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

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