Tianzuida ON TRADING

EUR/USD in January 2020 traded 1.2359 and DXY 90.44 or roughly 3300 pips. The EUR/USD Vs DXY distance was to wide for the market to allow further EUR/USD highs and DXY lows. The reversal to EUR/USD shorts and DXY longs began.

Along the way to EUR/USD shorts and DXY longs were 2 vital crossovers at 1.0800 and 1.0300. The EUR/USD break below the 5 year average at 1.0800’s targeted 1.0300’s. Since 1.0300’s was the first EUR/USD V DXY crossover, EUR/USD traded to 0.9500’s for an additional 1300 pips. When DXY crossed over EUR/USD at 108.00 allowed DXY to travel 700 pips to 114.00’s.

In 2 years, EUR/USD traded 2800 pips lower to 0.9500’s or 2800 pips at 1400 pips per year while DXY traded to 114.00’s from 90.00’s at 1400 yearly pips.

As EUR/USD dropped from 1.1275 highs in July and DXY rose from 99.00 lows, the next and fourth historic EUR/USD V DXY crossover is upon us at 1.0600’s.

Currency markets trade in a precarious yet rare situation by a EUR/USD and DXY crossover. From 1999 to January 2003, EUR/USD traded below DXY. The only crossover occurred in 2003 when EUR/USD traded above DXY to become a 20 year permanent fixture to markets. This situation remained until DXY and EURUSD crossed at 1.0300’s and 1.0800’s.

EUR/USD traded deeply oversold and DXY overbought at the 1.0300 and 1.0800 crossover yet most vital was the crossover as this began a new trend. The current possible crossover at 1.0600’s is a replica of 1.0300 and 1.0800 as EUR/USD trades massive oversold to DXY overbought.

The essential ingredient to markets is distance as EUR/USD and DXY. No such concept as distance exists today as markets and trade ranges for all financial instruments trade daily minimums. Markets simply died as traders wait for the EUR/USD V DXY resolution. More importantly, statistical ranges compressed to the point of a EUR/USD and DXY marriage.

The immediate effects are to anchor currencies since DXY and EUR/USD are classic anchor currencies. Cross pairs are secondary as anchor currency movements are responsible for cross pairs moves.

Note weekly overbought USD/JPY vs oversold GBP/JPY and EUR/JPY. JPY cross pairs lack a clue to direction as certain days JPY cross pairs exceed USD/JPY and other days, JPY cross pairs outperform. USD/JPY although overbought trades its correct ranges daily and weekly and is a well functioning currency.

EUR/AUD sits at 1.6522 and waits for the next move and the same as GBP/AUD at 1.9112. GBP/NZD and EUR/NZD merged into 300 and 400 pip ranges. EUR/CAD and GBP/CAD as middle currencies in the distribution are natural small range currencies and is disregarded to the EUR/USD and DXY crossover. EUR/CAD and GBP/CAD will continue as small range movements.

Markets are forward traded instruments and never trade the hear and now in the present as all financial instruments trade for tomorrow and long into the future. The current market price is always wrong and explains why never trade it. Its traders greatest mistake.

EUR/USD Vs DXY separation is mandatory to create functioning markets again and this warrants concepts to a big move is upon us.

Not only is the crossover most vital but DXY trades above 50 year monthly averages at 99.00’s which means EUR/USD trades near its 50 year monthly average.

USD/EM reveals massive overbought for a vast majority of currencies. The end result to a EUR/USD V DXY crossover for this round should be extremely shallow.

Brian Twomey

EUR/USD in January 2020 traded 1.2359 and DXY 90.44 or roughly 3300 pips. The EUR/USD Vs DXY distance was to wide for the market to allow further EUR/USD highs and DXY lows. The reversal to EUR/USD shorts and DXY longs began.

Along the way to EUR/USD shorts and DXY longs were 2 vital crossovers at 1.0800 and 1.0300. The EUR/USD break below the 5 year average at 1.0800’s targeted 1.0300’s. Since 1.0300’s was the first EUR/USD V DXY crossover, EUR/USD traded to 0.9500’s for an additional 1300 pips. When DXY crossed over EUR/USD at 108.00 allowed DXY to travel 700 pips to 114.00’s.

In 2 years, EUR/USD traded 2800 pips lower to 0.9500’s or 2800 pips at 1400 pips per year while DXY traded to 114.00’s from 90.00’s at 1400 yearly pips.

As EUR/USD dropped from 1.1275 highs in July and DXY rose from 99.00 lows, the next and fourth historic EUR/USD V DXY crossover is upon us at 1.0600’s.

Currency markets trade in a precarious yet rare situation by a EUR/USD and DXY crossover. From 1999 to January 2003, EUR/USD traded below DXY. The only crossover occurred in 2003 when EUR/USD traded above DXY to become a 20 year permanent fixture to markets. This situation remained until DXY and EURUSD crossed at 1.0300’s and 1.0800’s.

EUR/USD traded deeply oversold and DXY overbought at the 1.0300 and 1.0800 crossover yet most vital was the crossover as this began a new trend. The current possible crossover at 1.0600’s is a replica of 1.0300 and 1.0800 as EUR/USD trades massive oversold to DXY overbought.

The essential ingredient to markets is distance as EUR/USD and DXY. No such concept as distance exists today as markets and trade ranges for all financial instruments trade daily minimums. Markets simply died as traders wait for the EUR/USD V DXY resolution. More importantly, statistical ranges compressed to the point of a EUR/USD and DXY marriage.

The immediate effects are to anchor currencies since DXY and EUR/USD are classic anchor currencies. Cross pairs are secondary as anchor currency movements are responsible for cross pairs moves.

Note weekly overbought USD/JPY vs oversold GBP/JPY and EUR/JPY. JPY cross pairs lack a clue to direction as certain days JPY cross pairs exceed USD/JPY and other days, JPY cross pairs outperform. USD/JPY although overbought trades its correct ranges daily and weekly and is a well functioning currency.

EUR/AUD sits at 1.6522 and waits for the next move and the same as GBP/AUD at 1.9112. GBP/NZD and EUR/NZD merged into 300 and 400 pip ranges. EUR/CAD and GBP/CAD as middle currencies in the distribution are natural small range currencies and is disregarded to the EUR/USD and DXY crossover. EUR/CAD and GBP/CAD will continue as small range movements.

Markets are forward traded instruments and never trade the hear and now in the present as all financial instruments trade for tomorrow and long into the future. The current market price is always wrong and explains why never trade it. Its traders greatest mistake.

EUR/USD Vs DXY separation is mandatory to create functioning markets again and this warrants concepts to a big move is upon us.

Not only is the crossover most vital but DXY trades above 50 year monthly averages at 99.00’s which means EUR/USD trades near its 50 year monthly average.
USD/EM reveals massive overbought for a vast majority of currencies. The end result to a EUR/USD V DXY crossover for this round should be extremely shallow.

Weekly
The trade strategy remains long deeply oversold EUR/USD and short massive overbought DXY, USD and USD/JPY.

Best trades are found in EUR/USD, GBP/USD, USD/JPY, EUR/AUD, GBP/AUD, EUR/NZD, GBP/NZD.

Oversold EUR/USD targets 1.0667, 1.0839, 1.0913 and 1.1001.

GBP/USD First target is located at 1.2351. Then the break at 1.2445 to target 1.2600’s.

USD/JPY waits for the break at 144.87 to target 143.02 and 135.51. Disregard speculation to BOJ intervention for at least 2 weeks. Exports were positive for July and August and September is also expected to reveal affirmative numbers.

USD/JPY targets 148.73 and 148.38. USD/JPY 147.00’s are blocked for next week. Longs remain impossible as USD/JPY trades extreme overbought from 116.00’s to 144.00’s.
GBP/NZD trades 2.0622 and 2.0684 Vs bottoms at 2.0272, 2.0261 and 2.0152. At current 2.0400’s, GBP/NZD trades perfectly neutral. Higher must break 2.0684 yet not expected anytime soon.

EUR/NZD trades 1.7878 to oversold 1.7532.

EUR/AUD 1.6524 is the magic number for higher and lower while GBP/AUD 1.9119 signifies higher or lower.

Wide rangers daily trade 100 pip days and best short to accumulate pips while the EUR/USD V DXY resolution materializes.

AUD/USD and NZD/USD trade at Richter Scale oversold. Ranges severely compressed however longs provide pips and profits.

GBP/JPY trades deeply oversold just above its vital line at 180.29. This line is dropping to inform the break is not expected. This week, GBP/JPY traded 100 pips to the line and next week begins at 139 pips.

Oversold EUR/JPY 155.84 for lower. Low 156.00’s are blocked for next week while middle 180.00’s are blocked for GBP/JPY

USD/EM

Massive oversold USD/PLN target 4.1626 while overbought USD/CZK targets 22.9144. Overbought USD/DKK targets 7.0030. USD/HUF targets 364.21.
USD/NOK and USD/SEK trades fairly neutral while severely overbought to USD/RON targets 4.6670.

Brian Twomey

2022 Vs 2015, the BOJ added YCC in 2015 / 2016 and adjusted the YCC bands to expand 3 times in 8 years. To adjust the bands effects Easing and JGB purchases.

YCC = 3M to 10 year JGB yield curve. Inflation is most important to to the BOJ and this is the purpose for YCC and to the 3 adjustments. Only if Inflation becomes a problem will YCC bands adjust again.

Monetary Policy statements don’t move USD/JPY unless a YCC move is expected such as January 2023 to expansion.

Traders line up and write 40 pages of bullshit for Monetary policy statements and nothing moves. Then comes 40 more pages of analysis when none exists or required.

Today, the BOJ released the Minutes from the last BOJ meeting. Any words or analysis. This is most vital as well as the Outlook report.

2022 Below

Statement on Monetary Policy

1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided
   upon the following.
   (1) Yield curve control (a unanimous vote)
   a) The Bank decided to set the following guideline for market operations for the
   intermeeting period.
   The short-term policy interest rate:
   The Bank will apply a negative interest rate of minus 0.1 percent to the Policy-Rate
   Balances in current accounts held by financial institutions at the Bank.
   The long-term interest rate:
   The Bank will purchase a necessary amount of Japanese government bonds (JGBs)
   without setting an upper limit so that 10-year JGB yields will remain at around zero
   percent.
   b) Conduct of fixed-rate purchase operations for consecutive days
   In order to implement the above guideline for market operations, the Bank will offer
   to purchase 10-year JGBs at 0.25 percent every business day through fixed-rate
   purchase operations, unless it is highly likely that no bids will be submitted.
   (2) Guidelines for asset purchases (a unanimous vote)
   With regard to asset purchases other than JGB purchases, the Bank decided to set the
   following guidelines.
   a) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment
   trusts (J-REITs) as necessary with upper limits of about 12 trillion yen and about 180
   billion yen, respectively, on annual paces of increase in their amounts outstanding.
   b) The Bank will purchase CP and corporate bonds at about the same pace as prior to the
   novel coronavirus (COVID-19) pandemic, so that their amounts outstanding will
   2
   gradually return to pre-pandemic levels, namely, about 2 trillion yen for CP and about
   3 trillion yen for corporate bonds.
2. The Bank will continue with Quantitative and Qualitative Monetary Easing (QQE) with Yield
   Curve Control, aiming to achieve the price stability target of 2 percent, as long as it is necessary
   for maintaining that target in a stable manner. It will continue expanding the monetary base
   until the year-on-year rate of increase in the observed consumer price index (CPI, all items less
   fresh food) exceeds 2 percent and stays above the target in a stable manner.
   For the time being, while closely monitoring the impact of COVID-19, the Bank will support
   financing, mainly of firms, and maintain stability in financial markets, and will not hesitate to
   take additional easing measures if necessary; it also expects short- and long-term policy interest
   rates to remain at their present or lower levels.

2015 Below

Statement on Monetary Policy

1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided,
   by an 8-1 majority vote, to set the following guideline for money market operations for the
   intermeeting period:[Note 1]

The Bank of Japan will conduct money market operations so that the monetary base will
increase at an annual pace of about 80 trillion yen.

2. With regard to the asset purchases, the Bank decided, by an 8-1 majority vote, to continue
   with the following guidelines:[Note 1]
   a) The Bank will purchase Japanese government bonds (JGBs) so that their amount
   outstanding will increase at an annual pace of about 80 trillion yen. With a view to
   encouraging a decline in interest rates across the entire yield curve, the Bank will conduct
   purchases in a flexible manner in accordance with financial market conditions. The
   average remaining maturity of the Bank’s JGB purchases will be about 7-10 years.
   b) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment
   trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 3
   trillion yen and about 90 billion yen respectively.
   c) As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about
   2.2 trillion yen and about 3.2 trillion yen respectively.
3. Japan’s economy has continued to recover moderately, although exports and production have
   been affected by the slowdown in emerging economies. Overseas economies — mainly
   advanced economies — have continued to grow at a moderate pace, despite the slowdown in
   emerging economies. Exports and industrial production have recently been more or less flat,
   due mainly to the effects of the slowdown in emerging economies. On the domestic demand
   side, business fixed investment has been on a moderate increasing trend as corporate profits
   have continued to improve markedly. Against the background of steady improvement in the
   employment and income situation, private consumption has been resilient and housing
   investment has been picking up. Public investment has entered a moderate declining trend,
   2
   although it remains at a high level. Meanwhile, business sentiment has generally stayed at a
   favorable level, although somewhat cautious developments have been observed in some areas.
   Financial conditions are accommodative. On the price front, the year-on-year rate of change
   in the consumer price index (CPI, all items less fresh food) is about 0 percent. Inflation
   expectations appear to be rising on the whole from a somewhat longer-term perspective.
4. With regard to the outlook, Japan’s economy is expected to continue recovering moderately.
   The year-on-year rate of change in the CPI is likely to be about 0 percent for the time being,
   due to the effects of the decline in energy prices.
5. Risks to the outlook include developments in the emerging and commodity-exporting
   economies, the prospects regarding the debt problem and the momentum of economic activity
   and prices in Europe, and the pace of recovery in the U.S. economy.
6. Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects,
   and the Bank will continue with QQE, aiming to achieve the price stability target of 2 percent,
   as long as it is necessary for maintaining that target in a stable manner. It will examine both
   upside and downside risks to economic activity and prices, and make adjustments as
   appropriate.[

Brian Twomey

As written for weeks to the DXY and EUR/USD relationship. How bad is it and how horrible are markets currently trading last weeks. No breakout is in sight.

EUR/USD 1.0614 Vs DXY 105.81

EUR/USD 1.0615 Vs DXY 105.80

1.0618 Vs 105.77

1.0625 Vs 105.71

1.0631 Vs 105.74

1.0638 Vs 105.57

Brian Twomey

The BOJ is represented by 9 members to cover Japan’s 9 regions and 47 prefectures. Each board member represents a specific region. Inside regions are cities. Another nomenclature for prefecture is city as 47 Japanese cities. Tokyo for example is located in the Kanto region along with 6 cities.

Each region is specialized. Ueda spoke today in Osaka in the Kansai region and represents the 2nd largest economy of Japan with a population of 20 million. The Chubu region represents the manufacturing base and provides Japan’s exports. Shikoku provides Agriculture and adds to a higher GDP.

The BOJ’s board of 9 members appears as a permanent fixture to never change

.
The question for today is why the mixed messages from Ueda to Interest rates and YCC. Are changes ahead and what will change. What caused the mixed signals or Ueda just talking the Old BOJ lines from decades past.

I submit, its old talk from decades ago as Ueda served as a BOJ board member in 2014. He knew and saw the wholesale changes from 2015 and the positive economic effects. More importantly, the BOJ as a deeply conservative body never renders wholesale changes. Moves are done in tiny increments.

The question to the BOJ is not how great were changes but find the flaws and problems. None exist and none will be found after the current 2 year study is complete.

Ueda’s speech today highlighted every favorite BOJ phrase dating to 2013. Economy recovering moderately is an all time favorite and seen in every BOJ statement, Minutes and Outlook report since 2013.

Monetary Easing has been part and parcel to the BOJ since 2013 and contained in every statement, minutes and Outlook report particularly when Kuroda became BOJ Governor in April 2013 and Prime minister Abe was elected in 2013.

Baseline scenario. Normally refers to future Inflation and / or overall economy assessments.

Virtuous cycle. Refers to Wages and Prices. The BOJ is highly accommodative to Japanese businesses.

Effect of rising import prices likely to gradually dissipate. Ueda’s words today are exactly stated in all BOJ statements, minutes and outlook reports since 2013.

Import Prices. Here’s a common statement from 2013 to 2015. This statement was common for 2013 – 2015. Import prices are expected to exert upward pressure for the time being, reflecting developments in international commodity prices and foreign exchange rates.

Internal and external shocks. Every BOJ minutes and Outlook report references overseas economies. The United States, Europe and China are most vital to the BOJ.
Inflation. Began as a Goal by BOJ Governor Skirakawa in 2012 then target and revolved to today’s, 2% Inflation Target and sustainable.

FX moves to reflect fundamentals.

FX Moves Vs Fundamentals.

2013 = Quantitative easing. Inflation traveled from negative in 2013 to +3.4% in 2015. USD/JPY April 2013 – June 2015 = 92.56 to 125.85 or 3329 pips at 128 pips per month

.
From 2013 to 2015, Import prices were high, Exports flat and Inflation skyrocketed along with USD/JPY. Inflation then dropped back to negative for the next 7 years. USD/JPY traded from 2015 to 2022 in a range from 125.00 to 98.00.

The main driver to USD/JPY moves from 2013 to 2015 was the additional insertion of Quantitative easing as Call Rates fell to the floor.

The driver to markets and fundamentals is the same old money supply V interest rate story. Inflation rise or fall was irrelevant.

By 2015, Quantitative Easing changed slightly from target to the monetary base and JGB yield maturities. Purchases from 3M traveled to 7 year then 10 year yields while the monetary base changed alongside JGB purchases. Remember 80 trillion then 120 and higher.

How vital is Inflation to the United States when interest rates skyrocketed and money supplies dropped like a rock to cause DXY to trade to 114.00 highs from low 90.00’s.

A vital change for the BOJ was to the Outlook Report. From 2013 to 2015, the Outlook report was issued twice yearly. From 2015 to 2023, the Outlook report is released 4 times per year.

What didn’t change since 2013 was the Monetary Policy Statement and to a certain degree as the Minutes. The BOJ went to the copy machines to release the exact same document every year since 2013.

Brian Twomey

This chart is part of a much larger version to the BOJ from 2013 to today. The question was to Ueda Man and mixed messages to raise and YCC. Why and what changed or did anything change. From 2013 to 2015, nothing changed as the BOJ is the same BOJ then and now.

Outlook reports were issued twice per year in 2013 then 2016 began issuance 4 times per year.

Call Rates went negative in 2016 under a 5 -4 vote. Ueda Man was on the Board then. Fresh Food was added as a measure to Inflation in 2014.

2013 = Quantitative easing. Inflation traveled from negative in 2013 to +3.4% in 2015. USD/JPY April 2013 – June 2015 = 92.56 to 125.85 or 3329 pips at 128 pips per month.

Import Prices skyrocketed. This statement was common for 2013 – 2015. Import prices are expected to exert upward pressure for the time being, reflecting developments in international commodity prices and foreign exchange rates.

In today’s Markets, USD/JPY doesn’t rise on upward Import Prices. Plus, Import prices rose along with Inflation. This statement is true today.

USD/JPY movements was the result of Higher Money Supplies Vs Lower Call Rates.

The main question overall. Are exchange rates and in particular USD/JPY movements driven by the same Economic factors today Vs 2013, 2015 and onward.

For the serious among us. The BOJ provides deeply detailed understanding to monetary policy, Economics, markets and exchange rates. But this requires immersion and time. And the entire picture will be seen.

Brian Twomey

DXY highs for the week is expected at 105.94 and 106.05. At 46 pips from the close, EUR/USD bottoms and long at 1.0608, 1.0696 and 1.0585 to target 1.0730. EUR/USD this week eliminates the question to DXY as EUR/USD by its own price trades vastly oversold against limited downside availability.

Overbought USD/JPY targets 147.17 on a break at 148.10. GBP/JPY big break for lower is located at 180.43 and 100 pips from 181.47 current price. USD/JPY lower for the week will assist to a GBP/JPY drop and trade closer to 180.43. The GBP/JPY break will allow all cross pairs to target big breaks such as EUR/JPY at 155.73 and CAD/JPY at 107.14.

For the week USD/JPY trades lower along with JPY cross pairs. EUR/JPY is blocked at upper 156.00’s and CAD/JPY at 108.00’s. GBP/JPY 180.43 will hold this week however next week presents the best shot to cross lower.

DXY same old weekly story to 100 pip ranges above and below current price. Next above is 106.01, 107.18, 108.36 then below at 105.00’s, 104.00’s and every 100 pips to 99.00’s.

The EUR/USD and DXY relationship ensures a market slowdown to ranges and movements.

GBP/USD and AUD/USD sit in the same deeply oversold position as EUR/USD. GBP/USD must trade to minimum 1.2394 then on the way to 1.2400’s and long term target at 1.2736.

AUD/USD beats NZD/USD as the best complement trade to GBP/USD. For the week, higher for AUD/USD and NZD/USD.

Economics

As Central Banks met, the next 6 week cycle begins with Inflation releases. The last 6 week cycle revealed Inflation for all nations ranged from 0.1 to 0.3. The vast majority of nations traded 0.1 to 0.2 but GBP and the UK brought the range to 0.3 by a 0.2 difference to Inflation rates.

The 6 week cycle is actually 2 weeks of economic releases and 4 weeks to central bank meetings.

The first 10 currencies in the weekly line up runs as best and easy trades and profits to least favored.

The list: EUR/USD, USD/JPY, AUD/USD, NZD/USD, EUR/CAD, CAD/JPY, EUR/NZD, EUR/JPY, EUR/AUD, USD/CAD.

The anchor currencies are first and required to create wider trade ranges upon broader movements. The anchor currencies are the same as the DXY V EUR/USD problem to compressed ranges and its the anchor currencies that must drag us out to trade correctly again.

GBP

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

GBP/USD and GBP/CAD hold as best trades for the week while GBP/AUD and EUR/AUD trade neutral and retain last positions.

Brian Twomey

Yesterday, Powell failed to offer reprieve to DXY and to the vital DXY Vs EUR/USD relationship. EUR/USD traded 120 pips this week to 102 for DXY. Neither DXY nor EUR/USD broke significant levels as both are trading inside small and meaningless ranges. Powell offered barely a 40 pip response to yesterday’s Fed meeting.

Viewed as either DXY, EUR/USD or both, the averages barely moved over the past 2 weeks and no changes to overbought DXY and USD VS EUR/USD. EUR/USD is contained next week from oversold 1.0599 to overbought middle and upper 1.0700’s.

DXY is stuck from overbought 105.00’s and oversold 104.00’s and 103.00’s.
As currency prices are the driving force to all financial market instruments, Gold, metals and stock markets will remain trading in small ranges until the EUR/USD V DXY relationship breaks free.

EUR/USD must and will eventually break 1.0797 to trade the range from 1.0797 to 1.0924. Long term target remains 1.1021. Higher, EUR/USD 1.0718 and 1.0749 to challenge 1.0797.

The overall trade strategy remains long EUR, GBP, AUD, NZD Vs short DXY, USD, USD/JPY unless DXY trades a clean break at upper 105.00’s.

EUR/AUD and GBP/AUD Targets

Recall targets on August 13, GBP/AUD traded 1.9500’s, long term targets 1.8841 and just the beginning to targets at 1.8600’s and 1.8500’s. GBP/AUD traded 1.9053 lows and 500 pips.

EUR/AUD August 13 traded 1.7000’s with a minimal target at 1.6200’s. EUR/AUD traded lo low 1.6400’s. GBP/AUD and EUR/AUD trade duration was 3 weeks as trades are on gong until target completion.

Massive oversold GBP/USD targets the break at 1.2521 to trade the range from 1.2521 to 1.2646 and 1.2847. GBP’s long term targets remains 1.2731.

USD/JPY

Lower for BOJ expected. Friday is a horrible day for BOJ as big interest rate changes occur. Next week, USD/JPY trades 149.72 to 147.87. No changes to USD/JPY this week as 100 pips traded and barely 175 pips is expected next week.

GBP/JPY trades 184.99 to 181.65. GBP/JPY 180.53 is required to break in order to trade 179.00’s and 178.00’s.

USD/JPY and JPY cross pairs are caught in the DXY and EUR/USD problem. GBP/JPY traded 136 pips this week and 111 for EUR/JPY.

Overall EUR/JPY traded a 318 pip range over the past 6 weeks and 469 for GBP/JPY.
JPY cross pairs trade oversold to USD/JPY overbought. Again, the DXY V EUR/USD relationship wreaking havoc on markets.

GBP/NZD higher must break 2.0821 and 1.7952 for EUR/NZD.

GBP/CAD, EUR/CAD and AUD/CAD trade Richter scale oversold. Longs for next week.

Overall, the same old weekly problems remain as the DXY Vs EUR/USD relationship must break free to create trade ranges. Failure to break then markets remain trading dead small ranges.

Brian Twomey

Overnight Average 2023. USD/JPY Higher

1 Week Average 2023. USD/JPY Higher

1 Month Average. USD/JPY Lower

2 month Average 2023. USD/JPY Lower

3 Month Average. USD/JPY Higher

1, 2 and 3 Month Average 2023. Blue = 1 Month, Orange = 2 Month, Green = 3 month

YCC Current = 0.855 – 1.718 = 3M to 10Y

The 3 Tiered System =

0.941

1.001

Deposit Facility = 0.90

0.913

Interest Rates

1.001

0.9519

0.941

0.9433

0.9427

0.913

GC = Tokyo Repo Rate = 2022 = 0.80’s ? This rate is most vital but hidden from public view. Must pay to Obtain but not required to trade USD/JPY and JPY cross Pairs Perfectly and for 100’s upon 100’s of pips.

Brian Twomey

The Japanese economic system begins with a positive rise in monthly Producer Prices from 0.1 in July to 0.3 for August. At 0.3 matches April’s highs at 0.3 but far below the 1.0 reading in October 2022. The yearly reading at 3.2 represents a low from 10.06 in December 2022 and not seen in 2022 and 2023.

The predominant driver to Producer Prices for all nations are Commodities and for Japan Petroleum, gas and electricity.

The positive result for Producer Prices provided a higher outcome to the monthly 1.9 issue to Exports. Exports are now running 1.9 as monthlies vs 3.7 on a yearly basis and up from -0.2 and -0.5 on a yearly value.

Imports at monthly 0.9 rose from -0.6 and yearly values at current -11.8 dropped from -14.4 in July . Imports for all nations, particularly Japan is factored by the Oil price. Higher Oil prices drops exports as imports rise.

The current relationship in Producer Prices Vs Imports and Exports assures the BOJ not only won’t intervene to USD/JPY but comments to levels will disappear.

Recall last July. Producer Prices Vs Imports and Exports were on the edge to negative as Imports higher than exports. This explains the BOJ comments to USD/JPY. But this is also the 1990’s approach to lower USD/JPY. The BOJ still believes words alone will drop USD/JPY.

When BOJ officials comment to USD/JPY levels, end of month is always the opportune time. The message is the BOJ are concerned to Imports and exports as both are primary drivers to Japanese economics. Imports and exports are primary drivers to every nation but the western world literally fell asleep to most vital economic indicators.

Exports at monthly 1.9 and 3.7 yearly Vs monthly imports 0.9 and -11.8 is healthy and positive economically. The constructive aspect is Inflation is set to drop and GDP will travel higher. The higher goes exports in the future then more confidence exists to no question to higher GDP and lower Inflation.

Economically, Japan is in recovery mode. Imports achieved highs in 2022 / 2023 and bottoms for Exports. Exports are now on the rise as imports continue to drop. Producer prices and Exports contain a long way to travel higher. The continuation will ensure GDP trades higher and lower to Inflation.

The Japanese recovery will come extraordinarily slow because of the small numbers in the Japanese System but also because Commodities must drop and western nations must also find a bottom to their current destructive ways.

The concern to Japan is the index values as Imports trade 158.00 Vs Exports at 133. and Producer Prices at 119.00. Higher Producer Prices and Exports must continue their winning ways in the months ahead in order for economic recovery to continue.

An interest rate change to the BOJ is viewed as impossible at the present time as a change even by the standard 0.10 would wreck the economic recovery and force the BOJ to completely re work a system working so perfectly.

Japanese Banks remain profitable and the positive is all learned perfectly how to trade Japanese Call Rates by the 3 Tiered system. A paper for another day.

Inflation is the BOJ’s greatest concern and only an out of control Inflation rate would force the BOJ to change YCC bands and interest rates. This is not expected unless the western nations force a change by the chaos reaped on their nations.

Overall, the BOJ is an extraordinary Central bank as they worked extremely hard over years to put together literally a perfect economic system and all the bases are covered in detail.

Brian Twomey

USD/EM currencies trade massive oversold. Enter anywhere or at the market price. Targets are easy and 1000’s upon 1000’s of pips profit exist.

USD/CZK open 23.0260, Target 22.7233

USD/DKK open 6.9960, Target 6.9453

USD/NOK open 10.7889, Target 10.6926

USD/SEK Open 11.1857, Target 11.0930

USD/BGN open 1.8346, Target 1.8214

USD/HUF open 359.87, Target 358.40

USD/PLN open 4.3572, Target 4.2887

USD/RON open 4.6617, Target 4.6203

Brian Twomey

Blue = Spot Market Rate

Orange = Exchange Rate Index

2009 – 2010

2022 – 2023. Note the massive BOJ adjustment

The overall difference is seen since the BOJ totally revamped the exchange and interest rate and economic system in 2015. And YCC introduction

Brian Twomey

The problem exchange rates in today’s markets are located within anchor currencies as EUR/USD, GBP/USD, AUD/USD and NZD/USD. The current prices are far to low and all are responsible to drive markets and to create wider trade ranges. All suffer the effects of a higher DXY over the past 9 weeks.

The low prices to anchor currencies created a further correlation disjunction to wide rangers as GBP/AUD, EUR/AUD, EUR/NZD and GBP/NZD.

GBP/AUD on the way to 1.9970 highs on August 17 correlated to GBP/USD at +88%. As GBP/AUD dropped to 1.9200’s and GBP/USD at 1.2380, correlations today trade at +30% and -91% to AUD/USD.

EUR/AUD correlates to EUR/USD at – 49% and -93% to AUD/USD. EUR/AUD’s price is completely lost and trades without an anchor connection.

AUD/USD was never the concern as AUD/USD correlated to GBP/AUD at -94% on August 17 and today at – 91%. AUD/USD traded highs on August 17 at 0.6450 and opens this week at 0.6427. AUD/USD was never part of the GBP/AUD equation to correlations.

Correlations continue as EUR/NZD Vs EUR/USD at -54% and -94% to NZD/USD. GBP/NZD correlates to GBP/USD at +27% and -92% to NZD/USD.

Anchor currencies continue to trade far to low while wide rangers despite a healthy drop, trade overbought.

USD/JPY Vs JPY Cross Pair Correlations.

The bright side to correlations is USD/JPY correlates to GBP/JPY +96% and +32% to GBP/USD. EUR/JPY correlates to USD/JPY at +97% and -47% to EUR/USD.

The difference today is USD/JPY owns the JPY cross pairs as opposed to past months when USD/JPY shared a fairly 50/ 50 correlation to anchor currencies. EUR/JPY for example correlated to EUR/USD at +50% and +50 to USD/JPY. JPY cross pairs once trapped are now free to travel alongside USD/JPY.

The Week

DXY traded higher every week for the past 9 weeks from 99.00 lows. Dating to 2015, DXY traded many times as 6 and 8 weeks straight higher and straight lower.
DXY above vital levels are located at 105.97, 106.57, 107.18 and about every 100 pips to 110.00’s.

DXY lower trades 104.35, 103.58 and roughly every 100 pips to 100.00’s.
DXY is the true problem currency. Trades are factored as DXY much lower to again challenge 99.00 lows.

USD/JPY trades this week from low 149.00’s to middle 146.00’s. Middle 146.00’s are blocked as the strategy is trade the 146.00 to high 148.00’s ranges.

USD/JPY long term targets are located at 142.19, 134.85 and 130.57. The target at 142.19 is located between the 100 and 200 day average.

EUR/JPY 156.00’s for the week are blocked. EUR/JPY 156.00’s trade at the 100 day average. The week range trades from 156.00’s to 159.00’s and low 160.00;s.

EUR/JPY long term targets are found at 153.18 and 146.56. The 153.18 target trades between the 100 and 200 day averages.

GBP/JPY long term targets 177.96 and 170.10 to start. The bottom at the 253 day average trades at 171.66.

USD/JPY, EUR/JPY and GBP/JPY trade deeply overbought and all contain a long way to drop.

GBP/USD must break 1.2552 and 1.2653 to target 1.2736.

EUR/NZD long term targets 1.7770, 1.7506 and 1.7344. EUR/NZD must trade to minimum 1.7770 on a break of 1.7974.

GBP/NZD break at 2.0868 targets 2.0632 and 2.0289. The bottom 253 day average = 2.0154.

GBP/NZD big line for the week is 2.1200 and 1.8200’s for EUR/NZD.
Easy targets for GBP/NZD and EUR/NZD on short only strategies.

AUD/NZD trades deeply overbought but a warning as AUD/NZD trades as a serious problem currency.

Deeply oversold EUR/USD targets the break at 1.0813 then 1.0930 to target 1.1025.
EUR/AUD next targets 1.6395, 1.6203. The 253 day average = 1.6198.

GBP/AUD next targets 1.9032, 1.8769 and 1.8640. The 253 day average 1.8609.

If AUD/USD and NZD/USD ever decides to trade normal again, the targets for AUD/USD at 0.6609 and 0.6756 are easy to achieve. NZD/USD targets 0.6082 and 0.6243.

Deeply oversold GBP/CAD strategy is long for the week as well as EUR/CAD and NZD/CAD. GBP/CAD and NZD/CAD are preferred trades to EUR/CAD.

Brian Twomey

The proper trade location for any currency price is within averages 5 to 253 days. A price above the 5 day or below the 253 day represents overbought and oversold below the 253 day. Averages must be correct as chart averages are wrong.

GBP/AUD below on August 17 at 1.9970 top. GBP/AUD opens this week at 1.9244. Note the position of 1.9200’s from August to today.

5 day = 1.9723

10 = 1.9580

20 = 1.9473

50 = 1.9264

100 = 1.9026

200 = 1.8588

253 = 1.8425

GBP/AUD at 1.9970 was absent from averages and overbought.

GBP/AUD today

5 day = 1.9387

10 day = 1.9482

20 day = 1.9521

50 day = 1.9535

100 day = 1.9247

200 day = 1.8891

253 day = 1.8609

GBP/AUD dropped from 1.9970 to 1.9200’s as 1.9200’s dropped from the 50 day to 100 day for this day. GBP/AUD today holds a position within the averages.

From 1.9970, averages from 5 to 253 day informed exactly where GBP/USD would trade on the drop. GBP/AUD had to trade to minimum of the 5 day average at 1.9700’s as 1.9700’s was bare minimum.

GBP/USD drove GBP/AUD at +88% correlation August 17.

GBP/USD August 17 as the GBP/USD top was 1.2787. Note overbought GBP/USD from all averages.

5 day = 1.2731

10 day = 1.2733

20 = 1.2747

50 = 1.2813

100 = 1.2679

200 = 1.2471

253= 1.2410

GBP/USD Today

5 day = 1.2463

10 day = 1.2487

20 = 1.2547

50 = 1.2653

100 = 1.2716

200 = 1.2536

253 = 1.2461.

GBP/USD today at 1.2380 correlates to GBP/AUD at +30% and a drop of 58%. The drop and low correlation represents GBP/USD 1.2380 and no presence to averages 5 to 253 day. As GBP/USD trades higher then correlations to GBP/AUD will increase.

AUD/USD Correlated to GBP/AUD on August 17 at – 91%. Today, AUD/USD Correlates to GBP/AUD at – 91% and no change since August.

Note the difference to AUD/USD averages from August to today. The 5 day average was the driver since August and no change today.

AUD/USD August 17 at 0.6450

5 day = 0.6467

10 = 0.6509

20 = 0.6550

50 = 0.6654

100 = 0.66

200 = 0.6712

253 day = 0.6739

AUD/USD Today at 0.6427 open

5 day = 0.6427

10 = 0.6409

20 = 0.6427

50 = 0.6477

100 = 0.6609

200 = 0.6638

253 = 0.6701

Brian Twomey

Many currencies trade at vital do or die to longs and short points. Recall long term targets such as EUR/AUD 1.6200’s. Highs traded 1.7000’s.

GBP/CHF 1.1185

EUR/USD 1.0588

EUR/AUD 1.6568

EUR/NZD 1.7970

GBP/NZD 2.0870

USD/CAD 1.3503

GBP/AUD 1.9242

USD/CHF 0.8908

AUD/NZD 1.0846 stay away from this currency

CAD/CHF 0.6598

EUR/GBP 0.8612

Brian Twomey

The Inflation theme for the current 6 week economic cycle is up by 0.10 or 1/10. Up by 0.10 applies to Europe, Swiss, China, Canada and the United States. The market response to the United states increase from 0.36 to 0.37 was 40 to 50 pips to include all G 28 currencies. GBP/USD and USD/JPY were best trades and EUR/USD clearly was least favored.

The Economic theme not only remains the same but will hold long into the future. Import Prices up = High Exchange rate, Higher Inflation, Industrial production and Lower to GDP, Consumer Confidence.

To Import Prices is added 10 y Vs 3 M negative, Money Supply and exchange rate. High Import Prices = Low Money Supply and GDP. High Import Prices = Low money Supply, high Exchange rate, 10Y V 3M negative.

Powell and the Fed are into year 2 and multiple rate hikes to defeat Inflation. Powell is following the exact replica to the 1979 Volker model as Volker spent 3 years against multiple rate rises to lower Inflation.

Volker assumed Fed chair August 1979 when the 10Y vs 3M yield spread was negative, Import prices were high and Inflation was 11.3. Volker raised Fed Funds from 11.20 to 16.39 by 1981 and Inflation skyrocketed from 11.3 to 14.8. When Volker woke up, he began to lower Fed Funds and Inflation normalized by 1983.Volker fought 4 years to an Inflation problem that required 1 year.

From 1933 to 2010, the only model the Fed understood was raise Fed Funds to lower Inflation and in each instance, the model was a failure as Inflation rose higher along with higher Fed Funds.

By the raise to fed Funds, higher was the Exchange rate, Inflation, Import Prices and Industrial Production. Lower to Export Prices, GDP and Money Supply.

As highlighted by Silvio Gesell in the Natural Economic Order and written in 1906, Interest rate locks money out of markets when money is required.

Powell and the Fed’s proper path to lower Inflation quickly was lower Interest rates to allow the money supply to remain stable or higher.

USD/JPY and BOJ

Japan’s Exports and Producer prices rose last month. Exports prices are higher than Imports. The BOJ worked Incredibly hard to drop Import Prices to raise Exports from 2021 to 2023. Import prices doubled from exports since 2021 on a yearly basis.

Today’s yearly basis = 3.7 Exports Vs -11.8 imports.

The BOJ’s economic scenario informs no intervention and the exchange rate to USD/JPY is irrelevant.

The risk to the BOJ and evident in all speeches and research reports is concern to economies of the United States and Europe as both economies could damage Japan, particularly exports.

The Week

USD/JPY ranges next week 200 pips from 146.00’s to 148.58 and overbought at low 149.00’s. USD/JPY 145.00’s are again blocked.

DXY same old story to overbought 105.00’s and ranges 200 pips from 105.00’s to 103.00’s. Actual overbought at 105.00’s and oversold at low 104.00’s.

The EUR/USD and DXY relationship continues to hold market progress to expanded trade ranges. EUR/USD traded 70 pips this week.

Oversold EUR/USD ranges from 1.0800’s to 1.0600’s. The EUR/USD target at 1.0809 achieved 1.0764 highs so far this week.

Higher for EUR/USD to target 1.0900’s must break 1.0822. EUR/USD contains easily ability to trade 1.0900’s. We’re long for next week to target low 1.0800’s.

GBP/USD higher must break 1.2568 and a long term target at 1.2700’s. Long for next week to target middle 1.2500’s and break 1.2568.

Oversold AUD/USD targets next week low 0.6500’s and break at 0.6532.
GBP/USD Vs AUD/USD

GBP/USD traded 113 pips this week Vs 79 for AUD/USD. AUD/USD continues to outperform EUR/USD every week.

For oversold GBP/NZD, the 2.1200 line is dropping and forces GBP/NZD lower. Short next week from 2.1200’s to target next 2.0900’s.

Oversold EUR/NZD target low 1.8000’s next. The 1.8200 line drops against EUR/NZD current price.

EUR/AUD challenges the break at 1.6575 to achieve the long term target at 1.6200’s.
EUR/AUD at 1.6600’s represents a 5 week drop from 1.7000’s.

GBP/AUD trades oversold at 1.9400’s and mid range from 1.9600’s.

EUR/AUD and GBP/AUD remain short only strategies as well as GBP/NZD and EUR/NZD.

Oversold EUR/JPY is blocked by low 157.00’s and overbought begins near high 159.00’s and low 160.00’s.

GBP/JPY is blocked by middle 182.00’s GBP/JPY has easy ability to trade middle 185.00’s.

Overall, the DXY and EUR/USD relationship requires a move to create trade ranges. Until the move is seen then trade ranges remain compressed.

Brian Twomey

The prevailing and vital market story remains the EUR/USD and DXY relationship. EUR/USD by itself at low 1.0700’s trades deeply oversold and the downside for shorts is over and done. EUR/USD oversold is assisted this week by a complement of oversold EUR cross pairs as: EUR/CHF, EUR/CAD, EUR/NZD and EUR/AUD.

EUR/USD oversold dominates among EUR cross pairs as EM from the usual suspects as EUR/CZK, EUR/PLN, EUR/MYR, EUR/INR, EUR/KRW, EUR/RON, EUR/THB.

EUR/USD oversold refers to short, medium and long term averages from 1.0800’s to 1.1500’s and beyond. EUR/USD trades oversold from the 5, 10 and 14 year averages at 1.1200, 1.1500’s and 1.2000’s.

DXY and USD trades massive overbought by EM currencies as: USD/CNY, USD/CZK, USD/DKK, USD/THB, USD/HUF, USD/INR, USD/PLN, USD/RON, USD/SEK, USD/SGD, USD/ZAR.

DXY and USD trades overbought to USD/CAD and USD/JPY.

EUR/USD Vs DXY trades within 96 pips to the great crossover however DXY Vs the EUR/USD relationship trades at extreme DXY overbought and extremes to oversold EUR/USD. For the week, DXY will remain at 104.00’s and 1.0700’s for EUR/USD until distance is achieved to create wider trade ranges.

Since December 2022 and the EUR/USD break above 1.0500’s, the trade strategy remained long EUR/USD and short DXY and USD currencies. The long EUR/USD and short DXY and USD currencies remains the strategy as the 1.0600’s break is not expected and not anytime soon however this situation is vigorously monitored. The current view is DXY and USD Vs EUR/USD brought us to the brink.

The market implications for the big break radically changes present market arrangements as short XAU/USD, Stock markets, Yields, Metals, Oil.

Further into deeply oversold for EUR/USD, here’s levels: 1.0687, 1.0656, 1.0626 and 1.0596. EUR/USD downside prices are severely slowing and above averages will compress further if EUR/USD trades lower and this will prevent the 1.0600 break.

The Week

EUR/USD big break and target for the week is 1.0809 on a break at 1.0778. Much higher for EUR/USD must break above 1.0839 then the range trades from 1.0839 to 1.0940 and 1.1105. The long term target remains 1.1033. EUR/USD above 1.0839 eliminates the pressure to the 1.6000 break.

DXY short, medium and long term trades deeply overbought at 105.00’s.
Oversold GBP/USD bottoms at 1.2420. GBP/USD big break at 1.2590 then trades the range from 1.2590 to 1.2660. GBP/USD longs is the only trade available.

USD/JPY and JPY Cross Pairs

USD/JPY trades the range from 146.87 to overbought 148.79. USD/JPY 145.00’s are blocked. EUR/JPY trades 157.40 to overbought 158.95. EUR/JPY 156.00’s are blocked this week.

GBP/JPY trades 183.24 to 185.18 while CAD/JPY ranges from 107.29 to 109.23.

Finance Minister Suzuki was out last week with more bluster to USD/JPY levels. This is the same old story from decades past. The deeply conservative Japanese never changes.

GBP/NZD and EUR/NZD

GBPNZD from August . GBP/NZD shorts next week at 2.1485 and 2.1518 targets 2.1352, 2.1229, 2.1086. GBP/NZD traded lows Friday at 2.1097.

The GBP/NZD trade to target duration was 3 weeks and the same time frame as the last target trade. If memory serves, both trades were 5 and 600 pips profit.

GBP/NZD and EUR/NZD begins the week oversold and big break for higher are located at 2.1342 and 1.8262. The overall strategy is short as GBP/NZD and EUR/NZD target much lower levels.

AUD/USD and NZD/USD trade deeply oversold as well as EUR/AUD and GBP/AUD. EUR/AUD contains easily ability to trade 1.6800’s and 1.6900 and 1.9700’s for GBP/AUD.

GBP/CAD and EUR/CAD trade deeply oversold. As usual, GBP/CAD is the best trade in the CAD cross pair universe.

USD/CAD trades overbought however USD/JPY and JPY cross pairs are the preferred trades. The BOC reports USD/CAD to trade within the 1.3600 vicinity for the next month easily. USD/CAD 1.3600’s translates to CAD/USD at 0.7300’s.

Brian Twomey

. EUR/JPY

Long 157.51 and 157.40 to target 158.95. Must cross 157.73, 157.95, 158.17, 158.39, 158.61, 158.83, 159.05.

Short 158.95 to target 158.08.

231 pips.

EUR/AUD

Long 1.6731 and 1.6723 to target 1.6856. Must cross 1.6762, 1.6791, 1.6820, 1.6849, 1.6878.

Short 1.6856 to target 1.6798.

183 pips

231 and 183 = 414 pips.

Slight adjustments to JPY cross pairs and wide rangers.

Example of 2 trades, 2 currencies and 400 pips. For weekly trades, 13 more will send this morning. Then comes 11 currencies for 24 hour trades and 8 currencies for 7 hour trades.

To include XAU/USD and DAX for 24 hour and weekly trades. A good man was lost for health reasons for additional trades for VIX, SPX and WTI. Our friend remains in our prayers.

Brian Twomey

EUR/USD traded 123 pips last week Vs DXY 113. Approximately 97 pips separates EUR/USD and DXY but this is also the same average that governed the relationship for past years. EUR/USD at 1.1200’s Vs DXY 99.00 hardly moved the average. Its a permanent fixture that exercises control over markets to separate overall USD Vs EUR and all associated currencies and market prices.

The early warning to a price problem attests to the tiny ranges especially over past weeks but also to limited upside DXY to downside EUR/USD. Two separate factors at work are overbought DXY and oversold EUR/USD and prices approaching a vital average.

On approach to a price at a significant average, the price slows substantially and ranges compress. A Price break at a significant average gains speed and creates wide ranges because the numbers associated to the average achieves 0 and must create new numbers to levels, targets and ranges.

I’m viewing DXY Vs EUR/USD as an average meeting without the significant break. Oversold and overbought prices can only travel so far then math stops the oversold and overbought progression. The most important market prices brought us to the brink and this is not unusual.

Further into deeply oversold for EUR/USD, here’s levels: 1.0687, 1.0656, 1.0626 and 1.0596. I don’t see these levels trading anytime soon.

For the week: EUR/USD and EUR cross pairs oversold, USD/JPY and JPY cross pairs overbought, USD/CAD overbought, USD/EM massive overbought.

AUD/USD, NZD/USD and GBP/USD deeply oversold. More later as I dig deeper into overall prices.

The next EUR/USD upside levels Vs DXY are fairly accurate.

EUR/USD 1.0717 Vs DXY 104.87

EUR/USD 1.0727 Vs 104.77

EUR/USD 1.0746 Vs 104.58

EUR/USD 1.0794 Vs 104.10

EUR/USD 1.0842 Vs 103.62 = Significant breaks here.

EUR/USD 1.0890 Vs 103.14

Brian Twomey

Overbought DXY and oversold EUR/USD for the past 2 months traded maximum at 150 pip ranges for each of the prior 8 weeks. Spot market EUR/USD Futures contracts since July traded 2 day highs at 300,000 contracts and a fairly normal 150,000 to 200,000 per day contracts. In days long past and never to return, EUR/USD traded 500,000 to 700,000 per day contracts regularly. No such concept as a 300,000 contract day existed.

The absence of spot market contracts found a new home in Currency swaps and interest rate contracts. Japan for example traded 400,000 Currency Swap contracts in 1998 and today well over 2 million while Spot Market contracts since 2015 / 2016 traded on an upswing at barely 200,000 contracts from multi year lows at 35,000.

Japan interest rate contracts in 1998 traded 9,000 per day and today contracts rose to 65,000 and at all time highs. EUR, JPY and DXY are most widely traded while JPY and USD market share account for 74.4% and 71.4%. Most popular are contracts with maturities at 1 year or less. Japan alone accounts for 87 trillion USD in Notional amounts.

Currency Swaps and Interest rate contracts ensured Spot markets traded limited weekly ranges. DXY and EUR/USD for example traded 100 and 150 pip weeks in each of the past 8 weeks while USD/JPY traded 200 pips.

Anchor currencies must be viewed in total as permanent 200 pip weeks at the maximum and 300 peaks for GBP/JPY and wide rangers, GBP/NZD, EUR/NZD, EUR/AUD and GBP/AUD.

The Week

DXY is in the same position as the past 8 weeks as severely overbought at 105.00’s and 200 pip ranges from 103.00’s to 105.00’s.

EUR/USD targets long term at 1.1033 on breaks at 1.0855 and 1.0940 while GBP/USD targets 1.2746 on breaks at 1.2605 and 1.2665. EUR/USD on a break of 1.0940 ranges from 1.0940 to 1.1108 while GBP/USD ranges from 1.2665 to 1.2861.

Economics

Import Prices for all economies remain elevated which means CPI and Inflation also remains high. When Import prices drop then Inflation drops. The month of significant releases is over except for the BOJ’s Producer Prices next week on Tuesday.

The BOJ’s producer prices will answer the question to USD/JPY intervention.

YCC

The Tamura and recent BOJ Nakamura speeches answered the YCC expansion from 0.5 to 2.00 for the 10 year JGB yield as a protection to Inflation. As suspected due to past expansion were derived from Inflation rises.

USD/JPY 146.00’s are blocked by the BOJ in a range from 146.42 to 148.43. My view is overbought ay 148.44 to 146.67. Break at powerful 146.00’s is required to target 145.76 and 144.87.

AUD/USD next week targets easily 0.6500’s while NZD/USD targets 0.6000’s.

Best trades are short wide rangers: EUR/AUD, GBP/AUD, GBP/NZD, EUR/NZD. Further, USD/JPY, GBP/USD, GBP/JPY.

AUD/USD and EUR/USD serves as a double trade to GBP/USD while CHF/JPY serves its purpose as a double trade to USD/JPY.

The new permanent condition for currency markets is flattened ranges at barely 200 pip weeks.

Brian Twomey