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