly story of dominance as both retain complete opposite correlations and for friends and followers over the years, EUR/NZD and NZD/USD combo was always the pairs recommended to trade RBNZ decisions.

EUR/NZD must break is located above at 1.7088 while NZD/USD awaits its break below at today’s 0.7226. NZD/USD’s current daily and longer term price is miles to high while EUR/NZD lies in wait to travel considerably higher but it needs a daily correction.

EUR/NZD’s vital and overbought daily break points below are located at 1.6924 and 1.6893. Overbought coincides to current price above its upper range point from 1.7014. EUR/NZD like its counterpart pairs posted this week in NZD/USD, USD/JPY, USD/CAD and CAD/JPY must travel back and trade inside its range. NZD/USD held its lower range point yesterday at 0.7170’s while EUR/NZD lacked a choice except to break above 1.7088 to 1.7160’s. As EUR/NZD was miles above 1.7014 , it corrected lower today to its range point at 1.7014.

At 1.6924 and 1.6893 is well supported by today’s lower range point at 1.6772. The most significant target above 1.7088 is 1.7290 on a break of 1.7159. At 1.7159 is not only the sole break point to 1.7290 but a break above 1.7290 allows a later run to the 10 year average at 1.7421. This will take more time as first 2 extreme prices are located at 1.7195 and 1.7256.

The larger overall range for EUR/NZD is located from 1.7950 to 1.6226 while the shorter range is located between the 5 and 10 year averages from 1.6027 to 1.7421. At 1.7421 coincides to NZD/USD at 0.6800’s. Within the 5 and 10 year range, EUR/NZD is well supported from 1.6200’s, 1.6500’s, 1.6700’s to 1.6900’s. The supports below are many and solid.

EUR/NZD trades well above 1.6027 and near its upper range because it can’t handle a lower price. Most vital above 1.7088 then a new trend begins.

As long as EUR/NZD trades above 1.6924 and 1.6893 then the buy drop strategy will remain for many weeks to months ahead.

 

Brian Twomey, Trades long and short term available for interested, brian@btwomey.com

NZD/USD: Levels, Ranges, Targets

When NZD/USD broke 0.7302 then its 14 year average at 0.7283 last Thursday, its most significant test for continued losses or a 55 pip range scenario occurred below at 0.7228. Thursday’s overall 66 pip trade day held NZD/USD’s decision.
Editorially, NZD/USD is a terrific and trade able currency pair yet its a highly contained pair due first to its challenge to maintain its position after American markets close between USD and its close cousin AUD.

The second test for NZD to maintain its own character separate from USD and AUD is to set the Asia trading standard as NZD provides, based on its money market system, determination to a volatile or range bound Asia trade condition. A volatile or range trade American market is irrelevant to assess Asia trade conditions as NZD determines the final judgement to protect its currency price. AUD becomes the follower as second in line in the G10 space yet overall AUD is irrelevant as AUD rarely leads any currency pair.

The containment and protection example is seen within the context of break points. To travel higher, NZD/USD must break 0.7228 but 0.7228 faces a continued test higher by further breaks at 0.7232 then 0.7257. While NZD/USD broke below 0.7228 Friday, the vast majority of trade occurred around 0.7228.

A break of 0.7257 would only travel to 0.7280 range top and 3 pips below the 14 year average at 0.7283. In the way to 0.7280 is a break point at 0.7270. The range top informs 0.7283 will hold into today’s RBNZ decision.

Further above and most significant is the 5 and 10 year averages at 0.7469 and 0.7418. A break of 0.7257 then 0.7302 becomes the next level and the 5 and 10 year averages are well protected by 0.7322 and 0.7343. A break of 0.7302 then NZD can only travel 20 and 41 pips to its next break points.

Viewed from the larger overall range from 0.6999 to 0.7515, NZD trades in small parameters within the context of the larger range system. NZD is well protected by a market implosion. At 0.7228 can only travel higher to 0.7270, 0.7280 and 0.7283.

NZD below can only travel to 0.7187, 0.7177, 0.7168, 0.7133 then a massive drop to 0.7010 and upon a break at 0.7010 won’t occur but a break opens the flood gates to the range bottom at 0.6999 and 0.6849 then 0.6727. Most challenging in days and weeks ahead is 0.7168 and 0.7133 bottoms.

Overall, NZD/USD’s price is far to high and contains potential for a deep drop but this will take some time.

 

Brian Twomey

EUR/JPY: Levels, Ranges, Targets

The true break for EUR/JPY in the past 4 weeks was any price below 133.00’s in order to trade back inside its respective range and this was seen at the end of February. Downside gains accelerated end February on a break of 133.39 and long ago written as the vital break point.

The past EUR/JPY 4 week and 303 pip range from 132.44 to 129.41 traveled 75 pips per week and this range is standard inside the new central bank imposition to exchange rates but its also correct as EUR/JPY must and traded inside the 4 week range bound USD/JPY and EUR/USD.

EUR/JPY 133.39 is today’s 132.11 and 132,11 is not only massively oversold but it represents the must break point to travel higher to the current range top at 133.53 but hurdles exist on the way beginning at the 5 year average at 130.72 then 14 year average at 131.54. Context to upper EUR/JPY is it ranged from 133.76 to 133.58 over the past 4 weeks and held.

The prior USD/JPY forecast informed USD/JPY had to travel back to its 106.32 range and higher and USD/JPY achieved today 106.60 but higher USD/JPY allowed EUR/JPY to follow. On the way higher, EUR/JPY broke its 5 and 14 year averages at 130.72 and 131.54 but faces its most significant challenge at 132.11 then 132.27.

Why significant challenge higher is because above 132.11 and 132.27 is only the range top remains at 133.53. From 132.11 to 133.53 represents danger zone because EUR/JPY today leaves its range at 133.05 and 133.53 is not expected to break, yet.

Significant break points below are 131.63 and 131.16 . Lower inside 131.63 allows EUR/JPY to retain its larger range from 125.66 to 131.63. Below 131.16 then EUR/JPY leaves its daily range as today’s daily range is located from 131.16 to 133.05. Further to current interesting position is EUR/JPY is its daily mid range Vs a current price much to high. EUR/JPY is in a struggle.

To travel to 131.16 then EUR/JPY must break 131.59, 131.54 at the 14 year average, 131.50 and 131.43. The 5 year average at 130.72 represents most significant on the way down but its break is protected by 130.99, 130.76 and 130.61. EUR/JPY has ability to trade inside its 5 and 14 year averages from 131.54 to 130.72. Range means sell tops and long the bottoms until EUR/USD or USD/JPY breaks significant points to allow a more significant longer term EUR/JPY move.

Range concepts are best represented by this week’s USD/CAD as the 1.3092 upper range broke to 1.3140’s and CAD/JPY broke lower to 80.50’s. Both pairs were forced to retain its ranges and USD/CAD yesterday dropped 100 pips while CAD/JPY rose 100 pips. Aptly described and well chosen is levels, ranges and targets to highlight all market prices.

What allowed EUR/JPY overall to travel higher is not only oversold 132.11 but 129.53 and 128.65 remains for weeks to come most vital break points to see EUR/JPY lower to 127.00’s and the bottom of bottom to the overall range. Further to 127.00’s is the 10 year average at 125.83 and not ever expected to break as this break represents a wholesale change in EUR/JPY to its EUR/USD and USD/JPY relationship.

At 129.53 and 128.65 held but those points weren’t ready to break lower particularly when USD/JPY was set to rise higher.

Brian Twomey

EUR/USD V USD/JPY: Levels, Ranges, Targets

Despite a negative 84% Correlation longer term and negative 94% daily view, USD/JPY V EUR/USD lacks price drivers in correlations as the story since Feb 23 is failure to break vital points to cause severe range compression.
The larger EUR/USD range compressed from 524 pips Feb 23 to current 509 while USD/JPY dropped from 457 to current 447 pips. Why compression is found in EUR/USD failure to break not only its 10 year average at current 1.2817 but the many break points from 1.2817 to 1.2894.

USD/JPY’s break point remains the 5 year average, now at 109.78. Overall, USD/JPY from its 5 to 14 year average retains a range from 109.78 to 103.00 while EUR/USD 1.1963 to 1.2817 is trapped between its 5 and 10 year averages. Failure to break from current ranges caused averages to compress week to week.

USD/JPY’s break point to travel higher is now 108.31 and down 147 pips from 109.78 on Feb 23rd while EUR/USD’s current break point at 1.2209 rose 47 pips from 1.2160 on Feb 23. USD/JPY’s close at 105.95 is 236 pips from 108.31 and EUR/USD from its close at 1.2287 is 78 pips from 1.2209. Last week’s EUR/USD’s 112 Vs USD/JPY 166 from break points were fairly balanced while USD/JPY this week is far off kilter and should lead the way higher.

USD/JPY break points below are located at 105.32, 105.22 and 104.66. USD/JPY’s price remains just above neutrality longer term and low, oversold and flat on the floor from the daily view. Oversold means from 105’s to 103’s and 100’s and no change from the last 4 weeks.

A break at 104.66 then 104.01 becomes the next target and a run to the 14 year average at 103.00 on breaks of 103.93, 103.09 then 103.00. Only an outside event from the BOJ or FED would see 105.22 and 104.66 due to a low and oversold price. First price extremes are seen from 104.33 and 103.34. The range bottom for example at the 5 year average at 109.78 and 105.22 are located at 101.79 and 100.74 therefore 103 will hold in the near term.

From 108.31 and the close at 105.95 is out of range and USD/JPY must travel higher to 106.32 and above. A challenge to 108.31 then 108.61 must break 107.48. The way higher from 105.95 must break 106.17, 106.21 then 106.62 to target 107.48. Severe caution is warranted at the 5 year average at 109.78 then 109.95 as USD/JPY’s price becomes far to high in the shorter term. Higher and breaks at 108.31 and 109.78 is not expected to break and will take more weeks to allow the averages to agree. The maximum price above 109.78 is located at 113.78 and targets more realistically longer term are located at 110.74, 111.59 and 111.89.

EUR/USD break point at 1.2209 would challenge lower levels at 1.2165, 1.2149, 1.2081, 1.2033 then the 5 year average at 1.1963. Below 1.1963 opens the flood gates to 1.1757 and far lower to massively overbought 1.1400’s. What holds 1.1963 from breaks anytime soon is the 1.2209 range bottom at 1.2041. A break of 1.2209 then targets 1.2041 and 1.2033.

Higher EUR/USD must break 1.2310, most important 1.2318, 1.2358 and 1.2377. Above 1.2377 then challenges 1.2406, 1.2516, 1.2520, 1.2665 and 1.2721. At 1.2700’s is not expected nor the 10 year average at 1.2817 as 1.2209 upside extreme price is located at 1.2713. The point at 1.2377 is a great target and reverse short for the week.

Overall EUR/USD price longer term is far to high but a bottom is close while intraday EUR/USD sits at its 4 week neutral position. Neutral means sell rallies and long the bottoms until breaks are seen.

Overall, EUR/USD from 1.1963 to 1.2817 is not expected to break anytime soon nor is USD/JPY 109.78 or 103.00. The 4 week story remains the same as failure to see breaks means further range compression and next week the same report may be written.

While Trade and Wars is the latest longer term economic topic, here’s a perspective from the US Trade Representative.
96% of US Imports are Industrial, means Non Agriculture. From the United States Trade Representative data, on a Trade Weight Average basis 2.0% represents the average Tariff on Industrial Imports. Yet 50% of all Industrial Goods enter the United States Tariff free. China for example as assistance to its opening in 1988 was granted Most Favored Trade Status in 1992 which means China goods enter the United States Tariff Free. Most Favored Trade Status is granted to friends and allies yet Tariff Free is never granted to United States Exports as harsh Import duties are assessed. Not sure trade and war belong in the same sentence as applied to the United States.

Washer Example.

From 2012 to 2016, domestic United States producers of Washers operated in deficit due to South Korea LG and Samsung Washer imports through Tariff free Mexico. Tariffs were assessed on South Korea Washers so LG and Samsung moved production to China and to export Tariff free from China. Tariffs were placed on Washers from China then LG and Samsung moved production to Thailand and Vietnam and again Tariff free. Harsh duties, 50% tariffs were assessed so LG and Samsung plan production factories in South Carolina and Tennessee.

Brian Twomey

USD/CHF: Levels, Ranges, Targets

Swiss overnight rates ranged 4 points, 0.23 to 0.27 from February 2017 to February 2018. Overnight Swiss Money trades ranged 0.11 from minus 0.18 to 0.05 while 3 Month Libor ranged from 0.25 to 0.27. Libor OIS is located far below as is the norm for financial price protection at 0.01. From above, as the BOE finalizes its new system in April, welcome to the new GBP, welcome to the new DXY when US markets close. Markets are heading to interesting developments.

The purpose for USD/CHF as it trades in small ranges is to maintain a location to trade below EUR/USD and GBP/USD but above AUD/USD and NZD/USD. Against USD/CAD and USD/JPY, USD/CHF ranges trade below both. Not a problem exists in USD/CHF as it operates correctly but it lacks range and ability for the big move. As a market instrument, USD/CHF follows rather than leads. From the SNB perspective and due to a small economy, USD/CHF just wasn’t designed to move.

USD/CHF hit its break point yesterday at 0.9520 and fell. USD/CHF 0.9520 remains the big break point today in order to travel higher. Higher in USD/CHF retains a sincere problem as not only is the 5 year average located at 0.9559 but many breaks point exists in 0.9500’s as follows, 0.9518, 0.8542 0.9562 then 0.9598 and 0.9600. Above the 5 year average is located the 10 year at 0.9788.

The only break points below are located at 0.9436, 0.9409 and lower means USD/CHF leaves its multi year range. USD/CHF overall is slightly oversold but oversold means targets are located at 0.9488, 0.9509 and 0.9550 to inform the 5 year average won’t break anytime soon unless USD/JPY and USD/CAD travel higher.

Why slightly oversold is because USD/CHF trades directly around its break points and many exist from 0.9500’s to 0.9800’s. Higher for USD/CHF will be a tough and slow grind.

To see higher volatility and range expansion then 0.9784 and 0.9788 must break and 0.9784 is located the 10 year average.

Below 0.9784, USD/CHF will remain a slow mover inside short ranges. USD/CHF at 0.9400’s includes slow mover and short ranges. On the way above 0.9559 is next major breaks at 0.9633, 0.9646 and 0.9667 then the 10 year average at 0.9784.

To compound short ranges is USD/CHF’s position as low to near perfect neutrality to inform dramatic moves and ranges will continue into the future.

USD/CHF 0.9445 decides the break point fate at 0.9520 as USD/CHF above then the shot exists to break. A break at 0.9520 then USD/CHF gains speed higher. Below 0.9445 then 0.9429 becomes the focus. Oversold and long positions should look at 0.9377 to 0.9359 to target back to the break at 0.9445.

Overall, USD/CHF is a range rather than trend currency and its intended character to trade as a range currency pair won’t change anytime soon unless the SNB redesigns its monetary policy away from 3 month Libor as its multi decade standard.
Brian Twomey

CAD/JPY: Levels, Ranges, Targets

CAD/JPY’s traditional position in the currency market universe is alignment as a risk pair measurement. The big 4 risk pairs are situated as CAD/ZAR, CAD/JPY, AUD/CAD and EUR/JPY. In CAD/ZAR and AUD/CAD are risk off pairs while CAD/JPY and EUR/JPY are risk on pairs.

Taken to the next level, CAD/ZAR and AUD/CAD are essentially USD pair evaluatrs while CAD/JPY and EUR/JPY align  to EUR/USD in the risk on universe. Longs in EUR/USD for example generally see or should agree in CAD/JPY and EUR/JPY. Failure in agreement provides warning to EUR/USD longs as range conditions may persist as the market order.

Taken to further extremes as CAD/ZAR and AUD/CAD are USD measurements to commodities. Now the big 4 become insights to trades in commodities as USD traditionally correlates to commodities, particularly agriculture because this is where markets began after WW 1 and not one iota of change occurred to present day.

AS USD and DXY suffered severe downside effects since Trump’s election and through 2017, CAD/JPY embarked on a serious near 2 year downtrend. At 81.00’s and 82.00’s, CAD/JPY is not only Richter scale oversold and a severe on -the – floor low price but CAD/JPY fails to register on a 20 year chart as 81.00’s and 82.00’s are light years below its nearest break points at 84.71 and 85.27. A similar failed to register situation is seen in AUD/EUR as another example of a USD/ DXY pair. The DXY downtrend hit most particularly the USD cross pairs.

On the floor for CAD/JPY informs not much downside exists and traders should refrain from consideration to even 1 pip shorts in CAD/JPY. The daily scenarios comply against longer term views in oversold and low prices. CAD/JPY is severely oversold from 84.00’s, 85.00’s, 88.00’s and 90.00’s. CAD/JPY fell to far and to fast.

The 2018 scenario viewed opposite correlations in CAD/JPY vs USD/CAD as USD/CAD followed movements in EUR/USD and this sent CAD/JPY to the floor. To long USD/CAD is a sell CAD and CAD/JPY suffered the effects as its current situation is mispositioned against EUR/USD and USD/CAD.

The first CAD/JPY targets are located at 84.71 and 85.27. Above 85.27 is located next target points at 86.49 and 86.70. CAD/JPY 87.00’s are many and rough to begin at 87.13, 87.35, 87.62 and the 10 year average at 87.55. A break at the 10 year average represents a period change and not expected anytime soon as new market cycles would commence to place currency markets inside a whole new dimension. CAD/JPY’s rise for now represents a serious correction higher unless a break is seen at 87.00’s.

Brian Twomey

USD/CAD: Levels, Ranges, Targets

On Feb 24th in regards to USD/CAD at then 1.2655 it was written, USD/CAD price was low, averages were low, USD/CAD was oversold and USD/CAD must and will travel higher. The support point then was 1.2585, today its 1.2719. Break points above were, 1.2908, 1.2972 and the last level at 1.3100. Above 1.3100, USD/CAD left its range.

USD/CAD as written bolted to current 1.2983 and high at 1.2993 then lingered. Took 3 weeks to run 338 pips or 112 pips per week. USD/CAD’s story is its stuck, contained by its averages and has problems.

In the larger story, USD/CAD’s price remains barely above neutral while the daily side reveals USD/CAD sits dead on the floor and resembles USD/JPY’s position. USD/CAD desperately wants to travel higher but is contained by its highest average 1.3092 and down from 1.3100 from 3 weeks ago.

Above and only break points are located at 1.2931, 1.2952 and 1.3092. Above 1.3092, USD/CAD leaves its range and must return. USD/CAD is located at the top of its range and a noted point at 1.3092 is down 8 pips from 1.3100 from 3 weeks ago.

The overall status on the bottom are vital averages at 1.1931 and 1.1802. At overbought 1.1931 remains the problem average as USD/CAD at 1.2900’s is 446 pips off from its range at 1.2537. Despite a low low price, USD/CAD daily averages from 5 to 253 days are also overbought.

USD/CAD break points below are located at 1.2720, 1.2637, 1.2474, 1.2355 and 1.2232. Despite overbought, USD/CAD is well supported at 1.2720 and 1.2637 as well as its 5 year average at 1.2174.

The 5 year average means 1.1931 holds. Lower for CAD and to gain down speed, it must break its vital point at 1.2720. The overall range from 1.2720 is located from 1.2585 to 1.2855 and again at 1.2900’s, CAD remains outside its range. At 1.2585 reveals 1.2537 is well protected.

In days and weeks ahead as USD/CAD averages rightsize, 2 vital targets and overbought sell points exists at 1.3143 and 1.3125.
Despite a low price and struggles against overbought, USD/CAD range is located from 1.2720 to 1.3092 and a short term strategy to sell rallies. Longer term, USD/CAD as well as its counterpart USD/JPY is heading much higher.

USD/CAD’s low price means drops can’t hold, range tops means USD/CAD struggles to head higher and overbought means CAD must travel lower. USD/CAD at present is an extraordinarily complicated currency pair.

Brian Twomey

GBP, Sonia, G10: Levels, Ranges Targets

In the last 5 trading days, GBP/USD moved 130 pips from 1.3912 to 1.3781 or 26 pips per day. The only reason why the bounce to today’s high 1.3800’s is because 1.3732 was to close to break below. Today’s range so far is a whooper 37 pips from 1.3874 to 1.3911.

On paper, GBP is a blockbuster currency pair against wide range movements but reality informs the story is not only traders holding positions longer without profit but its the new Sonia finalization next month in reforms to kill the Great British Pound. Viewed from a chart, new Sonia flatlined in November and remains today in flatline mode.

Against new Sonia concepts, Swap rates and yield spreads become meaningless as trade vehicles because those points will be seen only if markets implode and GBP is not ready yet for explosions. Swap rates and yield spreads are merely protections built outside the new interest rate system to hold an exchange rate from zero or miles higher dependent on which nation causes an implosion. If GBP/USD as the focus of range compression by the new system means any pair in the GBP universe is subject to provide the implosion impetus.

Take GBP/RON, Romania, for example. GBP/RON contains a daily allowable movement at 263 pips. A contained GBP/RON can cause great damage to lowly daily movements in GBP/USD. In 2 years of Sonia reform studies, charts, graphs and commentaries, the focus was contained ranges. The exchange rate containment became automatic and lacked one ounce of focus.

Outide GBP and Sonia ranges are ancillary effects to other nations as hardly a difference exists in distance from interest rate nation to interest rate nation. AUD/USD as the best current example is ready for a massive move. Massive move means the impetus is here to see a long long candle in AUD. At AUD/USD 0.7600 or 0.8300 relieves the range pressures. Why AUD and not NZD is because NZD is more aligned to USD interest rates and AUD is deeply intertwined to GBP.

As central banks redesigned interest rates, focus shifted to range containment and volume but never was addressed the question, what happens when ranges are contained. GBP and Sonia are not outcasts as all central banks interest rates suffer the same GBP/Sonia effects. If ever travesty hits markets, 2008 will be seen as nothing in comparison to the next implosion.

EUR/USD from 1.2196 now comes the must break to head loer at 1.2204. The day;s target id located right around 1.2390.

GBP/USD Target today located at 1.3957, next above was 1.3966. Break point below now 1.3746.

EUR/JPY 132.30 break point. EUR/JPY today is loacted at 132.30 and do or die to much higher or lower.

GBP/JPY Broke 148.97 and explains why GBP/USD traveled higher and also why EUR/JPY remains at its 132.30 break point.

AUD/USD 0.7829 holds longs. Caution to AUD as a move is coming.

USD/JPY Nothing remains except above at 107.29 and 107.49. Break point above now 108.44

 

Brian Twomey

USD/JPY Vs EUR/USD: Levels, Ranges, Targets

Last week was written the vast majority of currency pairs contained break points within 100 to 150 pips in order for prices to see a better directional bias and no better example exists than to view EUR/USD Vs USD/JPY.

From USD/JPY’s close at 106.81 to its vital break point above at 108.47 is 166 pips while EUR/USD’s break point below at 1.2196 contains a distance of 112 pips. USD/JPY’s 5 year average above is located at 109.74 and 293 pips from 106.81 while EUR/USD’s 5 year average at 1.1965 contains a distance of 343 pips.

From a longer term perspective, EUR/USD’s current price is miles to high and must travel lower while USD/JPY’s current price remains barely above neutral against the potential to travel much higher. USD/JPY’s daily view reveals an extremely low and massively oversold price while EUR/USD sits just below neutrality. Massively oversold USD/JPY means from 106.00’s, 105.00’s and 103.00’s.

USD/JPY is well supported below against its vital break point  at 105.24 and 104.69 while EUR/USD faces headwinds at 1.2315, 1.2358, 1.2375 and 1.2410. USD/JPY at its 14 year average at 103.01 won’t break anytime soon nor will EUR/USD break its 10 and 14 year averages at 1.2800’s.

Most important USD/JPY supports below are located at 106.62, 106.21, 106.17 , 105.35 and against the break at 105.24. Most important number is 106.39 because this number represents the bottom range point from 108.47 against the topside at 109.74 and 110.54. Remember long ago was written and explained Mind the Gap concepts.

Most vital above for USD/JPY on the way to 108.47 and 108.50 is 107.99 as a must break to see a challenge to 108.47.

EUR/JPY lies in wait at its vital breaks above at 132.24 and 133.58 against below supports at 131.55 and 130.69. The hurdles and break points between EUR/USD and USD/JPY decides EUR/JPY’s direction or its a continued and aimless, wandering range trade.

Below are averages dated to Jan 1999.

80 day = 110.31

Special Average = 108.47

334 = 111.96

592 = 110.90

847 = 113.85

1102 = 111.55

1279 = 5y = 109.74

1357 = 108.50

1613 = 103.83

1872 = 100.59

2129 = 99.12

2384 = 98.57

2562 = 10y = 98.97

2640 = 99.25

2894 = 100.94

3150 = 102.20

3409 = 102.67

3589 = 14y = 103.00

3665 = 103.10

3921 = 104.04

4175 = 105.35

4429 = 106.17

4686 = 106.21

4914 = 106.62

 

Brian Twomey

 

EUR/USD: Levels, Ranges, Targets

EUR/USD close at 1.2308 is located 2 pips above its next break point at 1.2306 but below the distribution at 1.2315. At 1.2315 is up 4 pips from 1.2311 last week and 1.2310 on Feb 23rd. Not only must 1.2315 resistance break to travel higher but include the constant over 3 weeks at 1.2358.

The averages below remain far to high to inform a continued drop is on the way over time. At last week’s daily view, EUR/USD was positioned at near perfect neutrality and Neutrality from last week referred to a higher EUR/USD becomes overbought and lower results in oversold but overall movements will trade steady without dramatic spikes. The Draghi spike Thursday at 1.2445 was actually 128 pips from last week’s close at 1.2317 and under performed as 1.2459 was the target upon a break of 1.2436. Overall EUR/USD for the week performed as expected.

EUR/USD’s daily view this week is positioned below neutrality to inform a correction higher is on the way. The main break point below is located at 1.2196, up 26 pips from last week’s 1.2160 and the extremes to 1.2196 above is located at 1.2733 to again reveal the elusive 1.2800’s will remain a non event and won’t break anytime soon. Higher for EUR/USD means breaks at 1.2315, 1.2358, 1.2410, 1.2510, 1.2533 and 1.2665. The overall points to watch are 1.2358 and 1.2375 as 1.2375 represents top of the 1.2196 range.

The larger 513 pip EUR/USD range is positioned from 1.2828 to 1.1802 to inform how vital is the 5 year average at 1.1965 but further to reveal 513 pips is down 5 pips from last week and 7 pips from 2 weeks ago. Range compression means a showdown is on the way from vital breaks at the 5 and 10 year averages from 1.1965 and 1.2823. At 1.1965 is protected by not only 1.2196 but 1.2168, 1.2146 and 1.2113.

Below are averages dated to 1999
80 day = 1.2113
Special average = 1.2196
334 = 1.1374
592 = 1.1253
847 = 1.1261
1102 = 1.1764
1279 = 5y = 1.1965
1357 = 1.2035
1613 = 1.2168
1872 = 1.2410
2129 = 1.2533
2384 = 1.2665
2562 = 10y = 1.2823
2640 = 1.2880
2894 = 1.2937
3150 = 1.2893
3409 = 1.2873
3589 = 14 y = 1.2841
3665 = 1.2832
3921 = 1.2718
4175 = 1.2510
4429 = 1.2306
4686 = 1.2146
4914 = 1.2091

 

Brian Twomey

 

EUR, G10 and Inflation: Levels, Ranges, Targets

Inflation is the least understood monetary concept because it addresses a price level and the proper place for the price level per nation varies widely. What is accepted as 2% in the UK maybe quite different than an acceptable level for example in Australia. Again, Inflation is the 3rd removed cousin to the progression Money supply, interest rates, exchange rates and economic announcements.

Current Inflation in the UK at 3% has seen a rising exchange rate over past months. USD at 2.1% saw a falling exchange rate. AUD/USD lacks complete Correlational association to its interest rates and economic announcements. Its a lost wandering currency pair subject to market price movements to move higher or lower and despite a 1.9% Inflation rate. The correlational mismatch is found in the 1st movements to Money supply and interest rates.

A currency pair against a negative correlation to its interest rates represents a serious problem to the exchange rate and it may take months to years before a situation of this magnitude rectifies itself because of small and contained exchange rate ranges.
Two aspects must occur, either interest rates must raise or lower for the exchange rate to find its proper place. Only then will economic announcements align properly. But only then can Inflation possibly or maybe GDP employ as a direction to exchange rates but a strategy in economic announcements as a trade plan is far removed from time to align to proper exhange rate levels. Over time, a trader may go bust before alignment. View yesterday’s GBP article to see interest and exchange rates to economic announcements.

The question to time and alignment is seen in the latest central bank gimmicks to its interest rate adjustments. The BOE and ECB for example are hard at work on “risk free” interest rates. The USD and Fed just released SOFR as a new overnight interest rate to trade alongside Libor.

When respective markets are open, no mystery exists to trade levels, ranges and targets. But full exchange rate control is known by traders and central banks miles ahead. When markets close then exchange rates are subject to the levels of other nations exchange, interest rate and economic announcements. An exchange rate can easily fall outside the control and acceptable level of a respective central bank. Draghi delivered negative announcements in US markets with intent to drop EUR. If Draghi delivered his remarks before US 6:30 and 7:30 then EUR was subject to travel higher to near 1.2500’s.

The answer to SOFR and risk free interest rates is to garner more control over exchange rates when a particular nation’s market is closed. This will further restrict currency price ranges and it will take far longer for an economic announcement to rightside.
The payoff comes to bankers as they assisted to realign and restrict interest rates to tiny ranges. Take GBP. Interest rates trade in barely 2 point ranges. The bottom is a 0.44 to 0.46 or a topside from 0.46 to struggle at 0.47 and 0.48. This situation is a GBP range compresion in the highest order and far different than pre 2008 days of old . Pre 2008 market movements would’ve seen a rightsize far quicker than today’s dead range control of exchange rates.
Break Points.

EUR/USD. Must break 1.2191 for lower and 1.2191 is up 31 pips since Sunday’s open. Below comes the 5 year average at 1.1966. The road below is replete with massive supports.

EUR/JPY must break falling 132.24 to travel higher.

GBP/JPY must break falling 148.98 to head higher otherwise both EUR/JPY and GBP/JPY represent a correction in a larger downtrend.

USD/JPY must break 108.52 or again, USD/JPY is in correction mode from oversold at Sunday’s open.

AUD/USD must break 0.7824 while NZD/USD is located at 0.7233.

GBP/USD 1.3733 awaits to head lower as GBP os in do or die mode.

 

Brian Twomey

 

Sonia, Yields and GBP: Levels, Ranges, Targets

Never lose sight of the progression money supply, interest rates, exchange rates, other Financial instruments then last is economic announcements. Does Inflation dictate a currency price direction. Seems this answer is no. This lineup below is for other questions /purposes but since its written, it will post. My question  as the BOE finalized its new interest rate system, what was the repercussion to GBP. On this day, its tough to answer because all nation interest rates including UK are trading in wide ranges, especially AUD if that concept could be imagined. Every nation’s orientation to its interest rates are quite different from each other but the commonality is ranges remain a constant and explains currency prices in many regards. USD leads the way and is the big dictator and follower on world markets.

Sonia and Repo’s Today

0.4688

0.4700

0.4750

AVG = 0.4820

0.4850

0.4929

0.5008

0.5254

0.5500

AVG = 0.4925 = 1.4166 GBP/USD at 1.4929 and 150.15 GBP/JPY

Interest rates are miles to high particularly when GDP at 0.40 is low and Inflation at 0.3% is miles to high. The GDP/ Inflation relationship is 0.004 to 0.03. Lower Inflation, then GDP higher. GBP as well is far to high

Bond Yields

Swap Rates 3 m to 0.39 = 0.07

Overnight minus 3 month = 0.02

Overnight minus Repo = 0.07

Overnight minus 0.5008 = 0.03 = Inflation.

GBP/USD Break Point 1.3735.

3m = 0.39

GDP = 0.4 and below 0.445 AVG.

6m = 0.50

1y = 0.71

10Y minus 2 = 0.69

2y = 0.82

3y = 0.86

4y= 1.02

10 minus 3 month = 1.12

30 minus 2 = 1.08

5 y = 1.17

6y = 1.23

7y = 1.31

8y = 1.41

9y= 1.53

10y= 1.51    AVG 1.03.

 

Brian Twomey