FX Weekly: Powell, Inflation, EUR/USD, GBP, DXY

DXY is held this week by 103.63, 103.53, 103.36 and 103.22 and targets higher to 104.80’s and 104.90’s. The overall range is located between 103.63 and 103.53 to 106.98 then begins averages every 100 pips to 114.00’s. Provided 103.53 and 103.63 holds, next week targets low 105.00’s and top at 105.21. DXY break at 102.74 opens the flood gates lower to 100.00’s and 99.00’s.

The question to a higher DXY to eventually challenge 106.00’s is found in Powell’s words to continually raise interest rates. A currency price contains 100% correlations to its interest rates and its impossible not to correlate 100% as interest rates is the primary driver to price movements. DXY traded 97.00’s March 22 when Powell first raised by 25 points then traveled to 114.00’s on successive rate hikes.

Economically, Powell’s 4 1/2 point raises over the past year was obviously a failure. And as forecasted. Powell’s words to the 6 month lag to interest rate rise effects is also a failure. Inflation is a price problem found in the GDP economy rather than an interest rate focus and solution. The data supports the claim.

From 1000’s of data points to investigate Powell. Since 1992, Fed Funds Vs Inflation correlates to +52%. Shorter term, Inflation and Fed Funds rates correlates much higher to 80% and 90%. Powell’s raises adjusted perfectly to higher inflation and a continuation to the overall price dilemma.

Inflation Vs GDP Correlates +0.007. Under correct positioning, GDP rises forces Inflation lower. Powell’s raises offered a lower GDP, higher prices and an over priced DXY. GDP should be trading every quarter at 4% and 6% if Powell was serious to cure economic stagnation.

Silvio Gesell

Silvio Gesell informed in 1906 and the Natural Economic Order: Gesell says money isn’t the key to open markets but the bolt that locks markets shut because money incorrectly priced based on interest enters and exits markets at the wrong time.

Gesell viewed interest rates as unnatural, forces hoarding and concentrations of wealth, as collusion by moneylenders and the state and distorts the medium of exchange because only moneylenders possess the power of exchange to enter and exit markets at will based on an oversupply of money. Its a market distortion.

Overall, Powell hails from the Bernanke and Big Sis Yellen wayward economic path. With Democratic Party appointments to the Fed Board and votes to more raises, the concern isn’t recession but a market crash.

The Week

USD/JPY is caught between big break at 133.99 to 134.66. A higher DXY takes USD/JPY easily to low 136.00’s. For the week, we’re short for the 133.99 break to target 132.00’s. USD/JPY’s overall range is located from 124.93 to 133.23. The first target lower is 133.23. Higher for USD/JPY offers free money for shorts.

USD/JPY is trades far more daily and weekly pips than JPY cross pairs counterparts to inform JPY cross pairs tops reached the pinnacle.

GBP/JPY’s top in December at 163.00’s is now 162.07 and a 100 pip drop. GBP/JPY ‘s first target at 159.13 is the starting point to further targets at 158.57 and 157.16.

EUR/JPY remains on the range problem list to include USD/CAD and GBP/AUD. GBP/JPY is the best JPY cross pair trade followed by a distant 2nd to CAD/JPY.

EUR/USD sits oversold and firmly above 1.0595. EUR/USD bottom on a break is located at many points at 1.0400’s. For the week, we’re long to target near 1.0800’s and a long drop strategy.

NZD/USD as the bottom currency pair also sits oversold and targets 0.6258 then comes the resolution at 0.6280 for a higher NZD/USD. Longer term, NZD/USD targets 0.6432, 0.6494, 0.6513 and 0.6599.
Massive oversold NZD/USD complies to higher for NZD/USD. Watch NZD/CAD 0.8411 for longs and shorts throughout the week.

AUD/USD trades 0.6874 to 0.7009 and hardly any changes over last weeks. Both NZD/USD and AUD/USD lack range ability. Despite 0.7009 top for AUD/USD, overbought begins at 0.6959.

NZD/USD and AUD/USD longs are assisted by severely overbought EUR/AUD and EUR/NZD. Recall past weeks for EUR/AUD tops at 1.5600 and 1.5700’s and EUR/NZD at 1.7100’s and 1.7200’s. Not much room exists for topside EUR/AUD and EUR/NZD.

EUR/NZD at severely overbought 1.7100’s and 1.7200’s complies to overbought GBP/NZD at 1.9200’s. The divergence over past weeks between EUR/NZD and GBP/NZD subsided as both now achieved uniformity. EUR/NZD remains the better trade to GBP/NZD.

Oversold GBP/AUD remains a problem to EUR/AUD into the 4th week. Long strategy from 17300’s holds again all week.

The viable trade is long GBP/USD for the break at 1.2046 to target 1.2100’s easily. Massive oversold GBP/CHF lends assistance to long only strategies all week.

Brian Twomey


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