Bonds V Yields, Yield Spreads and Currency Price

A currency price and currency pair is arranged as either a yield or bond and represents the currency price connection to interest rates. USD as DXY, USD/JPY, USD/CAD and USD/CHF trade by the US bond price. This is what it means as safety of the USD currency. Non USD pairs such as EUR/USD, GBP/USD, AUD/USD and NZD/USD are connected and trade by yields.


The overall connection is Bond Vs Yield. Both are reflections of the same financial instrument except for different numbers. As Bond prices trade higher then yields fall. As Yields rise then bond prices fall.


A yield is considered a risk asset compared to the safety of the bond. Safety of the bond means holders of the bond will be paid no matter what happens as bonds are guaranteed by governments.


Notice the 2008 crash. USD currencies skyrocketed higher. What traded higher was the bond price. Non USD currencies fell as a result of falling yields. Exclude the extreme crash example, the same situation trades today and every market trading day only on a much smaller scale.


Notice the yield lineup and expansion by the 1 year yield. Also note all yields from the 3 month to 30 year all trade just below vital averages. Early warming to big moves ahead as the opposite bond price is also at vital levels. The lineup is constructive to yield spreads.


3 month 1.05, 0.9201
1 year 2.12, 2.07
2 year 2.64


3 Year = 2.87,
5 year = 2.93, 2.94.
7 year = 2.97, 3.01.


10 year = 2.9450, 3.0135.
20 year = 3.33, 3.47.
30 year = 3.12, 3.13..


The overall yield curve now runs 2.66 as opposed to 2.73 from yesterday’s view from 2 year to 30. Yesterday’s 66 point to possible movements is today 65 and no difference. Possible ranges and movements hold constant as yields against a +97 correlation move together as one unit.


Trading ranges expand for every higher yield. The 20 and 30 year yields trade wider ranges than the 2 year. The purpose to assign yield numbers is to hold the entire yield curve constant as one unit.


The 10 year yield dropped to 2.78 yesterday then rose to 2.91 and just prior to vital levels at 2.94 and 3.01. The overall path traded from 2.91 to 2.78 then higher to 2.91 again. EUR/USD dropped to 1.0464 then higher to 1.0606. The 10 year yield rise from 2.78 to 2.91 and completed in 12 hours while EUR/USD traded from 1.0464 to 1.0606 in 12 hours.


Same rise story to GBP/USD, AUD/USD, NZD/USD but the opposite story to USD/JPY, USD/CAD and USD/CHF.


USD/CHF likewise fell from 0.9865 to 0.9694, USD/JPY from 128.94 to 127.02, DXY from 103.88 to 102.66, USD/CAD 1.2858 to 1.2781.


BOND Vs Yield Relationship


The 10 year bond price from 2.84 traded a range from 2.83 to 2.87, the yield from 2.78 to 2.91 and a 4 to 13 point relationship. Yields are mispositioned to the bond price and this is the point where markets will see its greatest moves as yields must reposition lower. The misposition is seen in spreads.


The 3 leaders of the entire market trading bloc yesterday was DXY, bonds and yields.
Yield Spreads


Note the long end 20 to 30 and 21 point spread, 10 to 20 at 38 points, while the 7 year is mispositioned to the 10 and 5 year yield. The 3 to 5 year holds a 6 point spread and 23 points to 2 vs 3 year. Market volatility and price paths is seen from the lower end of the yield curve.


Correct is higher yields hold wider ranges, shorter at the low end and the longer end is the driver to market prices. A market price starts small then rises higher and wider ranges as the price rises up the yield curve.


Short EUR/USD is automatically understood as short yields or long EUR/USD as yields rise but also note currency pairs are arranged as opposites. EUR/USD = Yield/ Bond, USD/JPY = Bond/Yield,


DV01


DV01 answers what is the dollar value of a basis point. As highlighted in Inside the Currency Market 11 years ago, DV01 is the average absolute price change of Treasury securities to a 1 basis point increase ore decrease in yield to maturity.


The formula: Change is absolute value with 1 basis point/ divide by change in absolute value with 1 basis point./ 2.


Seen and factored is the bond price yield relationship and used daily to trade bonds and yields.

Brian Twomey

Yesterday’s Targets, Yields and the Yield Curve

Yesterday’s prices contained the potential to trade dead or explode such as the EUR/USD on Tuesday. No middle ground existed to yesterday’s potential as the choice was either / or. The market choice was trade dead as the S&P’s traded 40 points, 6 points for WTI.


Yesterday’s targets achieved destinations. WTI Achieved Target 107, Brent Achieved target 110.


SPX Achieved Target 4034 while NASDAQ Achieved Target at 111703.00.
EURUSD Target 1.0587 and highs at 1.0568.


Yield Curve


The yield curve from a day trade perspective is a symphony with movements at a basic 6 points. Anymore than 6 points is a bonus and a free money trade. Yields includes the 3 month as the 3 month yield is no different than the 2 year, 10, 20 and 30. Its a vital component to the overall yield curve.


As yields progress throughout the week, the count changes from 6 – 29 points or an average at 17 points. Above 17 points includes only the 20 and 30 year yields. Yields are married into 1 symphony orchestra as correlations between and among yields correlate +97%.


The total yield curve runs at 2.73 with the highest potential to move overall about 66 points. The long end at the 20 and 30 yields contains the greatest movements to the overall 66 curve. The overall curve may split at 33 points to cover 3 month to 10 year then 20 and 30’s.


Interested may view btwomey.com for many examples to yield spread analysis between nations, how to factor yields to currency prices and to forecast currency prices from yields. Europe and negative rates is factored and transformed as well for the EUR/USD.


ts simple math by using a calculator but all worked out in detail and shown. Yields most vital for USD/JPY are 2, 3, 5 and on rare days, the 7 year yield. The number 7 is a bible number and a vital constant to markets, financial instruments and prices. For USD/JPY, the 7 purpose is to act as resistance.


The current 10 year to 3 month spread is most vital to forecast and view the domestic interest rate. Current spreads run 1.88 and a good target for the FED’s continued raise campaign.


The 10 year to 2 runs 2.80, then 20 to 2 runs 3.06 and 0.46 to the 30 and 2 year. Overall spread runs 0.46 to 1.88 and 0.46 to 3.06 on the high side. Current 0.46 is built in for support from current 1.0.


The current Effective Fed Funds rate runs 0.83 and another raise places the effective rate at 1.08 for a 50 point raise and 0.95 for a 25 point raise.


Yields Vital Points


2 year = 2.64, 2.65
3 Year = 2.87,
5 year = 2.93, 2.94.
7 year = 2.97, 3.01.
10 year = 2.9450, 3.0135.
20 year = 3.33, 3.47.
30 year = 3.12, 3.13.

Brian Twomey

Targets: EUR/USD V DXY, WTI V Brent, SPX V Nasdaq

SPX achieved target at 4068 then not written was the reversal from 4068. Overall, SPX was a 50 ish point trade from the very basics. Multiple longs and shorts for the day offered more points.


NASDAQ target achieved at 11943 then the reversals.
Both the S&P’s and NASDAQ traded lower direct to supports at 111 and 109.
WTI target at 114.00’s traded to 113.20 and a miss by 0.8.
Brent’s target at 116.00 traded to 115.52 and a miss by 0.4.


Day Trades


Expected today is a “funny” price day and derived from the USD side to DXY, WTI and stock markets. An example is seen from yesterday’s EUR/USD. Yesterday’s USD side operated normally. “Funny” will derive from SPX and WTI as drivers.


SPX Vs NASDAQ


SPX targets 4105 and NASDAQ 12040. On the low side, SPX targets 4034 and NASDAQ 11703.
WTI Vs Brent


WTI targets back to 114.00;s at 114.35 and Brent 116.86. On the low side, WTI targets 107 and Brent 110.01.


EUR/USD Vs DXY


Today’s USD Vs EUR battle to market excitement is seen from EUR/USD 1.0491 Vs DXY 103.73. EUR/USD trades 16 pips from 91 and DXY 7 pips. DXY could offer easily 104.40’s and EUR/UDD 1.0390’s or EUR/USD trades to 1.0587 and DXY upper 102.00’s. The EUR/USD Vs DXY contention will materialize in the fate of WTI and SPX.

Brian Twomey

Targets: WTI, Brent, SPX, NASDAQ, EUR/USD, USD/CAD

Oil commentary is delivered as supply, demand, OPEC, driving season, not driving season, Heavy Vs Light Sweet, Canada, Oman, every nation on the planet, Inflation, No Inflation..
Once traders are complete reading commentary, they don’t have a clue to the most important aspect: The Oil price. Same principle as central bank commentary in relation to currency prices. They report every last theory without data or facts and traders render their own judgement to prices.


The Oil Price = Oil price. If the Oil price rises then all oil prices around the world rises. If the Oil price falls then all oil prices fall. Same principle as stock markets. Stock markets and oil are the exact same financial instrument. The only difference is the assigned price number to the instrument. Don’t complicate the uncomplicated.


Markets were designed for simplicity to profit and for investment purposes. This requires price knowledge but doesn’t necessarily require the theoretical aspects as this becomes a game of guess, speculation and chance.


Same old market story, a price only cares about a price. The hardest part to master is the price and gazillions of ways existed to find the answers over decades.


WTI Vital levels 104.85, 108.32 and 111.79


Brent Vital levels 117.78, 112.82, 107.87, 106.12, 102.55.


WTI lifted from 102.55 last week.


WTI rose 12 points last week, 6 point rise for Brent.


Today’s WTI target is 114. Brent’s current price is 114 and targets 116. Brent sits comfortably above vital 111.00’s and WTI at 109.00’s. Lower for Brent targets 107.00’s and 104.00’s for WTI. Brent and WTI share about a 3 point relationship. Both are the same financial instruments.


Higher Brent assists EUR/USD higher at +80% correlations.


S&P’s and Nasdaq


Must break for the S&P’s is 4015 to target 4063. Failure targets 3968. Nasdaq higher targets 11943, lower targets 11422.59.


EUR/USD


Higher for EUR/USD must break 1.0801. Lower levels to parity 102.60, 1.0133, 1.0106 then 1.0029.
EUR/USD 1.0400’s is a phantom number and 400 pips lower from the 1.0800 target from the 1.1500’s break at the 5 year average. Phantom numbers over years are historically good for maximum 600 pips and equates to EUR/USD 102.00’s.


EUR/USD target today is 1.0456. USD/CAD 1.3016,

Brian Twomey

DXY V WTI, Brent V EUR/USD and EUR/USD Forecast

In yet another historic market phenomenon, WTI traded above DXY in each of the last 3 months for the first time since 1999 / 1998 and DXY introduction. Historic is the misposition of WTI.


When WTI crossed above DXY at the crucial DXY 96.00’s then WTI was destined to travel higher. Once WTI crossed above, correlations changed to DXY and WTI trading as the same exact financial instrument. WTI traded 12 points higher last week to 110.00’s in comparison to 166 pips to DXY to achieve 105.07 highs.


As WTI traded and approached DXY exchange rate levels then correlations strengthened from +66% 3 months ago to current +86%. WTI is currently the higher price however exchange rates were the first financial instruments 2000 years ago and always leads newly formed instruments constructed in the modern day.


From monthly averages to 5 years, DXY and WTI are massively overbought. DXY remains above the many months long 95.00’s and 96.00’s and a break lower signifies a wholesale trend change. WTI is massively overbought from crucial averages at 84.60, 67.08, 60.70 and 60.49.


The commonality is DXY 95.00’s and 96.00’s Vs WTI 84.00’s as the closest breaks. Until breaks lower at least at 84.00’s are seen in WTI then the risk is gas prices remain elevated for longer periods and Inflation’s residual effects stay higher.


DXY lower must trade to 100.32, 99.15, 98.86, 98.09 while WTI must trade to 99.59, 89.04, 82.24 and 80.01. The WTI crossover below occurs at 99.00’s. WTI next breaks above are located at 104.85, 108.32 and 111.79. DXY above next breaks are found at 105.60, and 107.06.


Crucial breaks to trend aren’t expected anytime soon.


EUR/USD Vs Brent Oil


As markets are natural reflections of each other, its instinctive for Brent to trade above EUR/USD for the past 2 months in monthly average terms and for the first time in the 1999 /1998 EUR/USD and Brent relationship. Brent’s proper location is to trade below EUR/USD as much as WTI must trade below DXY.


The WTI and Brent relationship to exchange rates are severely off kilter. Brent is overbought and must trade lower while EUR/USD is oversold and must trade higher. In the WTI Vs DXY relationship, both DXY and WTI are overbought.


EUR/USD Vs DXY


EUR/USD at 1.0400’s is a price that doesn’t exist and dating to almost 20 year monthly averages while DXY at 104.00’s also doesn’t exist. The EUR/USD and DXY relationship must compress by EUR/USD higher and DXY lower.


EUR/USD Forecast


EUR/USD at minimum must trade to easily 1.0900s then 1.1000’s, 1.1100’s, 1.1200’s. EUR/USD brick wall is located at 1.1400’s and 1.1500’s.


Bloomberg Forecast


EUR/USD 1.0900’s is a phantom number so then how could EUR/USD possibly trade to parity or a consideration to parity. Highly improbable and another warning not to trust Bloomberg nor imbecilic money managers as they are glorified retail traders speculating and gambling.


USD/JPY Vs USD Trade Weight Index


USD/JPY is tracking perfectly to the Fed Trade Weight Index.


SPX 4023 V EUR/USD 1.0400;s Vs DXY 104.00’s. SPX requires a deep investigation.

Brian Twomey

EUR/USD Vs DXY: An Historic Day is Upon Us

EUR/USD and DXY as the two most important currency pairs in currency and all markets. Here’s present exchange rates EUR/USD 1.0406 Vs DXY 104.64. As like decimals, 1.0406 Vs 1.0464. This development is historic and may never be seen again in our lifetimes. EUR/USD crossed below DXY. Explains why EUR/USD went beserk yesterday.


Since 1999 and EUR introduction and from monthly averages, I don’t see another instance when EUR/USD traded below DXY. DXY above 100 occurred last for 3 months in 2017, once in 2016 and 2015. Then from 1999 to 2002.


In 276 months since 1999, DXY traded above 100 in 45 months. DXY achieved its highest high January 2002 at 120.59 and lows at 72.00’s. DXY 3 big lines exist at 103.71, 100.79 and 96.00’s.


Targets for DXY if complete, occurs at 105.60, and 107.06. Both are at extremes. If ever DXY and EUR/USD crossed then the only time is from 1999 to 2002. DXY at 105 and 107 takes EUR/USD to near parity and close to its 0.9900 introduction, although 0.9900’s was a fleeting instance as EUR/USD skyrocketed to 1.0300’s and 1.0700’s within 2 months.


To 1999 prices was the beginning of DXY and 1996 online currency trading, I believe FXCM was the first yet market sizes to trading was small and prices varied far far and wide then. The internet replaced the Teletype price feed from New York as the centralized repository to prices.

My estimation the feed from New York remains today to plug and align prices into various platforms.


EUR/USD’s proper place is trade above DXY. Prior to EUR/USD as USD/DEM or the German Deutschemark. EUR/USD at 1.0400’s translates as USD/DEM today at 1.8500’s and above DXY. Far and wide price trading was the result of EUR/USD transferred to DEM and DXY introduction. A truly new day existed since 1999.


While 96.00’s represents DXY’s historic levels, EUR/USD’s 23 year historic line is located 1.2112. Both DXY and EUR/USD not only achieved furthest distance but DXY is massively overbought and aligns to massive oversold EUR/USD.


In the Bloomberg Survey of 400 participants, 250 or slightly more than 1/2 forecast EUR/USD at parity. A vast majority forecast 1.1500’s from parity. My forecast to 1.1300’s holds and just below the 5 year average at 1.1500’s. Note my forecast to 400 ish money managers.


What money managers and my forecast are imparting is the trade of the decade is upon us.

Brian Twomey

GBP/JPY, USD/CAD, GBP/CHF, Next Week

USD/CAD wins the week long currency market battle for USD supremacy. Written yesterday USD/CAD support at 1.2881. The USD/JPY and USD/CAD roles reverse as USD/JPY supports are located at 129.08, 128.90, and 128.66. Previously USD/CAD 1.2908, 1.2890 and 1.2866.


Currency pair role reversals are most specifically seen in exchange rate cross overs and mathematically by Simple Regression Lines. USD/JPY for example may sit on the bottom of a Regression line and EUR/USD on top but eventually roles reverse as EUR/USD will eventually sit on the bottom and USD/JPY on top.


Bottoms and tops can only travel so far until the roles begin reversals. Found in the nature of the exchange rate relationships but seen early in Regression Lines to allow preparation for long term trades.


As written yesterday, USD/CAD bottoms 1.2929 and traded to 1.2923. Specifically, 1.2985 broke below and traded 50 pips lower. USD/JPY bottom at 129.57 traded to 129.43.


SPX achieved yesterday’s reported bottom at 3930, WTI achieved tops at 105.45, bottoms at 98.66 and GBP/JPY as written Sunday broke below 159.95 to 158.81 for 100 quick pips. GBP/JPY now trades 157.43.


Unique to Brian Twomey and trading is consistency to targets and profits as I maintained both for 10+ years. Targets and profits are yesterday’s news as today’s money interests to markets are more concerned with profits from extra curricular activities.


Trading correctly and market knowledge is the least concern yet should’ve maintained priority to bring in more views and revenues. Show a sign of sophistication on the other popular website is rejected.


The concept applies to hedge funds, institutions and currency analysts as much as the retail side of trading. Many hedge funds are out there struggling for profits as much as retail traders and currency analysts. All are no different. The word analyst is associated to expert but none are experts. The currency brokers are as much to blame in the consistent profit scenario. Nobody cares anymore for a leg up to traders.


Next stop for WTI above is 108, and 4080 for SPX 500. GBP/JPY bottoms today are done at 156.98. Good shot for longs to return to 158.18 easily.


GBP/CHF bottoms today right at 1.2129 then will travel back near 1.2221.


NEXT WEEK


Best pairs next week to trade are AUD/USD and GBP/USD as middle currencies. Both are moving daily at 130 ish pips per day and outperforming EUR/USD and NZD/USD. The week’s winner is GBP/JPY and GBP/JPY will again lead the JPY cross pair pack next week.


AUD/USD higher then best trades are EUR/AUD and GBP/AUD shorts. Watch EUR/AUD 1.5082. GBP/USD positive correlations to cross pairs will maintain its positive status for easily the next few weeks.


Overall currency markets are back to normal as next week returns to normal movements.

Brian Twomey

EUR/JPY V USD/JPY, USD/CAD, SPX500, WTI Targets

Yesterday’s USD/CAD traded 91 pips vs 79 pips for USD/JPY. EUR/JPY traded 106 and GBP/JPY 147. USD/CAD traded 12 pips more than USD/JPY. Yesterday’s spread for USD/CAD and USD/JPY as written yesterday is 20 ish pips. and no changes today as this spread will remain until significant breaks are seen from either USD/CAD or USD/JPY.


USD/CAD bottom contains 2 levels: 1.2937 and 1.2929 or 8 pips. USD/JPY bottoms are located at 129.59 and 129.57.


USD/CAD tops are located at 1.3061 and 1.3073. USD/JPY tops are located at 130.76 and 130.91. USD/CAD 2 tops = 12 pips difference Vs USD/JPY at 15 pips.


USD/CAD big break lower must cross below 1.2985 then USD/CAD challenges 1.2882. USD/CAD topside targets 1.3126. USD/JPY lower points are located at 126.42 and 124.32. If USD/JPY is destined for higher levels then 133.64 is on the way.


Severely overbought USD/JPY is prevented to move significantly higher by massively overbought EUR/JPY. Currently USD/JPY 130.00’s Vs EUR/JPY at 137.00’s. USD/JPY higher requires assistance from EUR/JPY.


EUR/JPY bottoms today are located at 136.74 and 136.64.


SPX 500


SPX 500 big line breaks are located at 4370, 4185, 4013. Today’s lower target is located at 3930.73 and 4096.93 on the topside.


WTI
WTI big line breaks are located 114, 105.84 and 101.55. Target below is located at 97.65 and 105.45 for the topside target.

Brian Twomey

EUR/USD Target, AUD/USD, USD/JPY V USD/CAD

Yesterday’s EUR/USD target at 1.0627 traded to 1.0592. Lows achieved 1.0494. We knew this Sunday as the low point was reported at 1.0495.


EUR/USD total range traded yesterday 98 pips. EUR/USD achieved 1.0592 at the 12:00 hour, known historically and famously in Canada as Noon day.


Long entry was anywhere as the only question was how much money was intended to earn yesterday. Longs from 1.0494 profit was 98 pips. Entry at 1.0582 profit was 10 pips.


Today’s EUR/USD target 1.0610 and 1.0615. Drops are covered for profits as well. It doesn’t matter where EUR/USD trades as profits are covered continuously.


The profit and target train never stopped here in 10 + years. Added by request to 24 hour trades was GBP/CHF, AUD/CHF, SPX500 and WTI. For SPX and WTI was also added weekly trades.


USD/JPY traded to 129.79 and below USD/CAD. Yesterday’s USD/CAD target from 1.2986 traded to 1.3035. Yesterday written 1.3044. Quick 50 pips for doing nothing.
Current USD/JPY 130.37 Vs USD/CAD 1.3013 are both in the FX battle for supremacy.

USD/JPY has the edge currently as it contains the higher exchange rate. The edge? Right at 20 ish pips.


Today’s USD/JPY and USD/CAD share a tightly bound relationship. USD/JPY 129.71 matches USD/CAD 1.3069. USD/JPY 130.69 matches USD/CAD 1.3069.


How about USD/JPY yield spreads and 4 hour charts. Its the road to purgatory.


Due to the tightly bound relationships to currency prices, all currencies are married. For example, Por ejemplo in Espanol, GBP/JPY 160.26 = EUR/JPY 137.06. EUR/JPY 138.44 = GBP/JPY 161.88.


EUR/USD 1.0592 = NZD/USD 0.6352. GBP/USD 1.2386 = AUD/USD 0.6986. AUD/USD 0.7004 = NZD/USD 0.6368.


EUR/USD and NZD/USD share a top and bottom position. AUD/USD and GBP/USD are related by positions as middle currency pairs.


Yesterday GBP/USD traded 146 pips Vs AUD/USD 125, AUD/CHF 116. USD/JPY traded 124 pips to USD/CAD 113.


AUD/USD traded to lows at 0.6906 and targets 0.6881 and 0.6853 are close. EUR/USD target at 1.0800’s from 1.1500′ s traded an extra 300 pips lower. GBP/USD traded 300 pips lower than its targets. AUD/USD was responsible as AUD/USD was yet to complete its targets.


Once AUD/USD completes its destination then 0.7300’s will eventually trade.

Brian Twomey

AUD/USD and AUD Cross Pairs

AUD/USD remains the last holdout currency to achieve target from long term averages. AUD/USD break at the 5 and 10 year averages from 0.7298 and 0.7934 targets 0.6881 and 0.6853. The market awaits resolution to AUD/USD as NZD/USD, EUR/USD, GBP/USD all broke long term averages and achieved targets.

EUR/USD,GBP/USD and NZD/USD now trade deeply oversold.


All JPY currencies all trade safely above longer term averages as well as USD/CHF, CHF/JPY and USD/JPY. EUR/CAD, GBP/CAD, NZD/CAD and AUD/CAD trade safely below. GBP/AUD trades safely below while EUR/AUD trades below with strong resistance just above current price.


AUD/USD main conundrum is it lacks correlations to its cross pairs. AUD/USD Vs AUD/CHF correlates at -41%, Vs AUD/JPY at -41%, Vs AUD/NZD at -62%. Most vital to AUD/USD and to stop AUD/USD’s further slide is the +95 correlation to AUD/CAD.


AUD/CAD is the top pair in the AUD universe at a 0.9060 exchange rate and 2000 pips from AUD/USD. The opposite pair to AUD/NZD is AUD/CAD and explains AUD/CAD’s top position to AUD/USD. Both AUD/CAD and AUD/NZD are the exact same currencies separated by 2 different exchange rates.


Plus AUD/CAD traditionally is a dead mover currency and contains every ability to stop AUD/USDs downslide.


Generally by year dated to the 1960’s, AUD/CAD trades roughly 700 ish pips per year. For 2022 and 5 months, AUD/CAD traded 600 pips, 1000 for 2021 and 800 for 2020. AUD/CAD for the current year trades within its historic range.


AUD/CAD is deeply oversold and matches oversold AUD/USD. AUD/JPY and AUD/NZD trade deeply overbought while AUD/CHF is fairly neutral short and long term and trades by meandering alongside AUD.


AUD/USD’s closest pair in the currency pair line up as middle currency is GBP/USD then bottom pair NZD/USD. EUR/USD fits into the AUD/CAD universe by a +44% correlation to AUD/CAD.


The Bloomberg survey forecasts EUR/USD to parity and 0.9700;s. EUR/USD was introduced at 0.9800’s in 1998 and traded above USD/CHF, AUD/CAD and DXY for all its 24 year existence. For EUR/USD yo trade at parity, it must cross below DXY.

USD/CHF and AUD/CAD would be forced to drop to act as bottom supports.
Most prominent today driving the vast majority of our currency pairs are 50 day averages. AUD/USD’s 50 day is located at 0.7365. Once AUD/USD bottoms, it contains a long way to travel higher.

Brian Twomey

FX Weekly: GBP/USD V USD/CAD, EUR/USD, JPY Cross Pairs

GBP/USD last month broke below its 5 year average at 1.3100’s and traveled 900 pips to 1.2200’s but the vast majority of the 700 pip move occurred last month to GBP/USD 1.2400’s.


USD/CAD last month bolted from 1.2400’s to current 1.2900’s but 400 pips last month resulted in the vast majority of the USD/CAD move. GBP/USD outpaced USD/CAD by about 2 times.


GBP/ USD at 1.2300’s sits deeply oversold from its 5 year average. USD/CAD failed to break its 5 year average at the corresponding 1.3100’s. USD/CAD’s 5 year average now sits at 1.2986 vs lows at 1.2400’s or 500 pips. USD/CAD previously was located from 1.2200 to 1.3100 or the same 900 pips to GBP/USD.


Target for USD/CAD above 1.2986 is located at 1.3416 or 500 pips and corresponds to the 10 year average target at 1.3544.


USD/CAD’s big line average breaks are found at 1.2862, 1.2812, 1.2724, 1.2657. USD/CAD is fairly well trapped in a 300 pips range. GBP/USD breaks higher 1.2356, 1.2456, 1.2479, 1.2788, 1.2933. GBP/USD 1.2933 happens to be found at the 50 day average.


GBP/USD 1.2470 is located the 5 day average and the first major break in order for GBP/USD to trade within the proper 5 to 253 day average framework.


USD/CAD’s dead range is equally blamed on USD/JPY as both correlate at + 88%. USD/JPY vital points below: 130.44, 129.70, 124.03, 123.89. USD/JPY 123.00’s corresponds to USD/CAD lows at 1.2400’s. USD/JPY 129.70 corresponds to USD/CAD 5 year average at 1.2986. USD/JPY 130.44 becomes USD/CAD’s first target on a break of 1.2986.


The overall driver to USD/CAD is GBP/USD deeply oversold from the 5 day average to averages dated to 1998. USD/JPY as the next driver to USD/CAD is deeply overbought from the 5 day average to averages dated to 1998.


USD/CAD at 1.2900’s is trapped in the middle of GBP/USD 1.2300’s to USD/JPY 130.00’s. Working against a higher USD/CAD is deeply overbought CAD/JPY and CAD/CHF. Both correlate to USD/CAD at +80 and +64% for CAD/CHF. Longer term, USD/CAD sits dead neutral from averages at the 5 day to 1998 averages.


GBP/USD’s averages at 1.2400’s should break easily to target 1.2600’s. GBP/JPY at -99% is the only currency in GBP’s universe to negatively correlate. GBP/NZD is light at +67% but the correlation explains NZD/USD wider movements to finally wake up from its months long coma.


EUR/USD


EUR/USD big break for higher is located at 1.0881 and this number happens to correspond to the 50 day average at 1.0841. Above targets easily 1.1026.
EUR/USD sits deeply oversold from short to longer dated averages to 1998. EUR/USD sits massive oversold at the 5, 10 and 15 year averages. The EUR trade and direction is higher.


For Sunday to Monday’s 24 hour trade, upper target is located at 1.0627 and just shy of the 20 day average at 1.0664.


24 Hour Trades


24 Hour trades contain 2 longs and 2 shorts and 1 reversal per each long and short.


GBP/JPY


As current leader of JPY cross pairs, GBP/JPY sits fairly neutral at 160.00’s from the 1.4800 to 168.00 move. Big break for lower is located at 159.95.


JPY Cross Pairs


USD/JPY is back to +99% Correlations to JPY cross pairs. For the week, we’re cautious to weekly trades as JPY cross pairs all resemble GBP/JPY’s neutral position. Neutral means JPY cross pairs could easily fly either way. The strategy is short rallies.


20 Currency Pair Ranking Scale


For the first 14 currency pair rankings as follows: Favored trades this week: EUR/USD, EUR/CAD, AUD/USD, AUD/JPY, EUR/AUD, EUR/NZD, NZD/USD, AUD/CHF, CAD/CHF, NZD/CHF, USD/CAD, CAD/JPY, EUR/JPY, NZD/JPY.


JPY cross pairs are relegated to the bottom, USD/CAD doesn’t have a clue, CHF cross pairs are normally decent trades week to week but lack big moves.


Best trades from the overall rankings: EUR/USD, EUR/CAD, AUD/USD, EUR/AUD, AUD/JPY, EUR/NZD, NZD/USD.


GBP


GBP/USD, GBP/AUD, GBP/NZD, GBP/CAD, GBP/CHF, GBP/JPY. Best trades: GBP/USD, GBP/AUD, GBP/CAD, GBP/NZD.


Currency Markets


Currency market prices overall are back to normal from a few fairly tough weeks. The yearly pattern is currency prices goes haywire at least 2 times per year and always in the March and April period. Except for an occasional week now and then to go off kilter, currency markets function +90% for any given year.


As off kilter subsided, normal will last for the remainder of the year. Normal means wider daily movements will disappear to favor the daily to weekly balance to overall trades. Previously, daily moves stole pips from weekly trades. Rare day to see such events.

Brian Twomey

GBP/USD Vs GBP/CHF, Anchor Pairs Vs CHF

GBP/USD yesterday traveled 309 pips lower and 2 targets were viable at 1.2488 and 1.2405. Both targets achieved destinations easily. But GBP/USD dropped another 81 pips into the stratosphere. Now what and where was GBP/USD heading below 1.2405.


The strategy is look to the next lowest pair and the only low pair to GBP/USD is GBP/CHF. GBP/CHF began its trade life at 1.2290’s against a big break point at 1.2250. GBP/CHF eventually broke below 1.2250 and this break allowed GBP/USD to trade 81 pips lower.


GBP/USD lows had to evaluate against GBP/CHF highs. While GBP/USD traded 300 pips, GBP/CHF traded 184.


AUD/USD traded 189 pips yesterday while AUD/CHF dropped 74 pips. USD/CAD 155 pips to CAD/CHF 79 pips.


Without the break below of all currency pairs as GBP/CHF,CAD/CHF, AUD/CHF, NZD/CHF, EUR/CHF then GBP/USD, EUR/USD, AUD/USD, NZD/USD would’ve never traded to such great distances. The CHF currencies would’ve stopped anchor pairs at a dead stop at the CHF highs.


The import to CHF pairs is anchor pairs are never allowed for exchange rates to cross below. GBP/USD for example can’t ever trade below GBP/CHF nor can GBP/CHF trade above GBP/USD. Same situation for all CHF pairs to anchor pairs.


Without CHF pairs in the universe mix then anchor pairs would trade enormous distances and far more than yesterday’s GBP/USD 300 pips. CHF currencies serves its FX purpose as the rescue currency to stop movements.


Each currency pair in the exchange rate universe serves its purpose as masters of their own ranges. Its their own domain and this domain is protected by each currency pair in the mix as each currency provides a check against the next currency. No currency pair in the universe is allowed to cross above or below another.


The glue that holds currency pair ranges together are averages but averages must be correct. Refrain from the closing price as I’ve seen others use lately.


The more permanent glue to hold currency prices together is the broker platform. What is a platform? A big giant Statistic. Every platform in every nation and on every continent knew exactly for GBP/USD to dead stop at 1.2324.


Today’s CHF pairs are dead to trade as all lack ranges for a viable trade. The message is long anchor pairs as CHF pairs won’t move far today. The only direction is up to support anchor pair rises.

Brian Twomey

EUR/USD, FED and Money Supply

EUR/USD for the Fed’s raise traveled 121 pips. Looks great on paper but its wrong. The currency price exist in a perpetual day trade and never to leave. EUR/USD for the Fed’s day trade release actually traded to 1.0595 or 53 pips. Yesterday’s target as written 1.0598. Slightly more than 53 pips.


The target at 1.0598 was guaranteed. We’ll take guaranteed. Beside the Fed, morning day trades and 24 hour trades were running. Walking into the Fed’s release, at leas 29 pips were banked. After the Fed, 60ish pips were added. Now we have the reversal for an extra 20 and 30 pips just for laughs.


EUR/USD traded 121 pips overall but banked by the smartest trade manner was 101 pips.


But EUR/USD traveled to 1.0630 and a miss of 32 pips. Wrong. The extra 32 pips traded to a location not to touch nor factor for correct trading. Without the 50 point raise or Powell’s words, EUR/USD would’ve never traded to 30.


Instead, initial targets at 1.0590’s were perfect. EUR/USD 1.0630’s comes into trade view for reversals only. What was missed? Nothing.


The target at 1.0598 was known not yesterday on Fed Day but Tuesday afternoon around 4:00.


Just for laughs, here’s the weekly trade: Long 1.0486 and 1.0480 to target 1.0644. Lows achieved 1.0491 and highs at 1.0630 or 139 pips. Weekly trades are now working on reversals and running more profits.


So why not take the day trade to 1.0644 to match the weekly. Day trades and weekly trades are 2 completely different animals. Each contain specific entries and targets separate from each other. Levels and price paths to targets are light years apart from each other.


Now that the Fed is over, normal day trades resume to normality.


USD/JPY before the Fed Release sat at 128.00’s and traveled to 130.00’s. USD/CAD was located at 1.2700’s and traded to 1.2800’s. USD/JPY was the winning trade while USD/CAD did nothing. USD/CAD can[]t move until USD/JPY makes a larger move.


EUR/USD 1.0660 remains the big break against the next hurdle at 1.0904. Big tops today are located at 1.0629, 1.0656 and 1.0661.


EUR/USD requires a bigger move otherwise averages for next week will drop and EUR/USD will trade to 1.0550’s and lower easily.


M2 Money Supply


Powell’s next big break is located at 20427.95. Powell has a long way to go to reduce the balance sheet. The first 30 billion reduction will take us to 21453 then 21423.

Brian Twomey

Inflation Rates and EUR/USD 24 Hour Trades

Inflation rates is a factor of a price paid by consumers for goods. Inflation is a price and the Inflation word alone is synonymous to price. No difference. Consumer goods over the past 12 months skyrocketed to prices.


The main categories to price rises are Energy, food and dairy. The main problem is Oil prices skyrocketed and the higher oil price translated into all related categories of consumer goods. Not only does a higher oil price result in higher delivery cost for all consumer items but Oil is used in the manufacturing process for many consumer goods such as clothes and apparel.


The RBNZ factors Oil as 0.4 to their CPI index. How much for the BLS is unknown exactly but 0.4 is nor far away as all central banks factor the exact same way for all economics so not one central bank shows an advantage over another. Done by design, collusion, agreement.


While a deeply close relationship exists to the CPI Index, Inflation and Fed Funds rates, an equally close relationship exists to the M2 money supply and velocities. Analyzed from particular years in the 1970’s, 1980’s, 1990’s and all the way to 2021, the system together operates perfectly.


Inflation at 7 and 8% is an economy problem but not at all related to any monetary situation related to Money supplies, velocities, the CPI Index or Fed Funds.
Inflation’s economy problem at 8.5% is again the direct result of higher commodity prices and oil is the main dilemma. The answer to lower Inflation rates is do nothing as market prices will peak and drop and naturally drop Inflation rates over time. Powell requires a drop of 6 points to the 2% target.


But here comes Powell and the Fed to raise interest rates as interest rates is the only tool controlled by the fed in the CPI, money Supply and velocity relationship. And all for 6 Inflation points.


Since 1992, Fed Funds Vs Inflation correlates to +52%. This means raise or lower Inflation then Fed Funds must follow. The relationship is historic since 1972 and free float markets. Powell will raise interest rates to lower an Inflation rate at 52% correlation.


Shorter term, Inflation and Fed Funds rates correlates much higher to 80 and 90%.
Inflation Vs GDP Correlates +0.007. Under correct positioning, GDP rises forces Inflation lower.


Fed Funds Vs GDP correlates +37%. Raise or lower GDP then Fed Funds follows.


After Powell raises, how fast will we see lower consumer good prices. Long long time. Good chance Powell cause much more damage.


Trades.


Many multiple longs and shorts are available over 24 hours.


Best trades: EUR/USD, GBP/USD, AUD/USD, GBP/JPY.


GBP/USD and AUD/USD are middle currencies and trade together.
EUR/JPY is always a perfect 24 hour trade because its relationship to daily interest rate trades is near perfect.


USD/JPY and USD/CAD contain range problems. NZD/USD isn’t worth a click.


EUR/USD


The main target points are 1.0578 and 1.0598 then 1.0463 and 1.0469.

Brian Twomey

Inflation Rates

I spent hours and hours to understand the relationship to the CPI Index, Inflation and Fed Funds rates. I wasn’t thrilled with my findings as I saw a cozy and deeply close relationship so I ran M2 money supplies and money velocities. No changes, A deep relationship.

The key is Inflation is a price paid for consumer goods. Consumer goods skyrocketed therefore Inflation rates must follow. Inflation rates is not a monetary phenomenon nor derived as result to central banks, money, interest rates or the CPI Index. Pretty simple.

The problem is located in the economy somewhere as prices just skyrocketed everywhere. Why and where did this derive to see 8.5 Inflation is the real question.

Here’s the latest 12 month Prices paid index.

All items 8.5%

Food 8.8%

Food at home 10.0%

Cereals and bakery products 9.4%

Meats, poultry, fish, and eggs 13.7%

Dairy and related products 7.0%

Fruits and vegetables 8.5%

Nonalcoholic beverages and beverage materials 8.0%

Other food at home 10.3%

Food away from home 6.9%

Full service meals and snacks 8.0%

Limited service meals and snacks 7.2%

Energy 32.0%

Energy commodities 48.3%

Fuel oil 70.1%

Gasoline (all types) 48.0%

Energy services 13.5%

Electricity 11.1%

Natural gas (piped) 21.6%

All items less food and energy 6.5%

Commodities less food and energy commodities 11.7%

Apparel 6.8%

New vehicles 12.5%

Used cars and trucks 35.3%

Medical care commodities 2.7%

Alcoholic beverages 3.7%

Tobacco and smoking products 6.9%

Services less energy services 4.7%

Shelter 5.0%

Rent of primary residence 4.4%

Owners’ equivalent rent of residences 4.5%

Medical care services 2.9%

Physicians’ services 0.7%

Hospital services 3.3%

Transportation services 7.7%

Motor vehicle maintenance and repair 4.9%

Motor vehicle insurance 4.2%

Airline fare 23.6%

Brian Twomey

Market Prices off Kilter, AUD/USD, ISM

Currency markets over the past few weeks are off by about 100 pips. The vital word is off and this concept is seen predominately in weekly trades. Off is defined as non normal prices to weekly trades. Off maybe seen in many combinations.


An entry and target might be off by 50 pips each. An entry maybe off by 100 pips. A target may trade higher by 100 pips. An entry maybe off by 50 and target trades 50 pips higher. Recall 2 of 18 weekly USD/JPY trade entries were off by 80 and 90 pips but targets achieved destinations.


The steering mechanism as the moving average to the entry and target propulsion overall is off. To take the 100 pips out of the weekly trade setup, what’s off is the entry side but never the target.

For the vast majority of weeks over many years, currency prices trade normal and correctly which means weekly trades operate and function exactly as expected to entries and targets.


In rare instances, markets decide to go off kilter and off kilter is usually defined within this 100 pip space. The off kilter to prices are fleeting instances and never last.

Normally over years, off kilter price durations last as long as 6 weeks to borrow from the GBP/USD 1.2900 to 1.1900 example. Markets and weekly trades then resume normal price functions for at least the next year.


The weekly trade 100 pips was a transfer to daily trades as daily 100 pip days became the norm over last weeks. Markets return to normal again when 100 pip days subsides and the 100 pips transfers back to the normal weekly trade. The number of allowable trade pips are fixed and never expand.


The main key to the 100 pips and weekly trade scenario off kilter is recognition as awareness requires a fast trade adjustment to entries and targets. Miss the acknowledgment to a price problem then losses maybe realized.


AUD/USD served well this week for price adjustment. AUD/USD began the week deeply oversold and contained longs as the only trade.


AUD/USD main break line for higher prices is located at 0.7267. The weekly high point is 0.7155.


The first part of the weekly trade was long to target 0.7094. AUD/USD traded to 0.7099. RBA took AUD above 0.7155 to 0.7179. A break below 0.7155 was required for the short trade to target again 0.7058. AUD traded lows today at 0.7084.


AUD/USD 0.7155 is also seen as today’s day trade top at 0.7151 and 0.7146 and the 24 hour trade top at 0.7094.


ISM Manufacturing.


The average to beat for higher ISM was 57.85. Expected was 55.4 and ISM traded to its expectation. The real story is the distance lower traveled to achieve 55. The average at 57.85 will now adjust lower to reflect the next ISM release. Due to the massive distance traveled and lower averages, the 50 line to declare recession becomes more pronounced today.

Brian Twomey

EUR/USD Vs USD/JPY and EUR Averages

Vital averages from short to long term. Averages should cover the next 12 months of trading at least.


EUR/USD 1.0660, 1.0731, 1.0991, 1.1006, 1.1406, 1.1512, 1.1541, 1.1847, 1.2405.
USD/JPY 130.12, 129.08, 126.42, 122.73, 115.07


The cross over point for EUR/USD Vs USD/JPY at 115.00’s is not only a complete trend change and reversal but its the distance measured to EUR/USD lows and USD/JPY highs. USD/JPY traveled 1600 pips higher and EUR/USD 1100 pips lower.

EUR/JPY 117.08, 124.62, 127.19, 132.02, 136.98, 137.13.


EUR/CAD 1.3611, 1.3648, 1.4527, 1.4788, 1.4808, 1.4979, 1.5836.


EUR/NZD 1.4842, 1.5974, 1.6217, 1.6426, 1.6949, 1.7295, 1.8779.


EUR/AUD 1.4687, 1.4891, 1.5042, 1.5151, 1.5866, 1.6360, 1.7058.

Brian Twomey

CPI Index V Inflation and FED Funds Rates

The neutral rate of interest in 2016 was 1.64, 1.07 in 2017 and negative 4.91 in December 2021. With the Inflation rise to 8%, the neutral rate stands at -5.53. Inflation historically and economically must share an opposite correlation to Fed Funds.
The Fed funds rate since about 1920’s inception achieved its highest rate at 19.10 in 1981 under Volker as Fed chairman. This places the Fed Funds average at around 9.7 and the neutral rate at 1.2 from 8.5.


Since May 2007, Fed Funds achieved highs at 5.25 and the 2007 neutral rate at 3.15 to 0.95 as Inflation rates tracked higher from 2.1 to 4.3. The Inflation rate held an average at 3.2 while Fed Funds averaged 4.23 and 206.21 for the CPI Index. Inflation rates tracked higher, Fed Funds lower and higher for the CPI index.


The CPI index contained a deviation of almost 4 points, just above 1 point for Inflation and under 1 point for the Fed Funds rate.


By 2008, the CPI index rose from 211 to 219, Inflation rates dropped from 4.3 to 0.1 and Fed Funds radically dropped from 4.27 to 0.09. The neutral rate remained deeply negative. The Fed Funds to Inflation relationship held a 1 and 2 point deviation against a 4 point deviation to the CPI index.


2021 CPI Index rose from 261 to 278, Inflation 1.4 to 7.0 and a deviated relationship from 8 to almost 3 points for Inflation. Fed Funds from 0.02 was erased from the CPI Index to Inflation rate equation.


January 1981 Inflation achieved 11%. As the CPI index January 1981 achieved 87.0 lows and rose to 94.0 by December, the Inflation rate subsided to 8.9%. Fed Funds dropped from 22% to 11%.


CPI maintained a 4 point deviation, Inflation 1.5 and a whopping 5 points to Fed Funds.


The Inflation rate to the CPI Index is a solid relationship historically and lives prominently to this very day by Inflation rate divide CPI. The CPI Index rose from 2019 to 2022 from 251 to 287 historic highs in 2022 since the 1913 inception while Inflation rates tracked from 1.2 lows to to now 8.5%.


The driving force is the CPI Index as the determination to Inflation rates. While Fed funds shares a 1 and 2 point relationship to Inflation rates and a 2 to 4 point relationship to the CPI Index, Fed Funds appears absent to the support in the CPI vs Inflation rate equation. Current interest and neutral are so low, Fed Funds factors to no role played in the CPI Vs Inflation rate scenario since at least 2019.

Powell’s view to Fed Funds is to beat averages at 1.23 and next at 2.65 then resolve a negative neutral rate at 5.85.

Brian Twomey