EUR/CAD: Break Even Trade and No Losses

The weekly trade was long 1.4357 to target 1.4500’s. A good valid weekly trade as usual. However, EUR/CAD traded to lows at 1.4262 and off entry by 90 pips.

I cannot state this point enough, an entry miss is a bonus to profits. Normal traded markets never experiences an entry nor target miss. But now and then in our weekly trades, an entry miss is seen.

But an entry miss only affects 1 or maybe 2 currency pairs and extremely rare to see entry misses on multiple currency pairs. For example, USD/CAD might experience an entry miss. This means CAD/JPY will miss entry as well. Possibly, all GBP or all EUR might witness an entry miss

The only manner to see en entry miss is a price trades from oversold to more oversold or an overbought price rises to more overbought. This week and 2 weeks ago, all prices are trading lower on oversold and higher on overbought. Signifies an ailing market overall as prices lack symmetry from currency pair to currency pair.

GBP/NZD is a good example. this week as entry 2.0304 was surpassed 3 times. Rare to see 2 times for the same trade entry. Overbought 2.0304 went to more overbought 3 times.

Never a problem as strategy is add 1 lot to a missed entry and never think twice as this decision should be automatic. The target is never in question but in GBP/NZD;s case, entry was the problem.

Example to missed entry and break even trade.

Add 1 lot at lows 1.4262 and so far traded highs was 1.4338. Add 1 lot result was +76 pips so far. EUR/CAD will eventually trade to original entry at 1.4357. Good choice to exit the first lot at break even and now we run at least a 76 pip profit on the second lot.

The second choice to the trade is hold both lots to the 1.4500’s target. But that is an individual decision to holding periods. Most traders want the weekly trades then to exit by Friday so then a new trade is issued every Saturday.

The lesson here is not only how to trade to break even on a missed entry and how to profit from a second lot but most importantly, currency and all financial instrument trading never experiences losses. Hard concept to grasp for the majority but if the price context is fully understood then losses are impossible. Many traders that trade with me for many moons fully achieved understanding to this concept and all know exactly what to do on missed entry, break even, profit trades and never a loss.

And note to the trade, 3 numbers for entry and target. Nothing more is required. Not a stop, chart, graph, Conovirus or the latest market talk or economics. A market price doesn’t care about such things as it only knows entry and target and the price always complies.

 

Brian Twomey

 

 

 

Realignment: EUR/USD, USD/JPY and JPY Cross Pairs

EUR/USD, AUD/USD, NZD/USD and GBP/USD all trade not only in deep oversold territory and further dropping but all currency pairs lost control to proper attachments to its JPY cross pairs. EUR, AUD, GBP and NZD broke below vital break points to allow the drops to oversold but JPY cross pairs failed to follow.

EUR/USD for example trades below 1.0982 Vs EUR/JPY above at 120.06.

AUD/USD trades below from 0.6769 while AUD/JPY trades above at 74.00

NZD/USD trades below from 0.6465 while NZD/JPY trades above at 70.68.

The ultimate story is GBP/USD trades below 1.2925 and GBP/JPY far above at 141.33

The opposite side is severely overbought USD pairs beginning with USD/JPY from vital 109.32 trades above, USD/CAD at 1.3215 trades above and USD/CHF at 0.9797 trades above.

USD/CHF above at 0.9797 also reveals correctly CHF/JPY above at 111.61.

The wild card pairs are always USD/CAD trades above yet on the brink and CAD/JPY correctly trades above.
Overall USD/JPY and all JPY cross pairs trade above respective high / low break points while all Non USD pairs trade below.

USD/JPY above vital high/ low point and all JPY cross pairs trading above vital points not only explains why EUR and non USD pairs continue drops into oversold but also explains current far deviations in USD Vs Non USD pairs. A deeper explanation to present currency markets is a Realignment.

As an example, most widely traded EUR/USD, EUR/JPY and USD/JPY.

Currently USD/JPY owns EUR/JPY and EUR/USD is odd ball currency kicked to the curb. Most stunning and rare to the synopsis to realignment is GBP/USD, GBP/JPY and USD/JPY.

USD/JPY now owns GBP/JPY and GBP/USD is also left on its own. GBP/JPY is a highly special currency pair and rarely loses its attachment to GBP/USD. For GBP/USD to lose its association to GBP/JPY is a massive development.

Typical and correct currency pair arrangements in currency markets are AUD/USD owns AUD/JPY, NZD/USD owns NZD/JPY, EUR/USD owns EUR/JPY, GBP/USD owns GBP/JPY. In this development, USD/JPY is left on its own. Normal trading then means for example, AUD/USD and AUD/JPY are the same trade as AUD V AUD, long or short as a double trade.

Mathematically, the word “own” means a massive Correlational shift. Correct is EUR/USD and EUR/JPY as rightful owners by EUR V EUR and strong Correlations while USD/JPY as odd currency contains no correlational association to EUR/USD or EUR/JPY.

In current Realignment, the reverse now holds which means USD/JPY and JPY cross pairs are now the double trade to long or short. But it also means USD/JPY as new owners to JPY cross pairs holds a strong Correlational association to JPY cross pairs and no association to EUR/USD.

To define a Realignment, its a Correlation shift or transfer from either negative to positive or positive to negative, depending which currency pair is affected. Correlation is a commentary and derivation on a Standard Deviation which is the overall glue that holds currency prices and currency markets together by defining movements.

The last 2 major Realignments occurred from 1998 to 2008 and from 2008 to present. Generally, major Realignments last roughly 8- 10 years. Within the 10 year framework, mini Realignments occur to last anywhere from 2 to 3 years. How strong and lasting are major Realignments requires a view to at least 10 years of Regression Statistical moving average data from EUR/USD, EUR/JPY and USD/JPY.

Seen from the data to include Correlations however are longer term trades to last for mutli years as the data sees the future over many years. Year 2007 was clearly evident to the impending 2008 crash and the massive Correlations shift as the Correlations from USD/JPY and EUR/USD revealed a top.

By defining movements addresses predominantly ranges. Residual Plots define multi year boundaries and ranges compress when USD/JPY owns JPY cross pairs and expands when EUR/USD for example owns EUR/JPY. Same principle for AUD/USD VS AUD/JPY, GBP/USD V GBP/JPY. Its a USD Vs Non USD move as USD volatility is quite low when USD is the dominant feature to currency markets and contracts when in its descent.

The derivatin to current Realignment by speculation derives from DXY at 99.00’s as the 5 year average is located at about 95 to 96.00. DXY naturally allowed USD/JPY to trade hgher, non USD to trade lower and JPY cross pairs to attach to USD/JPY. Then JPY cross pairs transforms to trading exactly the same as USD which means they are now USD pairs rather than non USD pairs when attached to for example EUR/USD and EUR/JPY.

For USD/JPY watch 112.03 at the 5 year average, EUR/JPY at 123.21, GBP/JPY 147, CHF/JPY 114.14 and CAD/JPY at 85.77.
Under Realignment, USD/JPY, USD/CHF and JPY cross pairs higher while Non USD pairs much lower. If my speculation is correct then markets could very well be under at least a 2 -3 year Realignment.

Interested students of the markets are invited to read my 2015 academic paper when EUR/USD, EUR/JPY and USD/JPY were analyzed by 10,000 exchange rate data from 1998 to 2008 and 2008 to 2015.

 

Brian Twomey

Weekly Trade Count

 

Here’s my counts

 

GBP/CAD

Monday 1.7309 highs to Tuesday lows 1.7214. Questionable to take profits here when targets failed to achieve and did we know GBP pairs would skyrocket higher. GBP does this from time to time on an entry then decides to rocket higher. And at the same time when exact entry wasn’t seen.

Then Tuesday 1.7303 highs to Wednesday, today, 1.7133 target. The sell Point was 1.7315 and 1.7341.

Same story with GBP/NZD. Achieved 116 pips on shorts then traded past 2.0304 weekly entry. And did we know GBP would trade higher, no.

But Monday’s 2.0290 was close enough to 2.0304 for entry. The final highs were 2.0400 and passed entry. That’s wonderful.

Let;s assume no short entry at 2.0290 but entered at 2.0304 and add 1 lot at 2.0400. Lows achieved 2.0236. From 2.0400 then 164 pips and 2.0304 is 68.

GBP/NZD target remains far away at 1.9900’s. Should we even take profits and count above pips.

My advice for most traders is get the money 1st and target die to distance, second.

 

Not sure GBP/AUD is under question at 1.9515 from 1.9480

 

EUR/CAD runs a loss about 100 pips

 

Most don’t bother with GBP/ZAR nor NOK and other currencies outside our regular 28

 

Brian Twomey

 

 

 

Weekly Trade Results: GBP/NZD, GBP/CAD, GBP/AUD, EUR/CAD, GBP/ZAR

Trades this week were based on trader requests. GBP pairs worked on 2 rounds of shorts. This happens at times especially when we see entry hit on Monday or Tuesday. To respectfully restate for new viewers, the job of the trader is enter and exit at target. This is done Sundays. Never a need to watch screens all week as trades are perfect. We don’t use charts, graphs, stops, indicators. I use math but math formulas that work as many don’t. Peruse the site and my words are backed by performance over 16 years.

Target is never in question as targets are written in math formulas. On occasion we miss an entry but never far from the original weekly entry. Add a lot and continue with the trade to target as a missed entry is free money bonus points.

Open trades as this week all posted on Linked IN, twitter and Fxstreet.

 

GBPNZD Short 2.0276 and 2.0304 to target 1.9991
Results: 2.0291 – 2.0175 + 116 pips
Then rise 2.0400 to 2.0243. Add 2.0400, Lows 2.0243 +157 Pips from 2.0400 and +61 from 2.0304. Total +334 pips.
GBPAUD Short 1.9441 and 1.9480 to target 1.9117
Results 1.9515, Lows 1.9351, Trade runs +164 pips.
GBPCAD. Short 1.7315 and 1.7341 to target 1.7133
Results 1.7291 to 1.7199, +92 Pips. Then 1.7304 to 1.7165 lows. Trade runs +139 pips.
EURCAD Long 1.4357 and 1.4342 to target 1.4534
Results Lows 1.4290, missed entry, add Lot, hold to target or week end profit
GBP/ZAR short 19.4716 and 19.4886 to target 19.0636.
Results. Horrible Trade Highs 19.6521, add lot, Lows 19.3771.
From 19.4886, +1115 pips, From 19.6521, +2750 Pips. Total 3865 Pips.
Last week’s GBP/ZAR was miss 600 ish pip entry but trade far surpassed target. GBP/ZAR is a 5000 per week movement. Wild currency.
              Brian Twomey

 

 

 

Weekly Trades: GBP/NZD, EUR/CAD, GBP/AUD, GBP/CAD, GBP/ZAR

This week’s trade theme derived from solicited trader requests and the winning pairs are GBP/NZD, GBP/AUD, GBP/CAD, EUR/CAD and again, GBP/ZAR. All wide ranging currency pairs to include 2 traditionally neutral pairs; EUR/CAD and GBP/CAD.

Two factors qualify EUR/CAD as neutral: as middle currency to EUR/USD and current price location between the 5 and 10 year averages from 1.4200’s to 1.4700’s. Recall last year’s March / April’s EUR/CAD trade from 1.5300’s to 1.4800’s. As stated last year, EUR/CAD was then dropped from trade consideration as 1.4800’s settled EUR/CAD’s price. Once a price is settled, any pair is dropped.

Since last April 2019, EUR/CAD traded 1.5100’s to 1.4300’s and 1.4900’s to 1.4300’s from July 19 to current day. Why drop is due from a 500 pip range and settled price lacks qualification for longer term 5 and 800 pip trades and EUR/CAD’s range longer term entered compression mode. A breakout is warranted from current location between 5 and 10 year averages but until EUR/CAD trades to either 1.5500’s or 1.3500’s then only a weekly trade exits.

GBPCAD automatically qualifies as neutral due to total opposite and location between defining currency market pairs, GBP/USD and USD/CAD. GBP/CAD further qualifies as neutral as it currently trades between 5 and 10 year averages from 1.7200’s to 1.7600’s.

Normal neutrality for GBP/CAD is trade between 5 and 16 year averages. As EUR/CAD, a breakout is on the way for GBP/CAD.

Short term, nothing special in regards to GBP/CAD except its wide ranges and qualification as a great weekly trade.

Overall, the vast majority of G28 currency pairs trade below 5 year averages and this means not only are prices extremely low but wide ranging movements remains dead. Until prices trade above 5 year averages, volatility will remain lifeless.

Short term, daily non movement to nation’s interest rates are compressing currency price ranges and this situation is growing worse. The ECB’s new STR interest rate introduced last October now allows EUR/USD barely a 100 pip trade week, AUD at barely 50 pips, NZD at 100 and the list goes on.

Nothing special to GBP except it trades within the confines of its basic ranges.

GBP/ZAR contains easily ability to trade 4500 – 5000 pips per week. Currently GBP/ZAR at its 19.4546 close is massively overbought. The long term target remains 18.2850 on a break of its 5 year average at 18.5877.

GBP/USD remains overbought and in a downtrend since it touched its long term target at 1.3400’s. Until 1.3515 breaks, GBP/USD’s downtrend remains.

GBP this week will suffer a bit higher until short points are achieved.

Weekly Trades

GBP/NZD. Short 2.0276 and 2.0304 to target 1.9991. Must cross 2.0248, 2.0220, 2.0192, 2.0162, 2.0134, 2.0106, 2.0078, 2.0050, 2.0022 and 1.9994.

Break 1.9931 targets 1.9820.

GBP/AUD. Short 1.9441 and 1.9480 to target 1.9117. Must cross 1.9402, 1.9363, 1.9324, 1.9285, 1.9246, 1.9207, 1.9168 and 1.9129.

GBP/CAD. Short 1.7315 and 1.7341 to target 1.7133. Must cross 1.7289, 1.7263, 1.7237, 1.7211, 1.7185 and 1.7159.

Short below 1.7081 to target 1.6977. Must cross 1.7055, 1.7029 and 1.7003.

EUR/CAD. Long 1.4357 and 1.4342 to target 1.4534. Long at market open is also acceptable. Must cross 1.4386, 1.4415, 1.4445, 1.4474, 1.4504 and 1.4519.

GBP/ZAR short 19.4716 and 1.4886 to target 19.0636. Must cross 19.4546, 19.4376, 19.4206, 19.4036, 19.3866, 19.3695, 19.3526, 19.3356, 19.3186, 19.3016. 19.2846, 19.2676, 19.2506, 19.2336,19.2166, 19.1996, 19.1826, 19.1656, 19.1486, 19.1316, 19.1146, 19.0976, 19.0806, 19.0636 target.

 

Brian Twomey

9 Currency Day Trade by Interest Rate Results

Every Central bank on the planet offers for their daily currencies not only trade levels, bottoms and tops but specific ranges.
To know daily ranges then allows knowledge to tops and bottoms or longs and shorts at exact points. Don’t waste pips.
Longs and shorts on 7 1/2 hours transforms traders to ping pong players as multiple longs and short are available.
Rare days when ranges break but those days are Market gifts as prices must retain original ranges.
GBP 1.3017 and GBPJPY 142.93 great example to free Money Points.
Day trade losses are impossible. Repeat impossible and as impossible as my weekly trades. Bold but true.
Ranges all Held, how many Pips long bottoms and short tops. Many.
No charts, stops or market blather.
EURUSD 1.0834 -1.0886 or 52 pips
EURJPY 119.70 -118.87 or 84 Pips. Range allowed 60.
Times of trades matters, 1:30 am -9:00 am.
AUDUSD 0.6706 – 0.6745 or 39 pips.
NZDUSD 0.6429 to 0.6467 or 38 pips
USDJPY 109.63 – 110.09 or 46 pips.
USDCAD 1.3241 – 1.3271 or 30 light pips
AUDEUR 0.6171 -0.6216 or 45 pips. Normal AUDEUR range tops 32, cause EURAUD daily range bout 70 pips.
Asia, AUDEUR range max 17 pips. trades 1/2 its allowed distance.
   Brian Twomey

9 Currencies: Day Trades by Interest Rates

Exchange rate= Glorified Interest rate.. Hardly a difference. 1972 free float was based on interest rate trades only.
interest rates are dead for years means no Exchange rate movements.
Until daily interest rates move, expect dead Exchange rate movements as both are the exact same thing.
Daytrades 1.30 Am to 9:00 am. Means 3 news events, 2 for Europe and 1 for United States. Exit by 9.00 am.
Remainder time = Currency Price sits in equilibrium and untouchable. Know your prices to trade or forget day trades.
All are now Ping Pong Players by short tops and long bottoms and top and bottom zones. Requires patience.
All Trades based on nation Interest rates. All given freely everyday by central banks. A Bottom price factors completely different than rising price and are 2 totally different concepts.
Here’s Interest Rates to must know in order to trade exact exchange rates.
AUD = Bank Bills and OIS
NZD Bank Bill Yields
CAD Corra and Money Market Finance Rate
EUR Eonia and Euribor and STR
GBP Sonia and Repo Rates
USD Commercial Paper
JPY Tibor and Euroyen
CHF Saron, Call Money Tom Next, Debt Register Claims and Libor. 
Most Important = vital average lines.
You see AUD/USD but what about USDAUD or USDNZD.
You don’t know but you are Trading both reciprocals for every pair. JPYUSD. Its why Daytrades are impossible to lose. Break Point = Vital High. Low Point.
Yield curve inverted is pablum information as an interest rate curve cannot ever go negative or invert. Its impossible.
Current interest rate curves are extremely low. Means exchange rates are extremely low.
USD interest rates drives every financial instrument on the planet.
As usual, my views and trading is not only correct but radically different from the world but we are also exact traders.
AUD/USD
 Most Important 0.6694 and 0.6701 Vs 0.6723, 0.6730, 0.6733, 0.6737, 0.6743, 0.6757 and 0.6751
 Bottom. 0.6682 achieves by 0.6699 and 0.6691
 Upper target 0.6751
 Break Point 0.6785
     AUD/EUR
 Most Important 0.6157 and 0.6163 Vs 0.6180, 0.6183, 0.6190, 0.6192, 0.6196, 0.6202 and 0.6208
 Bottom. 0.6146 achieves by 0.6161 and 0.6153
 Upper target 0.6208
 Overnight Range 0.6189 to 0.6175 = 14 pips
 Break Point 0.6149
    USD/JPY
 Most Important 109.38 and 109.69 Vs 109.86, 109.92, 109.99, 110.08, 110.23, 110.29 and 110.36
 Bottom. 109.26 achieves by 109.53 and 109.39
 Upper target 110.36
 Continuation Fail 110.08
 Break Point 109.10
               NZD/USD
  Most Important 0.6409 and 0.6436 Vs 0.6453, 0.6459, 0.6464, 0.6470, 0.6475 and 0.6481
 Bottom. 0.6416 achieves by 0.6431 and 0.6423
 Upper target 0.6481
 Continuation Fail 0.6464
 Break Point 0.6484
                      EUR/USD
 Most Important 1.0829 and 1.0859 Vs 1.0876, 1.0882, 1.0990, 1.0898, 1.0912, 1.0919 and 1.0926
 Bottom. 1.0816 achieves by 1.0843 and 1.0829
 Upper target 1.0926
 Continuation Fail 1.0898
 Break Point 1.1034
                 EUR/JPY
Most Important 118.94 and 119.26 Vs 119.45, 119.51, 119.69, 119.76, 119.84, 119.91 and 119.99
 Bottom. 118.78 achieves by 119.11 and 118.94
 Upper target 119.91
 Continuation Fail 119.69
 Break Point 120.39
                   GBP/USD
 Most Important 1.2901 and 1.2937 Vs 1.2958, 1.2965, 1.2974, 1.2984, 1.3001, 1.3008 and 1.3017
 Bottom. 1.2886 achieves by 1.2918 and 1.3001
 Upper target 1.3017
 Continuation Fail 1.2984
 Break Point 1.2915
             GBP/JPY
Most Important 141.67 and 142.05 Vs 142.28, 142.36, 142.57, 142.66, 142.75, 142.84 and 142.93
 Bottom. 141.49 achieves by 141.86 and 141.67
 Upper target 142.93
 Continuation Fail 142.57
 Break Point 140.93
              USD/CAD
Most Important 1.3201 and 1.3237 Vs 1.3259, 1.3266, 1.3285, 1.3293, 1.3302, 1.3310 and 1.3319
 Bottom. 1.3186 achieves by 1.3218 and 1.3201
 Upper target 1.3319
 Continuation Fail 1.3285
 Break Point 1.3217
   Brian Twomey

NZD and NOK Trade Results and Trade Signals

Hi All.
We trade 18 Currency Pairs per week. All 18 Currency Pairs are sent to subscribers. Subscribers and now long time friends come and stay for years and years. Because my signals are perfect.
I’m not a trade service. My offer is only for interested traders to trade my signals. My signals are designed for busy people, people who may have lives outside of markets and for those who don’t have time nor want to watch screens all week.
The job of the trader is input entry and target for the week then go live your life without worry.
I use math and calculate carefully by hand every week. If any are interested in a weekly trade, feel free and I will post it.
The end result for my trades is accounts grow and grow money.
RBNZ on hold. WE knew this as RBNZ interest rates failed the 5 Basis Point move in 5 days, as Interest rate Rules.
RBNZ told us on hold long before the statement.
NZDUSD As Posted Long 0.6394 and 0.6383 to target 0.6496
Low 0.6378, Highs 0.6479
Trade runs from 0.6383 +96 Pips and 17 pips to Target
NZDJPY As Posted
Long 70.22 and 69.88 to target 70.75
Lows 69.98, Highs 70.75 Target Complete +77 pips
2nd Leg Long above 70.89 to target 72.21
Highs 71.31,
Trade Runs +41 pips Total 118 pips, 2 Trades
Long 0.6251 and 0.6239 to target 0.6339
Lows 0.6236, Highs 0.6323
Trade Runs +87 Pips and 16 pips to Target
Total 4 trades +301 Pips and perfect Trades
                                  NOK

 

USD/NOK

Short 9.3039 and 9.3168 to target 9.1367.

Highs 9.3057, Lows 9.2040.

Trade runs +999 Pips and long way to target.

 

EUR/NOK

Short 10.1906 and 10.1957 to target 10.1235.

Highs 10.1938, Lows 10.0569.

From 10.1938 to 1.1235 trade ran +703 Pips. To 10.0569 trade runs +1359 pips.

Watch 10.0512 break  for next leg lower.

 

 

GBP/ZAR

Short 19.4365 and 19.4448 to target 19.2370.

Highs 19.5342, Lows 19.1092.

Forced to add 1 lot on missed entry.

From 19.5342 to 19.2370 = 2972 pips.

From 19.4448 to 19.2370 = 2078 Pips.

 

Brian Twomey

RBNZ, NZD, 5 Day Interest Rate Rule

President Hoover after 1929 crash introduced the 3 month Interest rate to fund Government short term.
America was broke after the crash and all wanted bailouts.
Hoover refused otherwise Government would’ve been broke.
Then began 3 month Interest rate to finance governments. All governments then adopted 3 month interest rates. Canada was first.
3 month Interest rate was first and oldest rate. Exist today as most vital interest rate.
In currency trades, exactly what are you trading. Well the 3 month Interest rate. Despite no trader knowledge, they trade day trades by 3 month interest rates. It sets price boundaries and prevents prices from traveling far off course.
                             5 Day Rule
If the 3 month rate moved 5 basis points lower or higher within 5 days then Central banks will cut or raise.
Why 5 days is because traditional markets to normalize interest rates took 5 days. Means 5 days good Volatility.
5 days alerts traders to cut or raise and how to position trades.
Its central bank offer to free trades, free money.
                       NZD Example
90 Day Bank Bill Yields 5 days = 1.26 -1.23 or 3 Basis Points.
Doesn’t qualify to move OCR.
Today’s Rate = 1.23. And Today’s 3 month Bank Bill Reference Rate quoted by NZD Financial Markets Association = 1.24.
Doesn’t qualify to cut or raise.
Qualifies as no OCR movement at today’s meeting.
Only rare occasions does central banks move interest rates without alerting markets and traders.
Central banks stick to Market scripts.
Today’s markets as in past decades of markets contain a structure and its imperative for traders to understand what the structure is all about and how it operates to trader advantage.
                    Brian Twomey

Correlation Analysis: EUR/USD, EUR/NOK, USD/NOK, GBP/ZAR

Correlations EUR/USD, EUR/NOK, USD/NOK, GBP/ZAR

A deeper dive into EURNOK, USDNOK and GBPZAR weekly Trades reveals a Correlation nightmare.

Purpose for Correlations is identify and isolate the problem currency.

 

No reason to trade correlation problems but trades this week are requests and explains deeper analysis.

 

1. EURNOK and USDNOK both massive overbought. First sign of trouble as 2 opposite pairs should reveal overbought Vs oversold.

 

2. EURNOK and USDNOK at + 99%. Correlations for opposing Currencies should run negative Correlations.

Deeper Analysis

 

3. EURUSD Vs EURNOK Correlations at -96%. Identify problem. 2 like Currencies should reveal +90% correlations.

 

4. EURUSD V USDNOK Correlations runs -98 %. Correct as 2 opposite Currencies.

 

Analysis Interpretation

 

5. We know EURNOK or EURUSD is the Problem, not USDNOK. Isolate.

 

6. Either EURUSD must Trade higher or EURNOK Lower for Positive and correct Correlation.

 

GBPZAR Correct Vs GBPUSD at +78% but Low.

 

Should be high +80’s or low +90’s.

 

Correct at +94% Vs EURNOK as both same Currency.

 

GBPZAR Not a problem. Its EURNOK.

 

7. EURUSD and EURNOK from Negative Correlations must by Math law turn Positive.

Problem is level of Prices.

A Correlation is a Unit less measure from Minus 1 to +1. It flows through currency price relationships and changes with levels of exchange rates.

Deeper analysis is Correlation is a deep analytical commentary on the Standard Deviation between 2 currency prices. The real measure is distance or deviation. Large distances between 2 currencies Prices will travel closer while close relationships will break wide open such as EUR/NOK and USD/NOK at +99%. Or EUR/USD Vs EUR/NOK at minus 94%.

EUR/USD and EUR/NOK will eventually turn positive while USD/NOK Vs EUR/NOK will break wide open. The Correlation signifies big moves ahead in order to rightsize the Correlation.

 

Interested may view great tutorials and pictures at vassarstats. He lays it out in easy to see and understandable language.

 

 

 

Brian Twomey

Weekly Trades: NZD/USD, NZD/JPY, NZD/CHF, EUR/NOK, USD/NOK, GBP/ZAR

Weekly trades this week focus is NZD as RBNZ meets Wednesday and currently NZD is running perfectly on all cylinders. Next set of weekly trades are USD/NOK, EUR/NOK and GBP/ZAR however analysis is required as NOK and ZAR contain deep price problems.

EUR/USD V EUR/NOK V USD/NOK Correlations

EUR/USD V USD/NOK Correlations short term for 1 year runs -98 % and this is correct.

The problems reside as EUR/USD Vs EUR/NOK Correlations at -96% then EUR/NOK and USD/NOK at + 99%. EUR/NOK is not correct to EUR/USD as the Correlation must be positive nor is EUR/NOK correct Vs USD/NOK as the Correlation must be negative.

EUR/NOK is clearly the problem currency pair. To rectify and rightsize the correlation to positive, EUR/USD must trade higher or EUR/NOK must trade lower. USD/NOK however is deeply overbought and far more overbought than EUR/NOK. EUR/USD is deeply oversold.

GBP/ZAR V GBP/USD, V USD/NOK Vs EUR/NOK Correlations

GBP/ZAR Correlations Vs GBP/USD at +78% is precise but GBP/ZAR Vs USD/NOK at +94% lacks proper alignment but is correct at 94% Vs EUR/NOK.

USD/NOK and EUR/NOK Weekly Trades

USD/NOK. Short 9.3039 and 9.3168 to target 9.1367. The first target at 9.1882 will achieve easily.

On a longer term basis on a break of 9.0854, USD/NOK targets 8.7766 and 8.3831. Miles upon miles of downside exists to USD/NOK on a sell rally strategy for many, many months in the future.

What 8.3831 represents is proper alignment and to offer what it means for exchange rate prices are never correct. USD/NOK has no business trading a 9 handle.

USD/NOK to follow the weekly trade, vital downside levels are located at 9.2911, 9.2783, 9.2655, 9.2527, 9.2399, 9.2271,9.2143, 9.2015, then 9.1882 target.

EUR/NOK. Short 10.1906 and 10.1957 to target 10.1235. The first target at 10.1338 will achieve easily.

On a longer term basis on a break of 10.0512, EUR/NOK targets 9.8034 and 9.5389. To align properly, EUR/NOK must trade to 9.5389.

To follow the weekly trade, vital levels are located at 10.1854, 10.1751, 10.1648, 10.1545, 10.1442, 10.1338 and 10.1235 target.

GBP/ZAR. Short 19.4365 and 19.4448 to target 19.2370. To follow the trade to target, vital levels are located at 19.4199, 19.4033, 19.3867, 19.3701, 19.3535. 19.3369, 19.3203, 19.3037, 19.2871, 19.2705, 19.2538 and 19.2373.

Long term and on a break of 18.9708, GBP/ZAR targets 18.1722 and 18.2850.

GBP/ZAR like USD/NOK and EUR/NOK is far off sync to its proper trade location at 18.2850. Until 18.2850 trades then GBP/ZAR adopts a sell rally strategy for many, many months in the future.

NZD/USD, NZD/JPY and NZD/CHF

Not only is NZD’s main pairs, NZD/USD, NZD/JPY and NZD/CHF properly aligned but NZD will publish this week to Exchange Rates predict Exchange Rates alongside the NZD orientation to its exchange rates, tops, bottoms possible neutrality to NZD/USD and relationship to NZD/AUD.

NZD/USD. Long 0.6394 and 0.6383 to target 0.6496. Must cross 0.6416, 0.6438, 0.6460 and 0.6482.

Long above 0.6504 to target 0.6592. Must cross 0.6526, 0.6548,, 0.6570 and 0.6581.

NZD/JPY. Long 70.22 and 69.88 to target 70.75. Must cross 70.38, 70.54 and 70.70.

Long above 70.89 to target 72.21. Must cross 71.05, 71.21, 71.37, 71.53, 71.69, 71.85, 72.01 and 72.17

NZD/CHF. Long 0.6251 and 0.6239 to target 0.6339. Must cross 0.6251, 0.6263, 0.6275, 0.6287, 0.6301, 0.6313 and 0.6325.

Long above 0.6352 to target 0.6426. Must cross 0.6364, 0.6376, 0.6388, 0.6400 and 0.6412.

 

Brian Twomey

Trade Results: GBP/CAD, EUR/AUD, AUD/CHF, NZD/CAD

This is what Fxstreet offers its esteemed viewers and exclusive to the best website bar none throughout the world.
Trade Results as Posted

GBPCAD

Short 1.7465 to target 1.7095
Highs 1.7457, Lows 1.7196
Trade runs +269 Pips

EUR/AUD

Short 1.6597 or literally any price, Target 1.6267
Highs 1.6597, Lows 1.6421
Trade Runs +176 Pips

AUD/CHF

Long 0.6439 to target 0.6623.
Lows 0.6443, Highs 0.6527
Trade Runs +84 Pips

NZD/CAD Holdover trade from last week

Long 0.8565 and 0.8543, Target 0.8592.
Lows Friday 0.8537, Highs 0.8603
target Achieved +60 pips

Total: 4 Trades, 4 Currency Pairs, +589 Pips. This is the same old story week after week on 18 currency pairs. The trades are few but profits high.

EURAUD remains deeply overbought and miles of downside exists. The long term target is 1.5900’s. The complement is deeply oversold AUD/USD against miles of upside to go. AUD/USD must achieved a minimum of 0.6758 to normalize. Note minimum. A break of 0.6815 then far higher for AUD as its upside will accelerate and EUR/AUD will begin a faster descent. EUR/USD will also assist EUR/AUD drop on a break lower at 1.1077.

Same story to AUD/CHF on a break of 0.6645 and AUD/JPY at 74.22. No love for NZD/CAD as it was part of last week’s trade theme as CAD in the currency pair second position. NZD/JPY is by far the best trade NZD offers.
Long way to Friday as trades are weekly and targets yet to achieve.

 

Brian Twomey

Weekly Trades: GBP/CAD, NZD/CAD, EUR/AUD and AUD/CHF

Before results to last week’s currency pairs and highlights to this week’s trades, a brief analysis to last week’s overall market moves due to an unusual one day jump in the Fed Funds rate.

Fed Funds on Thursday jumped an abnormal 5 basis points from 1.55 to 1.60. Last time an exorbitant move to this degree traded was Oct 16. Why 5 basis points is unusual and from Fed Funds directly is because central banks redesigned their own interest rate systems due to Libor elimination.

The new focus for all central banks is to maintain Fed Funds and central bank overnight rates contained within tiny ranges over long periods until a change in headline interest rates. Fed Funds for example since Oct 30, traded 1.54 to 1.58 and closed at 1.55 for 48 days vs 60 trade days.

By enforcing no movement to overnight rates allows interest rate maturities to not only trade below overnight rates but interest rate maturities must perform the daily and necessary interest rate obligations.

Prior to central bank interest rate redesign, interest rate maturities dictated to overnight rates and overnight rates would comply by trading in wider ranges. Central banks turned the prior system upside down in a new dictatorial approach to interest rate markets. Control the interest rates then commands ability to control all market prices including and most especially FX as market prices and interest rates are synonymous as drivers to prices.

The 5 basis point move Thursday lasted into Friday and explains higher moves to GBP, EUR and risk pairs and the massive drops to USD currencies. Thursday’s moves however severely disrupted the weekly balance to currency prices as GBP skyrocketed from deep overbought to extremes, AUD and USD pairs dropped to extremes from deep oversold. Despite the moves, the trades were untouchable. Pick any currency pair and it opens this week in extremes.

Trade Results: GBP/CAD, EUR/CAD, AUD/CAD, NZD/CAD, AUD/NZD

GBP/CAD Short 1.7217 and 1.7263 to target 1.7034. Highs 1.7273, Lows 1.7101. Trade ran +172 pips then bounced Thursday and Friday to 1.7400’s.

Note the bounce from 1.7101 from weekly must cross levels as follows 1.7217, 1.7194, 1.7171, 1.7148, 1.7125, 1.7102,1.7079 and 1.7056.

EUR/CAD. Long 1.4479 and 1.4463 to target 1.4561. Lows 1.4479 and perfect entry, Target 1.4561 achieved for + 82 Pips.
2nd Leg, Long above 1.4577 to target 1.4642. Target achieved for +65 pips. Highs at extremes 1.4690. Total pips 147.

AUD/NZD. Long 1.0313 and 1.0298 to target 1.0412. Lows 1.0283, Highs 1.0374. Trade ran +91 Pips.

AUD/CAD. Long 0.8961 and 0.8954 to target 0.9006. Trade entry failed to materialize.

NZD/CAD. Short 0.8685 and 0.8709 to target 0.8625. Trade entry failed to materialize. However, new entry was sent over social media as follows, Long 0.8565 and 0.8543 to target 0.8601. Lows Friday 0.8537.

Total 4 trades, 3 currencies for +410 pips.

Trades this week are GBP/CAD and NZD/CAD as continuation from last week and new trades in EUR/AUD and AUD/CHF.

GBP/CAD.

Short 1.7465 to target 1.7095. Must cross 1.7413, 1.7361, 1.7309, 1.7257, 1.7205, 1.7193, 1.7141 and 1.7115.

NZD/CAD. Long 0.8565 and 0.8543. Entry achieved Friday at 0.8543, lows 0.8537. To Target 0.8592. Long above 0.8601 to target 0.8639.

EUR/AUD.

Short 1.6597 or literally any price to target 1.6267. Must cross 1.6564, 1.6498, 1.6432, 1.6367 and 1.6300.
Short below 1.6235 to target 1.6102. Must cross 1.6201, 1.6168 and 1.6135.

AUD/CHF.

Strategy. Long 0.6439 to target 0.6623. Must cross 0.6470, 0.6501, 0.6532, 0.6563, 0.6583 and 0.6613.

 

Brian Twomey

How FX Prices and Interest Rates Trade

Instruments 2020
Jan
24
2020
Jan
27
2020
Jan
28
2020
Jan
29
2020
Jan
30
Federal funds (effective) 1 2 3  1.55  1.55  1.55  1.55  1.60
Commercial Paper 3 4 5 6
Nonfinancial
1-month  1.57  1.54  1.54  1.56  1.57
2-month  1.53  1.56  1.56  1.55  1.55
3-month  1.55  1.57  1.57  1.56  1.55
Financial
1-month  1.55  1.56  1.54  1.54  1.60
2-month  n.a.  n.a.  n.a.  n.a.  n.a.
3-month  1.61  1.65  1.58  1.58  1.63
Bank prime loan 2 3 7  4.75  4.75  4.75  4.75  4.75
Discount window primary credit 2 8  2.25  2.25  2.25  2.25  2.25
U.S. government securities
Treasury bills (secondary market) 3 4
4-week  1.51  1.50  1.50  1.49  1.56
3-month  1.51  1.52  1.54  1.53  1.54
6-month  1.51  1.53  1.54  1.53  1.53
1-year  1.51  1.50  1.49  1.47  1.44
Treasury constant maturities
Nominal 9
1-month  1.54  1.53  1.53  1.52  1.59
3-month  1.54  1.55  1.57  1.56  1.57
6-month  1.55  1.57  1.58  1.57  1.57
1-year  1.55  1.53  1.53  1.51  1.48
2-year  1.49  1.44  1.45  1.42  1.41
3-year  1.48  1.41  1.45  1.39  1.37
5-year  1.51  1.44  1.47  1.41  1.39
7-year  1.61  1.52  1.56  1.51  1.49
10-year  1.70  1.61  1.65  1.60  1.57
20-year  2.00  1.91  1.95  1.89  1.88
30-year  2.14  2.05  2.10  2.05  2.04

 

Above is one of my favorite topics in fx and trading and that is interest rates. Presented is the Fed’s H15 daily release at 4:15. This is the true Yield Curve and no other exists. This yield curve is severely off kilter but the Fed’s Yield Curve has been severely off kilter for years. Its not the overnight rate at 1.60 to inform off sync although today it plays a significant role. Its the maturities response to 1.60.

Lets view reverse osmosis to understand and to our FX prices.

The position of the overnight rate 1.60 Fed Funds for a perfect Yield Curve should be located at the center to all maturities. At the center means the yield curve is perfectly balanced as an equal amount of maturities exist above and below. A true financial market then exists to include Fx prices by selling high and buying low using 1.60 as the guide. All Market and FX prices presently are incorrect because of the current Yield Curve imbalance. The imbalance is derived from all maturities trading below 1.60. A market of this caliber is treacherous and requires expertise due to extreme non normality.

When the ECB went negative in 2015/2016 and Libor eliminated, all Central banks redesigned their interest rate focus to match their own financial market prices and FX. What changed was 1.60 and all central bank overnight rates would become the sole drivers to maturities rather than an equal chance for maturities to drive 1.60. This translates as central banks by sheer power adopted full control of the yield curve, market prices and Fx. No longer a free market but a central bank controlled market.

When I state my daily FX interest rate trades are derived by central banks, factored by interest rates and given freely by central banks. Here it is.

Example. Commercial Paper Financial and Non Financial. The most vital interest rate on god’s planet because maturities drive money flows. Non Financial maturities if memory serves drives and dictates money prices offshore while Commercial paper Financial drives money flow prices onshore United Stated for money funds, money markets, banks and a long list of interested financial parties. It drives Treasury yields, FX prices, Stocks, Bonds. it drives loans of any sort from big ticket items to cars and every loan in between. Commercial paper Rates should be the talk of the town for market traders, not Fed Funds because Fed Funds don’t move. Can’t predict an unmovable interest rate.

Note the unusual rise this week from 1.55 to 1.60. This is a stunning move for today’s markets. This says to market trades, USD maturities radically dropped and allowed Risk currency pairs to rise. The USD drop allowed GBP to trade higher from extreme overbought at mid week to ballistic extreme by Friday. It allowed extreme AUD/USD Lows to travel 200 pips lower to ballistic extreme.

What central banks offered by overnight rate and maturity control is a range of allowable FX and all market prices to trade. A range however that has been severely restricted more and more over the years. Today’s ranges are at lowest depths since EUR introduction in 1999.

To add insult to injury, Central banks inside post Libor redesign efforts, slashed maturities to ensure range compression would become permanent. An FX price compresses because it lacks a maturity to match against an fx price. We only have so many maturities to work with. The ECB once had 15 maturities, now 5 maturities exist.

Every central bank on the planet has been working tirelessly to slash maturities, allow overnight rate control and dictate FX prices. Every central bank contains its own unique orientation to its interest rates and FX prices and no two central banks are the same. This explains why certain currency prices trade wide ranges, other FX prices are dead. Its the variation between overnight and maturity control to dictate each particular system’s FX prices.

Central banks normally maintain overnight rates at a firmly controlled rate. For example, the Fed 1.55 was actually 1.54 to 1.58 since last October 2019. As an interest rate changes, the overnight rate and FX prices adjust to the changes. A 25 Basis Point move adjusts the overnight rate by 12 to 12 /12 Basis Points. Maturities then must also adjust to the changes.

Traditionally, this process of interest rate normalization once took 5 full trade days. Against Central bank control and diminished maturities, normalization is seen in 1 or maybe 2 days. Certain nations, normalization priced the interest rate change before hand. Most nations are now following the exact model to priced changes. This means no movements to fx prices on an interest rate change.

If ever anybody wondered to why no movement to FX prices on an interest rate change, its because of the 12 to 12 1/2 pity move to the overnight rate and the even less of a move to the supporting interest rate maturities. The interest rate system quickly falls in line to never allow a market price to move.

Note 1.60 and supporting maturities. The Apple truly doesn’t fall far from the tree. Add the Fed’s General Collateral and Tri Party Repo rates and nothing changes at yesterday’s 1.55. How about the new Fed SOFR rate or the Secured Overnight Funding rate at 1.58.

Interest rate maturities love each other and maintains a close relationship. Central bank control of overnight rates ensures this marriage maintains far into the future. FX and market price movements however despise this love affair. Yet the balance won’t break anytime in the future. It means daily and weekly ranges compresses further over time.

Central banks are working on Risk Free Interest rates. It means addition of another interest rate. The Fed’s SOFR is a good example. Risk free interest rates are complements to the 1.60 overnight rate. Notice yesterday’s 1.60 Fed Funds to SOFR 1.58.

To add another interest rate as the central banks are working on currently means FX range movements will die yet another painful death. An extra interest rate adds yet another FX price point that must rise or fall throughout any trading day. It is an extra FX price point that requires a break up or down to ensure the FX price continues to allow enough movements to profit.

Note the extra interest rate is located not outside but inside the current mix of maturities. This fails to assist to fx price movements and profits.

Economic releases are now fully controlled by the central bank’s command and control to overnight rates and maturities. The economic release is found inside the FX price and the FX price is found inside interest rate maturities. A release as expected means no moves. An off kilter release might see a few points trade immediately yet its all contained within the daily ranges and price points offered by the central banks.

As daily market prices are now contained in a wide 7 1/2 time frame to include the major economic releases,  the vast majority of an FX price is located in exact equilibrium. An equilibrium price is untouchable until an extreme price trades. If an extreme price fails to trade then no trade for a currency price.

Extreme is not necessarily true commentary but maybe correct daily buy and sell points for day trades is more apt as explanation.

Its actually rare to see extreme prices anymore. It happens but not as often as once existed in currency prices. Trade systems and models required deep adjustments to the new central bank interest rate system. It is a deep requirement to retail traders who are looking to far and wide at their currency prices.

What the central banks controlled is not only interest rates and FX prices but they changed the markets orderly structure. The structure and order still exists but it was severely adjusted to favor the central banks and not the market trader.

This will not change anytime soon.

 

Brian Twomey