GBP, ECB Money Supplies and Next Week

Deeply oversold GBP/USD upon BOE dropped 100 pips. The characteristically skitzy nature of GBP/USD born from the BOE dropped from vital 1.3589 to 1.3532 or 57 phantom pips. Phantom pips belongs to the trader on rebounds as free money as the only trade was long. The only trade today is long, next week is long.

GBP/USD longer term vitals are located at 1.3484, 1.3458, 1.3412, 1.3373. Then the 5 year average at 1.3091.

Today’s day trade vitals: 1.3423, 1.3451, 1.3464, 1.3526, 1.3559.
The BOE and GBP/USD are followers but never leaders. When the Fed or ECB raises then the BOE follows. We have 3 central bank leaders: ECB, FED and RBNZ. The remainder follow. The BOE decision was expected rather than classified as a disappointment.

Powell faced 2 options with Inflation at 4% and Fed Funds at 0.08. Either taper the money supply or raise rates as Inflation is born, lives, rises and falls from the money supply. All market prices are located in the money supply yet so sensitive is this information, central banks release money supply date for the past month.

Current ECB M3 is running at 7.4 billion, down from previous months at 7.9 billion, 7.6, 8.3. For M3 dropped in 2021 from 12.5 billion. M1 money dropped from 16.5 billion im January to current 11.0 and 11.0 for the past 3 months. At some point soon, the ECB will be forced to raise as the risk is much higher Inflation.

Futures contract trade by money supplies. For EUR/USD at 11 billion to M1. Factor your contracts to money supplies and revealed is 11 billion is allowed something like 19 to 20 billion to highlight an overbought EUR/USD. Normally EUR/USD runs about 8 to 9 billion contracts over the money supply to consider overbought EUR and short.

Oversold EUR/USD works in the opposite direction to factor money supply lows to Futures contracts. Then the last possible trade exists as M1 and M3 crossovers. Not seen often especially in QE days but happens under normal circumstances.
Next Week
Every currency as GBP/other currency sits at richter scale oversold. GBP oversold matches GBP/EM s GBP/CNY however many GBP/EM currencies are on the verge of breaks higher.

AUD approaches oversold and long for next week. Overbought USD/JPY short for next week. USD/CAD we’re looking for a close around 1.2483 for shorts next week. USD/CAD 1.2499 then shorts would become more attractive.

EUR/USD longs for next week however with a lazer bean focus on 1.1489.

Lower EUR/AUD then decent longs however GBP/AUD is not only the better trade but GBP/AUD at 1.8220 matches its close last week at 1.8188. GBP/AUD was the clear winner trade this week as we traded longs and shorts.

Brian Twomey

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