EUR, USD/JPY, JPY Crosses, Yellen: Levels, Ranges, Targets

Queen Yellen offered not only a raise against a dangerous overbought Fed Funds but she upped the volatility game therefore expect more volatility moving forward. Draghi is the best of the wayward central bank heads as he confirmed what we learned from Queen Yellen, volatility is here and will remain until the central banks close the Gaps. If Draghi remains on hold long into 2018 then he places severe pressure and volatility on CHF, DKK, NOK, SEK as all priced interest rates below Europe as is their self defensive posture to protect bottoms.

Far more interesting outside of G10 are emerging market currencies and positions of Repo rates because its incumbent upon Repo Rate nations to price above Reserve Ratios from 3% to 10% as world Reserve Ratio standards. ZAR for example cut in July, Russia cut in Oct. More Repo rate nations will cut and overall emerging market nations won’t escape the volatility offered by Draghi and the Queen. Poland and PLN by far lead all Eastern Europe nations followed easily by a smart central bank in Romania and RON.

Russia is most interesting as they upped defense spending due from US sanctions and now the current Russia deficit runs about $38 billion. While Democrat focus remains destroy Trump, Russia continues to gain chaos and inroads into the US. Failure to recognize Russia in severe enemy position will see much grief in US/Russia relations. Watch RUB volatility.
Volatility means we upped my Statistical Price Path game from roughly 50 pips per pair, per trade to right at 70 pips depending on the pair yet overall our positions run short, to daily to longer term.

USD/JPY and JPY cross pairs are all on the verge of significant breaks and its JPY will lead the way in overall market volatility. And why is again due to Queen Yellen’s desire to lower USD so to see higher Inflation. This places upward pressure on Non USD pairs and as well most undesirable for the central banks, AUD is a good example but many examples exist. SEK will become a basket case for destruction if they don’t order their economic game correctly.

USD/JPY break points are now located at 112.42 vs 112.10.

EUR/JPY break points 132.35, 131.87 and 131.55. Most important is 11.87 and current oversold.

GBP/JPY remains inside 148.49, 149.16 and 153.51.
AUD/JPY is trapped between 87.13 and 86.04
NZD/JPY is on the verge at break points 78.61 and 79.02
CAD/JPY 88.05 and 88.09 Vs 89.14.
EUR/JPY leads GBP/JPY while CAD/JPY is the overall risk determined pair to inform NZD/JPY and AUD/JPY. All will break respective points as USD/JPY breaks 112.10.
EUR/USD break points 1.1729, 1.1807 and 1.2013.
Brian Twomey

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EUR, G10, McConnell, CFIUS: Levels, Ranges, Targets

In the 1980 Reagan years, Mitch sellout Mc Connell was a reliable and respected conservative but as the grow Government Democrat Party became successful under the 1st George Bush and Slick Willie then Mc Connell bought into the grow government movement.

All Republicans elected after Sellout McConnell were forced into the grow government movement or they remained forever on the outside. On the outside means relegation to sit on the Post Office Committee rather than most influential Committees such as Ways and Means and Judiciary as a few examples. Party money for reelection efforts becomes impossible to obtain and offered legislation won’t ever see a vote. Republicans forced conscription into the grow government Democrat movement allowed all to grow government by raising tax money on the private sector and by slick finance efforts.

As union membership dwindled, union money to Democrats dried up. Obummer then imposed on Federal agencies 30,000 pages of regulations to allow agencies enormous power over the private sector. It was the MAO plan. Government was for sale as Smithfield was sold to the Chinese, Banks paid up, the IRS imposed additional fees and charges, the EPA confiscated land. Every agency went on a raise money rampage. Then only Democrat party members received favorable govt contracts. Pay the Democrats then expect favorable treatment.

The Committee on Foreign Investment in the United States or CFIUS allowed sale of Smithfield as the largest agricultural company in the United States to sell to the Chinese. CFIUS approved Hilarious sale of Uranium to the Russians. Agency heads all sit on CFIUS and must vote. Without Inspector Generals to monitor the agancies, all CFIUS activity was done secretly.
Then ask who runs markets, the FED every trading day and by understanding FED actions is what allows perfect 24 hour predictions ahead as the Fed imposes its will. Inside the 2 most important functions of life most don’t have a clue how government or markets operate. I find these topics fascinating.

As I review forecasts for 2018, GBP/JPY and EUR/JPY could also use a deep dive correction. 140’s GBP/JPY could be seen easily. Best pairs to view are GBP/CAD, GBP/NZD, GBP/AUD, EUR/AUD, EUR/NZD and EUR/JPY.

The problem with GBP/USD and EUR/USD rangebound is the outlined cross pairs are far to high and in dire need of a deep correction. But EUR/USD and GBP/USD won’t offer assistance to take the pairs lower to their proper locations. EUR/USD for example can’t handle 1.0900’s yet above 1.2000’s faces a massive rough road of resistance.

Proper locations and rangebound commonalities for 2018 means prices are looking at 600 pips roughly either side of current prices.

USD/JPY must breaks are located at 112.42 and 112.01. If 112.45 breaks then longer term look for 108’s.

EUR/USD break points, 1.1729, 1.1808, 1.1841 and falling 5 year at 1.2016.

GBP/USD. Break Points 1.3258 and 1.3229.

GBP/JPY break points 149.06, 148.19 and 153.57. If 149.06 breaks then GBP/JPY falls a long way to 140’s.

EUR/JPY break points 132.26 , 131.86 and 131.55.

Brian Twomey

EUR, G10, Mueller/ Inspector Generals: Levels, Ranges, Targets

Most vital point to the Mueller investigation and why such chaos exists in the FBI and Justice Department is because America’s Bummer purposefully never appointed Inspector Generals inside the agencies. Inspector Generals job and overall purpose is watch over the agencies to ensure agencies perform their function/ Mandates, ensure laws are performed, watch personnel. Inspector Generals are the most important persons in agencies as they also maintain full investigative powers inside each agency.

If an agency lacks an Inspector General as was the case for many agencies under America’s greatest Bummer then agencies are allowed to run wild as they lack supervision. As all upper agency personnel, 15%, are all Democrat /presidential appointments then the field day began.

The system of American government through its checks and balance system applies to agencies as much as divided executive / congressional government to protect society from agencies and government gone wild. James Madison, Benjamin Franklin and the Founding Fathers greatest concern was government collusion, govt non function and operate against the people. This is exactly what we see today and as usual it all involves Democrats as every road leads to a Democrat.

Without an Inspector General then Regulation after Regulation is allowed as no regards to legality exists. Congressional requests for information are never fulfilled. Public information requests are never fulfilled. Without an Inspector General, nobody knows what the agencies are doing. Use private E-mails to communicate rather than follow the law to use government e-mails then agencies are totally insulated from inspection.

How Mueller and his band of crooks come to light is Trump by law appointed Inspector Generals and under the many Democrat scandals, Inspector Generals must by law investigate especially Ethics and criminal Laws suspected to be broken. Scandals and crimes always come to light because of the check and balance system. Expect many more Democrat scandals to materialize in time.

Government’s size allowed personnel and agencies to run wild as they are insulated from inspection. Its far easier to figure the confounded NZD price as it didn;t move from the dairy auction than it is to monitor all the workings of government.
Advice: Don’t forecast exchange rates against exchange rates because forecasts will result in far off kilter results and targets won’t be seen. Ask yourself this question from a top tier bank. Will GBP/USD trade to 1.1300’s in 2018, 2000 points in 1 year. And especially when EUR/USD is forecasted to 1.1100’s, USD/JPY to 114.00’s. Places the dairy auction in perspective.

EUR/USD break points, 1.1731 Vs 1.1808, 1.1841.

GBP/JPY break points 148.99 and 153.60.

GBP/USD break points 1.3259 and 1.3222.

AUD/USD break points 0.7649.

NZD/USD. Break point 0.6972.

Brian Twomey

 

EUR, G10, Yellen/ ECB: Levels, Ranges, Targets

ECB’s No Wotny informs interest rates must rise slow. The translation is if the ECB raises, we’ll only see a 10% raise and don’t expect 1/4 point at one shot. Queen Yellen and a possible raise places the ECB in a precarious situation. The ECB can’t raise while stimulus remains the ECB’s game plan otherwise they play the unsound Yellen economic game. More vital for the ECB, they must cut the interest corridor or the EUR swings wildly.

The far better move for the ECB is eliminate stimulus then focus on raises. The ECB’s weekly M3 money supply at 2.9 billion is far below the Fed’s 3.5. Then the ECB’s latest M3 decreased to 5.0% from 5.2% while M1 dropped to 9.4% from 9.8.

Economically, the ECB is in a far better position at 2.6 GDP to sustain itself over time as Queen Yellen’s raises brings FED funds to scary overbought. Another raise by Yellen further places FED Funds into dangerous overbought territory.

Yellen works backwards, she believes raises will bring prosperity while the correct economic approach is maintain the economic house first then raise. The economic house high priorities should be price indicators in Inflation and GDP but this is Supply Side economics and Yellen is a Keynesian with beliefs to money supplies and interest rates bring GDP higher. Hasn’t worked in 9 years but she remains ideologically committed.

Here’s a great Keynes quote from the General Theory. Economics is a science of thinking in terms of models joined to the art of choosing models relevant to the contemporary world. The translation is hello to the poor house.

Yellen was the Democrat party choice in 2012. In February when she thankfully leaves, expect story after story in regards to Yellen’s brilliance, how she steered the economy back to life. Meanwhile FED Funds proper position under heavy stimulus should’ve traded in deep negative. It should trade negative today.

Current OIS rates and Yellen’s favorite indicator trades today at 0.38, 0.34 last week and a question to raise this week. Yellen may follow OIS rates but she is never committed. Primary Dealer surveys as the more accurate indicator all see a 71% probability to raise in Fed Funds to 1.38. Again, we’ve seen this story before though.

USD/JPY. Break Points 112.24 and 111.91. Among the USD pairs in CAD and CHF, USD/JPY offers the best move. A severe problem remains inside USD/JPY. Current price is far overbought, an outright sell signal materialized and USD/JPY cannot remain in its current range. Its must move. Today’s upper brick wall is located at 113.90 and 114.17. Below watch 113.29.

EUR/USD. Overall break points 1.1808, 1.1841 and 1.1738 below.

GBP/JPY. Remains in range from 153.63 to 148.83.

GBP/USD remains overbought from break points at 1.3259 and 1.3216. Its the long terms averages most overbought.

 

Brian Twomey

 

 

EUR/USD Long and Short Range: Levels, Ranges, Targets

EUR/USD’s 5711 pip drop from 2008 at 1.6069 to 2017 January at 1.0358 factors to an overall straight line reduction of 634 pips per year and slightly outperformed Jan 1998 to 2008 at 1.6069 for 531 pips per year. Jan 1998 was factored against 1.0753 yet EUR’s introduction rate was 1.1795. Much volatility existed in EUR/USD’s early years as the questions to the exchange rate was will it price above or below USD. EUR/USD correct position is to remain always above USD and its why EUR/USD approaches multi year bottoms.

EUR/USD from 1998 to 2008 traded as low as 0.8251 to highs at 1.6069 for a mid point at 1.2160 while 2008 to 2017’s mid point is located at 1.3212. As seen below in averages, the 5 year is located at 1.2017, the 1360 day at 1.2066 , the 4852 day at 1.2079 then comes the 4689 day at 1.2124. From averages at 1.2948 to 1.1146, the mid point is located at 1.2047. The 2000’s area will remain the big break zone over time.

What holds EUR/USD from a far deeper move lower to 1.1311 is the break point at 1.1738. A break of 1.1311 targets 1.1172 and 1.1146. In the vicinity of 1.1311 and 1.1172, long is the way as EUR/USD’s price becomes dangerously low. I wouldn’t consider the possibility for EUR/USD at 1.0900’s. The absolute bottoms are located at 1.0600’s and 1.0700’s.

On the upside, 1.1807 and 1.1840 must break to target the falling 5 year average at 1.2017. The safe target above 1.2017 is 1.2609 and 1.2678.

The current USD/ EUR interest Corridor runs currently 48 points. If Yellen raises, the corridor will expand to a far distant 69 points and highest since 2014. Draghi’s question is not if but when will he raise. Draghi has to cut the corridor by raise Eonia to at least 0.92. Unless Draghi is prepared for much higher EUR volatility. By current estimates, EUR is going higher anyway so the raise stops a volatile EUR.

4 currency pairs ready for the big move in 2018 are EUR, AUD, CAD and NZD. GBP/USD and its cross pairs are sitting at dead center levels and may not offer big moves. CHF and cross pairs as well won’t offer much hope either. USD/CAD is actually dead center but cross pairs are at to high levels.

The cross pairs to watch are GBP/CAD, the Carney Cross, NZD/GBP AUD/GBP, AUD/ EUR and AUD/CAD. EUR/CAD despite currently far to high doesn’t offer the big move. Many more currency pairs and longer range forecasts will post in due time.

Following are averages from 80 day, Special averages and dated to Jan 1999.

80 day = 1.1807
XXX = 1.1738
337 = 1.1172
595 = 1.1146
850 = 1.1311
1105 = 1.1840
5 year = 1.2017
1360 day = 1.2066
1616 = 1.2234
1875 = 1.2453
2132 = 1.2609
2387 = 1.2708
2643 = 1.2925
2897 = 1.2948
3153 = 1.2891
3412 = 1.2877
3669 = 1.2818
3924 = 1.2678
4178 = 1.3462
4432 = 1.2256
4689 = 1.2124
4852 = 1.2079, Jan 1999.

 

Brian Twomey,

EUR, GBP, JPY, Dems: Levels, Ranges, Targets

The abrupt expulsion of Democrats as a result of women affairs was a perfectly planned and coordinated Democrat party event. Nobody prepares and implements strategies long and short term better than the Democrats. They are not only absolute masters of the political game for 100 years but Dems maintain light year distance ahead of cultural society and the sleepy Republicans.

Many examples. How were Democrats able to steal and maintain the black vote from Republicans when the purpose of Republican party formation was to eradicate slavery. How Liberal / Conservative labels shifted over the years from Conservative Democrats and Classical Liberal Republicans is a misnomer in modern day politics.

The Dem strategy and reason for the latest disposal of party members is 2020 with a view to recapture the lost women vote by offering a women as the next candidate. The appeal by Dems will focus strictly on young voters, educated and non. Dems own the total black vote so this group is marked for exclusion. The type of candidate will soon be known in this 3 year effort as Hollywood and the culture will inform as force acceptance into society in short time.

The longer range for AUD/USD is located from 0.6400’s to 0.9000’s. Current AUD at 0.7500’s trades at its lower multi year range. Problem for AUD/USD’s upside is break points at 0.7664, 0.7794, 0.8297, 0.8468 and 0.8774. All lines are falling. Context to current AUD prices is in the 1.1910’s and 1920’s, AUD traded at 2.400’s and today’s 97 year mid point is located at 1.5000’s.

NZD/USD at 0.6500’s and 0.6300’s will see a rough proposition. NZD 0.7500’s is a far more comfortable zone yet as AUD, much rough points exists above to begin at 0.6976, 0.7070, 0.7272, 0.7435 and 0.7531.

Overall, non USD pairs in total are fast approaching multi year bottoms.

EUR/USD break points today are located at 1.1808 and 1.1740. To see 1.1740 then 1.1751 must break below. A break at 1.1763 targets 1.1812.

GBP/JPY faces a big break at 153.66. Break to the downside is located at 153.09 then 152.78, 152.59. Above 153.09 targets 153.24.

GBP/USD is far overbought and 1.3499 is first massive resistance point. Below must break 1.3472, 1.3455 then 1.3438.

USD/JPY made its move as mentioned yesterday but momentum remains and another spike is on the way. Break point are located below at 112.19 and 111.86. Upside targets a brick wall at 113.97 provided 113.73 breaks higher.

 

Brian Twomey

EUR, Mueller, Economics: Levels, Ranges, Targets

As we watch Mueller and the unyielding Democrats perform the greatest coup ever seen in modern day government and in the history of every spy novel ever written, the clear result is the Obummer effects will be seen for many years in the future. Why Obummer revealed himself as a communist after hiding such revelations for 100 years informs exactly how powerful Dems became and the depths of government ownership throughout the agencies.

Electoral victory for the Democrats is a small win as the greatest prize they own is the Bureaucracy. Why the stacked deck is because the Democrats own the Civil Rights Division in the Justice Department. Civil rights in the modern day is defined as voter rights to any issue. Over many years, the Democrats appointed lefty attorneys then grew Civil Rights division funding to appoint more attorneys. Now the Civil Rights Division owns the Justice Department. Democrats laugh at multi year court fights as it doesn’t stop their ability to play the long game.

Trump and the comatose Republicans either place a sledge hammer on the Democrat long game or they lose for many years to come. DACA is one example.

If Trump approves just 1 DACA child in today’s meeting with la la Paloozi and “I cry for Immigrants” Chucky Schumer then the Republicans can expect to lose the House of Representatives in quick time. The Democrats will load voting age DACA children in Republican Districts and dominate those districts for many years in the future.

Fascinating political developments but understand Democrat public comments then one knows the plan of attack as the Democrats always reveal themselves.

Let’s look at America;s next genius, Queen Yellen.

Total Public Debt to GDP Ratio is currently 103% and the highest since 1966. As highlighted by Jim Rickards yesterday and correct by fact check is Reagan;s tax Cut occurred when the public debt to GDP ratio was 30%. At 103%, any tax cut is a minor band aid and its effects will last extremely short term.

To place 103% in context is to view data from Rogoff and Reinhart: 8 Centuries of Economic Folly, 1970 Debt to GBP ratio was 49%, 1981 was 30%, 2012 was 59.49% and today 103. Debt to GDP ratio doubled in less than 5 years. Astounding but extremely dangerous.

General Govt Gross Financial Liabilities as % of GDP in 1970 was 49% and 60% in 2012. Higher today and again dangerous.
Add the losing experimental concept to raising interest rates under a high balance sheet without any chance for reduction then the economic destructive course is underway. Further is the Senate Republicans non serious wish to begin Tax cuts in 2019.

The vast majority of previous crashes except for 1908 were caused by Government overspending as debts far exceeded ability to pay. America is close. Exports led the way out of the 1929 crash as the % of world exports declined 69% from 1929 to 1932. Exports bottomed in 1930 and Peaked from 1968 to 1973. Current world exports are now middle range but overall lack ability to assist in growth if a crash was seen. A severe drop must be seen first but then comes the 1930’s concepts in exchange levels and Competitive devaluations to gain export advantage.

Smart as usual are the interest and exchange rate traders as ranges this week for all currency pairs severely restricted. Far worse among USD pairs is USD/JPY as current price cannot remain in its present location.This means watch EUR/JPY as well because its past lopsided price no longer contains built in resistance points. EUR/JPY is normalizing after many many months in off kilter status.

RBA wants to see AUD/USD 07000’s. AUD has a better chance at 0.8000 before 0.7000.

EUE/USD. Break points 1.1805 Vs 1.1744. Above 1.1805 then comes 1.1840’s.

USD/JPY break points 112.15 and rising 111.82. A massive brick wall today is seen at 113.15 and 113.10.

EUR/JPY break points 132.02, 131.72 and 131.55. Most important 132.02 and a break means far lower. Overall watch USD and non USD pairs rather than cross pairs for direction as they are leading the way.

 

Brian Twomey

 

EUR, GBP, JPY: Levels, Ranges, Targets

 

What is the derivation of the current political environment to divide us as societies to far extremes. How is it possible brothers align against brothers and even political scientists war against their Poly Sci friends. Society’s middle ground and normal comfort position was ceded and occupied by the political system by introduction of wedge issues and it divided us as we were forced to take positions to one extreme or another.

Every night, the news media aligns the factions and pure chaos ensues as logic, facts, reason and brotherly love leaves us. The Fairness Doctrine was eliminated years ago because it was thought to align warring factions against each other on TV would cause chaos.

By introduction of wedge issues in successive order quickly divides us as the political system takes the middle ground by sheer bully tactics. Last time such societal factions were seen was Lyndon Johnson and the great society programs. Johnson introduced Fair housing, civil rights, medicaid, voting rights and the list goes on as it has done today.
What heals the curent sickness in our society is economic growth and prosperity. Wedge issues, predominatly social progrms won’t maintain its high status. The political system will then leave its center position to be occuppied again by citizens and reason. We’ll stop here.

EUR/USD. Watch break points today at 1.1805 and 1.1746. Most vital to see far lower is 1.1746. What’s lower mean, 1.1400;s.

We won’t see 1.1746 break today as supports exist at 1.1802, 1.1794 and 1.1781.

EUR/JPY has a long way to go to break 131.97, 131.66 and 131.55. Massive supports exist today at 132.17 and 132.11 and both will be seen on a break of 132.43. Above, watch 132.68 to travel higher.

GBP/USD. 1.3415 is most important line today as below means 1.3388, 1.3371 and 1.3362.

GBP/JPY break points are located at 153.71 and 148.57.

USD/JPY break points are found at 112.10 and 111.80

 

Brian Twomey

EUR/USD and Russia Investigation: Levels, Ranges, Targets

The recently released 48 page report by the Department of National Intelligence reveals in deep detail Putin’s direct order to undermine the 2016 elections to favor Trump over Clinton. The overall campaign focus was undermine the United States system of democracy by use of cyber tactics to influence United States citizens to question their nation, systems, fairness Vs unfairness.

Freedom House as well as the 116 page, June 2016 Department of Intelligence reports reveal voter influence campaigns were launched by Russia in 16 other nations. Who is the enemy? Russia, the Democrat Party as assistants to Putin and the Republican Party for silence.

Putin saw in Clinton a threat derived from the 2011 and 2012 protests in Moscow, regime change in the Ukraine, Dem Party orchestration of the Arab Spring, installment of the Muslim Brotherhood in Egypt, against Russia in Syria and Senate sanctions on Russia.

So feared was Russia to believe Clinton would target Putin for Regime change, Russia radically increased its Defense spending. Russia always favored Democrat electoral victories because Dems first priority in power is decrease Defense spending to shift monies to social programs. War threat was eliminated.

Putin’s main ally and scary Rasputin look alike in Moscow is most dangerous Alexander Dugin. Dugin’s writings in early campaign days favored Trump and it was Dugin’s influence that convinced Putin to embark on the influence campaign. When Trump uttered the words, I can get along with Putin and we can solve problems was all it took for Russia to support Trump.

Most important is Russia lacked ability to influence the campaign except to the degree they targeted Ads against Clinton when she was ahead in the polls and targeted ads against Trump when he was ahead. But the advertisements were all geared towards concepts such as  America is no good, unfair, favors white people, rich people, racist.

Russia ads simply reflected Democrat Party lines so the groundwork for Putin was layed on their laps. Russia could’ve easily hacked into every state’s campaign computers to change votes such as was demonstrated by the Frontier Foundation. This would’ve been declared an act of War and Russia was not crossing those lines. Russia’s only job was create chaos and weaken America. The irony is America’s Bummer accomplished Russia’s mission while the Republicans allowed it.

Enter Democrat Mueller and his team of devoted Democrats. Mueller’s mission is eliminate Trump by impeachment, charges or any means necessary if only they can prove Trump colluded because Trump policies and “drain the swamp” is a deep threat to Democrat power. A successful Trump can knock Democrat electoral victories back many decades. 200 plus pages of intelligence reports highlights in deep detail Russia’s limited role and limited success in the campaign. But reports further highlight Russia didn’t collude with the Trump campaign.

Mueller not only won’t find collusion but this entire Mueller investigation is a giant Public relations campaign cooked by the Democrats and news media partners to maintain pressure and undermine Trump. The Manafort and Flynn arrests despite news media happiness added to Trump pressure to instill into the public the idea that Trump is not a legitimate president and won by other than legitimate means. Therefore policy successes can’t credit to a non legit president. As time goes by and Mueller fails, we ill soon hear Trump as tyrant, dictator, crazy, insane, bizarre. It will get much worse from here.

EUR/USD Overall break points 1.1804 and 1.2021. At 1.1804 won’t break today as massive support exists at 1.1806 and 1.1807. Lower must break 1.1858. Higher must break 1.1871 to target 1.1907 and 1.1922.

AUD/USD approaches a big break at 0.7672 then comes 0.7806. AUD/USD’s partner NZD/USD break point is located at 0.6983 then 0.7105.

GBP/USD, we continue to play the short side as GBP remains way overbought. A break at 1.3445 targets 1.3423, 1.3406 and 1.3397.

 

Brian Twomey

 

EUR/USD and Trump, Tweet and Communication

Why Trump’s twitter strategy and fake news label as a communication plan contains a purpose to drive a massive wedge between the power of the Democratic party and its vast majority news allies. If Trump can discredit the Dem news media then Democrats are not only isolated but as they speak for themselves then the 100 year anti american words and policies will be revealed.

By Trump’s twitter writings, he’s turning the Democrat / News media alliance back on itself. Its working brilliantly as Trump expected as now even the news media waits daily for Trump tweets. Trump knows he’s winning and he’s having a great time as he has the news media in his hands. Trump now leads the news media and creates news and this is a first since the Dems and the news media conspired to take down Nixon.

Previously, once Dems announced a policy, the news media kicked into high gear with human interest and other related stories to force acceptance. The news media performed the Dems work and Dems didn’t have to speak one word. As long as Democratic voters heard the magical news media words from Political Philosophy, Equality, Justice and fairness then the Roman army buys into the Dem policy. It doesn’t take much to buy democrat votes as the appeal is based on emotion rather than fact.

The kicking into high gear aspect meant an imperative for news media audiences to remain in the present. To do this, Dem policy stories were pounded into audiences daily. The news media created a daily ongoing soap opera day by day. To remain in the present with focus on the next leg of the news media story, audiences would never perform research, find the truth, the costs, the consequences and most important, Facts. If the news media says it, it must be fact.

Trump’s twitter strategy appears to be working as a new style, balance and news media focus appears to be emerging. No longer can Dems rely on news media as partners to report one sided stories. But Trump also knows the news media is his greatest threat rather than the Democrat party by itself. Consider the Dem debate in the tax cut bill as tax the rich, tax raise for poor. Arguments fell on deaf ears. To succeed, Trump must maintain the constant pressure.

Equal abuse to the majority Teddy Roosevelt Republicans for failing to fight against Democrat policies and failure at a communication strategy. Nothing new as Teddy Roosevelt Republicans lacked a communication strategy since Teddy Roosevelt in the 1900’s.

EUR/USD overall break points 1.1803, 1.1735 Vs 1.2022 at the 5 year average. Above must break 1.1872 to target 1.1895 and 1.1924. Below watch, 1.1858.

GBP/USD is far overbought as out strategy in last days is trade the short side. Overall break point is 1.3214. A break below at 1.3439, targets 1.3417, and 1.3401.

GBP/JPY. is fast approaching the 10 year average at 153.77 while below break is located at 147.99. GBP/JPY as well is far overbought and short only strategy is out way forward.
Brian Twomey

EUR/USD Gaps and Ranges: 2008 to 2017

The original intent in this writng was to view daily currency pair Gaps and EUR/USD as proxy because its most widely traded. To view daily Gaps alone imparts zero information because it lacks the answer to what drives EUR/USD due to its two sided composition therefore its imperative to analyze the longer term view. Secondly is price location must be known. Lastly, not all currency pairs work as smoothly as the EUR/USD.

In USD/JPY and EUR/JPY are nightmares using current methods because price readjustments are absolutely essential otherwise its an impossible effort. To know the adjustments then is to understand a deeper insight into the EUR/USD, USD/JPY and EUR/JPY range, Gaps and overall positions. EUR/USD ranges always exceed USD/JPY and this is true from 1998 to 2008 and 2008 to 2015. EUR/USD ranges always exceeded DXY while EUR/JPY bounces in between EUR/USD and USD/JPY.

Gaps are not only built into the price structure in every currency pair but its impossible for a currency pair not to contain Gaps. Gaps are defined as daily distance between vital break points as well as distance from daily prices. The long view was seen by European interest rates through 4 daily spot checks ( May, Sept, Nov, December) in each year from 2013 to 2017. Enough analytical information was seen from 2013 to 2017 as prior to 2013, European interest rate maturities began its elimination stages. July lacked inclusion in the spot checks yet July served as reinforcement to overall findings.

From 2008 to 2017, EUR/USD prices were driven by either EUR by itself, USD by itself or a combination of USD and EUR. Interest rates clearly delineates this assessment because break points are revealed as EUR only, USD only or combination USD and EUR. EUR in 2014 was the most crucial year as the EUR/USD choice was price driver as either EUR or USD. The result was 2014 to present day, EUR/USD was / is driven by both USD and EUR,

If EUR/USD is driven by either USD or EUR then massive Gap distance exists in the break point framework and price movements are able to swing wide which means volatility is high. If EUR/USD is driven by EUR and USD then volatility is low because the price Gap is trapped between USD and EUR.

Since 2008, EUR/USD traveled down a 9 year road to price Gap compression. Certain years were good as in 2011 to 2012 while 2013 to 2014 as well as 2015 to 2017 were low movement years. In January 2017, EUR/USD 1.0339 at 0.06% was the absolute bottom from 1.6029 in 2008. EUR/USD above the current 25% point has every ability to fly far higher or lower. To travel lower as EUR and USD will experience a slow price move. Higher means watch 1.2800 to 1.2900’s at the 50% point as this area represents the USD and EUR separation. Lower at 25%, watch 1.1300 to 1.1400’s.

To the overall question is technical analysis dead or are prices in a new period , EUR/USD traveled continuously in 3 stages from severe wide distance to middle range then to current severe compression. Current technical analysis as well as the current period lays in severe dormant stages in wait for resuscitation. Eventually an enormous breakout will be seen as EUR breaks free from USD or vice versa.

Overall, EUR/USD traveled lower but it lacked a choice therefore the question how it arrived at its final destination to some degree is meaningless. Outside events only influenced the downward spiral as the EUR/USD price was far ahead of any consequences in economics, interest rates, money supplies.

Interest rates reveal allowable daily price movements and this serves as an insight to Gaps and ranges as well as likelihood to possible breaks. EUR/USD traded in 2013 and 2014 as high as 78 daily pips while early 2015 saw a massive compression to 50 ish daily pips. Compress the daily pips, closes Gaps and ranges.

A typical 2013 example as EUR/USD traded in the 1.3500’s.

Break points are as follows: 1.3290, 1.3355, 1.3656, 1.3722. From 1.3290 to 1.3722 is a distant 432 pips. From either side of daily pips existed 225 pips from 1.32 and 1.37. Fast forward to 2017, break point to break point is about 100 pips total and 50 ish pips from daily prices.

Its always a question to timing and exchange rate level to an interest change.The timing and exchange rate levels appeared appropriate in June / September 2014 when the ECB went negative as a 63% distance existed from 1.3600’s and 0.7300’s in USD.

In July 2008, EUR/USD’s price was 1.6029, USD/EUR was 0.6238 for a difference of 0.9791 or a distance of 97% and a ratio of 2.5% to 0.38%.

By July 2009, EUR/USD traded 1.5132 while USD/EUR was located at 0.6608 for an 85% distance. Despite an 897 pip move in EUR/USD, USD/EUR remained at its same 2008 levels which means the EUR/USD drop was driven purely by EUR/USD.

As July 2010 revealed EUR/USD at 1.3087 and USD/EUR at 0.7641, a compressed distance at 54% existed as USD and EUR shared equal participation in exchange rate moves.

July 2011, EUR/USD corrected to 1.4573 while USD/EUR dropped to 0.6862 for a distance of 77%.

July 2012, EUR/USD dropped to 1.2673 as USD/EUR continued its rise to 0.7890 for a 47% distance and a break of the 50% line since 97% in 2008.

July 2013, EUR/USD corrected to 1.3300 and USD/EUR dropped to 0.7518 while distance factored to 57%.

July 2014, EUR/USD corrected again to 1.3695 as USD/EUR dropped to 0.7301 and a 63% distance.

JULY 2015 Saw big changes as EUR/USD at 1.1207 and USD/EUR at 0.8922 experienced a 22% distance.

July 2016 while EUR/USD at 1.1178 and USD/EUR at 0.8946, distance remained at 22%.

July 2017, at EUR/USD 1.1853 and USD/EUR 0.8436, distance rose to 34%.

 

Brian Twomey,

EUR and Income Taxes: Levels, Ranges, Targets

Yet another day to tax reduction and its due as usual to the obstructionist Democratic Party as they forced, at my count, 5 Motions to Recommit the Bill back to the Finance Committee. The Dems lost every vote as expected but if successful, the bill would’ve traveled back to the finance Committee for additional hearings and votes before the bill could again see a vote on the Senate Floor. At 5 Motions to Recommit is a long time in the life of a Slooow moving Senate. A viewer would become an expert in classical music before they see the resolution in 5 rounds of votes. So day 2 is here as again the Dems suffer the Yellen effects, they took the money and won’t give it back. How did we arrive at this day.

The Income Tax was temporarily imposed by Republican Lincoln to assist in Union, mostly the South, rebuild after the Civil War. After rebuild, the Income Tax was rescinded as promised by Lincoln yet it was ruled by the Supreme Court as Unconstitutional in 1894 and long after Lincoln’s death. Republican McKinley was assassinated in the 1890’s at a time to not only American prosperity but the anti American Progressive movement was in full swing. Enter the next enemy of America , Republican Teddy Roosevelt.

Roosevelt was busy during his term to create Government agencies, finance the Spanish American War and stop Capitalism’s progression. He endorsed and faught hard for an estate tax, inheritance and Income Tax. Republican Taft’s succession of Roosevelt passed the 1% Corporate Tax and Taft Endorsed the 16 Amendment to impose an income Tax as a means to beat the Supreme Court’s purview.

As Roosevelt and Taft split conservative and progressive Republicans, Democrat Wilson sealed the Income tax fate by passage of the 16th Amendment. The key was Wilson’s lowering of Import Duties from 40% to 29%. Sounds familiar ? as the question to make up for lost revenue to Import Duties, 1% was imposed as the first Income tax, More familiar sounding debates today is 1% was imposed on incomes over $3,000 and $4,000 for married couples. The Bureau of Internal Revenue, now the IRS was created to collect the tax on who would’ve guessed the famous 1040 form. Then, the 1040 and other Tax forms were considered complicated.

As Wilson lost Tax revenue to Duty Imposition, then began the massive rise over years in income and other taxes. Government grew exponentially as a result but the rise never stopped and continues to this day.

The conservative Republicans under Harding, Coolidge and Hoover lowered income taxes in the 1920’s, Add Reagan and Trump, only 5 presidents since Lincoln lowered taxes. Trump is fighting against not only a 100 year tax rise tradition but Dems as well as the Teddy Roosevelt Republicans are against his lower tax proposals.

Debates as in tax the wealthy and government deficits remains a 100 year tradition.

How many government agencies exist in the Federal government to finance tax increases? Well 200 to 400 depending on who is believed .How many outside government groups are funded by government revenue. Good question.

EUR/USD. Overall break points now 1.1803, 1.1737 and 1.2023. Lower for EUR means break at 1.1915 to target 1.1893, 1.1876 and 1.1861. Higher must break 1.1928 to target 1.1954 and 1.1981. EUR leans to overbought but seen only in longer term averages.

GBP/USD. Must break 1.3542 to target 1.3497, 1.3482 and 1.3461. Above must break 1.3538 to target 1.3450’s. GBP is severely overbought and 2 day recommendation remains sell rallies and not take 1 pip long.

USD/JPY overall break points are located at 111.95 and 111.70. Lowe means breaks at 112.47 to target 112.31, 112.16 and 112.09. Higher must break 112.70. Today’s JPY brick wall is located at 113.17 and `113.20.

 

Brian Twomey

 

EUR, USD/JPY, EUR/JPY, Gaps: Levels, Ranges, Targets

Yesterday’s hazy EUR/USD convolution resulted in a 69 pip range from 1.1882 to 1.1813. Topside held and performed perfectly while 1.1838 was under serious question. EUR/USD broke 1.1838 and dead stopped at 1.1813. The 10 day average at 1.1826 broke lower to ensure 1.1813. The far better model informed long before 1.1813 was the ultimate bottom and 1.1826 was the rest point. The original question was volatility to target time and revealed is no question exists as performance was perfect. Yesterday informed range while Tuesday saw clear trend.

Different models yet same features but each is employed to meet its own specialities, overbought Vs oversold, range v trend, break points v trade able levels, perfect entry to exits, fast price speed to slow, short to long term trades, gaps to range.
Never mentioned is stops because its a feature long ago excluded. To know a price path excludes a stop. High volatility markets and fast price speeds may require my invented Mathematical Stop. Charts are also gone and not needed. I need a number, not a picture. Charts were replaced long ago with pen, paper, calculator.

How does today’s daily currency pair Gaps match to previous days and years and are Gaps a constant feature or not in the life of a Statistical Price Path. Rather than quantify the Gap statistically as in the “Tiles”, Quintiles, Quartiles, interquartiles the question is what informs the breakouts. Stay tuned for interested yet overall, don’t complicate trading as the basic foundations of math for trade success are add, subtract, multiply, divide. Never forget the progression, Money Supply, interest rates, currency price , economic data.

EUR/USD break points are now 1.1801 and 1.1731 below vs above at 1.2024. A break below at 1.1831 targets 1.1822, 1.1816 and break point at 1.1801. Above watch 1.1874 and 1.1889. Overall MA’s are neutral but this situation informs how close is the breakout point at 1.1801. Correct language is EUR is vastly oversold unless 1.1801 breaks. If 1.1801 breaks, EUR gains downside speed and longs are done as sell rally strategy becomes the new order.

EUR/JPY remains safely above its break points at 131.77, 131.55 and most vital 131.30. The break at 131.30 is required to see EUR/JPY direction change to sell rallies. Today, 132.04 and 132.37 protects 131.00’s. Topside, 133.37 must break to target 133.63 and 133.89.Short term MA’s are today overbought.

USD/JPY. Supports now exist at 111.92 and 111.67. Vital break points today below are 111.96 and 111.88. Strong cluster of supports overall. Above must break 112.37 to target 112.45 and 112.74. Watch the brick wall at 112.74 and 112.72.
Brian Twomey

 

EUR/USD: Levels, Ranges, Targets

Yesterday’s overbought 5 day average at 1.1845 hit its upper target at 1.1905 then began the drop. The vital break point below was 1.1887 and this point broke at the time of the post. What remained as targets upon the 1.1887 break was 1.1878, 1.1875, 1.1864 then 1.1847, 1.1843, 1.1845 average and 1.1829 and 1.1821.

EUR dead stopped and bounced at 1.1827 and now trades at 1.1873. I expected the bounce at 1.1847, 1.1843 and 1.1845. The significance of 1.1847 is represented because its the central bank level. This means any price under 1.1847 became a free trade and it highlights the importance to know price location and associated vital break points. Central banks offer free trades every trading day. Despite the 1.1840’s, nothing was missed as the free pips came from 1.1820’s.

The minor aspect to yesterday’s trade was EUR/USD from the 1.1905 break was already into its drop and the entry at 1.1905 was the perfect point. The trade was caught in the middle of the drop.

Today’s 5 day average at 1.1884 reveals a trend just underway. The 10 day is located at 1.1826 and the 5 day target at 1.1843 achieved objective. Outstanding targets below exist at 1.1858, 1.1843 and 1.1838. Above targets outstanding exist 1.1887, 1.1862, 1.1901 and 1.1922. The target at 1.1882 was hit and its the Gap between 1.1962 and 1.1887. Nasty move those Gaps. Actual drivers to today’s prices are the overbought 50 and 253 day averages.

Overall break points are located at 1.1799, 1.1724 and 1.2024. Break at 1.1799 and 1.1724 then longs are finished and new sell rises becomes the way forward.

The daily model is viewed as 1.1888 as the break point then 1.1903 and on to target 1.1917. At 1.1827 and 1.1814 becomes the bottom break point to target caution area at 1.1799. A break of 1.1799 targets 1.1764 and this is the free trade area 1.1799 to 1.1764 for longs. Obviously those few traders I agree to take into my trade service are not afforded the convolution offered here.

Brian Twomey

EUR/USD: Levels, Ranges, Targets

Yesterday’s EUR/USD contained 2 price points above, 1.1960 and 1.1979. EUR/USD reversed at 1.1960 and bolted 18 hours later to 1.1885. Yesterday’s assist lower was the result of breaks at 1.1942 and 1.1913. Once 1.1913 broke, EUR was able to travel lower for an overall 75 pip move.

The target yesterday was 1.1879 based on this particular model but mentioned was 1.1879 would possibly fall just short of its objective. Yesterday’s trade was marked as perfect and for gazillions of new readers, every trade is perfect as we remain years later, serious traders. Trades are games of ping pong, Statistical Price Paths as I call it, as we take longs and shorts continuously. Under question was yesterday’s volatility comments.

Today’s overbought 5 day average at 1.1845 targets 1.1905 but this target was achieved today. To travel further to targets, what remains below is 1.1875, 1.1843 and 1.1829. Today, 1.1875 was also achieved so 1.1843 and 1.1829 lingers as outstanding. Above 1.1921 exists.

The short term daily model informs 1.1887 must break to target 1.1878, 1.1864, 1.1847 and 1.1821. Forget 1.1829 and 1.1821 achievement today and view 1.1847 and 1.1843 as bottoms and bounce points.

Above must break 1.1931 to target 1.1947, 1.1968 and the Max top point today at 1.1997 . Although specified, 1.1997 won’t trade today.

EUR/USD vital break points overall are located at 1.1798 and 1.1710. Breaks are needed here to see shorts gain speed. Above, the 5 year average is located at 1.2026.

Brian Twomey

EUR/USD and G10: Levels, Ranges, Targets

The generalized word volatility as in price movement is defined by example. EUR/USD’s 5 day average at 1.1804 is currently overbought and needs correction. A correction to align the averages targets 1.1879. How long before 1.1879 achieves target. We’ll count the days.

To continue, prior targets took 3 to 7 days roughly. This is astounding and quantifies how dead is volatility. An overbought / oversold average target should take as little as 20 minutes to as much as 1 hour to compare to our old trades in fxstreet.net days. The trade should pay at least 50 pips from fxstreet examples and many examples exist. The 1.1879 target may not see its achievement until, well that’s where the price to time components factor. In today’s markets. a target should hit at most in 2 to 2.5 days. And this is kind to the calculations.

Many times was written this day would come and strategy changes were mandatory. Markets didn’t change but central banks changed markets. This condition could last well into 2018 easily. As conditions changed, we changed strategy so not to rely on days wait for targets.

Overall, EUR/USD’s 3 big break points are located at 1.2026 , 1.1797 and 1.1695. At 1.2026 is the 5 day average and a huge break. Means far higher for EUR/USD but it also means the EUR would enter a new day, not seen since the 1.3200’s break below in 2014. The 1.1695 line is fast rising and its the line to view in days ahead. This line must break to see shorts gain speed.
For today, a break of 1.1942, targets 1.1879 and 1.1860. Below must break 1.1913 then comes 1.1899, 1.1882 and 1.1867. How’s 1.1879 today, not looking good.

AUD/USD is approaching vital break at 0.7681 while NZD break point is located at 0.6987.

USD/JPY break is 111.62 and 112.16. See EUR/AUD today? Oversold AUD/EUR was responsible.

GBP/USD is well supported by 1.3159 and 1.3151. But GBP/JPY is in do or die mode at 147.51 and 146.90. GBP/JPY’s brother EUR/JPY is also at crucial breaks at 131.67, 131.55 and 131.17.

 

Brian Twomey

 

 

Fed Monetary Policy 2016 to 2017

A Fed Statement for market move purposes is defined as Inflation and Interest rates up or down then GDP and the economy up or down. Monetary policy is a quasi legality and is defined by vote to solidify the objective. Monetary policy adopted by vote becomes accepted until or unless its eliminated by another vote. Older monetary policy adopted by vote is written forever in the statement such as the Fed SOMA account and Swap arrangements with other nations. Written means use the exact same words month after month.

New monetary policy must succumb to a majority vote such as January 2015 adoption of Repo Markets, January 2016 adoption of new Inflation language, January 2016 adoption of new Unemployment language and QE, January 2015 adoption to longer term FX holding periods from 18 to 24 months. Today, Minutes are 10 + pages as a result of Keynesian policy under full market control over many decades.

Why lazer focus in what appears as minor changes to policy is vital because modern day Fed policy, information, minutes and statements reveal zero to no actionable information especially in relation to past decades. The Fed speaks and writes but says nothing. Students of the markets must perform due diligence and do their homework.

The December 1925 Fed Bulletin for example contained 84 pages of deeply detailed charts as well as a plethora of economic / market statistics and information. American markets were built on Agriculture yet AG is missing from today’s statements. Credit extension and interest rates built America yet today’s statements afford a few minor words to an OIS rate or a spread.

Bank health, troubled banks, borrowings and financial holding information is missing, money supplies are missing, Fed economic projections are revealed only 4 times yearly and the information is always wrong. The modern day Fed blacked out and quarantined necessary economic and market moving information. Fed statements from 84 pages are down to barely 10 and much is non information. The counter argument to today’s markets are more efficient doesn’t hold as 1925 market focus remains the same factors today.

As 2016 and 2017 is reviewed, the depth and degree to Queen Yellen’s deeply conservative, unyielding ideology is known and it turned to the poison of social justice. If Yellen was a voter, only the Democrat party is her choice because of the concepts of negativity and control. Yellen thoughts are forced to see rain as dominant on a sunny day. Those deeply negative feelings experienced daily transforms by osmosis into policy and market control. The concept of a free market and a random price would drive Yellen into pure insanity as the price lacks control and lack of control becomes fear of the unknown.

Life under true price discovery is seen by Yellen to quote Thomas Hobbbs as a war against all where market life would be poor, nasty, short and brutish. Without policy control, markets would crash as a war against all would ensue to quote Hobbs again. Men under their own devices would self destruct. An unsatisfactory price to Keynesians is a market disturbance rather than normal functions of markets.

As Yellen felt the strengths of her savior/ power to the rescue, QE was adopted to control money, Repo markets were adopted to control fed funds, QE recission was adopted to control money’s trip downward. Without a plan, roadmap, structure and control, Yellen wouldn’t nor could she move. Control is hard as more energy and time is expended to complete an unknown market roadmap. Interesting question is without control, where markets would be today if markets were allowed full correction on its own.

Yellen’s negativity as dominant was on social justice display January 2016 as unemployment was adopted as a new policy and reporting requirement in the statement. Why not focus on the positive employment is because employed person positions are known, fully covered and fully controlled. The randomness of the unknown in the unemployed drives Yellen and Keynesians to the brink of mental disaster.

Long term Unemployment is now viewed as a median rather than central tendency and the Social Justice Keynesians delineated unemployed to Asians, Blacks and Whites rather than an overall focus on specific industries for market / investment purposes as was done in 1925. Employment / Unemployment lacks Fed direct influence as its classified as the result of Fed policy and gleaned from the short term Output Gap therefore focus as new policy is challenging. A full view to Employed / Unemployed requires a data check to its Feb 1939 inception and simple averages is enough because Medians are always wrong.

As January 2016 long term repo rate holding periods were established as 65 days, the Fed is now taking a longer term view in continuation to hold Fed Funds in its 25 point range, specifically at the mid point. To accomplish this mission, Repo rate floors as well as the 1.25 basis point interest paid on reserves must hold. Only then will Fed Funds rise again.

Why mid points is to allow brisk Repo lend and borrow against a 12 point channel above and below. To further guard against longer term plans, QE rescission was done to not only assist to hold Fed Funds steady but if Fed Funds falls below its channel or crashes, the Fed is prepared to institute new QE spending.

As money supply and interest rates share an adverse correlation, the Fed message is not only will the floor hold but a new floor will establish upon the next raise to Fed Funds. Repo market participation is key otherwise Fed Funds is vulnerable to trade outside its 25 point range. The current range is 1.00 to 1.25 and 1.75 as the Primary penalty rate for banks and borrowers in trouble. The 1.75 is the Discount Rate and the discount window to borrow at 1.75. The 1.00 point is known by other central bank terminology as the Treasury Funding Rate.

The mid point and monetary policy success in Keynesian terms is hold the channel particularly against higher Fed Funds. A higher Fed Funds means more slow and dead volatility remains but market prices will operate against the next highest range plateaus.

The 65 day or less new holding period represents 2 Fed Maintenance periods at 70 days, 2 Fed meeting periods and /or 3 months if viewed from 20 trading days per month. Knut Wiksell is alive and well.

The topside to 1.25 is  protected by interest reserve payments and by 3 month Libor at 1.46 while the OIS spread at current 0.30 protects Fed Funds to trade to zero. Viewed from American markets specifically, OIS runs from 0.13 to 0.19.

In normal market trading, bottomside Fed Funds is protected but if markets crash, Fed Funds is vulnerable and this explains the Fed’s cautious approach, the long term view and the slow rise to Fed Funds despite the 9 year wait. A higher Fed Funds raises the OIS spread therefore against a market crash or severe correction, Fed Funds in the longer view is well protected from zero.

Market price volatility is held hostage by the Fed and its small ranges to control over Fed Funds. From 2008, brought Fed tools and replaced the Fed’s traditional obligation to add and subtract weekly money to the financial system. Floating weekly money supplies and floating Fed Funds dictated a market price and volatility but Fed tools, Repo Rates and QE reversed market volatility to condense prices to ranges. All central banks adopted the Fed’s approach.

January 2017 defined Inflation and the 2% target as ” the annual change in price index for Personal Consumption Expenditures”. Overall 2% is a giant number in relation to a CPI index and its many variable price components.
The new Stanley Fischer policy offered and adopted by the Fed is to view the 2% target acceptable if its within the 2% range. The new 2% is seen as a goal, not a ceiling and the range means slightly above or below 2% but not far above or far below. To far above or below means a policy response by the Fed is mandatory and a policy response is defined as an interest rate raise or drop to bring CPI back to range. Why interest rates is because Inflation percentages and Fed Funds share an opposite correlation.

The model to follow is Canada’s October 2016 renewal to its Inflation Control targets as 2% is the mid point to 1% and 3%.

Current CPI annual 2016 average was 240.0 against a low Inflation rate at 1.3%. The 2017 annual average at 2.0% must see the CPI index at roughly 244.8. Current CPI in Oct reported 246.6 and a 2017 range from January 242.8 to September’s 246.8. Current CPI is running slightly above 2.0 %.

To the credit of Keynesians, Fed Funds maintained its mid point close for a vast majority of days from 2016 to 2017. Normally 2 to 3 days per month sees Fed Funds close far below  but this daily pattern changed as repo traders maintained the 25 point channel. Only 3 times in the past 78 trading days has Fed Funds closed at 1.06 and 1.07. The questionable days are now month and quarter end.

What the Fed created was the 25 point channel rather than the current $2.3 trillion daily trade in repo markets. Repo market daily trade volumes  in 2015 went from $2.2 trillion and 48% Treasury and Mortgage securities as collateral to $2.3 trillion and 54% Treasury and mortgage securities as collateral. Despite lofty numbers, volumes are down significantly from the $4.8 trillion 2008 peaks. The increase in Treasury and Mortgage lend / collateral is derived from new SEC rules to Money market funds.

Under the 25 point channel, monetary policy is measured a success as 2016 and 2017 was a steady time without alarm bells on the horizon. Monetary Policy is expected to see more of the same in all 2018.

Despite Fed criticism, Yellen’s road was quite a balancing act. How Yellen will be viewed overall is more interesting. One view is Yellen is a transition chairperson as she steered the US back to economic health. She then paved the way for Powell to continue unabated. Then the question to policy and timing. Is Yellen policies correct and in relation to time or not correct policies as in to little to late. Fed policy affects world economies as the copycat syndrome dominates.  Good question is the left / right divide to economic policies. The jury is still out.

 

Brian Twomey

EUR, AUD, NZD, JPY, Fed 2016 to 2017

Next post is a long review to Yellen as well as 2016 and 2017 Fed Monetary Policy. Yearly monetary policy is established every January as this meeting represents the Fed’s organizational meeting. Tweeks to policy are done if needed in the middle of the year such as Yellen’s increase to QE around May 2015. Tweeks or changes to monetary policy won’t be seen in the OCT / Sept period traditionally as this time represents not only budget time for the US but the Fed’s Yearly investments are recommended and implemented at this time.

Yet this time doesn’t stop deeply conservative, deeply ideological Yellen to warn against tax cuts. Its impossible for Yellen to overcome her deeply ingrained Keynesian disposition. Given a full Fed board of Keynesians against the same shared ideological dispositions, Board member votes become an exercise in Irving Janus groupthink as Keynesians all vote as 1 solid block.
Given a negative or positive view to life and economics, ideological predispositions always chooses negative and this negative view is what stopped economic progression over years as Keynesians abilities just can’t move forward. It took 1 year to raise Fed Funds in 2015 and this is just one example of many meanwhile Fed Funds traded 0 to 1/4.

Here’s 3 examples. The weather and hurricanes are back to explain low GDP. Obviously its been raining and cloudy over the past 9 years with 2% GDP. Given small numbers in unemployed persons Vs the vast majority employed, which way is the focus. The positive majority employed or negative small numbered unemployed. Kook ball Yellen took unemployed to a new low. How about new Inflation Language. Sure looks and sounds like Canada’s October 2016 revamp of Inflation targets in ranges. Yellen’s message is i’m trying to balance negativity against mandates to move forward and I’m struggling.

If GDP hit 5% today, the message would be negative. Negative explains why EUR rises on every Fed statement.
Yellen and the Keynesians in post 2008 are the Arthur Burns of our time. If markets were allowed to function on their own without the spookiness in Fed tools, where would markets trade today. Yet the negative in Yellen and Keynesians were balanced against her overall economic approach.

Fed Statements are defined as policy as opposed to law. The majority vote implements policy yet a majority vote may rescind policy. Once policy is voted, its written in the statement and reported month after month using exact same words. An activist Fed against new policies increases the number of statement pages. No policy changes means Statements are reported as the same document every month, same words, same everything.

Statement commonalities for market moving purposes month after month, decade after decade, reports Inflation and Fed Funds up or down then economy good or bad. Fed Minutes are statements yet restated but stated succintly using same words, same old document reported month after month. Statements are market moving documents rather than minutes because a statement might contain new information.

Criticism to those reporting on 1 statement as this represents 1 moment in time and its meaningless pablum respectfully, as the full Fed statements over time must be seen to understand the Fed’s approach, philosophy,, orientation, tools. We’re dealing with Keynesians and to their credit, they provide crystal clear roadmaps. The statement may report for example Fed Fund raise probabilities but gazillions of prior statements reveal probabilities to the Fed board is meaningless information. The current Fed statement reports 87% probabilities to a December Fed Funds rise. Severe caution is warranted as this probability report has been seen time and time again. June 2015 is just one of many examples.

The view overall appears as 2016 and 2017 has been a good ride for the Fed against only minor, minor changes. The EUR was hit in July 2017 by Fed policy but this is unclear so far to the what question.

EUR/USD. Overall break points, 1.1796 and 1.1681. Bottom sides continues to rise and its the line to watch. A break of 1.1879 targets low 1.1900’s while 1.1821 provides the support point.

AUD/USD. Overall break points are close at first 0.7682 then 0.7832.

NZD/USD. Overall break points are located at 0.6989, 0.7125 and further out, 0.7271.

USD/JPY break points 111.61 and 112.25.

 

Brian Twomey

 

EUR and GBP: Levels, Ranges, Targets

New Zealand Dairy prices moved 3% and I’m in utter schock why NZD/USD traded 2 pips on this stunning news. AUD/USD moved 50 pips and I’m in utter schock again as Iron Ore didn’t move 1 pip. A jar of coffee in my grocery store dropped 3 cents, DXY went higher. Maybe attributable to Queen Yellen’s Inflation thing. What explains USD/CAD’s 50 pip move and WTI moved 1 point. Could it be the WTI / Brent spread or maybe Canada’s premiere oil WCS.

Stunning developments in currency prices must be attributable to those fickled traders and their money as they just don’t know what they are doing. Must be the liquidity thing as this surely distorts the price. Maybe the platorm is off kilter as a 3 cent move in a jar of coffee and 2 cents in NZD milk might reveal a problem if the exchange rate doesn’t move. Only if North Korea fires a missle today into Tokyo and USD/JPY drops 200 pips will I call the authorities or my banker. Then I will know this whole currency price thing is rigged against me. Myths and realities of exchange rates continue and the retailers are in the cross hairs. Students of the markets and I know a few must still exist, should read Fxstreet pre 2008. Such excellent commentary.

GBP/USD overall break points, 1.3154 and 1.3130. Bottom side is rising, same as EUR/USD 1.1798 Vs 1.1675. Lower for GBP must break 1.3226, 1.3209 then the rough points at 1.3209 and 1.3201. Higher remains equally rough as breaks must be seen at 1.3253 and 1.3266 to target anything near today’s tops at 1.3319 and 1.3329. Do you think Hammond or UK reports will move the market today. Not if the BOE has its way as they ring fenced GBP.

EUR/USD. Overall Break Points, 1.1798 and 1.1675. Big move from the bottomside as Monday was 1.1611. EUR big break move is on the way. Higher for EUR must break 1.1769 then 1.1798 is challenged. EUR top today is 1.1833 while shorts must break 1.1726 to target 1.1717 and 1.1703.

Both GBP/JPY and EUR/JPY sit just above vital break points at 147.58 and 146.79 while EUR/JPY breaks are located at 131.63, 131.56 and 131.22. At 131.56 is the 14 year average to offer 131.56’s vital import.

GBP/JPY break at 148.61 targets 148.31, 148.12 and rough point at 148.03. Above must break 148.61 and 148.76 to target 148.99 and `149.23.

EUR/JPY below 132.58 and 132.45 targets 131.44 and 131.27 while above 131.58 targets 132.72.

Brian Twomey

GBP, EUR, 24 Hour Results: Levels, Ranges, Targets

AUD/USD’s 24 Hour Range ahead prediction was 0.7589 and 0.7584 Vs 0.7538 and 0.7518. AUD caught the low at 0.7532 and skyrocketed to exactly 0.7584.

USD/JPY 24 Hour Range ahead prediction was 111.93 to 113.55. To see 113.55 then 112.69 must break. USD/JPY touched 112.70. Both AUD and USD/JPY hit range tops and now trades lower.

EUR/USD now trades at its lower end break point at 1.1723. A break then comes 1.1707, 1.1699 and 1.1686. The overall most important break points are located at 1.1798 and 1.1671. Above 1.1723 targets 1.1766.

GBP/USD. Overall break points are located at 1.3154 and 1.3125. Lower for GBP must remain under 1.3244 to target 1.3217, 1.3199 and a massive line at 1.3184. Above 1.3244 comes next 1.3257 then a wide swath of land to 1.3318. GBP touched already today 1.3267 and 10 pips above 1.3257.

GBP/JPY below 148.99 then comes 148.69, 148.51 and a massive line at 148.32. Above 148.99 comes 149.14, 149.51 and 149.89.
Brian Twomey