Parity Curves: ECB, FED, RBA, BOC, RBNZ, BOJ

The purpose for today is parity curves and one day the intention to write this most fascinating and definitive way to trade perfectly by interest rates. Most importantly is by very simple math to how and why interest rate trades work so perfectly for day trades and longer term views. My perspective is this is original work and never revealed or written in the literature.

To construct the required system to trade takes minutes and once set then the only prerequisite is enter the proper number.. All are trading by moving averages yet not from a yield curve but interest rates and interest rate curves.

No difference exists to interest rates for day trades from the Fed, RBA, RBNZ, BOC, ECB. All offer the exact same trades and all are perfect. Missing is the BOE and Sonia rates but no difference exists to GBP/USD from central bank to central bank as all report the same exact trades. Sonia is vital only to traders of Sonia. The BOE redesigned their website and I can’t find daily Sonia rates but I also didn’t search very hard nor did I write the BOE.

The elimination of Libor offered a massive wholesale change to interest rates as all the central banks melded all interest rates to reveal the exact same interest rates to trades. The numbers are different but the trade remains the same. A time once existed when each nation’s interest rates required entry as each currency was massively different to daily ranges. Today, its all the same.

The BOJ is the anomaly as negative interest rates must convert to positive rates by 1+ interest rate. The BOJ only offers 3 daily numbers and not enough information for day trades except to offer 1 support point below and 1 resistance point above. But not enough for a full day trade’s price path. Required is enter the 3 daily numbers along with Tibor and Japanese Yield rates.

Yet the BOJ is not required for USD/JPY trades as any central bank will offer the same daily trade by entering the proper number.

The BOJ and ECB are the only central banks to offer longer term range views. No difference exists to longer term views. USD/JPY for example offers from the BOJ as 122.46, 127.81, 129.42, 133.40 and extremes at 140.88. The ECB reveals 129.48 and 133.34. The BOJ and 3 numbers are far better at long term views than the ECB.

EUR/USD from the BOJ factors as 1.0434, 1.0557, 1.0870, 1.1005. From the ECB, EUR/USD factors as 1.0550 and 1.0865.

All roads lead back to USD/JPY 131.40 and EUR/USD 1.0707. AUD/USD factors as 0.6583 to 0.6779, NZD/USD 0.6297 to 0.6115. GBP/USD 1.2430 to 1.2070.

Daily interest rates must change day to day to allow accuracy.

Today’s EUR/USD and USD/JPY and the proper set up.

EUR/USD

Long Short Line 1.0707

Most Important 1.0680 and 1.0699 Vs 1.0713, 1.0720, 1.0727, 1.0734, 1.0747, 1.0754, 1.0761

Bottom 1.0653 achieves by 1.0667 and 1.0680

Upper Target 1.0761

Continuation Fail 1.0734

Every number today is perfectly accounted.

USD/JPY

USD/JPY

Long Short Line 131.40

Most Important 131.07 and 131.30 Vs 131.48, 131.56, 131.64, 131.73, 131.89, 131.97, 132.06

Bottom 130.74 achieves by 130.90 and 131.07

Upper Target 132.06

Continuation Fail 131.73

I realize all are not supposed to understand this stuff nor are any interested in doing work apart from a chart.

Brian Twomey

EUR/JPY Long Term Targets

Tops for EUR/JPY are found at 141.35 and a big line break at 142.44. EUR/JPY is held below by 136.01, 132.35 then 130.00’s.

Targets from 141.35, next at 137.63, 135.68 and 134.77. To achieve 134.77, the average at 136.01 must break.

Recall GBP/JPY at 156.00’s big line break, CAD/JPY 94.70 and USD/JPY 125.00’s. If GBP/JPY breaks 156.00’s then JPY cross pairs travel much lower.

The driving force is DXY above the 50 year average at 99.00’s. DXY cannot hold above 50 year averages. This concept to markets just doesn’t exist except on rare trade days.

EUR/JPY trades at high extremes. Check this out.

Noise Ratio 207.6146 Vs the Coefficient of Variation 0.4817. A higher EUR/JPY sends the extreme noise ratio higher and lowers the variation. EUR/JPY doesn’t have a choice except to trade lower and to normalize at 137.00’s to 136.00’s.

Taken further, the 5, 10 and 14 year averages are overbought from 129.75, 128.79 and 125.00.

Brian Twomey

FX Weekly: ECB, EUR, DXY, JPY, GBP, AUD

Most vital to currency markets this week is deeply oversold USD/JPY and JPY cross pairs. Then the question to which JPY cross pairs for longs. GBP/JPY as JPY cross pair leader assumes leadership roles to correlate to USD/JPY at +96% and – 93% to GBP/USD. CAD/JPY is next as correlations to USD/JPY run +93% and +77% to AUD/JPY.

EUR/JPY is the problem currency this week as correlations run a solid +82% to EUR/USD and +23% to USD/JPY. EUR/JPY will trade this week as a distant follower to GBP/JPY.

EUR/USD vs EUR/AUD correlations strengthened this week from +69% to +75%. The EUR/USD Vs EUR/AUD relationship at 75% is at maximum top at +78% and +87%. The correlation will begin a slow breakdown as seen from tops and ranges.

EUR/USD traded 200 pips to EUR/AUD at 500 in a strong 2 Vs 5 relationship. Last week, EUR/USD traded 244 pips Vs EUR/AUD at 356. AUD/USD and AUD/EUR suffered as correlations now run -49% to EUR/AUD. AUD/USD traded 144 pips last week and AUD/EUR at 141 pips.

AUD/USD big break this week is located at 0.6732 to target easily 0.6750 then 0.6769 and on the way to 0.6800’s. Correlations damaged AUD/USD’s ability to break 0.6732 as EUR/USD trades above 1.0562, GBP/USD above 1.2015 and NZD/USD above 0.6209. AUD/USD is the last currency yet to break.

The ECB raised the Refinance rate or the rate banks pay to borrow from the ECB. Here is where the opposite effects are seen from the FED and ECB. The ECB raised at a time when the FED is either on hold, pause or a top is in place to additional Fed raises. Recall the December post to Fed Funds from 26 to 31 year monthly averages: The overall range is located from 1.69 to 6.95 and 6.98. The 70% Confidence interval is located at 5.65 and 7.85 at the 90% mark.

Despite Fed and ECB raises, the EUR/USD hasn’t adjusted to daily movements nor will it change in the future. The EUR/USD and all currencies are situated as permanent to daily moves. The ECB’s Euribor rate moved 11 points or 0.11 from the ECB’s raise and the best performer among Euribor rates Euribor 0.11 isn’t moving the EUR/USD anywhere nor will a raise to infinity and beyond as central banks garnered full control to interest rate markets.

The Week

DXY Vs EUR/USD

DXY achieved oversold Wednesday at 103.44 and traveled 166 pips to overbought at 105.10 while overbought EUR/USD at 1.0759 traded 244 pips lower to 1.0515. EUR/USD lows traded perfectly to DXY tops as both are the same exact currency only arranged as perfect opposites. Both are not only currency market leaders but dictators to all market prices to stock indices, Gold, Metals, Oil, bonds and yields. DXY and EUR/USD run with a degree of separation from 200 to 400 ish pips.

DXY this week must break 104.00’s to trade to overbought 105.00’s while EUR/USD must trade below 1.0562 to trade to oversold bottoms at 1.0400’s.

The new ECB interest rate curve informs EUR/USD ranges this week from 1.0546 to 1.0783 while the Fed advises DXY trades from 1.0500 to 1.0272. EUR/USD opens Sunday from 1.0669 to 1.0656 or 13 pips Vs DXY 103.92 to 103.79 or the same 13 pips.

GBP/USD begins the week massive overbought and matches overbought to cross pairs GBP/CHF, GBP/CAD and GBP/AUD. GBP/NZD opens the week fairly oversold against a top at low 1.9500’s.

GBP/USD long term targets are located at 1.2166, 1.2287, 1.2347 and 1.2408.

Deeply oversold GBP/JPY bottoms at 156.51 and tops are located at 162.01 and 162.12. Targets are located at high 161.00’s.

USD/JPY tops are located at 133.18 then the next break line at 134.91. USD/JPY averages are not only dropping but longs this week due to oversold represent a slight correction. Next target below are found at 129.23, 127.25 and 126.28. As DXY trades lower, USD/JPY and JPY cross pairs will follow.

Overbought USD/CAD matches to deeply oversold CAD/JPY and fairly neutral to CAD/CHF.

WTI ranges from 62.00’s to 82.00’s over the next trading weeks. WTI broke vital 76.00’s and 77.00’s to trade to 65.00’s. Previous 76.00’s and 77.00’s are today’s 71.00’s and 73.00 and required to break higher to target 80.00’s easily.

To the 2 year yield, nothing special happening here. Low 4.00’s must break to target 5.21. As dictators to market prices, both DXY and EUR/USD informs the 2 year yield will range from 4.88, 4.10, 3.99, 3.60 2.77, and 2.70. The 2 year yield trades 2 points above DXY and EUR/USD.

EM

Trade of the week is clearly short USD/BRL from severely overbought 5.2799 to target 5.2459. EM as EUR and USD trade fairly neutral and not much happening.

Brian Twomey

Averages: EUR/USD, EUR/JPY, GBP/USD, GBP/JPY

Correct averages from Fix prices. Averages is the gateway to many important math formulas to trade profitably such as Regression, Z and T scores, Correlation, exchange rate crossovers, Kurtosis. Averages allow for proper placement of stops and hedges for those that use such methods. But just as easy to view price in relation to averages to determine overbought and oversold levels.

I’ve been checking on JPY correlations this weekend because USD/JPY and JPY cross pairs are deeply oversold and I wanted to know if USD/JPY was correlated to JPY cross pairs for long trades.

Very simple to enter each of the main 7 averages from the 5 day to 253 to obtain a correlation. The correlation is correct provided the proper averages are used. The math professor at vassarstats Dot net not only has the best calculators but offers great tutorials for interested.

EUR/USD

5 day =1.0650

10 = 1.0622

20 – 1.0623

50 = 1.0696

100 = 1.0689

200 = 1.0350

253 = 1.0308.

EUR/JPY

5 day = 141.25

10 = 142.74,

20 = 143.52

50 = 142.65

100 = 142.11

200 = 142.81

253 = 141.76

GBP/USD

5 day = 1.2127

10 = 1.2038

20 = 1.2029

50 = 1.2095

100 = 1.2135

200 = 1.1821

253 = 1.1859

GBP/JPY

5 day = 160.86

10 = 161.76

20 = 162.54

50 = 161.31

100 = 161.25′

200 = 163.15

253 = 163.10

Brian Twomey

USD/JPY Averages: 5 day to 253

5 day = 132.6350

10 = 134.3903

20 =135.1324

50 = 133.3938

100 = 132.9733

200 = 138.2023

253 = 137.6981

See the ,top at 137.00’s and shorts. See oversold at 131.00’s. The imperative is to use correct averages derived from Fix prices rather than chart averages because chart averages are miles off and wrong. Would anyone honestly take USD/JPY long from high 136.00’s to target 137.00’s. The trade hit target but what a gamble to roll the dice in such a way and to gamble with trader subscription money. But this is common practice today as chart averages lead traders down a losing road.

Brian Twomey

FX Next Week: Targets, EUR, DXY, GBP, JPY, AUD

On a known long term target written in mathematical stone, entry is anywhere as it doesn’t matter. The trade options are take the trades at the highs until target completion or trade down to targets in multiple trades. Trade from the highs allows traders to enter, set the platform target and walk away to enjoy life as intended.

For interested, btwomey.com has gazillions of long term target trades over many years to include EM’s.
CAD/JPY 95.00’s target complete from 100.00’s, +500 ish pips.

USD/CAD 1.3600’s target complete from 1.3800’s, +200 pips.

EUR/AUD 1.5800 target complete from 1.6200’s, +400 pips

EUR/NZD 1.7000’s and 1.6900’s target complete, highs 1.7300’s, +300 ish pips.

GBP/AUD Target 1.7900’s, not complete, lows 1.8111 from 1.8300’s, running +200 pips

GBP/NZD 1.9300’s target, not complete, lows 1.9400’s from 1.9600, running +200 pips

USD/JPY target 122.00 on break 125.00’s, lows 132.20, highs 137.00’s.

EUR/JPY forget the target

SPX this week as written, lows 3810, lows yesterday 3808.

Next Week

DXY traded to 103.00 lows and remained at the oversold bottoms. Next week high breaks are 104.00’s to target 105.00’s. DXY is building averages above the current price to inform DXY is heading lower. The break at 102.90’s ensures DXY trades back to 100.00’s.

EUR/USD broke the lows this week at 1.0606 and is heading to 1.0700’s again for next week. Long term target remains 1.1042 on a break of the driver averages at 1.0900’s.

GBP/USD must trade higher to minimum 1.2157 and target at 1.2700’s on a break at 1.2500’s. Oversold GBP/USD contains a long way to travel higher.

EUR/AUD final target is located at 1.5771 and 1.5705. Many averages support EUR/AUD at 1.5600’s starting at 1.5689, 1.5633 and 1.5631. The 1.5600 averages must break to target 1.5400’s. Any price above 1.5823 is good to go for shorts.

GBP/JPY tops and big breaks are located at 162.26 and 162.39. GBP/JPY supports at 156.00’s remain.
JPY cross pairs begin next week deeply oversold as GBP/JPY, EUR/JPY, AUD/JPY and CAD/JPY. Best trades are GBP/JPY, EUR/JPY and AUD/JPY.

EUR/JPY tops are located at 141.49 and 142.90 to target 143.00’s and 144.00’s again.

USD/JPY is in the exact same position from the BOJ 700 pip drop months ago. USD/JPY’s top is located at 133.39 and a massive line at 135.33. Bottom at 125.00’s remains the same as reported many months ago. We’re looking at a Friday close at 133.42 for shorts next week.

AUD/USD Long term target remain 0.7083 as the first hurdle must clear above at 0.6736 then 0.6831, 0.6922, and 0.6952.

GBP/AUD traded 200 pips to EUR/AUD at 400. GBP/AUD target at 1.7900’s dead stopped at 1.8100’s. Speculation is an average line must exist at 1.8000’s and 1.7900’s.

Verified as well is EUR/AUD is the better trade than GBP/AUD.

EUR/NZD traded 500 pips this week to GBP/NZD 200. EUR/NZD’s big line for longs and shorts for next week is found at 1.7032. GBP/NZD trades deeply overbought at 1.9500;s and mid point from this week’s 1.9600 to 1.9400’s. GBP/NZD turned into a horrible currency pair.

EUR/CAD and GBP/CAD shorts for next week. GBP/CAD trades currently 1.6596 and opened last week at 1.6627. Both EUR/CAD and GBP/CAD are highly neutral currency pairs and not intended to travel far.

On the CHF side, AUD/CHF and NZD/CHF trades deeply oversold and fairly neutral to EUR/CHF, GBP/CHF and CAD/CHF. Best trades next week are AUD/CHF and NZD/CHF.

Brian Twomey Contact brian@btwomey.com

Targets complete

Many long term targets were posted since December and this list probably doesn’t cover all trades but here’s a few from last month or so posts.

GBP/JPY 159.21 and 159.19 target . Lows today 159.19, highs 165.00’s. +600 ish pips.

CAD/JPY 95.00’s target complete from 100.00’s, +500 ish pips.

USD/CAD 1.3600’s target complete from 1.3800’s, +200 pips.

EUR/AUD 1.5800 target complete from 1.6200’s, +400 pips

EUR/NZD 1.7000’s and 1.6900’s target complete, highs 1.7300’s, +300 ish pips.

GBP/AUD Target 1.7900’s, not complete, lows 1.8111 from 1.8300’s, running +200 pips

GBP/NZD 1.9300’s target, not complete, lows 1.9400’s from 1.9600, running +200 pips

USD/JPY target 122.00 on break 125.00’s, lows 132.20, highs 137.00’s.

EUR/JPY forget the target

EUR/PLN from March 9 post. Target 1.7014, highs 1.7037, from 7.67 and 7.6800’s

SPX this week as written, lows 3810, lows yesterday 3808.

Don’t know why the trading crowds don’t or won’t trade EM currencies as they are a great source of profits. Took 2 EUR/PLN trades this week, MXN/JPY. See this site for many, many EM trades.

All know how the story goes here and without changes over many years.

Brian Twomey

FX Weekly: Correlations, EUR, DXY, GBP, JPY, CAD

The primary currency market story over the past 2 weeks is the significant rise to wide range currencies and to travel to current severely overbought status. Wide range currencies switched correlational allegiances from the second side of the currency pair back to the respected cross pair in the universe. The correlation shift allowed wide range currency pairs to trade to exorbitant overbought levels.

EUR/AUD for example now correlates to EUR/USD at a healthy + 69% and -43% to AUD/USD. As EUR/USD traded 200 pips higher last week, EUR/AUD traded 500 pips higher. For every 2 pips of EUR/USD, EUR/AUD trades 5.

AUD/USD is not only on the lost side of the EUR/AUD arrangement but was continually sold as EUR/USD and EUR/AUD reached higher levels. EUR/AUD is not only severely overbought but AUD/USD and AUD/EUR sit this week and past weeks at deeply oversold levels.

A Correlation change requires a break of an average and a break of an average forces a change back. EUR/USD for example trades safely above 1.0555 while AUD/USD trades below vital 0.6752 and EUR/AUD above 1.5636.

The dominant EUR/USD V EUR/AUD correlation at 59% translates to a double trade as EUR/USD and EUR/AUD. EUR/USD as a correlation to EUR/AUD is correct as anchor pair EUR/USD is always intended to correlate to all cross pairs within its universe.

EUR/NZD correlates to EUR/USD at +59% and -11% to NZD/USD. Both AUD/USD and NZD/USD traded to bottoms and in decreasing ranges as EUR/USD and EUR/NZD traveled higher.

EUR/CAD correlates to EUR/USD at +93% but USD/CAD also correlates positively at +80%. USD/CAD trades safely above 1.3547, EUR/USD above 1.0555 and EUR/CAD above 1.4298. USD/CAD is off kilter.

GBP/USD Vs GBP/AUD, GBP/NZD, GBP/CAD, GBP/JPY

GBP/AUD correlates to GBP/USD at +19% and -60% to AUD/USD. While GBP/AUD lacks a correlation to an anchor pair, GBP/AUD followed its currency market function by trading alongside leader currency as EUR/AUD. Both GBP/AUD and EUR/AUD correlate at +95%.

GBP/NZD correlates to GBP/USD at -40% and -69% to NZD/USD. GBP/NZD correlates to EUR/NZD at +76%.

GBP/CAD correlates to GBP/USD at +78% and USD/CAD at +74%. GBP/JPY correlates to GBP/USD at -82%.

GBP/USD classifies as a problem currency due to lack of correlation agreement to its cross pairs. Generally, GBP/USD is deficient to upward movements without cross pair assistance.

GBP/NZD Vs EUR/NZD and EUR/AUD Vs GBP/AUD.

As written to long term targets, EUR/NZD is the dominant trade signal currency to GBP/NZD and EUR/AUD drives trade signals to GBP/AUD. GBP/AUD follows EUR/AUD while GBP/NZD follows EUR/NZD. Verified not only by averages but Correlations.

The Week

EUR/USD and EUR cross pairs is clearly the preferred trade category for the next few weeks as EUR/USD contains solid correlations to its cross pairs.

EUR/USD trades from 1.0555 to 1.0727 and bottom at 1.0400’s while DXY travels this week from oversold 103.00’s to overbought 106.00’s. DXY at 107.00’s represents the 50% correction zone from the 114.79 drop to 100.00’s while EUR/USD long term sits at solid bottoms at 1.0200’s and 1.0100’s from the 1.0800 drop to 0.9500’s and from the rise to 1.1032 from 0.9500’s. DXY serves as market leader to next big currency market moves.

USD/CAD rose to 1.3800’s last week and held due to the deep drop to overbought CAD/JPY and CAD/CHF. Sufficient distance and a more solid relationship exists to oversold CAD/JPY and CAD/CHF to overbought USD/CAD. Plus USD/CAD Correlates -59% to CAD/JPY.

JPY cross pairs trade deeply oversold to CAD/JPY, AUD/JPY and NZD/JPY and fairly neutral to EUR/JPY and GBP/JPY. GBP/JPY 162.59 decides longs and shorts while EUR/JPY 143.20 determines EUR/JPY’s direction.

USD/JPY must break 135.76 to target again 136.00’s.

GBP/USD at 1.2000’s and USD/CAD at 1.3800’s spreads 1800 pips and miles to wide. Spreads should fall back to easily 1000 pips. USD/CAD targets low 1.3600 easily this week.

EUR/AUD targets easily 1.5800’s, GBP/AUD 1.7900’s, EUR/NZD 1.7000’s, GBP/NZD 1.9300’s.

Wide range currencies are subject to Gap openings for Sunday.

EUR/USD will open Sunday from 1.0630 – 1.0645, GBP/USD 1.2037 to 2.2020, EUR/AUD 1.6165 to 1.6142. EUR/USD open at 15 pips is baked inside the price

EUR/USD longs anywhere from 1.0606 and below and back to 1.0700’s.

EUR in the EM category is overbought Vs EUR/SEK, EUR/NOK, EUR/KRW, and oversold as EUR/PLN, EUR/THB and EUR/MYR. Despite EUR/NOK and EUR/SEK overbought, the USD side is also overbought as USD/NOK and USD/SEK.

EUR/GBP watch 0.8808. Severely oversold GBP/CHF provides the only assistance to GBP/USD to prevent a massive drop. Same for deeply oversold EUR/CHF to hold EUR/USD from a deeper fall.

SPX next low is located at 1.3810. Last week’s lows at 1.3904 traded to 1.3847 and extra points. Since January’s SPX post to long term, SPX traded 3700’s to 4100 or 400 points and 200 points per month. The 5 year average at 3400’s is close. Higher EUR/USD assists to higher SPX.

Brian Twomey

FX Next Week: DXY, EUR, GBP, AUD, EUR/PLN

From last week, DXY becomes overbought in the middle 105.00’s and oversold at 103.90’s. DXY traded 104.12 lows and traveled to 105.88 highs into massively overbought territory. DXY remains severely overbought with limited upside potential and every ability to trade 103.00’s.

USD/JPY’s big line break this week at 135.45 traded to 135.35 then 137.90 highs. USD/JPY was deeply overbought at 137.00’s but allowed to travel a few pips higher due to DXY overbought to overbought status. A gamble trade to 137.00’s is the same as saying overbought USD/CAD must travel to more overbought at 1.3800’s to accommodate USD/JPY at 137.00’s. The easier and more profitable trade was long USD/JPY from vital 135.45 to just under 137.00’s then short at the highs.

USD/JPY began this week: 136.06, 136.59, 137.64. USD/JPY begins next week: 136.19, 136.69, 137.68. USD/JPY’s averages changed but USD/JPY’s position remains constant to no change status. Big break for lower is now 135.69.

EUR/USD ia trading around vital 1.0559 Vs next level below at 1.0519. Limited upside exists to DXY as limited downside exist to EUR.

EUR/USD next week will trade 2 X’s DXY.

GBP/USD is not only oversold from vital 1.1992 but also from 1.2500’s. GBP/USD could travel to low 1.2100’s next week and EUR/USD to 1.0700’s.

From last week: GBP/JPY shorts at low 164.00’s targets low 163.00’s until the break at 162.68. GBP/JPY traded to 163.84 to lows 163.00 then the break materialized at 162.68 and traded to 161.60 lows. Higher for GBP/JPY must clear 162.62.

GBP/JPY is inching closer to the 159.21 target. This means all JPY cross pairs trade much lower for about another 300 pips as GBP/JPY will take all JPY cross pairs lower.

Deeply oversold AUD/USD has every potential to trade middle 0.6700’s next week and NZD/USD to high 0.6181 and 0.6199.

AUD Vs RBA

AUDUSD Actual 52 pips Vs 34
AUDEUR 29 pips Vs 32
AUDGBP 29 Vs 28

AUDJPY 66 Vs 46
AUDCAD 60 Vs 46

AUDNZD 44 Vs 54
AUDCHF 32 Vs 32

Overall currency markets are slowly moving to the next level of slowdown of prices in a brand new regiment of price movements. Slow the currency price means a severe adjustment to slower stock index prices and every market instrument on the planet.

EUR/PLN

Trade of the week for EUR in the EM category is EUR/PLN long to target easily 4.7014 from 4.6820.

Brian Twomey

Money Supply

I don’t feel like screwing with further data and continuation to this article for these dumb ass websites

Inflation in April 2021 rose to 4.2% from 2.6% to eventual 9.1% while interest rates skyrocketed from 0.07 to 4.57. GDP hasn’t moved from 1 and 2%. The money supply as M1 also skyrocketed from an average of 7 billion to 20 billion over the Inflation period.

Brian Twomey

Long Term Targets: EUR/AUD, GBP/AUD, EUR/NZD, GBP/NZD

The battle lines are drawn between GBP/NZD Vs EUR/NZD and GBP/AUD Vs EUR/AUD as all pairs moved 500 pips in February to meet the criteria to re evaluate. A far different situation exists since December as GBP/NZD and GBP/AUD trade in a large and respected range while EUR/NZD and EUR/AUD trade at significant tops.

The significant rise in all 4 currencies since December is responsible for driving AUD/USD and NZD/USD to the ground at lowest oversold depths.

The driver currencies are EUR/NZD and EUR/AUD at representative tops and mathematical limits as prices can only travel so far until the maximum price is capped. The trade signal is derived from EUR/NZD and EUR/AUD as GBP/NZD and GBP/AUD follow. More importantly, significant tops to EUR/AUD and EUR/NZD informs AUD/USD and NZD/USD achieved bottoms.

The rise in all 4 currencies were derived from DXY’s upward moves in January and February as all 4 currencies are delineated as members of the 15 of 28 currencies driven by DXY and USD. The same top for EUR/NZD and EUR/AUD translates as DXY and USD tops for USD/CAD, USD/JPY and all associated currencies as USD/Other currency. Generally, tops and bottoms to EUR/NZD and EUR/AUD converts to tops and bottoms to DXY. The difference to substitute other currencies to analyze DXY is EUR/AUD and EUR/NZD provide early warnings as both trade wider ranges.

EUR/NZD top is located at 1.7243 and targets 1.6972, 1.6962, 1.6925. Significantly lower must break 1.6961 however EUR/NZD is up against massive supports from 1.6840 to 1.6700. EUR/NZD trades massive overbought.

GBP/NZD averages are located at 1.9382, 1.9415, 1.9512 and 1.9914. Below targets 1.9311, 1.9277, 1.9263 and bottom at 1.9133. Most vital are 1.9277 and 1.9275.

EUR/AUD lower targets are located at 1.5809, 1.5801, 1.5753 and 1.5690. EUR/AUD is held by lower averages at 1.5753, 1.5616, 1.5601 and 1.5562. EUR/AUD also trades severely overbought.

GBP/AUD must trade below 1.8121 or GBP/AUD targets 1.8175, 1.8204 and 1.8253. Below 1.8051 targets breaks at 1.7971 and 1.7957 to trade to 1.7849, 1.7738, 1.7694. GBP/AUD trades significantly overbought particularly from 1.7600’s.

Brian Twomey

AUD: The Hierarchy of Exchange Rates

The Hierarchy of exchange rates is permanent and never to change for AUD nor did AUD ever change in past years since the 1983 free float. The purpose is to allow each AUD currency to remain trading inside its own lane. More important is AUD must trade inside its own boundary in relation to EUR, GBP and every currency on the planet.

Last RBA meeting, OCR was raised and AUD/USD moved 30 pips. The 2016 market changes were designed for currency and market prices to not move by slashing ranges.

The focus for trade and profit purposes is the permanent numbers rather than the question to raise, lower or remain on hold. Rather than hawkish or dovish, yesterday’s news and promises to raise or lower OCR in the future. This is all BS and doesn’t profit but designed to change trader focus from numbers and profits to an assortment of non logical centers of attention. All the BS is found inside the permanent numbers.

AUD/NZD 54 pips, current 1.0888
AUD/CAD 46 pips, current 0.9159

AUD/JPY 46 pips, current 91.64
AUD/USD 34 pips, current 0.6747

AUD/EUR 32 pips, current 0.6328.
AUD/CHF 32 pips, current 0.6296

AUD/GBP 28 pips, current 0.5599.

RBA will trade the above permanent numbers or possibly permanent numbers X 2 but highly doubtful. After RBA and no matter to OCR or what the RBA says, AUD will trade the exact permanent numbers again. Next week and next years, AUD will trade the permanent numbers.

AUD/NZD Vs AUD/CAD. The reciprocal of AUD/NZD = AUD/CAD by 1 divide 1.0888 or 0.9184. The reciprocal of AUD/CAD = AUD/NZD or 1 divide 0.9159 – 1.0918. AUD/NZD permanent place is always above AUD/CAD.

AUD/JPY 91.64 Vs AUD/CAD 0.9159. AUD/JPY is shown and offered as a percentage while AUD/CAD is offered as a decimal. AUD/JPY aligns more permanent as AUD/JPY 0.9164 Vs AUD/CAD 0.9159.
AUD/USD as middle currency trades dead center to AUD/JPY 0.9164 Vs AUD/EUR 0.6327 or 2400 pips to AUD/JPY and 400 pips to AUD/EUR and AUD/CHF.

AUD/USD larger range is located from 0.9164 to AUD/EUR 0.6328. AUD/EUR and AUD/CHF are offered 32 pips Vs AUD/USD 34 to maintain permanent spaces and never to cross above or below.

AUD/GBP 28 Vs GBP/AUD 90 pips offered to 28 AUD/GBP pips inside GBP/AUD 90 or 62 GBP/AUD pips.

AUD/USD for RBA will trade 34 pips or if lucky 68 pips. More than 68 by a freak accident then free money is offered.

The entire AUD complex will move in a symphonic harmony for RBA as 7 trades. The entire AUD complex will move tomorrow in the same symphonic harmony.

Brian Twomey

FX Weekly: Japan Output Gap, EUR, XAU, SPX, GBP, JPY, AUD, NZD

BOJ proposed Governor Ueda hails from Southern Japan and it is suspected new members Shinichi Uchida and Ryozo Himino were also born and raised in southern Japan. The current BOJ board under Kuroda is dominated by northern Japan members and adversaries to the economic experiments from the south since 1868.

The reported refusal of northern Japan member Amamiya to lead the BOJ is interpreted as the south’s refusal to cede BOJ control after 155 years to the more conservative northern members. The north would never adopt YCC and the enormous sums of money involved nor embrace the 1990’s USD/JPY peg to GDP and the money supply, negative interest rates.

The threat to southern members from the north is tweak then eliminate YCC in favor of more sound economics such as Japan’s Output Gap for example to determine what an economy is producing in relation to what it may produce in the future. For Japan, the Output Gap is measured by Capital input to Labor’s production Vs the Tankan Index.

By BOJ estimates, Japan’s Output Gap registers current -0.06 and negative every quarter since the 2nd quarter of 2020. Since YCC and negative interest rates in the 3rd quarter of 2016, the Output Gap recorded 12 negative quarters vs 13 positive. The 1990’s experiments to peg USD/JPY to GDP and the money supply experienced 20 positive vs 20 negative quarters to the Output Gap. Since 1983 and 159 quarters, Japan reported 95 negative quarters vs 64 positive.

Since the 2008 market crash, Japan produced 40 negative quarters vs 16 positive and time to adopt the latest experiment as YCC and negative interest rates. The normal procedure for the BOJ is to run the experiments roughly 10 years to its final conclusion when the policy crashes and burns as was the time duration for the 1990’s, the 1930’s USD/JPY peg to Gold and the early 1900’s when the BOJ purchased Treasury Bills. Recall Japan’s Lost Decade.

The Week

DXY becomes overbought in the middle 105.00’s and oversold at 103.90’s from current 104.50’s. Expected is overall a good trade week against wider trade ranges.

USD/JPY’s big line break is located at 135.45 and overbought above translates to 137.00’s. The larger analysis to USD/JPY is a trade range of 800 pips vs GBP/JPY and EUR/JPY at 4 to 500 pips. USD/JPY is not only the best trade to JPY cross pairs but USD/JPY will continue to outperform JPY cross pairs.

JPY Cross Pairs

Not only are JPY cross pairs overbought as EUR/JPY, GBP/JPY and CAD/JPY but severely overbought to BGN/JPY, MXN/JPY, CZK/JPY, DKK/JPY, KRW/JPY, PHP/JPY, PLN/JPY, RON/JPY.

GBP/JPY shorts at low 164.00’s targets low 163.00’s until the break at 162.68.

EUR/USD trades safely above 1.0560 and the bottom at 1.0400’s on a perpetual long only strategy. Same story for GBP/USD, AUD/USD and NZD/USD.

EUR/NZD and GBP/NZD are aligned and short for the week as well as EUR/AUD and GBP/AUD. EUR/AUD shorts anywhere from high 1.5700’s to low 1.5800’s.

USD/CAD long term targets are located at 1.3395, 1.3278, 1.3252 and 1.3134 on a break of 1.3156. No changes to USD/CAD targets since last reported in December.

USD/CAD’s lack of range movements forced EUR/CAD to 1.4200’s to 1.4600’s over the past 3 months, GBP/CAD 1.6100;s to 1.6600’s, AUD/CAD 0.9100 to 0.9500’s and NZD/CAD 0.8300’s to 0.8800’s. All follow USD/CAD’s 400 pip moves over the past 3 months from 1.3600’s to 1.3200’s. All are oversold on a short trade strategy and all trade a range at roughly 133 pips per month and 166 for GBP/CAD.

USD/CAD’s overall problem is the failed mission to follow DXY lower yet the same fight to CAD/JPY as CAD/JPY targets are much lower than present exchange rates. The entire CAD complex is in disarray amd forces small ranges until the CAD universe right sizes. A lower USD/CAD forces overbought CAD/JPY and CAD/CHF higher at a time when CAD/JPY and CAD/CHF are already severely overbought.

CAD/JPY long term targets 100.98, 96.51 and 94.76.

USD/ILS and USD/NOK remain deeply overbought and both pairs are the only USD pairs in the EM space worth a trade. USD/NOK targets 10.2621 and watch USD/SEK for shorts below 10.4736 to target 10.4518.

EUR Vs EM is in agreement to oversold except to massive overbought EUR/RON and EUR/MYR.

SPX next lows are located at 3917.61 and 3904.98. SPX above has every ability to trade to 4220.00’s.

XAU/USD is either 1991 or lower to 1794 and long again. As EUR/USD trades oversold, the complementary trade is long XAU/USD and XAG/USD.

Brian Twomey

War and Long Term Targets: EUR, GBP, AUD, JPY, NZD

In past currency market trading years, the threat of war, missile fires and troops on another nation’s border had dramatic and immediate effects to movements. South Carolina had a past United States Senator who served from 1966 – 2005 by the name of Fritz Hollings. War or threats to war was characterized by Hollings in his best southern drawl as Waa.

War is a threat today as China may invade Taiwan, Russia /Ukraine, US troops to Ukraine, Israel bombs Iran’s nuclear reactors. Then skirmishes and war continue to build in Saudi Arabia / Yemen, Pakistan, Haiti, Ethiopia and the decades old fight for Nagorno Karabakh between the Armenians and Azerbaijani’s.

Then the question: how important is war to movements in today’s markets. The Taiwan currency as USD/TWD ranged from 32.00’s to 29.00’s over the past 6 months. USD/RUB rose from 50.10 to 76.33 over the past 9 months. Ukraine’s currency, the Hryvnia as USD/UAH rose from 29.36 to 36.00’s over the past 9 months but held 36.00’s for the past 8 months.

USD/CNY dropped from 7.3200’s to 6.6900’s over the past 6 months while the Saudi Riyal as USD/SAR rose from 3.7200’s to 3.7700’s over the past 3 months. SAR is a fairly Fixed currency with limited allowable movements.

Movements to Wars and catastrophe results in an immediate effect to currency prices then the price dead stops at its destination. A war or skirmish with China or Russia for example would see USD and DXY skyrocket higher. Japan’s Fukishima nuclear reactor incident saw USD/JPY jump 700 pips in March 2011 from 76.00’s to 83.00’s.

The same principle holds for market crashes as USD and DXY would fly higher under extreme volatility. The academic literature is filled with market crash examples by specialists who study crashes and crash risks.

Long Term Targets

EUR/USD targets 1.1046 on a break at 1.0914. Next major break: 1.0819. EUR/USD begins its 6 month seasonal pattern by trading higher over the next 6 months.

GBP/USD targets 1.2770 on a break of 1.2571.

No changes to EUR/USD and GBP/USD since December.

AUD/USD final target is located at 0.7099. Next targets 0.6854, 0.6945, 0.6969 then 0.7099.

NZD/USD targets 0.6593. Next targets 0.6309, 0.6426, 0.6505 then 0.6593.

USD/JPY targets 121.83 on a break at 1.2517. Next targets 133.36, 127.60, 124.38. USD/JPY is overbought short, medium and long term and on a short only strategy for months to come.

GBP/JPY targets 159.21 and just short of vital 156.52. Next targets 162.39, 159.21, 158.80, 157.35.

Brian Twomey

FX Next Week: EUR, EM, GBP, JPY, CAD, AUD

USD/CNY achieved targets at 6.9432 then 6.9298 from 6.9723 highs. USD/ZAR hit target at 18.0995 from 18.5191 highs. USD/INR target at 82.32 traded to 82.36 from 82.94 highs. USD/NOK target at 10.2655 traded to 10.2977 lows from 10.4477 highs. USD/ILS target at 3.5830 traded to lows at 3.6024 from 3.6941 highs. Profit 1000’s upon 1000’s pips.

GBP/USD Broke above 1.2024 and traded to middle 1.2100 and easily to 1.2142 as written. USD/JPY 135.37 target completed at 135.24 lows. CAD/JPY 100.33 to 100.86 then the 100.33 break lower to 98.00’s. EUR/USD Parity Curve 1.0711 to 1.0378. EUR/USD highs for the week traded 1.0690 and from vital 1.0568. Profit 100’s upon 100’s of pips.

Friends, we all know how the story goes for the past 15 years by use of $4 calculator then click. The same story will be seen for the next 15 years. The difference is I will research to find ways to improve if this concept exists.

Two aspects to all market prices: offered as percentages or decimals and second, never use a market price to forecast a market price because all then trade apples to oranges and the market price will eventually defeat all traders.

CAD/MXN failed to achieve target. Massively oversold CAD/MXN longs are good everyday until 13.5606 trades. This trade is the exact same as GBP/AUD over the past month. Take CAD/MXN long anywhere from 13.1013 to 13.3310. Each long trade contains 1000 pips on each day.

Next week

EUR/USD is held by 1.0557 and bottoms at 1.0400’s. High targets next week at 1.0726 is easily achievable.
DXY overbought begins at 105.47 and 105.55 while DXY bottom is held by 103.09 to target 100.00’s again.

USD/JPY requires a break at 135.33 to target 134.23 easily. Next week shorts are located at 137.00’s to target again low 136.00’s.

AUD/USD requires a break at 0.6808 to trade the range from 0.6808 to 0.7015. Deeply oversold AUD long drop strategy is the only way forward to the eventual break at 0.6808. AUD/USD’s problem at the lows and small ranges is EUR/AUD is far to high. A lower EUR/AUD will offer AUD/USD much wider trade ranges and more profit opportunities.

EUR/AUD overall is on a short only strategy to the eventual break at 1.5507. EUR/AUD is clearly the better trade to GBP/AUD as AUD/EUR at 0.6300’s aligns more perfectly to AUD/USD. Plus, EUR/AUD is far more overbought than GBP/AUD.

NZD/USD is in the same position as AUD/USD due to EUR/NZD at the 1.7100’s and 1.7200 highs. A high EUR/NZD forces NZD/USD at the oversold lows to trade tiny ranges. The last problem is EUR/NZD and GBP/NZD lack the ranges it once had in past years so its much harder for EUR/NZD and GBP/NZD to correct lower in order for NZD/USD to trade higher and wider ranges.

GBP/USD Averages Vs Positional Changes.

GBP/USD begins next week in the same exact position as last week. Averages changed numbers but positions remain the exact same. Market prices perform this function often week to week. The trade is the position to the average or a wholesale change to positions to target a different average. Ranges forces movements to positions Vs averages.

CAD/JPY and CAD/CHF are in the same position as last week Watch CAD/JPY 100.47 for longs and shorts.

GBP/USD’s trade next week is the exact same as this week as long low 1.1900’s to target the eventual break at 1.2016 then middle 1.2100’s.

Overbought GBP/JPY is held by 162.54 to target much lower. EUR/JPY must break 142.74.

GBP/CAD lower must break 1.6186 and 1.4220 for EUR/CAD on a short only strategy. Short only strategy is characterized for GBP/CAD, EUR/CAD, EUR/AUD, GBP/AUD, EUR/NZD and GBP/NZD due to all are DXY or better stated, USD currencies. All trade mostly as percentages to DXY and USD.

On the EM side, USD/HUF USD/NOK and USD/PLN align as best trades for next week.

Brian Twomey