Trades: AUD/USD, USD/JPY, USD/CHF, EUR/JPY and NZD/USD

 

Thank you all for many views lately. Here’s trades for the week, wait for the entry price to trade.

 

AUD/USD

Long 0.6841 and 0.6821 to target 0.6916, Long Term Target 0.7200’s easily

 

USD/JPY

Long 107.79 and 108.05 to target 108.56. Below 107.79 then long 107.54 to target 108.56

 

USD/CHF

Long 0.9891 and 0.9902 to target 0.9953.

 

NZD/USD

Long 0.6474 to target 0.6551. Long Term Target 6859 easily

 

EUR/JPY

Long 121.43 and 121.08 to target 122.12. Long Term Target 125.00’s

 

Brian Twomey

 

 

Advertisements

11 Central Banks Overnight Interest Rates

Overnight Rates Mid Point CHF V FED 1.32,
Total Range CHF Vs Fed 2.12.
Explains Dead Markets,
Prices compressed and trades below 5 Year averages, applies to currencies, Commodities and Most Financial Instruments.
Fed Cuts and Not seen reason why then cut means more dead ranges and price compression.
Higher goes all prices then higher goes ranges to follow. Its stats, Ranges are in stats.
Forget the ridiculous word volatility, its meaningless. stated by traders to impress.
Of 29 Currency Pairs, only 8 pairs trade above 5Y average. DXY trade above, big deal, DXY is dead, un trade able as any viable trade.
Better currencies to trade.
Fed Funds 2.38
Japan 0.99
Europe 0.63
New Zealand 1.50 ish
GBP 0.70
Canada 1.73 Corra Vs 1.74 OMMFR
Sweden 0.75
Norway 1.01
Denmark 0.35
      Brian Twomey
    My trusted friend, http://tantalumwatches.com  exquisite top brand name Watches, #watches, Pocket Watches, Rings, luxurious, please have a look, Brian Twomey

WTI June 17

Recall the WTI trade last December from 44 ish to 52 for 8 quick points in 1 or 2 days. It was the best and only trade available.

The recommendation then was leave WTI alone above 52.00’s. For 6 months, WTI traded above 52, around significant averages and trended higher at barely 2 points per month. The top at 60’s was missed but my specialty is currencies so wasn’t interested in a top.

What changed since December was the overall averages changed slightly yet to no significance but ranges remain today as then at maximum 22 points.

Why dead ranges is because WTI contains negative correlations to DXY, 2 and 10Y Yields, S&P’s, and Fed Funds.

WTI Positively correlates to GDP. If GDP goes higher then WTI will follow. WTI is a lost price and doesn’t have a clue where to trade.

I suspect many other commodities also contain dead ranges and no correlations. The reason is a vast majority of currency and commodities trade below 5 year averages. Of 29 Currency pairs including DXY, 8 trade above 5 year averages while 21 pairs trade below. WTI trades below at 56.69.

If the FED Cuts interest rates and I haven’t seen a good argument as to why then ranges for all financial instruments, including currencies will compress further. The higher prices travel then the expansion of ranges will be seen and the faster prices will move. Downside won’t experience the same quickness to drops as prices are already deeply compressed and lay on the floor.

The top in WTI is located at 63.71. At 56.69 represents a big break for WTI to move higher but 53.02 and 56.06 must break. The next trade we want entry at around  48.75 to target 51.89, 52.46. A break at 53.02 then targets 56.06.

As in Currency Trading, its imperative to know  entry and exit but it is just as vital to wait for the price, no matter what it takes. Why no touch above 52 is because, WTI wouldn’t perform well and the call was correct.

Brian Twomey

Effective Lower Bound V Zero Lower Bound

 

sr877.pdf

My speculation is Effective Lower Bound addresses the decades old central bank problem to managing Inflation rather than focus on interest rates judging by the above paper.

The math in the paper looks complicated but they used Taylor Rules and Taylor Rules are simple to factor and know the appropriate Fed Interest rate in relation to Inflation and GDP. By Q to Q, I factored the appropriate interest rate at 3.24.

Taylor Rules

Inflation +0.5 X (Inflation Minus Inflation) + 0.5 X (GDP Minus GDP) + Current Interest rate.

The 0.5 is called a Coefficient for math Purposes and anchors the Interest rate V Inflation and GDP relationship.

Taylor Rules Using 1.5 and 90 Day Interest rate

Target = 90 Day Rate + Inflation target +1.5 X (Inflation Minus Inflation ) +0.5  X Output Gap.

Only slight differences between the 2 calculations.

 

Fed V Inflation V Fed Funds V GDP

The Fed Set up is to anchor Inflation as an average or range from 1.75 to 2,.00,
Fed funds at 2.25 and 2.13 as daily trade able Rate
GDP anchored comfortably from 2.00 to 3.00.
Recall many Fed Minutes ago, Inflation within range of 2.00, above and below is acceptable.
Looks like this on a cut to Fed Funds 2.25.
1.75 to 2.00 Inflation average or range
Fed Funds 2.25
GDP 2.0 – 3.00
This means Fed Funds daily Trade Rate at 2.13, not a terrible position as Fed Funds middle bounds holds distance to Inflation and GDP and has ability to change in relation to GDP and Inflation Data. Fed Funds becomes the equilibrium point to adjust.
A No cut Set Up
1.75 -2.00 Fed Funds Daily Trade Rate 2.38 or Fed Funds Headline 2.50
GDP 2.00 – 3.00.
GDP Averages sits comfortably well above 2.0 and has ability at 3.00 and above.
    Brian Twomey

WTI June 17

Recall the WTI trade last December from 44 ish to 52 for 8 quick points in 1 or 2 days. It was the best and only trade available. The recommendation then was leave WTI alone above 52.00’s. For 6 months, WTI traded above 52, around significant averages and trended higher at barely 2 points per month. The top at 60’s was missed but my specialty is currencies so wasn’t interested in a top.

What changed since December was the overall averages changed slightly yet to no significance but ranges remain today as then at maximum 22 points.

Why dead ranges is because WTI contains negative correlations to DXY, 2 and 10Y Yields, S&P’s, and Fed Funds.

WTI Positively correlates to GDP. If GDP goes higher then WTI will follow. WTI is a lost price and doesn’t have a clue where to trade.

I suspect many other commodities also contain dead ranges and no correlations. The reason is a vast majority of currency and commodities trade below 5 year averages. Of 29 Currency pairs including DXY, 8 trade above 5 year averages while 21 pairs trade below. WTI trades below at 56.69.

If the FED Cuts interest rates and I haven’t seen a good argument as to why then ranges for all financial instruments, including currencies will compress further.

The higher prices travel then the expansion of ranges will be seen and the faster prices will move. Downside won’t experience the same quickness to drops as prices are already deeply compressed and lay on the floor.

The top in WTI is located at 63.71. At 56.69 represents a big break for WTI to move higher but 53.02 and 56.06 must break. The next trade we want entry at around 48.75 to target 51.89, 52.46. A break at 53.02 then targets 56.06.

 

Brian Twomey

FX Weekly Trades June 10 -14

Actual 1076 Pips, 10 Trades, 12 Currency Pairs.

GBPJPY triggered today despite 138 -136 drop.

Trade instruction are Easy trend Trades, Ex. GBPJPY long term target 147.00’s. Long only strategy. Few Traders take counter trades for many more weekly Pips. When trades are clear and good then we will take counter trend trades.  I take deep responsibility to trader accounts to ensure constant profits.

Entry and Targets below.

GBPJPY 136.65, target 140.06, Just triggered.

GBPCHF 1.2538, 1.2518, Target 1.2786, Actual 1.2537 -1.2683, +146 Pips

EURAUD 1.6178, 1.6223, Target 1.6072, Actual 1.6115 -1.6365, Add to target.

EURUSD 1.1351, 1.1359, Target 1.1278, Actual 1.1345 -1.1278, +67 Pips. 1.1251, Target 1.1143, not triggered

GBPUSD 1.2685, Target 1.2783, Actual 1.2653 -1.2759, +74 Pips. 1.2815, Target 1.3010 not triggered

GBPCAD 1.6884, 1.6848, Target 1.7096. Actual 1.6793 -1.6969, +121 Pips. 1.7166, Target 1.7236 Not triggered

USDCAD 1.3260, 1.3223, target 1.3368, Actual 1.3229 -1.3344, +115 Pips. 1.3396, Target 1.3449 not triggered.

CADJPY 80.93, 80.40, Target 81.77, Actual 82.14 -81.15 Not triggered

NZDJPY 71.54, 71.18 Target 72.68 Actual 71.54 -72.60 +106 Pips. 72.98, Target 73.69 Not Triggered

GBPAUD 1.8053, Target 1.8246 Actual 1.8133 -1.8246 Not triggered 1.8273, Target 1.8438, Actual 1.8273 -1.8387 +114

EURNZD 1.7218, 1.7248, Target 1.6997 Actual 1.7274 -1.7202, +46, Add and ongoing target

GBPNZD 1.9053, Target 1.9259, Actual 1.9060 -1.9259 +199 Pips. 1.9289, Target 1.9377 Actual 1.9289 -1.9418, +88 Pips.

Note the precision to weekly trades over last 15 weeks of Trade posts

 

Brian Twomey

2 and 10 Yields and Correlations

Monthly averages 1 to 10 years for the 10 year yield severely compressed at current 2.24 to 2.74 and at a maximum range of 50 points. Averages and ranges should spread easily 2 and 3 times from current compression particularly when the 2 year maximum range is 80 points.

From June 2 to 13, the 10 year ranged 13 points from 2.05 to 2.18.

10 year Correlation to DXY is practically lost at 35% and 10% to GDP yet positive at 83% to Fed Funds and positive 80% to the 2 year. Lost correlations to DXY and GDP explains why averages and ranges consolidated as those correlations should trade easily at 80% and above.

Break points to travel higher are located at 2.24, 2.27 and 2.29 to target easily 2.34 and 2.38. Current 10 year from the 1 year average at 2.74 is severely oversold. A far higher yield must break 2.34 and 2.382 to challenge 2.44 and 2.55.

Perfect long points are located at 1.79, 1.82 and 1.87 to target 2.29 and 2.32. A Fed interest rate cut may easily challenge those lower levels further.

The 2 year averages range from 0.91 to 2.52 and a maximum span of 80 points. The 2 year exceeds the range of the 10 year by 30 points. If a trade is warranted then the 2 year is a better trade. The 2 year is overbought from 0.91 and deeply oversold from 2.52.

From June 2 to 13, the 2 year ranged 16 points from 1.77 to 1.93.

Correlation to the 2 year stands on more solid ground than the 10 year as DXY correlates at 80%, S8P’s at 96%, Fed Funds at 99% and 80% to the 10 year. As in GDP correlations to the 10 year, the 2 year is negative 29% to GDP.

Vital supports for the 2 year are located at 1.437 and 1.347. Below 1.347 targets 1.18 and above 1.437 targets 1.80, 2.19 and 2.52. Perfect long point is located at 1.67 – 1.75 to target 2.19. if the Fed cuts then the 2 year travels lower to challenge 1.437 and 1.347.

Brian Twomey

GDP June 2019

GDP at last reported 3.1 skyrocketed over its 10 year average at 2.57 and now sits in ranges from 2.57 to 4.05. GDP below sits comfortably at 2.00 and its 5 year average at 1.98. Overall GDP averages from 1 to 3 year are slightly overbought but in total the averages are in great shape. This means GDP contains no problems for 2.5 and middle 2.0 ‘s from today to infinity.

As was the same scenario under Reagan in the 1980’s, tax cuts were directly responsible for GDP’s fast rise but Trump added extra benefits to slash Obummer’s regulatory burdens and trade wars forces US companies to operate again in the US. Trump’s plan in my estimation is to bring home the powerful manufacturing base so then to export and possibly reduce reliance on traditional service exports. The last positive trade balance in the US was 1975 then the 1960’s.

A Trump re election in 2020 and control of the House of Representatives means a cut to Personal Income taxes and an economy that skyrockets at 4 nd 5% GDP to infinity.

Next points below 2.57, 2.49, 2.46, 2.32 and 2.29. Currently overbought from lower averages at 2.17, 2.21 and 2.29.

Off the charts at 3.1 may explain why GDP correlates Positively to WTI and barely to the 10 year yield while negative to DXY, 2 year, Fed Funds and the S& P’s. GDP is lost at 3.1 and needs a correction to then travel higher and to re correlate to its own financial instruments.

Interesting fact is AUD and NZD GDP out performed the US every quarter since March 1990 while the UK and Japan under performed every quarter since 1990.

Correlations 120 data points

GDP Vs 10 Year Yield

Correlations 10%, Vital Averages 2.20 Vs 2.38, GDP 5 year average 1.98 Vs 10 year at 5 year average 2.27. Max range for 10 year is 50 ish points but Max spread relationship is 16 points.

GDP Vs DXY

Correlation -73%, Vital points 2.29 Vs DXY 92.44 yet 5 year average 94.72.

GDP Vs 2 year Yield

Correlation -29%, Vital points 2.20 Vs 1.437 and 5 year at 1.347.

GDP Vs WTI

Correlation 83%, solid to hold in the future. Vital Points 2.20 Vs 63.71 and 5 year average 56.69

GDP Vs Fed Funds

Correlation -22%, Vital Points 2.20 Vs 0.98 and 5 year average 0.84. The spread in this relationship is 0.57, extremely low.

GDP Vs S&P’s

Correlation -45 %, Vital points 2.20 vs 2300.342 and 5 year average 23399.47. The spread in this relationship is 294 points.

 

Brian Twomey

WTI Correlations Vs 2 and 10’s, Fed Funds, S&P’s, GDP, DXY

Based on 120 data points. WTI price is a lost soul

WTI Vs DXY

Correlation -95% Vital Points 63.71 Vs 93.44 WTI Max range 22 points

WTI Vs 2 Year Yield

Correlation -64%, R2 =0.40 Vital Points 63.71 Vs 1.437, the 5 year average 1.347, Max Range 80 points V WTI 22 Points

WTI Vs GDP

Correlation -83%, R2 =0.69 Vital Points 63.71 Vs 2.207, GDP 5 year average 1.98, Max Range bout 80 Points

WTI Vs S%P’s

Correlation -78% R2 =0.61 Vital Points 63.71 Vs 2300.342, the 5 year average 2339.47, Max range bout 500 Points

WTI Vs Fed Funds

Correlation -57%, R2 =0.33 Vital Points 63.71 Vs 0.98, The 5 year average 0.84, Max Range roughly 1.56, equate to 2.0 -3.25

WTI Vs 10 Year

Correlations -13%, R2 =0.01 Vital points 63.71 Vs 2.382, the 5 year average 2.27, Max Range 56 Points, 2 Year V 10 Max ranges 80 Vs 56 Points.

 

Brian Twomey

 

 

EUR/USD Undervalued

quick view chart

This picture is Eonia, the overnight rate to the ECB and governs all Europe and all EUR currency pairs. It is suppressed on purpose by the ECB to ensure always a lower yet severely undervalued EUR. Trump’s words this morning was again absolutely correct and this chart is the evidence, particularly when negative rates began in 2014 but the drop to negative began in 2012.

 

Brian Twomey

Fed Funds Rates, Averages and Correlations

Since the last Fed raise to 2.50, the daily trade able fed funds effective rate closed and traded at 2.38. From monthly averages 1 to 24 years, Fed Funds effective trades between 2.13 to 2.47. The wide distance between averages is explained by lower averages from the 4 year at 1.02 to the 22 year at 2.19 then 2.47 at the 24 year.

Middle averages since Dec 15 raises moved and are moving extremely slow to center positions to cause a wide divide between shortest and longest term averages. The entire 27 year average curve runs from 0.48 to 2.61 against a 1.54 mid point.

Middle averages overall are overbought yet shortest and longest term averages reside in good positions. A clear explanation why forecasts range from 1 cut, 2 cuts to zero cuts but a further commentary to exactly what the data reveals.

If the Fed cuts once to 2.25 then Fed Funds effective would trade at the 1 year average at 2.13 as a cut in headline means 12 1/2 points lower must factor to assess the position of the daily trade able rate. Further, 2 cuts means the Fed Effective rate trades at 1.88 and directly at the 20 year average.

Current ECB rate at 0.63 Vs 2.38 reveals a 174 point distance, a cut to 2.26 slashes the distance to 162 points, CAD 1.74 V 2.38 distance is 64 points and closest proximity to the FED among all G10 nations.

JPY 0.94 Vs 2.38 = 144 points, AUD 1.25 Vs 2.38 =113 points, NZD 1.50 Vs 2.38 = 88 points, GBP 0.70 vs 2.38 = 168 points and 212 points CHF from 0.26 to 2.38. Fed cuts to 2.26 compresses interest rate distances further.

Distance and interest rate compression as practiced since the 2008 crash means 21 currency pairs trade below 5 year averages while 8 currency pairs to include DXY trades above. The 8 currency pairs as follows share a commonality as all are considered USD pairs: EUR/GBP, EUR/AUD, GBP/AUD, EUR/NZD, USD/CAD, USD/CHF, EUR/CAD and DYY. Slash interest rate distances automatically cuts price movements.

Always was my contention in past writings the FED lifted rates far to late, to fast and at the 1.0 vicinity while post 2008 lows hit at 0.02 and 0.06 and a perfect time for liftoff if normalization was the serious policy move.

If the Fed cuts and the If question is why then I see a one and done without a need to move further, particularly when GDP averages remain extremely healthy to see 2.0’s from now to infinity.

Consider as well a cut means in positive correlation terms, lower 2 and 10 yields, S&P’s, DXY and negative to GDP and WTI. Understand WTI correlates to nothing, literally and is a lost price, floating without purpose or direction.
120 month data below per financial instrument.

FED Funds Vs DXY Correlates healthy 76%

Vital Fed Funds average = 0.98 Vs 92.44 for DXY yet the 5 year year is located at 94.72.

,Fed Funds vs 2 year Correlates 99%,

vital averages below 0.98 Vs 1.437 and 5 year at 1.347.

Fed Funds Vs 10 year Correlates 83%

Vital averages 0.98 Vs 2.382 and trades below the 5 year at 2.34

Fed funds Vs GDP Correlates minus 22%

Vital averages 0.98 Vs 2.20 GDP and 5 year average at 1.98

Fed Funds Vs WTI Correlates minus 57%

Vital averages 0.98 Vs 63.71 and 5 year average at 56.69.

Fed Funds Vs S%P’s Correlates 94%

Vital averages 0.98 vs 2300.348 and 5 year average at 2339.47.

The interesting aspect to GDP is AUD and NZD outperformed GDP in the United States every quarter since 1990 while the GBP and JPY under performed every quarter since 1990.

 

Brian Twomey

S&P Correlations V WTI, Fed Funds, Yields, DXY, GDP

 

S &P Correlations

Most Interesting S & P Negative Vs GDP and WTI means movement in opposite directions

S&P Vs DXY Correlation = 91%, R2 =0.83

Bottom most Significant Averages for trend change 2300.342 Vs 92.44

S&P Vs GDP Correlations -0.45% R2 =0.21,

Bottom Most Significant averages for trend change 2300.342 Vs 2.207

S&P Vs 2Y Correlations 96% R2 =92%

Bottom Most Significant averages for trend change 2300.342 Vs 1.437

S&P Vs WTI Correlations Correlations -78% R2 =0.01

Significant Averages 2300.342 vs 63.71

S& P Vs 10Y Correlations 63% R2 0.39

Significant Averages 2300.342 Vs 2.38

S&P Vs Fed Funds 94% R2 Vs R2 0.88

Bottom Most Significant Averages 2300.342 Vs 0.98

 

Brian Twomey

FX Trade Results Feb 22 -June 7

 

Total Available Pips 14 weeks 43,199, Vs Actual profit Pips 19,466

Total Available Pips 14 week average 2843 vs Actual Pips Average 1314.

We profit on Average 1314 pips per week on 12 currency pairs. We maintain profit at least 50% of all traded pips on 12 currency pairs. More Available Vs Actual is explained by Contingency Trades for trades at significant MA Break Points. Those Vital points may or may not break in any given week but we’re prepared.

Available Vs Actual

3347 Available Vs Actual 1187

3185 V 2 pips

3317 vs 1162

2988 Vs 126

2422 Vs 1979

2793 Vs 794

2740 Vs 957

2263 Vs 1033

3804 vs 1127

3195 v 1700

2942 Vs 1962

2311 Vs 1979

2094 Vs 1800

2404 vs 2592

 

Brian Twomey

 

FX Trade Results June 2-7

Actual 1187 Pips, 13 Trades, 12 Currency Pairs.
Missed entry GBPCAD runs -153. No Problem. Add Lot, long into next week.
Entry, targets and Pip counts below.
EURAUD 1.6214, 1.6244, target 1.6094. Actual 1.6196 -1.6067, +102 pips. 1.6035, Target 1.5914, not triggered.
GBPUSD 1.2695, 1.2667, Target 1.2863. Actual 1.2612 -1.2764. +97 Pips. 1.2891, Target 1.3003. Not triggered.
GBPCHF 1.2688, 1.2715, Target 1.2945. Actual 1.2660 -1.2557, Not triggered.
GBPJPY 136.65, 136.78, Target 141.57. Actual 136.61 -138.20, +159. 142.55, target 143.52, Not triggered.
GBPCAD 1.7009, 1.7038, Target 1.7193. Actual 1.7114 -1.6886. -153, Add lot, Long. 1.7256, target 1.7378, Not triggered.
EURNZD 1.7170, 1.7248, target 1.7014, Actual 1.7151 -1.7014. +137. 1.6936, target 1.6858. Actual 1.6936 -1.6910. +26. Total 163.
USDCAD 1.3482, 1.2515, Target 1.3422. Actual 1.3525 -1.3422. +93. 1.3386, Target 1.3255. Actual 1.3386 -1.3263. +123. Total 216.
EURUSD 1.1136, Target 1.1215. Actual 1.1160 -1.1215. +55. 1.1244, target 1.1351.Actual 1.1244 -1.1348. +104. Total 159. CADJPY 80.48, 80.69, Target 82.39, Actual 80.01 -81.61. +113. 82.61, Target 83.45, Not triggered.
GBPAUD 1.8242, Target 1.8347, Actual 1.8126 -1.8268. +26. FX
GBPNZD 1.9257, Target 1.9378. Actual 1.9360 -1.9092. Not triggered. 1.9417, target 1.9614. Not triggered.
NZDJPY 71.23, 70.87, Target 73.05. Actual 70.99 -72.15. +116
                       Brian Twomey

FX Trade Results Feb 22 -May 31

 

Total available pips 14 weeks 39,852 Vs Actual profit pips 18,279

Total available pips 14 week average 2845 vs Actual pip average 1363.

We profit on Average 1363 pips per week on 12 currency pairs. We maintain profit at least 50% of all traded pips on 12 currency pairs. More Available Vs Actual is explained by Contingency Trades for trades at significant MA Break Points. Those Vital points may or may not break in any given week but we’re prepared.

Available Vs Actual Pips

3185 Vs 0

3317 Vs 1162

2988 Vs 126

2422 Vs 1979

2793 Vs 794

2740 Vs 957

2263 Vs 1033

3804 Vs 1127

3195 Vs 1700

2942 Vs 1962

2311 Vs 1979

2094 Vs 1800

2404 Vs 2592

3376 vs 1768

 

Brian Twomey