ECB Interest Rates

An interest rate from nation to nation is exactly like the relationships between and among currency pairs. An overbought or oversold currency pair is the same concept as saying the interest rate is overbought or oversold. The interest rate then shares the same position as the currency price.

Note AUD/USD and RBA interest rates. All Bank Bills trade above the OCR rate at 3.60. AUD/USD as a trade strategy is long only. As long as Bank Bills trade above OCR then the long only strategy holds from today to whenever.

Note ECB’s Ester Rate at 2.87 and notice all Euribor rates trading above 2.87 Ester. All nations are in the exact same positions. EUR/USD trade strategy is long and holds long as Euribor trades above Ester.

I haven’t viewed NZD and the RBNZ but I guarantee, New Zealand Bank Bills trade above OCR.

Will the ECB raise. The position of Euribor above Ester is prime ripe for a raise.

Understand just 1/2 to what I’m writing and I assure all, no surprises will ever exist in markets. I also assure all, this is not rocket science but its rocket science to today’s dumb ass currency analysts, trade services and the crooked web sites that support these people.

These people watch screens everyday, all day and always surprised. And I’m sorry to say but these people are incompetent and dangerous to the trading crowds.

Ester 2.87

Euribor 1 week: 2.872 %

Euribor 1 month: 3.052 %

Euribor 3 month: 3.265 %

Euribor 6 month: 3.645 %

Euribor 1 year: 3.880 %

The ECB is in good position to raise. Will they.?

April 24

Ester 2.90

Euribor 1 week: 2.88

Euribor 1 month: 3.03

Euribor 3 month: 3.28

Euribor 6 month: 3.637

Euribor 1 year: 3.865

Euribor and Ester hasn’t had the same AUD and RBA effect from OCR and Bank Bills. Nothing screams raise. The only positive is Euribor trades above Ester but not to the degree where it says the ECB raise is guaranteed.

With one day remaining to Ester and Euribor rates to determine if we can say absolutely the ECB raises, one last check must be determined but its not likely Euribor will move to any degree. Interest rates trade today as dead as the currency price. Interest rates don’t trade in wide ranges anymore, nor does the currency or any market price.

Brian Twomey

AUD/USD, RBA, 5 Day Interest Rate Rule

The 90 day interest rate began in 1929 when President Hoover signed legislation to introduce T Bills to fund the government on a 3 month short term basis. The legislation offered ability to auction T Bills.

During the first offering, the Treasury offered $100 million, 90 day bills with payment due seven days later on settlement day. The auction actually saw investors bid for $224 million in bills with an average price of 99.181. Quoting bills three decimal places was part of the passed legislation. The government now earned cheap money to finance their operations.

Since 1929, all nation adopted the 90 day interest rate as the premiere rate to finance governments but the 90 day rate is the prime rate to forecast central bank interest rate changes.

The RBA lacks an interest rate probability tool such as the FED and BOE. But as seen from Fed Funds and SOFR rates, traders may easily factor their own probabilities and known before the CME posts.

The best method is what I term as the 5 Day Rule. If the 3 month interest rate moves 5 points in 5 days, the central bank will move interest rates and traders are alerted to an impending change.

The RBA’s OCR rate was last at 3.60. The 3 month Bank Bill rate for the past 5 days traded as 3.71, 3.70, 3.66, 3.67, 3.65, 3.64. Since April 17, the 3 month interest rate traded lows at 3.63 and steadily rose to 3.71 on Monday.

The RBA was screaming rate rise for the past 2 weeks and the RBA delivered as the market expected. No mysteries and no surprises.

If the 3 month rate traded below OCR over 5 days then a rate decrease is expected by the market.
The 5 day Rule eliminates Probability tools as I’m not sure to its reliability.

The AUD/USD and RBA Trade

The RBA Fixed AUD/USD at 0.6639. AUD/USD at the RBA interest rate announcement sat Richter Scale oversold at 0.6625. A raise says automatically, AUD/USD higher and known long before the announcement.

The break at 0.6639 traded to 0.6697 or +58 pips. Deeply oversold longs at 0.6625 then +72 pips.
By the next hour after the announcement, AUD/USD traded to 0.6707 highs. The RBA dead stopped AUD/USD by the next FIX at 0.6705.

AUD/USD currently trades 0.6695 and must break 0.6704 to target 0.6715, 0.6725 and 0.6746. Fail to break at 0.6704 then AUD/USD traded to 0.6683 and 0.6659.
Note RBA Fix at 0.6707 and my line at 0.6704. We’re perfectly in line with the RBA and all central banks.

Brian Twomey