GBP/USD: Levels, Ranges, Targets

EUR/CHF January 2015 dropped 2300 pips from 1.2000 to 0.9600’s. The plummet was especially seen in longer term moving averages and resulted in an 8 and 9 Standard Deviation move. As a price distribution and as extraordinary as it was, it was a market event. The current GBP/USD drop is a far different structure as Brexit and the price drop is more than an event but rather its a wholesale structural change, a complete shift and seen from a complete price distribution as prices are now 14 Standard Deviations from the main breaks at now 1.4383 and 1.4431. Both must break to even consider higher prices.

The fact USD/JPY dropped and won’t rise while USD/CAD and USD/CHF skyrocketed informs the 10 year Realignment is upon us. In the 2008 Realignment, EUR/USD was at 1.6000’s and EUR/JPY 169.00’s. Eight years later, EUR/USD saw 1.0400 lows while EUR/JPY dropped 5700 pips from current 112.00. Key for USD/JPY is 100.06 and 99.62 and most important 100.06.

Most informative in Realignments is not only wonderful volatility but multi year trends and trades once Realignment completes. If Realignment completes as suspected and Risk on results in higher EUR, GBP and risk on pairs then USD/JPY may suffer years of low prices. The last Realignment was a risk off event and why USD/JPY jumped from 80.00 lows to 125’s. The new Realignment must result in Risk on as wholesale market shifts must occur and take its turn.

EUR/CHF recovered from 0.9600’s to 1.1038 or 1376 pips 8 months later and 13 months later saw 1.1191 highs or 1529 pips. Our longer range GBP target so far remains 1.3800’s.

GBP/USD broke below the last base at 1.3503 to form a new base at 1.3084. Prices now betwen 1.3084 to 1.3220 are flat on the floor. As mentioned before Brexit, refrain from longs. After Brexit, don’t dare short for 1 pip.

The big breaks above are located at 1.3347, 1.3482, 1.3573, previously 1.3503. Volatility is again found due to 74 daily pip ranges. GBP is allowed to fly under 74 pip ranges.

The strategy moving forward is buy any and all dips.

Brian Twomey, Inside the Currency Market,

GBP/USD: Levels,Ranges and Targets

GBP/USD will see serious changes in the next 24 to 48 hours of trading from the Sunday opening to Tuesday.

The stated market sell gift on GBP/USD rises on Brexit was a true gift. The explosive move upon us occurred. The 1000 pip move mentioned occurred. EUR/USD 215 maximum monthly pip ranges from 1.1200 violated on brexit above by 10 pips from Maximum 1.1415 to 1.1425. The downside at 1.0995 violated by 83 pips to 1.0912 and 15 pips from reported 1.0927. Ranges held for 17 trading days, 19 to include Sunday openings.

GBP/USD must go far higher. The caution area comes at 1.4200 to 1.4380. The caution area means the break points are located at 1.4386 and 1.4459 and the same break points from last week. Most important to the caution area is GBP/USD price could normalize at this point and volatility could fall to normal trading as the vast majority of current oversold is relieved.

At 1.4380 for example, next above points turn to 1.4395 and 1.4503. On a break of 1.4386, next points remain 1.4395 and then 1 pip up at 1.4504. GBP/USD will continue to struggle higher from 1.4386. At 1.4386, easy trades are over and its back to analysis.

Longer range targets, 1.3811 and 1.3936. Targets and GBP/USD will be focus all week.
The big base point is located at 1.3508. The big base point means prices between 1.3508 and 1.3996 are literally bottomed on the floor.

Further concerning aspect to GBP/USD 1.4386 is USD/JPY is low, flat on the floor and highly oversold. Once GBP/USD settles, USD/JPY may begin a massive move higher.

Big base points in USD/JPY are located at 101.68 to 101.21 then 100.90 and 100.06. On a break lower at 99.62, USD/JPY could remain lower for longer as USD/JPY must decide as was the case in 2008 the impending Realignment.
Big break points above in USD/JPY, 103.81 and 106.31.

For GBP/USD, Most important points on the way up, 1.3808, 1.3949, 1.3996, 1.4183, 1.4230, 1.4323, then 1.4386.

GBP/JPY correlations to GBP/USD from high +90%, now +60.

GBP/USD will be volatile but direction is higher, much much higher.

Brian Twomey, Inside the Currency Market,

S&P’s and VIX 500: Levels, Ranges, Targets

The S&P’s closed Friday at 2018.25 and experienced two vital break points below the 1 and 2 year monthly averages: 2027.59 and 2020.72 To go higher, not only must 2020.72 and 2027.50 break but next vital points exist at 2043.50 and 2052.00.

Next important point levels below are located at the 3 and 4 year monthly averages at 1952.63 and 1836.23. To achieve 1952.63 breaks must occur at 1999.79 and 1978.87. To achieve 1836.23, not only must 1999.79 and 1978.87 break but 1923.12 as well.

In a larger picture from monthly averages 1 to 10 years, S&P’s prices are located from 2020.72 to lows at the 8, 9 and 10 year averages located: 1489.25, 1482.06 and 1475.75. Any significant rises are stopped by overbought averages at the 8, 9 and 10 year. Currently, the 8, 9 and 10 year averages are middle range overbought territory. Middle range overbought means the best the S&P’s can achieve is 2699.27, 2671.63, 2650.78, 2627.55 and 2566.75.

Yet any significant drops are stopped by 2020.72 and 2027.59. The best current prices can achieve below are 1845.84 and 1822.78. The range and averages explains why targets are found from 2082.51 to 1839.42.

Closer to home, the 5, 10 and 20 day averages reach bottoms at 2007.67, 2022.90 and 2024.65. The points at 2022.90 signifies 2024.65 are currently out of bounds from the close at 2018.25. Targets call for higher from 2056.98 to 2066.01. Targets assume averages break at 2020 and 2027. Both are key to rises. Viewed from the overbought VIX then rises in the S& P’s are valid.

Correlations in the S&P’s to the VIX runs from negative 74% at the 1 year monthly average to lows at the 7 year at minus 59%. The most important averages from a correlational perspective is the 3 and 4 year as the 3 year records zero and 4 year at minus 0.02.

From the 25.76 Friday close, the 8, 9 and 10 year averages drive prices as all crossed above averages from 1 to 7 years. The 8, 9, and 10 year averages are located at 21.74, 21.64 and 20.67. A break of 20.87, next comes the 7 year average at 19.20 then the 1 year average at 18.73 and 6 year at 18.17.

Most immediate price drivers are the lowest 3 and 4 year averages at 16.21 and 16.19. Any price rises are stopped by those averages. Currently, both averages are far overbought. From the 25.76 close, upper prices are at extreme overbought levels at 27.98 and 26.77.

Overall the VIX warrants a correction and supports the case for an S&P rise. Targets overall are found from 19.71 lows to 31.12 highs. On a larger scale, the VIX can easily handle prices in the 30’s as the 19.71 target lows are found in the 4 year average. Remainder average targets reveal prices hold above the 8, 9 and 10 year averages at 21.74, 21.64 and 20.67.

Brian Twomey, Inside the Currency Market,

2016 Currency Market Realignment

The significance of the GBPUSD drop is USD/JPY, EUR/JPY and GBP/JPY followed lower. Prior to the GBP/USD drop, GBP/JPY correlated to GBP/USD 90% while EUR/JPY correlated to USD/JPY 90%. If ever a mix match occurred and a warning of impending explosive moves, its found in the JPY cross pairs. And again if I may allow myself, I wrote last week the big giant 1000 pip move was upon us.

For GBP/USD in the mix match, it was most important because the association GBP/USD shared with its counterpart pairs was a hodgepodge. GBP/USD lacked positive association to GBP/CAD, the Carney Cross, for example. Well, GBP/CAD and GBP/USD are the exact same pairs yet lacked association. GBP/USD suffered the correlational association for at least the past year and its why the recommendation was stay away from GBP in favor of EUR pairs if and until GBP corrects itself.

To excuse grammatical first person accounts, January 2015, I wrote about the impending currency market realignment. I saw it coming then at EUR/JPY 132 and was early in this assessment. Without absolute factual data to back my assessment but based on a 25 page academic paper where I viewed the USD/JPY, EUR/JPY and EUR/USD periodic relationships from 2000 to 2014, my contention is the USD/JPY drop along with EUR/JPY and GBP/JPY could very well signal an FX market Tealignment is finally here.

The exact same situation occurred in 2008 as USD/JPY, GBP/JPY, EUR/JPY, GBP/USD, EUR/USD all droppped significantly.
Currency market Realignments are seen on average since the 1971 free float every 10 years and a rare rare event in currency markets. Its a market shift, a wholesale structural change.

Prior to 2008, EUR/JPY and EUR/USD were the same pair. GBP/JPY and GBP/USD were the same pair. The crash forced a realignment as EUR/JPY and GBP/JPY shifted its alliance to USD/JPY which means overall currency markets shifted and Realigned from risk on mode to risk off. A relationship of this magnitude generally last 10 years.

A currency market Realignment, a noun, is a shift of cross pairs and a shift of allegiance. Note cross pair arrangements are aligned as one risk on and one risk off pair. Correlational association to major USD pairs informs the type of market traded. Since 2008, markets traded in risk off mode yet a Realignment forces the change from Risk off to Risk on as GBP/JPY and EUR/JPY will again shift its loyalty back to EUR/USD and GBP/USD. A development of this magnitude is extraordinarily positive for volatility and back to normal functioning markets as cross pairs align to their natural home base.

Positive volatility means EUR/USD, EUR/JPY and GBP/USD, GBP/JPY associations when positively Correlated offers natural mathematical parameters much wider in risk on than risk off mode. Its a design structure by central banks when cross pairs were introduced to counterpart USD pairs to protect not only currency pairs but currency markets, nations associated to cross pairs, business interests and a natural ability to never allow prices to crash to zero.

The opposite effect occurrs in risk off mode as mathematical parameters shrink. To reiterate, EUR/JPY positively correlates to USD/JPY limits volatility because mathematical parameters shrink while EUR/JPY correlated to EUR/USD offers wider mathematical parameters and normal functioning markets. The shrinkage of parameters as USD/JPY correlation to EUR/JPY imparts unhealthy, risk off markets due to parameter and volatility shrinkage. A far different price exists for example when USD/JPY correlates to EUR/JPY than when EUR/USD Correlates to EUR/JPY. The same holds true for GBP/USD and GBP/JPY.

Most important point in Realignments is its never seen in major USD currency pairs but rather its only seen in cross pairs because its a complete market structural and price change. Ask what drives currency prices, cross pairs or USD counterparts. More cross pairs exist so cross pair assessments must completely re factor.

EUR/JPY dropped 1200 pips while GBP/JPY dropped 2200. It takes about 1500 pips to completely change a currency market Realignment so I am convinced a historic yet positive development is upon us. Why big drops is because all cross pairs associated to counterparts must also Realign. The best view is found in JPY cross pairs but a shift in one cross pair must see an allegiance switch in all cross pairs. The other best pair to view Realignments is traditional risk off CAD/ZAR but because its not a well known currency pair and not widely tradd, JPY crosses can easily determine Realignments. What is Realignment is the significant break point associated to allow a Realignment to occur. Cross pairs again re associate to their natural home base.

What we are experiencing is first terrific volatility ahead for easily the next year because prices must now Realign as well as other slower moving cross pairs like AUD/CAD, AUD/CHF, NZD/CAD and many others.

Currency Market Realignment

Inside the Currency Market: Currency Market Realignment

Posted by Brian Twomey on January 25, 2015 at 7:13pm View Blog, Posted FX street Jan 2015,

This call was early but Realignment I believe finally arrived with UK Vote. Must investigate

Posted in October was an outline of the historic currency market Realignment in development, a truly rare event in currency markets because it means currency pairs undergo a structural price adjustment. Pricing adjustments are structural in currency pairs and slow in development but its never seen in USD V non USD pairs rather structural price adjustments and its historic Realignment counterpart is seen only in cross pairs but most pronounced in JPY crosses.

I reported in October when EUR/JPY broke 132, Realignment will occur. Last week, EUR/JPY broke 132 therefore currency markets and prices are in formal Realignment ( a Noun in my opinion). A brief history, explanation and the trade forward.
A Realignment occurs when cross pairs change allegiance, its periodic but periods remain based on market events. The last Realignment occurred in 1998 upon the Thai Baht, Russian Ruble and other crisis and lasted 10 years until the 2008 Housing market dilemma. Year 2008 was the end of the old period to begin a new cycle. Because Realignments are rare events, its not well known unless one knows how to find and interpret its occurrence.

When free floats began in the early 1970’s, central banks adopted monetary target polices where the object was target of money supplies in some fashion such as the Bank of Japan who targeted GDP. Most central banks throughout the 1970’s and 1980’s experienced utter failure when deficits ensued, Inflation skyrocketed to 20% and currency prices saw high volatility. Realignments during the 1970’s and 1980’s occurred on average every 5 – 6 years.

Fast forward to the 1990’s when Monetary targets were discarded in favor of Inflation Targets. Inflation targets allowed Central banks to extend periods by their successes for the most part by sustaining Inflation therefore periodic Realignments were extended and volatility was depressed.

What periods and Realignments inform is what type of markets trade. From 1998 – 2008, the period was classified as risk on because not only did the EUR/USD hit historic highs but so did EUR/PY follow to hit its 169 highs. Economic times were good. Upon the 2008 housing market crash, the Realignment was classified as Risk off since EUR/JPY switched allegiance and economic times were atrocious. But Realignment is as much a price as well as economic structure.

When the next Realignment will occur after the present is unknown. It could very well be another 10 years, 20 or longer. It depends on central bank management of their economies and currency pair positions.

A normal market structure occurs when EUR/JPY is the market leader because its the most widely traded and dominates in percentages in daily market turnover every year since year 2000. For the past 7 years, highly neutral GBP/JPY adopted the new title of market leader.

With the 132 break and allowance of time for prices to Realign, EUR/JPY will again become the market leader and GBP/JPY will again retain its position as neutral. More importantly, we now head into the period of risk on. This will take time to develop because prices in all pairs must realign and because currency prices are slow to move. The EUR/CHF break from a daily market trading perspective means the old structure will again see its day. EUR/JPY as risk on will measure against risk off EUR/CHF to determine the type of traded market.

The pairs affected in Realignments in JPY terms are first EUR/JPY then GBP/JPY and CAD/JPY. AUD/JPY and NZD/JPY retain their original position for now since both pairs were not affected nor are ever affected by market crisis. The wild card in the cross pair Realignment mix is CHF/JPY. In past periods, CHF/JPY followed the crowd. I’m in the process of evaluating the entire CHF adjustment, takes time cause much data is involved.

Many pairs are vulnerable in new Realignments. Since the focus of my Realignment example is JPY focused, USD/JPY becomes a free float pair so its price structure lives on its own. In past Realignments, USD/JPY experienced massive multi year sell offfs. Its vulnerable again to another selloff afrer Realignment completes and the ECB retains its economic posture.
Volatility will remain and should even increase since market prices are not random and its a market well coordinated in its price structure to the new Realignment in front of us.

Brian Twomey, Inside the Currency Market,
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GBP/USD: Levels, Ranges, Targets

The current move this week is derived from the big break point at 1.4420 an 1.4360’s. The current points are now located at 1.4428 and 1.4368. Inside the current move is a big base formed at 1.4610. Shorts must break 1.4610, 1.4428 and 1.4368 to see GBP far lower.

Current price at 1.4700’s is done on the topside. A deep correction is not only warranted but any moves higher from 1.4700’s must be derived from Brexit because no reason exists to take GBP higher from current altitudes. Up to this point at 1.4700’s, Brexit lacked any factor to current prices but rather the 1.4400 to 1.4700 move was normal in all regards.

If 90% correlated GBP/USD to GBP/JPY is included then GBP/JPY faces tough Resistance points at 155.81 and 155.73. The point at 155.73 is today’s range point and a break opens the flood gates higher to 157.00’s.

Mentioned GBP price dead on the floor at 1.4400 and 1.4500’s. Current price is now at the BOE favorite location and that is equilibrium. Means price overall in the longer term picture is well balanced. This well balanced approach is also the NZD and RBNZ model and adopted way back in the 1980’s when NZD free floated and broke from age old GBP and London Pegs.

GBP/USD Bottom today 1.4686 and achieves this destination by breaks at 1.4723 and 1.4704.

Upper targets 1.4796 and 1.4793. Watch closely 1.4774 as another tough point and reversal.

Range breaks above 1.4912, 1.5064 and below range breaks 1.4610 and 1.4463. 1.4400’s will be rough break points in days ahead.

Brian Twomey, Inside the Currency Market,

GBP/USD: Levels, Ranges, Targets

The breaking news to GBP/USD is Brexit is not involved one iota in GBP/USD price moves, not one iota, not 1 pip. Its quite shameful to see such headlines devoted to Brexit when Brexit plays no role in GBP/USD. Today’s analysts, traders and websites are shameless disgraces to the trading world.

Three factors working inside GBP prices, GBP/USD broke above big point breaks at 1.4430 and 1.4361. Both must break lower to see far lower GBP prices.

Secondly, GBP/USD correlates to GBP/JPY at 90%. Its the best GBP/USD has to offer inside its universe as both GBP/JPY and GBP/USD will travel again as friends. GBP/JPY is vastly oversold as well as EUR/JPY but the difference between GBP/JPY and EUR/JPY is EUR/JPY correlates 90% to USD/JPY so GBP/JPY is driving GBP/USD.

Most important factor driving GBP/USD and mentioned many times over last days is GBP/USD prices are dead flat on the floor. Why 100 pip rise? That was the gap leftover since Friday and never filled. What is seen absolutely is perfectly normal price movements.

GBP/USD For today.

Bottom. 1.4561 and achieves this destination on breaks at 1.4598 and 1.4579. Look for 1.4525 as alternative bottom in next day ahead. 1.4525 is a big break point.

Upper targets: 1.4667 and 1.4649.

Range breaks above 1.4745 and 1.4820. Below range break 1.4525

Daily pip movements all last week was 72 pips, today 74, up 2 pips.

Thick resistance between 1.4574 to 1.4590. Thick supports 1.4635 to 1.4640. Don’t touch prices inside these areas.

Brian Twomey, Inside the Currency Market,

Currency Market Health, Structural Changes, Monetary Policy

The result of false dichotomies from central bank messages is a once bifurcated market in overnight interest rates and yields to now a full embed of interest rates and yields. Structurally, installation in interest rates inside yield curves is extraordinarily unhealthy and a phenomenon not seen since the misunderstood free float markets of the 1970’s and 1980’s.

Perfect positions between interest rates and yields are interest rates must trade below yields in a buy low, sell high approach to finance markets. A potential automobile purchase from a consumer perspective is to obtain the lowest finance rate while the loan purchaser objective is to sell the loan to the market for the highest market rate. Meld of interest rates and yields locks interest rates to the lowest common denominator and lacks the stair step ability across maturities.

The two exclusions to the new submergence is NZD and JPY. For Japan, JPY yields and interest rates always traditionally traded above Germany as is the current case to the 9 year yield. JPY yields traditionally traded above USD yields yet now trade well below. The implications for the BOJ and RBNZ is ability to slash interest rates. Yet yields and interest rate positioning is not the overall driver to RBNZ further OCR cuts as the impetus remains the Trade Able to NON and Exports to Imports.

Australia, Canada, Germany, France, USD, UK and CHF all share the interest rate / yield commonality. What this means for markets is not only interest rates at lowest depths since the 2008 crisis but trading ranges and volatility will remain suppressed. The pairs with the best volatiity remains EUR/USD, USD/JPY, USD/CAD and EUR/JPY.

Least favored in current interest rate scenarios are CHF, AUD, NZD and GBP although GBP ranges are beginning to open much wider but may be due to expected movements from the Brexit vote. Daily GBP pip ranges all last week were located at 72 pips.

What volatility means for EUR/USD is 6 months of 500 pip ranges yet under normal functioning markets, EUR/USD ranges should be easily 1000 pips. Why range suppression is due to the current interest rate /yield environment as European interest rates once traded above German yields before the ECB went negative. As the ECB dropped interest rates, EUR/USD trended.

What today’s interest situation means is more ranges ahead without trends until the impetus hits for the big move that lies ahead. Part of the explanation to interest rate / Yield embed is July 1st the ECB cuts interest maturities to 5 from 8 and 15 in 2014. If the current interest rate/ yield conundrum holds for Europe after July 1st then EUR/USD will experience further volatility / range compression.

The long held view is the ECB is trying to follow the Australia model and turn EUR/USD into range and pip movements of AUD/USD. If true, EUR/USD ranges V DXY may see constant 200 pip ranges every month long into the future.

Brian Twomey, Inside the Currency Market,

EUR/USD: Levels, Ranges, Targets, German Yield Curve

EUR/USD: Levels, Ranges, Targets, German Yield Curve

For the German 10 year yield, its top heavy in relation to Eonia by at least 30 basis points. Negative is a factor of the overall Silvio Gesell plan and negative interest rates. The 10 year adversity is part of the component what negative means and its development to negative is actually healthy and attests to a market performing perfectly. If Eonia was higher then the 10 year lacks ability to go negative.

Overall, the entire German yield curve is supportive of European interest rates and typical of the German system. Negative at the 10 year should be viewed as a healthy and positive economic sign as Euros adjust to the new negative scale from positive.
If the ECB continues to follow Gesell as they are currently performing perfectly then the potential to build an economic powrhoiuse is absolutely astounding. What takes time throughout this process is dead market prices. If prices had ability to range wider then adjustments would occur much faster.

Yields from 1 to 5 year trade far below Eonia and supports European interest rates on the downside. Viewed in this context, its understandable why Draghi is on hold as he doesn’t have a reason to cut again. Viewed from the larger context, CHF, DKK, and SEK interest rates trade far below Eonia and are literally on the floor. Anymore ECB cuts risks the economies of CHF, DKK and SEK. The location and distance of yields 1 to 5 years are actually just perfect. The yields are low yet supportive. Higher Eonia sees yields 1 to 5 year higher but not expected long into the future.

The 9 year yield is also top heavy by about 30 basis points. Drivers of EUR/USD are the 5, 6 and 7 year yields and held in tiny channels. Mentioned many times is the FED containing prices in small channels but the ECB shares as much guilt for containment. If each central bank contains its own prices then yields and market prices V each other reveal as much containment. The EUR V USD 2 year spread is minus 1.32, 5 year minus 1.62, 10 year is far wide at minus 2.62. Spreads should trade equal to its counterparts on the positive interest scale.

The big EUR/USD base is located at 1.0801. Current price is again dead on the floor shortest terms but fighting far overbought longer term. If Draghi continues to follow Gesell and European economic begins to turn positive, EUR/USD has ability to fly higher to upper decks.

EUR/USD Bottom. 1.1162. Achieves by breaks at 1.1190, 1.1176 and Bottom 1.1162.

Vital points above 1.1435, 1.1346, 1.1321, 1.1281, 1.1238 to 1.1230, don’t trade between 1.1230 to 1.1238.

Bottom points, 1.1170, 1.1104, 1.1119, 1.1051, 1.1032. Monthly average 1.1090. Day 11 and 200 pip ranges held.
Upper targets 1.1266, 1.1247 and Failure point 1.1227.

For days ahead, EUR/USD must break and hold above 1.1239 and 1.1228.

EUR/USD: Levels, Ranges, Targets, False Bottoms

EUR/USD closed Friday 1.1246 while the reported Bottom for Friday was 1.1245 and 1.1273. Wednesday, Thursday and Friday last week offerred ” The False Bottom” at 1.1301.

False Bottoms as is my own term is a price concept not seen very often. The RBA to lower AUD in light of RBA Statements and Big Glenn Stevens speeches attempted to employ the “False Bottom” concept but always failed. The RBNZ and NZD was always a bit more successful, not often.

Its a question of timing as central banks never ask themselves or know if their currency pair is overbought or oversold, where can we drive prices to and at what bottom price. Central banks don’t evaluate such concepts to be honest. My models are the central bank models but refactored to address concepts of overbought, oversold and much more.

Central banks view currency prices in a larger picture so abstract, it leaves concepts of reality. Alred North Whitehead in 1924 stated it best as ” Fallacy of Misplaced Concreteness”. Abstract thoughts, beliefs and concepts become misplaced as reality.

The motivation by central banks in “False Bottoms” is to force down the price of a currency pair. The “False Bottom” concept is rarely seen by the ECB so quite interesting. More interesting is to take the playbook from the RBA because the RBA perfected False Bottoms. Again, big changes coming to ECB July 1 and long term speculation is the ECB will turn Euro into AUD and slow EUR speed and cut overall ranges.

EUR/USD Bottom. 1.1203. Normalized again. Target achieves by breaks 1.1231, 1.1217, 1.1203 Bottom.

Upper Targets 1.1309, 1.1288 and Failure Point at 1.1267.

Vital points above 1.1457, 1.1390, 1.1354, 1.1323, 1.1270 to 1.1278, don’t touch this area.

Vital points below 1.1207, 1.1157, 1.1144, 1.1069, Monthly average 1.`1090. Note Bottom 1.1203 V 1.1207.

Good points to reload longs for the day because EUR/USD price remains dead flat on the floor for very short term.

Brian Twomey, Inside the Currency Market,



Alfred North Whitehead coined the 1924 phrase ‘ Fallacy of Concreteness” in relation to rejection to spatial and temporal locations. The simple assumption is abstract beliefs, concepts and opinions are accepted as concrete reality. Freud stated it best as Narcissim of Small Differences in relation to intra group conflict and dynamics as it further relates to the excess of fine tuning. Whitehead and Freud relate to the Fed, DXY and WTI relationships.

March’s Fed statement finally stated Fed monetary policy. Lower WTI, lower DXY and higher equities to raise the elusive, phantom number called CPI. In the 1970’s, CPI hit 20% and central banks lacked ability to lower it while the year 2008 to present, CPI is the phantom concept whereby central banks lack ability to raise it. Central banks tell us WTI and Oil contribute to CPI but how much.

In the RBA and RBNZ example, Oil provides 0.2 to CPI. Australia CPI is currently 1.3% or as a decimal 0.013 so add 0.2 then CPI becomes 0.213 or 2.1% and at the CPI target. The old textbook definition of CPI is a loss of purchasing power of money and capital. The Dangling Modifier in central bank speak is why higher CPI is vital and how to achieve targets in an 8 year accommodotive easy money policy.

The conundrum in the Fed’s monetary policy in regards to WTI and DXY is both correlate perfectly negative at high 90% from monthly averages 1 to 10 years. This means as DXY prices travel higher, WTI prices travel lower and vice versa. High Correlations in this magnitude contains ability to literally linger for years unless significant breaks are seen from the averages. While significant breaks lack ability for this month, the concept to lower DXY and WTI blows yet another credibility hole inside Fed speak.

Like DXY and EUR/USD, WTI trades between 1 and 2 year monthly averages from 43.02 to 55.27 or 12 points. DXY monthly averages trade between 96.87 to 93.97 and currently at the lower range. For WTI to go higher, DXY must break 93.97 and WTI lower must break DXY at 96.87. Neither breaks are expected for the remainder of the month.

WTI in the larger picture from trend lines 1 to 10 years is the price not only trades far below the lines but WTI prices are flat dead on an historic floor. Far below trend lines means any price rises are corrections inside the current massive downtrend. Problem with lower WTI prices is it will take more time as the lines need more time to descend. At the same time, DXY sits just below trend lines. Just as EUR/USD is waiting on the DXY and Fed directional move, WTI stands ready to move as well but until the FED decides the Fallacy of Misplaced Concreteness then WTI ranges and meanders.

To understand corrections, the best targets on averages from 1 to 10 years is 59.00 yet massive hurdles exist on the way and the targets are slated only for the remainder of the month.

To go higher, WTI must break 49.31, 50.90, 51.48, 51.62, 53.02, 53.29, 53.99 then 54.04 and 54.48. Range tops are found at 60.23, 60.36, 60.69, and 62.89 further out.

Bottoms are not only protected but out of range begins from 46.38, 46.34, 46.21, 45.42, 45.34 and 44.94. Out of range prices are sell and buy gifts. Trade the points and levels as indicated.

Interested see blog site for data and trend line pictures.

DXY is massively steep and WTI dead on the floor. If the Fed fails in whatever attempt today’s monetary may be and DXY falls then WTI on a long term long basis is a terrific trade.


Working on DXY V WTI Crude, Regression Charts to Follow

DXY 10Y Monthly Averages


WTI 10Y Monthly Averages


1 Year DXY V WTI Crude

1 Year WTI V DXY

3 Year DXY V WTI

3 Year WTI V DXY

5 Year DXY V WTI

5 Year WTI V DXY

10 Year DXY V WTI

10 Year WTI V DXY

EUR/USD V DXY: Regression Charts

10 year monthly average regression Charts correct if shown, This is experiment to assist in exact view and post, I’m trying to make Regression Plots on my own but this isn’t working as expected

EUR/USD Data, 120 monthly averages 10 years data


DXY Data 120 monthly averages, 10 years data


EUR/USD V DXY 10 year Regression Line Chart

DXY V EUR/USD 10 year Regression Line Chart

DXY V EUR/USD 5 Year Regression Line Charts

EUR/USD V DXY 5 year Regression Line Chart

EUR/USD V DXY 3 year Regression Line Chart

DXY V EUR/USD 3 Year Regression Line Chart

EUR/USD: Levels, Ranges, Targets

The major pairs with best movement abilities is EUR/USD, USD/CAD and USD/JPY by design and construction. The Great British Pound once had the same abilities but the BOE stopped GBP movements and will only allow a short price distance.

Refer to monthly EUR/USD V DXY and the 200 pip allowable range movements between each other. So far 6 trading days and the range held. EUR/USD is in good shape but DXY is a problem as the inside numbers are calling for a big explosive move. If the FED doesn’t straighten the situation, the market will impose its will on the FED. The longer the FED waits, the bigger the move.

EUR/USD. Bottom 1.1363. Again 2nd day and a problem on the downside. Why. EUR/USD price is literally like NZD and AUD flat on the floor. Alternative bottoms, 1.1335, 1.1306, 1.1302.

Upper targets, 1.1374, 1.1396 and again 1.1420.

Note breaks above, 1.1498, 1.1447, 1.1429, 1.1383, 1.1376, 1.1374. Most important 1.1383, was a tough break point last week and into this week.

Below break points, 1.1253, 1.1247, 1.1192, 1.1170. Big base at 1.1007 and monthly average at 1.1090. Most important break below 1.1253 and 1.1247, never trade between both prices.

Brian Twomey, Inside the Currency Market,

NZD/USD: Levels, Ranges, Targets, RBNZ Preview

Why is the RBNZ the smartest and forward central bank is because the RBNZ invented Inflation Targeting in the 90’s and the world followed. Th RBNZ perfected and institutionalized the 10 and 2 year yield spread and the world followed. The RBNZ perfected 200 year old Knut Wicksell strategies and the world followed. Today’s average pip range is 11, the FED from Fed Funds at 37 to 0.50 = 13. What’s 0.37, the daily close everyday since December 17, 2015.

The world’s central banks and exchange rates price from the FED and the FED is not delivering as the ranges and volatility simply disappeared due to FED lock tight in their own interest rates. The Fed’s game is going to end and the result will not be pretty.

The perspective in the 3 raises in 2015 from 2.25 to 3.25 is 3.25 was just above the 20 year average at 2.86. Why the 3rd raise in my estimation was insurance and to raise above the 20 year average. Why the 20 year average is the recommendation of Knut Wicksell to measure the performance of the economy. Above means economics is good to offer simple. The world fell so the RBNZ cut back to 2.25. The location of OCR is not terrible nor does an immediate need exist to cut to 2.00.

The only reason to cut is to lower the exchange rate because the FED went absent and turned inward and without its usual historic assistance. The message from the FED is, we take care of our system while the rest of the world are on their own.
Here’s the RBNZ dilemma. NZD/USD price is literally on the floor long and short term. Yet the criteria to cut is present loud and clear. This particular RBNZ decision is going to be tortuous. An OCR cut will drop NZD/USD but a drop can’t sustain itself at lower levels.

A no cut decision risks NZD/USD higher unless a word is mentioned in the statement regarding future cuts. Like the FED, it only takes a few words to stop prices dead as the central banks forced themselves to become the center of attention and price controllers. Again, monetary policy never before seen and strictly experiments with a devise and adjust strategy as experiments progress.

NZD/USD. Bottom. 0.6951. Achieves by breaks at 0.6969 and 0.6960.

Upper targets 0.6990 and 0.6998.

Range breaks above, 0.7030, 0.7116, 0.7186.

Ranges breaks below, 0.6944, 0.6860, 0.6815. Range breaks are vital because central banks hold prices inside tight ranges.

Vital points above 0.7033, 0.7030, 0.7008, 0.6990, 0.6987, 0.6974. Important most is 0.6987.

Vital points below0.6962, 0.6955, 0.6944, 0.6935.

Brian Twomey, Inside the Currency Market,

EUR/USD V DXY: Current Prices and Crash Risks

EUR/USD V DXY: Current Prices and Crash Risks

Prior to the 2008 crash, statistical Regression models predicted the move long before in terms of longer term averages from 5 to 8 years. Quite telling a short time frame can predict so perfectly. The EUR/USD V EUR/JPY relationship reached its maximum peaks from monthly but particularly from weekly plateaus. Why early warning is because the EUR/USD and EUR/JPY monthly and weekly relationship was fixed as is always the case in terms of Residual plots. The EUR/USD and USD/JPY relationship was also fixed and boundaries well established pre and post 2008. Not one iota of change in boundaries occurred in USD/JPY V EUR/USD from pre to post 2008 and allowed EUR/JPY to become the signal pair in terms of the big move ahead. No such statistics exist to allow a price to fall outside a plotted boundary.

The monthly DXY V EUR/USD relationship resembles the same similarities seen in the EUR/USD, USD/JPY and EUR/JPY associations. One month before the 2008 crash, EUR/JPY and EUR/USD shared an extraordinary 54 T Score for the weekly and 26 for the monthly.

Current monthly T Scores for the EUR/USD and DXY Residual Plots at the 1 year average are both at 30. The EUR/USD V DXY relationship from averages 4 to 10 years in successive order reveal T Scores range from 17 to 26 and track higher as averages travel higher in years. If monthly 26 T Scores are present then weeklies as the far better forecast of impending problems and big moves are much higher than 26. Consider as well to view DXY in first position as DXY V EUR/USD then monthly averages from 1- 3 years also reveal a deep drop from 30 to 1.68 and 1.26

If monthly average exchange rates alone are factored from 1 – 10 years in successive order then EUR/USD V DXY T Scores range from minus 27 to minus 34 and minus 4 to minus 34 in DXY V EUR/USD. Not only are 1 year residual plot averages a concern at 30 but both DXY and EUR/USD exchange rate averages from 4 – 10 years are not performing and explains why T Scores are high.
What not performing means is the Regression Standard Error as the range indicator and driver of T scores is under severe pressure. When ranges are restricted, T Scores rise and fall as ranges increase. Its an early warning signal to severe price problems exist and big moves are ahead from possibly upper most Peaks, lowest low troughs or it warns a fiscal or monetary phenomenon may trigger the big move. Either way, it warns the big move is ahead and associates to a crisis type move.
For the 2008 crisis, the enormous T Scores experienced in EUR/USD and EUR/JPY saw EUR/USD at 1.6000’s in August 2008 and drop 3 months later to 1.2300’s for a 3700 pip move. EUR/JPY traded 1.69 in August 2008 and dropped 5600 pips 3 months later to 113.00’s. Why the focus on DXY and EUR/USD and why the concern is due because both are not only most widely traded especially USD but the entire world of interest and exchange rates and commodities are affected by either a USD or Euro problem.

The International Standards Organization reveals 56 nations use the Euro as their main currency while 21 nations use the DXY. To correct for the USD imbalance, South America, Asia, Middle East, Canada and Mexico arrange their currency pairs as USD/ Other nation. To understand the SE and T Score relationship is to comprehend restricted ranges since December 2015 particularly from DXY.

Every month since December 2015, DXY and EUR/USD traded between 1 and 2 year monthly averages Secondly, as DXY and EUR/USD prices traded within its averages since December, price pressures every month continued to severely build to the point we see not a trend but a massive breakout. Both DXY and EUR/USD await the impetus to make the big move yet without the catalyst.
The DXY 290 pip June range is found from 96.87 to 93.97. To understand 290, January’s 489 pip range was located from 100.27 to 95.38 while February range expanded to 599 pips from 97.53 to 91.54. February’s bottom dropped. March’s Fed statement stated a lower DXY was ahead from its then current price at 96.17 as the Yellen plan is lower DXY, lower WTI and higher equity prices to raise CPI.

May saw a 438 pip range from 97.12 to 92.74. DXY at 290 is just under half of February’s range and the current orbit is located at its lowest interval since December. Overall, DXY ranged 500 pips from December to June at 99.0 to 94.03 while EUR/USD doubled and traveled 1100 pips from 1.05 to 1.16. DXY is clearly the conundrum and the currency to direct the breakout.

The EUR/USD 967 pip range in February was located from 1 to 2 year averages at 1.0995 to 1.1962 while June’s 462 pip restricted latitude is found from 1.1090 to 1.1552. While 290 DXY and 462 EUR/USD represent distances to averages, actual average ranges between DXY and EUR/USD factor to 166 pips and 192 pips as EUR/USD V DXY. Overall range factors to 200 pips maximum.

June EUR/USD V DXY SE’s in average exchange rates 1 to 10 years range from 2.665 to 1.19 while DXY V EUR/USD range from 0.0439 to 0.0107. T Scores for EUR/USD V DXY range from minus 34 to minus 27 while DXY V EUR/USD travel from minus 4 to minus 34 at the 3 year average. EUR/USD V DXY SE’s in 1 and 2 year averages range from 1.19 to 1.33 while T Scores travel from minus 4 to minus 17 and minus 34 at the 3 year average. DXY V EUR/USD SE’s range from 0.0215 to 0.0107 and T Scores Minus 4 to minus 17 and minus 34 at the 3 year average.

Not only are range restrictions seen in exchange rates to cause Standard Errors and T Scores to achieve alarmingly astronomical levels but the same phenomemon is experienced in Residual Plots. Correlations in exchange rates from monthly averages 1 to 10 years calculate to upper negative 90% yet residual plot averages from 1 to 3 years for DXY V EUR/USD run + 99%, + 33% and +21%. EUR/USD V DXY in 1 to 3 year averages factor + 99%, + 86% and +78%.

What is seen in range restrictions, SE’s, T Scores and correlations is the variations in current prices between EUR/USD and DXY reached extremes and formed tortuous clashes against each other’s prices. One side must win while the other side must lose which means DXY or EUR/USD must go far lower or far higher against each other. The attributable variations currently seen are the types of deviations to see a fundamental economic event to cause a price explosion such as was experienced in 2008. More fundamentally, price is as much about location as much as the relationship between each other. The location of EUR/USD and DXY cannot remain in current ranges as the marriage of variations must experience a divorce or at least a separation.

The great Statistician George Box and famed for Box – Jenkins and Box- Cox Transformations stated ” all models are wrong but some are useful”. When Standard Errors underperform and T Scores rise then not only is the big move ahead a warning but the further admonition is the current models are seriously deficient in exchange rates and residual plots as both Standard Errors and T Scores reveal EUR/USD and DXY could easily fly higher but the price construction and design between both won’t allow such an occurrence. The derivation of the current exchange rate situation is found in the June 2015 introduction of the new Fed Facility in Overnight Repurchase Agreements.

Two vital points to the Fed’s monetary policy is raise and support Fed Funds. Rather than allow Fed Funds to rise and free float, the Fed created the Overnight Reverse Repo Facility to support Fed Funds rises. Current Repo rates trade between the buy side at 0.20 and sell side at 0.25. The Fed raised Fed Funds to now trade 1/4 point between 0.25 and 0.50 with a mid point at 0.37. Only two days since December 17 has Fed Funds not closed between 0.36 – 0.38. When the Fed rescinded past statements to lower the Balance sheet, Treasury securities were reinvested at 0.25 and 0.25 served as a solid floor to Fed Funds.

The 1/4 point range in Fed Funds not only caused Fed Funds to become seriously overbought but DXY prices became affected by the 1/4 point latitude. Viewed from 1 month Commercial Paper Financial and Non Financial rates, 1 month Euro deposits, overnight to 3 month Libor and Treasury yields from 90 and 180 days then the entire short term system of Fed interest rates trade between a stunningly tight 1/4 point range. If short term interest rates trade between 1/4 point for six continuous months then all nations exchange, interest rates and market prices trade in tight ranges. The Fed and Yellen is not only responsible for the current situation but they are also compelled to break the deadlock.

Brian Twomey, Inside the Currency Market,

EUR/USD: Levels, Ranges, Targets, Price Imbalances

As I delve far deeper statistically into the DXY and EUR/USD relationship, I bring dire dire warnings and ask sincerely for every market trader to heed this advice. The DXY and EUR/USD relationship at present price junctures cannot sustain itself much longer. This marriage must and will burst wide open. The operative word is burst, not trend. Prices are beyond the point of trend, next comes explosion.

For perspective, the 2008 crash didn’t experience numbers to this depth, degree and magnitude. Once the market catalyst hits, look out. EUR/USD is in decent shape because its allowed to range wide by design and price construction particularly against DXY. EUR/USD ranges are allowed to roam about 2 times DXY ranges. Yet that means upon a catalyst, EUR/USD will be hit the hardest. DXY and USD pairs are dangerously strangled and represents severe problems yet the stranglehold in turn is restricting EUR/USD ranges.

DXY problems are the direct result of Yellen and all her hocus pocus economics. Dot Plots in FED Funds 5 year averages is not remotely close to serious. By offering the new 2015 Fed Facility in Repurchase Agreements, the USD system of interest rates was choked and gasps for breath because it locked FED Funds, Eurodeposits, Commercial Paper and every USD interest rate from Fed Funds to Yields in the tightest ranges. Done not only to hold FED Funds in small ranges but allowed Yellen to re invest Treasury proceeds. This in turn limited DXY and all USD pairs. All comotose Fed sees are those outdated and structurally ineffective DSGE equilibrium models. I’m not calling for a crash but I’m saying the big giant move is ahead unless Yellen wakes up and corrects the severe structural price imbalances.

Thank you to my long time commodity trader friend. Implosion or explosion. We could fly either way because DXY and EUR/USD are deeply married with limited variation between both. That’s exactly what happened at crisis times. A EUR/USD to fly higher is a problem for Draghi as much as a higher DXY for Yellen. Yet both can’t travel together.

For interested, I’m writing and publishing my deep analysis in the popular press.

EUR/USD. Bottom. 1.1358. This is a problem for today. EUR/USD is mis priced. Look at Bottoms at 1.1330, 1.1315 and 1.1302.
Upper targets, 1.1375, 1.1400 and 1.1426. Look for the failure and reverse at 1.1375 to 1.1400.

Big points above, 1.1507, 1.1552 ( Monthly Average), 1.1507, 1.1504, 1.1431, 1.1414, 1.1379, 1.1360 to 1.1365, don’t touch prices here.

Below points, 1.1278, 1.1247, 1.1236, 1.1186, 1.1155, and big break 1.1118.

Brian Twomey, Inside the Currency Market,

AUD/USD: Levels, Ranges, Targets

AUD/USD: Levels, Ranges, Targets

The final result of the RBA’s Glenn Stevens OCR drop was an AUD range in the last 19 trading from about 0.7350 to 0.7150. Overall, Stevens achieved about a 500 pip drop. The AUD financial system reveals Stevens remains on hold.

Current AUD price is literally on the floor long and short term. But the RBA is holding daily pip ranges at 19.

AUD/USD Bottom, 0.7295. Bottom achieves destination on break at 0.7314 and 0.7304.

Upper targets, 0.7377 and 0.7367. Watch 0.7356 as this point must break for AUD to head higher.

Upper ranges 0.7386, 0.7468, 0.7552, 0.7573. Below ranges, 0.7279, 0.7199 and big base point at 0.7100. Most important points 0.7386 and 0.7279.

Above points today, 0.7348, 0.7353, 0.7363, 0.7365, 0.7386.

Below points, 0.7274, 0.7265, 0.7249, 0.7218 and 0.7100.

Brian Twomey, Inside the Currency Market,

EUR/USD: Levels, Ranges, Targets

EUR/USD: Levels, Ranges, Targets

Overnight, EURUSD achieved 1.1362, the interval between last reported targets at 1.1352 to 1.1377 and on the way to the overall target at 1.1403. Overnight EUR/USD structure changed by 5 pips.

Bottoms today 1.1283, 5 pip change from 1.1278. Bottoms targets seen on breaks of 1.1311, 1.1297.

Upper targets, 1.1408, 1.1382, 1.1357. Again 5 pip change from last reported before the overnight session. To achieve 1.1408, breaks higher must be seen at 1.1360 and 1.1391. Watch the confluence area 1.1382 to 1.1391 to act as tough resistance today and reverse sell points.

Further upside points, 1.1581, 1.1567, 1.1487, 1.1414. Also monthly average at 1.1552. EUR/USD 1.1500’s starting from 1.1487 is another rough area.

Bottom side points 1.1256, 1.1230, 1.1216, To understand how vital is this area, next comes 1.1169, 1.134, 1.1117.
The point at 1.1117 is also a range point as next below comes 1.0928 and 1.0911.

Above range points 1.1567 then 1.1766.

Friday’s daily pip range was 49 pips, price achieved on NFP 4.2 times its range. Normal runs about max on one side 6 times. Despite the top heavy range, current price for the day is on the floor.

To describe this model. This model is what central banks trade, its how they view their currencies.

The model captures every changing dynamic from targets, ranges, trade able points, bottoms, tops, highest high ranges, lowest low range. Every last data point is known long and short term and down to the exact traded pip. What’s phenomenal is the model sees every news release from major NFP and Interest rate changes to minor releases.

Brian Twomey, Inside the Currency Market,

EUR/USD: Levels, Ranges, Targets

EUR/USD: Levels, Ranges, Targets

EUR/USD price remains on the floor, short term, means next day usually until the Tuesday changeover. Current price is still working in Friday as is the usual case for currency prices for time immemorial. The big monthly average break is found at 1.1552. EUR/USD V DXY remains in about a 200 pip range V each other.

Watch DXY 93.97 as DXY is leading all, all currency prices. I cannot stress enough the severe problems inside DXY prices. To offer a brief synopsis, the EUR/USD V DXY relationship resembles the EUR/USD, EUR/JPY, USD/JPY numbers just before the 2008 crash. The territory prices trade currently is scary, petrified scary. I’m not saying a crash is imminent but I’m saying price pressures are too high and severe and ready to severely pop.

The outline in the monthly averages was a small part of DXY problems. But price problems must also fall to blame on Yellen. And Yellen is why EUR/USD prices within itelf is finding overbought V oversold struggles. To believe Draghi, he says Europe is on economic track. Any EUR/USD moves higher are the direct result of DXY because EUR/USD lacks ability to fly higher unless its pure DXY driven. High balance sheets, re invest proceeds, severely overbought USD interest rates can only lead to the same economic situation we currently see at present.

EUR/USD Bottom 1.1278. Price achieves bottoms by breaks lower at 1.1306 and 1.1292.
Upper targets are found at 1.1352, 1.1377, 1.1403. Break points above located from 1.1482, 1.1409, 1.1386, 1.1355, 1.1343 and 1.1340.

Downside points 1.1225, 1.1251, 1.1211, 1.1164, 1.1129 and 1.1112. Watch this week breaks at 1.1251, 1.1225 and 1.1211. Not recommended to trade inside these numbers, wait for breaks to target much lower prices.

Range breaks above 1.1562 and coincides with monthly averages at 1.1552. Bottom range breaks 1.1124 and 1.0924. Now that Friday fireworks are over, back to normal in 52 pip day’s range.

Brian Twomey, Inside the Currency Market,