Month: June 2017

1 Month  EUR/JPY is far to high, should trade between EUR/USD and USD/JPY   http://fxtop.com/en/historical-exchange-rates-comparison.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=USD&C3b=JPY&C4a=&C4b=&C5a=&C5b=&C6a=&C6b=&DD1=30&MM1=05&YYYY1=2017&C7a=&C8a=&C9a=&C10a=&C7b=&C8b=&C9b=&C10b=&B=1&P=&I=1&DD2=30&MM2=06&YYYY2=2017&M=1&btnOK=Go%21

2 month  Confirmed EUR/JPY far to high. http://fxtop.com/en/historical-exchange-rates-comparison.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=USD&C3b=JPY&C4a=&C4b=&C5a=&C5b=&C6a=&C6b=&DD1=30&MM1=04&YYYY1=2017&C7a=&C8a=&C9a=&C10a=&C7b=&C8b=&C9b=&C10b=&B=1&P=&I=1&DD2=30&MM2=06&YYYY2=2017&M=1&btnOK=Go%21

3 month  Same EUR/JPY miles to high  http://fxtop.com/en/historical-exchange-rates-comparison.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=USD&C3b=JPY&C4a=&C4b=&C5a=&C5b=&C6a=&C6b=&DD1=30&MM1=03&YYYY1=2017&C7a=&C8a=&C9a=&C10a=&C7b=&C8b=&C9b=&C10b=&B=1&P=&I=1&DD2=30&MM2=06&YYYY2=2017&M=1&btnOK=Go%21

5 month since January   Look out below EUR/JPY   http://fxtop.com/en/historical-exchange-rates-comparison.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=USD&C3b=JPY&C4a=&C4b=&C5a=&C5b=&C6a=&C6b=&DD1=30&MM1=01&YYYY1=2017&C7a=&C8a=&C9a=&C10a=&C7b=&C8b=&C9b=&C10b=&B=1&P=&I=1&DD2=30&MM2=06&YYYY2=2017&M=1&btnOK=Go%21

1 year  EUR/JPY to high,  http://fxtop.com/en/historical-exchange-rates-comparison.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=USD&C3b=JPY&C4a=&C4b=&C5a=&C5b=&C6a=&C6b=&DD1=30&MM1=06&YYYY1=2016&C7a=&C8a=&C9a=&C10a=&C7b=&C8b=&C9b=&C10b=&B=1&P=&I=1&DD2=30&MM2=06&YYYY2=2017&M=1&btnOK=Go%21

Brian Twomey

Deutsche bank today addresses the question of US Vs EU rate differentials and a concept highlighted here weeks ago for many currency pairs. Long ago was also mentioned interest rate changes were coming and an imperative to learn how to prepare for the day now upon us. As we remain ahead of any curve especially interest rates, my own advice led 2 years ago to the most robust, accurate designed interest rate trading system. I’m long ready for these central bankers.

The current EU /US differential runs 53 basis points. This figure is light from a trading / volatility perspective yet its not terrible. If Yellen raises again and the ECB refrains then the differential climbs to 65 and volatility will be good, not great as the old days but good enough. A Yellen raise however might force the ECB higher in which case the differential remains the same as today at 53. An ECB raise and Yellen on hold means the differential closes to 41 and volatility literally disintegrates. The old days of EU /US differentials was right at 75 to offer a perspective of 53.

An ECB raise would force Denmark, Norway, Sweden and Switzerland higher so to cut the differentials. Central banks want differential contraction rather than expansion so to control / manage the exchange rate. Last aspect a central bank wants is the exchange rate to reach unintended levels as possible and expensive interventions might be seen. In this regard, the BOJ and its current economic experiment would come under severe threat as the Japanese differential sits directly between the US and EU. The Japanese would be forced to move interest rates.

Under any interest rate change however is the assumption normalization is here and the future economic orientation is bright. I’m not among those to see normalization in economics or interest rate changes ready for prime time. Nor do I see the need to raise ahead of any future economic forecasts. Yellen’s inverted yield curve marks the example. What effects other yield curve shapes look like is unknown in comparison.

The German 10 to 30 spread runs 0.77 Vs 0.19 for the 10 to 3 month. !0’s and 5’s as well as 10 to 2’s remain deeply negative. Draghi is not ready to raise as he risks a possible inversion to flat yield curve.

EUR/USD today must breaks below are located at 1.1403 and a tough area. Then comes 1.1388, a big break at 1.1382 and on to the bottom at 1.1374. Should today’s US CPI release report out of sync then 1.1352 and 1.1323 comes next. EUR/USD remains far overbought and targets longer term are located at high 1.1200’s to start.
Brian Twomey

While EUR/USD short term drivers are matched between short rates and shorter term averages, current 1.1400’s overbought is broad based from all averages 5 to 253 days. Viewed from extremes, EUR/USD is done from 1.1454 to 1.1492 medium and short term and to 1.1523 to 1.1566 in longer term averages 100 to 253 days. Bottom extremes are located from 1.1020 to 1.0987 and 1.0974. Downside extremes informs confirmation to bottom based overbought averages at 1.1058 and 1.0947. Far more downside exits to current EUR/USD prices yet overbought warns not to chase longs at current levels.

The current EUR rally is driven both by Draghi’s normalization dreams and Yellen’s inverted yield curve which are both USD negative. If Dragh’s reality proves correct and the yield curve remains inverted then EUR rallies higher into far more overbought 1.1500’s. An inverted yield curve however doesn’t correct itself overnight especially when at 40 or so basis points corrects the inversion.

What prevents faster inverted corrections is the range of interest rates from the short end. In the last 4 days for example, the range moved from a high at 55 basis points to today’s 42. A further shorter range restriction is required in order for the 30 year yield to travel far higher than the current 10 to 30 spread at 55 basis points. This Russian standoff wont rightsize anytime soon particularly when the same shorter range existed long, long before the Yellen raise. For USD money markets, its almost written in stone. Yellen’s raise guaranteed a short range inversion against a 30 year yield drop. The 10 to 3 month at 1.26 and 1.16 Fed Funds matches against 10 to 30’s at 55 and 10 Vs 2’s at current 91.

How broad is the current EUR move is found in cross pairs as the main pairs to EUR/USD all trade above vital supports yet the vast majority are approaching or currently sit at overbought.

EUR/JPY supports are located at 127.94 and 127.16 yet overbought. EUR/CHF trades overbought an sits on supports at 1.0838 and 1.0811.

EUR/CAD and EUR/AUD are only questions to EUR/USD as EUR/CAD trades above supports at 1.4731 and 1.4719 yet is oversold. A good move exists in EUR/CAD. Likewise, EUR/AUD breaks support at 1.4871 and travels to 1.4650 and 1.4542 or trades higher to 1.5392.

EUR/NZD trades overbought and above supports at 1.5564 an 1.5447. Next above is 1.5893.

EUR/GBP is another misnomer in the EUR universe as it doesn’t have a clue. Its sits range bound above supports at 0.8697 and 0.8618.

Despite EUR/USD far overbought, the downside must find assistance from cross pair breaks. EUR/CAD and EUR/NZD could easily lead other cross pairs lower.

EUR/USD Tough resistance today at 1.1432 and 1.1445. Downside break points are located at 1.1402, 1.1381 and a big break at 1.1360. The longer term end point is found at 1.1295.

The Fed and ECB decide EUR/USD fate over next days. A time once existed when central banks lacked such power and control over market prices.

Brian Twomey

GBP/USD.  Two support lines below to see far lower GBP/USD: 1.2695 and 1.2710. The 1.2710 average is definitely overbought as well as averages 5 to 20 day. Targets for the averages range from 1.2866 to 1.2820. Until the 1.2710 and 1.2695 averages break, GBP is working itself higher.

Main pair GBP/JPY assists to confirm overbought in GBP/USD. Main lines below supports 141.93 and 141.57. GBP/JPY is wildly overbought. Targets : 144.20, 143.37, 142.87.

A short in GBP/USD might as well take shorts for GBP/JPY as well.

A question never explored addresses “Forward Guidance” as public relations. Along the same lines is a just released BOE paper on Forward Guidance / Interest rate message as stimulus. When Yellen held a 12:00 press conference, she bumped against central banks Noon Day. Yellen’s words were viewed as positive because DXY traveled higher and market writers wrote of the positive market effects inside Yellen’s Guidance. Meanwhile, DXY traveled higher as a result of the price and not as a result of Yellen. DXY had an equal chance to drop. The price is the overall market dictator against any central bank speech or economic release. The only question to the price is where is the end point.

Draghi’s words were viewed positively yesterday because EUR/USD skyrocketed higher. The ECB took EUR/USD up in late morning then the non interest rate move over the past 5 days allowed EUR/USD to attain higher levels in late afternoon.
Yesterday morning, short term EUR/USD was done at 1.1220’s and faced a tough resistance line at 1.1239 then came 1.1250’s and the end point at 1.1300’s.

By afternoon, the end points changed to 1.1400’s and EUR stopped at 1.1350. The reality of the price was the overall dictator as the price had an equal chance to fly lower due to Draghi’s mixed message speech. Fascinating how this works in action. Interested can view my blog for the actual blow by blow throughout the day.

Yesterday Draghi stated deflationary pressures were easing yet stimulus remains. Weeks ago, Draghi informed a substantial amount of stimulus was needed over the long term and he was at the ready. GDP may look good at 2% but current 16311 vs 18573 throughout 2015 to 2016, hardly warrants rosy scenarios. My message is treat Draghi and his public relations with the same skepticism as Yellen and view yesterday’s prices as grand opportunities for the smart trader crowd.
At 1.1370’s and anywhere in this vicinity , EUR/USD is miles overbought from averages 5 to 253 day. From a daily perspective, EUR is overbought. Draghi’s dreams offered an opportunity.

Three resistance lines are located at 1.1373, 1.1402 and 1.1415. Shorts must clear 1.1331 then comes 1.1260’s yet today’s bottom is located at 1.1316. We’ve seen 1.1300’s many times before and each time, EUR dropped significantly because it bumped against the multi month trend line. Where the exact multi month trend is located is unknown but it must be close and we must assume the current EUR price is below.

The overall base of the bottom EUR line is located at 1.1045 and this line can travel to 1.1022 as EUR depends. This is the big break line to see far lower EUR. This line is equally overbought as the moving averages.

Regardless, EUR is miles overbought. My recommendation is short and sell rally strategy. If EUR/USD is viewed from USD/CHF, the CHF break line is 0.9524 and close.

Brian Twomey Again Trade signals available for interested.

EUR/USD Update. 10:00 am to 12:30 afternoon EST is most dangerous time for currency prices because all the central banks come to buy and sell. Its volatile or could be very volatile.

EUR/USD remains far overbought, shorts are the way forward. Above big breaks are 1.1319 and 1.1381. Below 1.1236 and 1.1175.

I would continue short and focus on the 1.1236 break to target 1.1205 and 1.1190. I wouldn’t push my luck past 1.1190 yet. Should be a good gain for the day

Brian Twomey

For today.

EUR/USD is miles overbought when it traded at 1.1226. Draghi drove EUR higher but the inverted USD yield curve is just as guilty as inversion doesn’t favor USD.

The EUR end point for today is 1.1301. I would be selling today. On the way down are 1.1270 then 1.1239 and 1.1197 and 1.1156. I would look for the 1.1239 break to target 1.1197 area. I wouldn’t push my luck past 1.1197 just yet.

I will update EUR  at about  11:00 am EST to determine any changes to the current levels.

Other requests, feel free anytime.

Brian Twomey

The current 40 point inverted yield curve signifies not normalization nor a smart move to raise Fed Funds but equates to economic trouble ahead for USD. Economic data should begin to deteriorate as a result of the inversion if past is prologue. Typically, inversions experience recession in 3 to 6 months.

The 2 most vital metrics to follow are Housing and Leading Economic Index. Housing typically turns down far faster than the Leading Economic Index and its the first warning to trouble. The Leading Index must turn down 3 times in succession in order for further recession confirmation. Currently the Leading Index is up. Yet GDP at 1 and 2% over years is not exactly boom times so possibly a new definition of recession is warranted. What’s recession is invested money fails to earn its proper yield return.

If the ECB ever raised interest rates then consideration must be given to Denmark, Sweden, Switzerland and Norway as those nation’s interest rates are currently priced below Europe. A raise in Europe forces those nations to also rise in order to maintain the current corridors. The assumption is Europe is truly normalizing and so far its under question despite Draghi’s words.
What forces AUD/USD higher is continued range pressures. The only direction for AUD is up to relieve the problems. AUD/USD is currently fighting against overbought prices Vs the need to travel higher.

The further poblem is AUD lacks a daily range and its stuck inside tiny channels otherwise Range pressures would relieve itself much sooner. Instead, slow price grounds continue for AUD. Below supports are located at slow riser 0.7536 and 0.7528 vs massive resistance at 0.7791. The 0.7536 Vs 0.7791 showdown is on the way. AUD lacks current ability to break 0.7536 yet 0.7650’s, AUD is miles overbought.

AUD/USD’sfurther containment problem is its location over the past month to trade directly in between its Correlation Counterparts AUD/EUR and AUD/CHF. The most significant marriage is found between AUD/CHF and AUD/USD. AUD/CHF nor AUD/EUR contains the same range pressures as AUD/USD therefore AUD/USD must lead AUD/CHF and AUD/EUR.

Currently, AUD/CHF to travel higher faces headwinds at 0.7400 and 0.7447 from current 0.7347 and its a further roadblock to AUD/USD higher. AUD/EUR is trapped at higher 0.6700’s. The most significant point is 0.6802 and translates to EUR/AUD at 1.4701. AUD/EUR currently provides vital supports for EUR/AUD at 1.4630 and 1.4701. Overall, AUD/EUR lacks a significant break point from current prices and is currently wandering around and again fails to assist AUD/USD’s range dilemma. The most vital for AUD/EUR translates to EUR/AUD 1.5200’s from current 1.4800’s.

The way to handle this is to look for EUR/AUD at its significant point at 1.4890 but this assumes AUD/EUR drops to 0.6714 today and next days, its not likely.

Our strategy over many many days for AUD/USD and all AUD pairs has been quick in and out day trades. Until the situation clears, this will be the continued strategy.

Brian Twomey

When WTI Crude dropped from June 2008 highs at 133.88, the current 43.17 price traded below monthly averages from 1 to 30 years. The current 43.17 price now trades between the 30 and 31.5 year monthly averges from 44.26 and 42.99. Current prices share representation to the period from 2000 to 2004 when 53.28 highs matched against 19.39 lows finds the mid point at 36.33.

The 31.5 year current mid point is located at 72.61 from 133.88 to 1980’s lows at 16.35. Why highlight 2000 to 2004 is because 19 monthly averages reveal a downtrend just beginning and oversold is not seen until easily middle 30.00’s. A break above at 44.26 may delay the downtrend but because of the lopsided averages, many, many resistance points are built against an uptrend. WTI at 43.17 is fighting against 18 averages from the 30 year to the 1 year. Those averages are located from 44.26 at the 30 year to the highest at the 10 year at 78.13. Speculation of $60 Crude is miles away from current prices. Monthly averages 1 to 31.5 years were viewed to total 19 monthly averages.

Further working against an uptrend is an inverted yield curve, Currently, the 10 to 30 spread trades 0.57 and 10 to 5″s trade 0.39. Matched against the 10 to 2 spread at 0.80 and 1.19 for the 10 year minus 3 month, upside in oil will continue to severely struggle. To understand 1.19, Fed Funds closed at 1.16 everyday since the last June 14th Yellen raise to add another layer of resistance.

The next WTI break is located at 42.99 at the 31.5 year monthly average then next comes 40.15 and 34.09. At 34.09 is vital because a break opens the floodgates to 29.68 and 28.44. Further, middle averages from 5 year to 12 range from 71.22 lows to 78.13 and 95% bounds range from 33.06 to 31.37, 31.28 and 30.54. The low of lows can take WTI to oversold at 29.34 and 26.67.

Inside the 17 to 31.5 year averages responsible for driving WTI prices, range indicators reveal no dramatic or sudden moves lie ahead but rather we’ll see more of the same slow grinds. Overall the WTI price is low but not low enough to skyrocket higher. A 1% higher or lower WTI move only takes WTI to 42.73 and 43.60 to bump against the 30 year average at 44.26. A 2% move takes WTI to 44.03, 3% to 44.46 and 4% to 44.89. A 10% move takes WTI to 47.48 while 20% to 51.80.

The upside is replete against many resistance points from 40’s, 50’s, 60’s and 70’s. The nearest break points are located from 44.26, 45.69, 45.84, 47.12, 47.51. Tough resistance lies at 49.04 and 49.07 then 48.90, 48.73 and 50.98. to see 60.00 WTI again, breaks must be seen at 53.22, 56.46, 54.87 and 63.07 to offer a few of the many points along the way to 60.00.

The further drop to WTI will take a further reduction in the higher 70’s averages. From 2012 to 2015, yearly averages for WTI were located from 97.98 to 93.17. The 2016 yearly average is currently running at 48.66, a significant drop.

Current Rig Count for June 23 is 941 and 933 last week Vs 1 year ago at 421. Canada’s Rig Count at 170 matches against last week ‘at 159 and 76 at 1 year ago. Rig Counts in context, 1st week December 1999, Rig Counts ran from 771 to 815 and monthly average WTI ranged from 12.01 to 26.10 for the 12 month period. In 1998, Rig Counts ran from 621 to 669 and WTI monthly averages ran from 11.00 to 15.00 for the year. In 1986, Rig Counts ran from 851 to 856 while WTI monthly averages for the year ran from 11 to 22. Speculation is more work must be done on Rig Counts rather than accept weekly face value data as a positive or negative sign to future WTI prices.

The EIA reports as a result of December 2015 Export restriction lifts, Exports skyrocketed to 520,000 barrels in 2016 and 1.1 million barrels as the highest monthly average in February 2017. Mexico imports the largest supply of Gasoline, 44% in 2014 Vs 53% in 2016.

Canada remains in 2016 the largest destination for Crude at 300,000 yearly barrels. WTI is light heavy oil vs Canada’s Heavy Sour Western Canada Select, WCS. 44% of Canada’s Oil produced is WCS heavy blends. Yet Canada’s refining capacity is 2 million barrels per day and 40% is WTI refined while the US refining capacity is 18 million barrels per day. While 300,000 yearly barrels travel to Canada, roughly 7.9 million barrels per day import into the US and results in a small net gain for Exports.

WTI spreads over WCS ran from 13.90 in January 2016 to 16.37 in January 2017. The current spread runs the tighest in years at 0.18. In Canadian Dollars, 0.18 runs 13.56 and 16.99 1 year ago and an average price of 15.88. Further WTI export destinations include China, Netherlands, Curacao, UK and Italy.

The question to further Oil supply is Trump’s signature to Executive orders to lift drilling and exploration restrictions.Then comes the OPEC policy questions as King Salman broke succession ranks to appoint his 31 year old son Mohamed Bin Salman as next Crown Prince.
Brian Twomey

The question to the 5 day – interest rate change rule in currency markets was to what degree was the failure and its answered by total collapse as a vast majority of currency pairs remained inside a 100 pip range. The 5 day Rule derives from currency markets in periods 1900’s to late 1930’s and then from 1970’s to current day. As expected and mentioned, NZD as usual wins the volatility day but EUR, CHF, JPY, AUD and the list of failures goes on. Even wide ranging EUR/AUD and EUR/NOK failed. EUR/NOK traveled 1000 pips but its allowed 500 pips of movement on any given trading day.

The manner to view the 5 Day Rule outside of national interest rates is the number of exchange rates trading at parity against each other. The world of exchange and interest rates grew deeply closer to each other over the years since crisis days. This explains why the 5 day rule failure and a paltry 100 pip range on a 25 basis point interest rate change. What’s 25 basis points inside a USD Vs EUR corridor of 50 basis points. It doesn’t register on the radar screen yet it speaks volumes to economic and central bank failure continuously over 8 years.

A marriage continuation in interest and exchange rates from a trading perspective confirms the need for a robust technical strategy. An ECB interest rate rise for example ensures Corridors remain and EUR/USD may trade 1.1300 to 1.1500 instead of 1.1100 to 1.1300. Interest rates badly need a break out in order to break the dead ranges but its not seen yet. The economic portion must lead interest and exchange rates rather than Yellen’s backward approach as interest rates lead economics. Not sure Keynes would approve of such an approach.

Further how markets found this dead range / Dead 5 day rule problem was the strict focus to protect interest and exchange rate bottoms as first priorities. GBP as an example landed inside the BOE’s 1.2300 to 1.2800 range and the result is UK money markets went dead and numb which means this range may hold for a while as bottom points are seen from 1.2639 to middle 1.2700’s. Focus on bottoms and protections questions the overall positive economic intent.

GBP/USD above targets are located at 1.2747 and 1.2796. Bottoms must break 1.2678 to see a lower GBP.

EUR/USD will severely struggle at 1.1224 so topside is seen at 1.1196. Bottoms will severely struggle at lower 1.1100’s.
AUD/USD Do or Die at 0.7528 and 0.7534.

USD/JPY must cross 111.52 to travel higher while 110.96 is current solid supports.

Brian Twomey

From head of research for Richard Fisher at the Dallas Fed comes Danielle DiMartino Booth’s book Fed Up to explain why the FED is bad for America and why the Fed is acting against the interests of ordinary Americans to favor the institutions. Much more is involved in this book form 2008 to current day but interest rate rises is key focus today.

To the unanswered question to why the Fed seeks aggressive interest rate raises, DiMartino answered in yesterday’s interview is to engineer a recession under Trump’s term. An extraordinary statement yet raise rates under easy money policies is actually the result to see recession based on years of past economic prescriptions.

Easy money and accomodative policies is defined by Fed’s holdings in the SOMA Account which currently contains in all securities $4, 237, 041, 281.00, the highest total in SOMA account history. The current total fails to speak to one raise let alone multiple especially when weekly changes barely sees $10 billion. The second Di Martino answer to interest rate raises is the threat to the establishment in Trump tax cuts as slashes would unleash full economic power to the masses and threaten Fed market controls. The laugh to this statement is to consider the Fed ahead of any curve since its 1913 establishment.

Why Trump as the target is because he seeks to take down the entire Washington establishment whose sole purpose since 1988 was grow government to grow wealth for those in the establishment. Democrats are as guilty as Republicans because the 1988 election of George H.W Bush saw a transfer of power from Taft to Roosevelt Republicans. The difference between Roosevelt Republicans and Democrats is minimal, particularly when tax cuts failed to enter the lexicon since 1988. The result was government growth at the expense of the masses in the private sector.

George H.W Bush’s economy in 1992 was 1.2 trillion. Today, its speculated + 2 trillion. Why speculation is because America’s Bummer never submitted a formal budget for Congressional hearings and approval and instead worked on Continuing Resolutions. Obummer asked for phantom budget numbers and Congress approved. Trump submitted a formal budget for the first time in many years at around 2.5 trillion.

The other question to raises is exchange rate related. Fed Fund raises saw DXY from December climb 300 pips from 99 to 102’s. Rarely does the Fed mention dollar policy in statements but last May? was revealed the Fed’s desire for a lower DXY. Raise Fed Funds and opposite effects will be seen. What Tax cuts mean for the masses under a higher DXY is the current unanswered question.

Under lower Inflation, the difference maybe minimal. The Fed nor any central bank doesn’t need an interest rate change to engineer an exchange rate level. The ECB mastered that concept last June and all central banks jumped on board. Its actually far better to not change interest rates so to leave exchange rates inside small channels for extended periods.

Politics, philosophy and party labels aside, we’re beginning to see years of the effects of Obummer’s economic destruction and America at its weakest levels as the direct cause. Not a word was spoken in 8 years of America’s Bummer yet today everybody speaks. To regain America;s strong posture again will take years as tax cuts is just the start.

The recommendation is follow Dimartino as she’s not afraid to speak her mind and reveals insightful information.
EUR/USD Bottom points at lower 1.1100’s is now 1.1117 and rising. caution at 1.1199 and 1.1227 .

GBP/USD below breaks at 1.2631 and 1.2620 needed to see lower while above 1.2667 and 1.2698 to see 1.2707 an 1.2757.

AUD/USD below 0.7535 and 0.7529 musty break for lower levels.

Brian Twomey

Carney confirmed previous mentionables as Interest rate hikes remain on hold as Brexit must be settled for UK independence, GBP hovers all 2016 and 2017 at barely 1.5, UK money markets remain fast asleep and political system as well as central banks care far less to bring prosperity. Instead of stimulus recession when markets stabilized in 2008 and 2009, central banks increased holdings. When “Green Shoots were seen in 2010 and 2011, balance sheets increased to choke off prosperity. Nearly 6 years later, interest, exchange rates and GDP remain stasis and on the floor. Yet the word Inflation won’t leave central banks verbiage.

The economic question to higher Inflation is the transmission to higher Food prices for average Joe Blow consumers and the effects how much weekly wages disappear due to payout in higher Food costs. DXY is the true commodity currency and positively correlates to Agriculture and its a number 1 export, particularly to Asia and Canada. Higher Interest rates leads to higher DXY and results in higher Food costs.

Food costs appear to track well in Inflation figures to Medical costs and Prescription drugs. Gasoline prices factors to about 0.2 to 0.4 to overall Inflation figures, depending which nation. NZD for example factors to 0.2. Higher Inflation must result in higher Gasoline prices. Now we have higher Inflation means higher Gasoline prices, Food, Medicine and prescription drugs. Wage relationship to Inflation as highlighted by Soc Gen appears as complete inverse. All prescriptions for consumer disaster and destruction to prosperity. The same old tired story from central banks is old and ran its destructive course. Trump at least is trying to pass growth policies.

GBP/USD. The break yesterday of 1.2703 saw the next line at 1.2625. GBP was heading to 1.2625 anyway, Carney allowed GBP to travel faster. GBP now remains inside the BOE’s 1.2300 to 1.2800 range. At 1.2500’s GBP remains dead center.

Below breaks are locate at 1.2601 then 1.2594 and 1.2582. Above, 1.2650 and 1.2669 provide headwinds to 1.2718.

EUR/USD. Big break at 1.1022 to target 1.0800’s is blocked by 1.1106 and 1.1086. Big break above at 1.1180’s should stop EUR rises for today.

USD/JPY supports are located at 111.04 and 110.95.

EUR/JPY. 124.90’s as mentioned failed to break higher.

Brian Twomey

NZD is most affected by USD changes to interest rates because its next in line after NY markets close, its the nation to open Asia trade and NZD Dairy is priced to USD. Most importantly, NZD sits behind the smartest and most forward RBNZ. As usual, Its the only central bank ahead of the curve. NZD/USD has been volatile and will continue its volatility to beat its counterparts AUD/USD, USD/CHF and USD/JPY.

The must break line for NZD below is 0.7231 then further supports at 0.7110 and 0.7016. Above 0.7453 and a stasis line exits as next break point. Current NZD is overbought and we’re looking lower.

Further why NZD trades is the common theme this week for a vast majority of pairs is a tight tight market and containment within 40 pip ranges. 40 is the number this week as overbought oversold hits current prices.

AUD/USD’s range problems as mentioned must result in a higher AUD to relieve the pressure. What happened was AUD went higher. Supports exists at 0.7531 and 0.7520. We’re looking lower for AUD and selling rallies.

Remember January’s CAD/MXN at overbought 15.00’s. CAD/MXN jumped to 16.70 then went on a long dive to current 13.44. Its price is low low especially in relation to CAD/JPY, EUR/USD, CAD/USD and EUR/USD. Yet CAD/MXN’s price on its own volition is low low. Above breaks are located at 13.99 and 14.03 vs below at 12.96 and 12.47.

CAD/JPY is overbought and big break below is located at 83.01.

CAD/ZAR Resistance points 9.7629, 9.7649 and 9.8845 Vs below at 8.6247. Higher in CAD/ZAR sends EUR/USD much lower. CAD/ZAR at current 9.66 and break at 9.76 then look out below EUR/USD.

EUR/JPY. Supports 122.59 and 121.52. Not a favored long pair as massive resistance has been built into current prices for the past week, today is no different as 124.90’s should contain EUR/JPY.

AUD/CAD. Support 0.9916 Vs Resistance at 1.0076 and 1.0135. Explains EUR/JPY lack of upside.

EUR/USD. Stuck today from 1.1144 to 1.1249. We selling above and buying below.
Brian Twomey

The measure of trader preference to take on risk trades or play it safe as risk off is assessed in currency markets by 4 most prominent currency pairs: CAD/ZAR, CAD/JPY, AUD/CAD and EUR/JPY. In EUR/JPY and CAD/JPY are risk pairs while CAD/ZAR and AUD/CAD are classic risk off pairs, play it safe. Longs in EUR/JPY and CAD/JPY results in automatic shorts in CAD/ZAR and AUD/CAD which informs overall, markets are willing to take on risk.

The traditional price laggard pair in the risk off alignment is AUD/CAD while CAD/ZAR is lightening fast responsive to market prices and is the best risk off assessment in currency markets. The positive to AUD/CAD’s slow move price is it becomes overbought / oversold far quicker than CAD/ZAR and serves as a forward indicator to risk determinations. Short term weekly and monthly risk on / risk off trades are found in AUD/CAD while longer term CAD/ZAR serves well.

Why AUD/CAD wins in the overbought / oversold evaluation is because traditionally it not only trades between CAD/ZAR and EUR/JPY, CAD/JPY but historical price moves from monthly averages barely see a 200 to 300 pip difference while CAD/ZAR changes by 1000’s of pips.

When AUD/CAD topped at 1.0216 in early June and dropped 263 pips to 0.9952, EUR/JPY jumped 221 pips from 122.26 to 124.47 and CAD/JPY skyrocketed 339 pips from 80.84 to 84.23. June saw a rare deviation in CAD/ZAR as it climbed 259 pips from 9,3891 to 9,7488,

Current domination in ZAR is early June’s GDP down minus 0.7%, Manufacturing off by minus 3.7% and 7 of the 10 manufacturing categories tracked for GDP calculations were off. Number 2 Export in Motor vehicles sales currently suffers a 7.2% yearly decrease in new, used and parts accessories. April’s Trade Balance Stats, released in May, revealed Vehicle and Transport Equipment were off by ZAR 2.2 billion, down 18% from February. Overall Trade Balance was ZAR + 5.08 billion thanks to Minerals and metals as all remainder Trade Export categories were negative.

Canada’s Exports rose 14.7% year over year , 3.2% for March and 1.8% for April and led by passenger Cars, light trucks , parts and energy. All 7 of the 11 categories covered by official Global Affairs Canada recorded positive. Overall, Canada’s Trade Surplus Vs the US widened to USD 5 billion in April from 3.4 billion in March and largest surplus since May 2014. The US is Canada’s largest supplier of Agricultural foods to include Vegetables, fruits and drinks.

AUD and ZAR share a relationship in Iron Ore exports especially to China as AUD and ZAR are the world’s largest supplier of Iron Ore.

CAD/ZAR and CAD/JPY’s position in the overall risk assessment for June traded directly to EUR/USD as both CAD/ZAR and CAD/JPY Vs EUR/USD are either ready to cross higher above EUR/USD or severely tumble. EUR/JPY is the laggard pair. See my blog for a picture.

While CAD/ZAR and AUD/CAD describe risk profiles for EUR/JPY and CAD/JPY, the correct view to encompass other currency pairs within the risk parameters is EUR/USD Vs CAD/ZAR because of the constant and widely negative Correlations EUR/USD shares with CAD/ZAR. Think CAD/ZAR as DXY and one may understand the vital import to CAD/ZAR as its a USD pair and opposite to EUR/USD.

Both EUR/USD and CAD/ZAR prices share the widest extremes among currency pairs therefore correct positions for AUD/CAD, EUR/JPY and CAD/JPY are found between EUR/USD and CAD/ZAR. Anytime CAD/ZAR and EUR/USD prices trade close to each other then prepare for a big and long lasting move. Likewise, when wide extremes is the order then again, the big move is on the way. In August 2008 crisis, EUR/USD traded at 1.4100’s to 1.2200 as CAD/ZAR skyrocketed to 20.00’s. Today, EUR/USD trades 1.1100’s Vs 9.7400 for CAD/ZAR. CAD/ZAR’s price is low and EUR/USD price to high. Any pair outside the CAD/ZAR Vs EUR/USD parameters must come back inside the channel.

CAD/ZAR and AUD/CAD are USD pairs yet true commodity pairs and serves the risk off determinations while both pairs provide signals to EUR/JPY and CAD/JPY.

1 month   all pairs http://fxtop.com/en/historical-exchange-rates-comparison-graph-zoom.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=CAD&C3b=JPY&C4a=AUD&C4b=CAD&C5a=CAD&C5b=ZAR&C6a=&C6b=&C7a=&C7b=&C8a=&C8b=&C9a=&C9b=&C10a=&C10b=&DD1=16&MM1=05&YYYY1=2017&DD2=16&MM2=06&YYYY2=2017&LARGE=1&M=1&>

2 months, all pairs, EUR/JPY trades above EUR/USD and far above CAD/ZAR and AUD/CAD.   http://fxtop.com/en/historical-exchange-rates-comparison-graph-zoom.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=CAD&C3b=JPY&C4a=AUD&C4b=CAD&C5a=CAD&C5b=ZAR&C6a=&C6b=&C7a=&C7b=&C8a=&C8b=&C9a=&C9b=&C10a=&C10b=&DD1=16&MM1=04&YYYY1=2017&DD2=16&MM2=06&YYYY2=2017&LARGE=1&M=1&>

3 months, CAD/ZAR and EUR/USD close, maybe to close, EUR/JPY hugs CAD/ZAR . AUD/CAD and CAD/JPY low and trades below CAD/ZAR.

6 months. Correct positions CAD/ZAR and EUR/USD. AUD/CAD low, EUR/JPY high. http://fxtop.com/en/historical-exchange-rates-comparison-graph-zoom.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=CAD&C3b=JPY&C4a=AUD&C4b=CAD&C5a=CAD&C5b=ZAR&C6a=&C6b=&C7a=&C7b=&C8a=&C8b=&C9a=&C9b=&C10a=&C10b=&DD1=16&MM1=12&YYYY1=2016&DD2=16&MM2=06&YYYY2=2017&LARGE=1&M=1&>

1 Year, AUD/CAD, EUR/JPY and CAD/JPY trade far above EUR/USD. CAD/ZAR is low. http://fxtop.com/en/historical-exchange-rates-comparison-graph-zoom.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=CAD&C3b=JPY&C4a=AUD&C4b=CAD&C5a=CAD&C5b=ZAR&C6a=&C6b=&C7a=&C7b=&C8a=&C8b=&C9a=&C9b=&C10a=&C10b=&DD1=16&MM1=06&YYYY1=2016&DD2=16&MM2=06&YYYY2=2017&LARGE=1&M=1&>

1 year with addition USD/JPY. USD/JPY is clearly the driver to explain pairs trade above EUR/USD. Must watch for EUR/USD and USD/JPY cross. http://fxtop.com/en/historical-exchange-rates-comparison-graph-zoom.php?C1a=EUR&C1b=USD&C2a=EUR&C2b=JPY&C3a=CAD&C3b=JPY&C4a=AUD&C4b=CAD&C5a=CAD&C5b=ZAR&C6a=USD&C6b=JPY&C7a=&C7b=&C8a=&C8b=&C9a=&C9b=&C10a=&C10b=&DD1=16&MM1=06&YYYY1=2016&DD2=16&MM2=06&YYYY2=2017&LARGE=1&M=1&>

Brian Twomey,

The 5 day volatility Rule after an interest rate rise or fall is traditional and inherent to currency markets on prices. Its a concept never to leave markets but we’ve not seen the effects lately. The best example was seen in NZD as the RBNZ raised and lowered OCR . I suspected this effect as EUR/USD 1.1180’s reported yesterday was not seen for 24 hours. This spoke volumes to the post 2008 currency market consequences.

The lack of volatility addresses interest rate Corridors and the relationships between and among nation’s interest rates. A few examples.

Sept 26, 2008, the Europe Vs USD corridor was 4.52 Europe Vs 1.08 USD for a 3.44 corridor to favor EUR. June 16, 2011, the corridor compressed to favor Europe and EUR/USD at 1.52. What happened was seen in the numbers 1.62 Europe Vs 0.10 USD.

June 16, 2014 another compression materialized by 0.59 Europe Vs 0.10 USD for a 0.99 corridor to favor EUR/USD. July 13th 2012 , The Corridor Favored USD by Europe 0.14 Vs USD 0.19 for a minus 5 basis point corridor. Before Yellen raised Fed Funds, the corridor favored USD by Europe 0.64 Vs 0.91 USD for a 27 basis point difference. After Yellen raised, the corridor widened to roughly 36 basis points. Roughly because Fed Funds 30 day Futures traded and closed yesterday on heavy volume at 0.98. The absolute settlement price for Fed Funds will be known today and it should be the final price to carry us forward in currency prices for days ahead.

Why lack of volatility is the result to marriage in interest rates between and among nations. This concept won’t last forever and one day it will return to see interest rate corridors widen.

What’s the USD/JPY movement dilemma, 0.91 Vs 0.90 JPY and minus 10 today to not favor USD. USD/CAD is favored positively to USD.

3 pairs with the best volatility potential based on Corriors are GBP, NZD and AUD. GBP/USD is negative GBP 70 before the Yellen raise and about 80 after the rise. This explains why the 3 votes to raise by the BOE. UK interest rates and GBP are dangerously low yet UK economics favors leave interest rates alone. Economics must pull GBP from low levels and to raise rates later otherwise the corridors will expand if Yellen raises again. Likewise, USD economics must justify Yellen’s raise or Fed Funds drops and GBP Vs USD Corridors compress from current wides.

Explained was lack of interest rate volatility but not necessarily a guaranteed trade. In the old days of currency markets, good possibility but when Libor was eliminated, nations redesigned interest rate system to manipulate currency prices to their desired advantage. See AUD and the mastery of the RBA as a great example. We don’t trade against the market or market traders as the trade today is trader Vs powerful Central banks.

EUR/USD overall vital support is located at 1.1022. This is the big break line to see a far lower EUR. Far lower means below extremes are located at 1.0600;s as opposed to above at 1.1500;s. EUR/USD at 1.1100’s is almost dead between 1.0600’s and 1.1500. Why higher 1.1200’s provided resistance is EUR was at range tops and lower 1.1300’s was tracking lower on EUR prices.
Previous 1.1300’s is today 1.1254 and a massive resistance point. Below EUR supports are located at 1.1107 and 1.1055. The big break at 1.1022 for today is safe.

USD/JPY big breaks are today 111.25 and 111.73. GBP/USD supports are located today at 1,.2741 and 1.2730. The downside for GBP will become a rough proposition in days ahead.

Brian Twomey

DXY began yesterday at 96.38 and now trades about 97.29 for a 91 pip rise. Seems a muted response to an interest rate hike but from the June 4 post, DXY was far to low at 96.00’s and Fed Funds much to high. Added to DXY’s dilemma is the search for a correlation to Fed Funds as current correlations to 0.91 barely holds a pulse.

Most important monitor to the current raise is watch 30 and 5 year yield spreads and 10’s vs 3 month. So far we’re humped in the middle by about 30 basis points which may partially explain the out of snyc DXY Correlations to Fed Funds. DXY and Fed Funds fails to operate on all cylinders and its rare to see for a central bank on an aggressive path to raise Fed Funds further. The RBNZ’s 3 OCR rate hikes and later 3 lower were easily seen as OCR and NZD/USD correlated perfectly. We’ll take another yield curve read today upon the Fed Funds close as effective rates must be known for an accurate view to answer normalization or an inversion. Inversion reveals rates were unwarranted and its my speculation to the future.

Vital break points for DXY today are 96.72 below Vs above at 97.46, 97.62 and 97.83. Much resistance is built into today’s DXY price which explains severely oversold EUR/USD at 1.1150’s.

EUR/USD break points today are located at 1.1108 and 1.1162. EUR/USD at 1.1160 is not only at bottom range but its oversold. Two break point lines are falling on EUR/USD’s current price: 1.1258 and far above at 1.1312. As stated in the weeklies posted Sunday, EUR/USD can’t handle the upper decks at 1.1200’s. EUR/USD will severely struggle at 1.1270’s and 1.1280’s.

Yet the downside will maintain a slow grind. A sell rally approach to EUR/USD is the way forward. Above longs today will struggle at 1.1180’s. An important aspect to EUR/USD. If the bounce to 1.1180’s is slow and shallow then its known EUR/USD ‘s price is engineered to lower levels.

Brian Twomey

Typically, 5 day volatility is seen in any nation upon an interest rate rise or fall as yields and interest rates normalize to new levels. Fed Funds closed today at 0.91 and failed to reflect the new 1.12 expected level. When the Fed raised December 2015, DXY traded 270 pips from 97.22 to 99.32. The BOJ went negative January 2016 and USD/JPY ranged 286 pips from 115.93 to 118.79. The non example is the RBA cut September 2016 as the RBA slashed from 1.75 to 1.50 in a slow series at 10 basis points each time.

Will we see the traditional 5 day volatility is questioned based on the yield curve. 10 year minus 2 trades 0.79. Then the 30 and 10 trades 0.64. The yield curve is flat from both ends. 10 minus 5’s trades 0.41 and 10 year minus 5’s trades 1.05. Most important is the correct 10 year minus 3 month at 1.11. Fed Funds at 0.91 trades above 10’s and 2’s, 10’s and 30, 10’s and 5’s and below 10 minus 3 months.

The middle portion of the yield curve is slightly humped by 32 and 47 basis points which means either a transition to normal or the yield curve inverts. Fed Funds raises normally experiences a short end rise against a long end drop and means an inversion and guaranteed recession ahead.

The pairs to watch for volatility so far are JPY cross pairs in EUR/JPY and GBP/JPY. NZD always contains great potential as NZD mirrors the USD system. The recommendation is  trade NZD/USD and NZD/CHF together.

Brian Twomey

GBP/USD’s position is at the day’s low of lows at 1.2723 while EUR/USD faces a break line at 1.1191 and most important at 1.1178. AUD and NZD are located at the day’s upper break points at 0.7592 and 0.7261. USD/JPY remains solid at 109.95 and 109.46 but approaches its break line at 110.57 and 110.65. USD/CHf will see its cap at 0.9728.

Today’s market is treacherous as all pairs are contained within about a 40 pip range to its vital upper or lower break points. USD yields reveal Yellen doesn’t raise while interest rates are on the edge. My analysis remains the same since last August, don’t dare raise as Fed Funds is not only overbought by light years but trading at the 10 year monthly average doesn’t warrant a raise. Nor does economics warrant a raise. If Yellen raises anyway, then Fed Funds reversals will come later. I argued against the last raise due to overbought but Yellen hiked anyway. Then what des a raise mean for GBP and Europe. My guess without running the data is deeply oversold interest rates.

AUD/USD is most tough among the pairs as AUD ontains severe range problems. Supports are located at 0.7535 then comes 0.7529 and 0.7516. Above line break today is 0.7592. Problem with shorts is 0.7578 and 0.7573 must break then rising 0.7535. Yet above to lower 0.7600’s, AUD can’t handle such richter scale levels. Higher for AUD relieves the enormous range pressures but 0.7791 is falling by the day. Bad position for AUD. View my blog for all AUD pairs for the week.

NZD/USD Broke 0.7230 and remains the break line to travel lower. Overbought NZD will see a dead stop at 0.7262. The line to cross below is 0.7209 to target another tough line at 0.7199.

EUR/USD is another pair that can’t handle the upper decks. The big line break is located at 1.1261 but 1.1270 and 1.1280’s will see a brick wall. Below 1.1191 and 1.1178 are big breaks and oversold. Don’t expect breaks down here.

GBP/USD must breaks above are located at 1.2743, 1.2777 then 1.2802 and 1.2832. GBP contains good range and abilities to move today.

EUR/JPY. Watch 123.91 and 123.91 big breaks to target 124.26 then 124.59. The downside is wide open to 123.83. Overall break points to see far lower are located at 122.51 then 121.34.

Brian Twomey

Posted Sunday GBP/USD support 1.2635, bounced 80 pips from 1.2638.

Ever heard Legacy currency such as DEM/USD. What about the Pegged currency. The British Empire and all nations under its dominion were Pegged to GBP exchange rates. When nations became independent, all established their own exchange rates and money market systems. What was established was a money market system exactly as the UK. AUD for example is the UK system with a slight twist. NZD is the UK system with a slight twist. CAD is born and raised in the UK system. When USD grew up, America went its own way and established a hybrid system as part UK and part its own invention. What changed in 2017, nothing. The names were changed to protect the innocent.

Ronald Reagan left office in 1988. The Republican Party then shifted its ideological focus from conservative Taft and belief small government was best to love of government Teddy Roosevelt. The jury must still decide if Trump is a Reagan/ Taft Republican or Teddy Roosevelt. Appointments on the Republican Party Boards will tell us soon enough.

A voter born in 1988 is today 29 and still young. A vote for America’s Bummer in 2008 was 20 years old. Why would communists in the Democrat Party reveal a hidden and evil ideology when they spent 100 years since Wilson to hide. The Democrats willingly outed themselves as Socialists / Communist in words and policy throughout the last campaign.

What’s the result. The Putsch is on to permanently turn young voters to Democrat orientation in government as solution to all societal ills. The vast majority of the 18 to 25 voters in the T.May election voted to remain in the Eurozone. Benjamin Franklin once said those who vote security over freedom will find neither.

Meanwhile the Democrat disrupt movement continues and young voters in universities are most vulnerable as targets. Ever wonder why American universities don’t offer degrees in American history. The reason is Democrat control of past Civil Service acts. Democrats control the bureaucracy in American governments and created the Education agencies under Carter in 1978. Sad is Google will teach brain surgery and functions of the brain but nobody will use it for simple research.

EUR/USD The big break line for EUR today is 1.1130 but EUR won’t see 1.1130 today. Look for longs at 1.1138 if seen and target back to 1.1157 then 1.1175. The big line break above is 1.1254 but EUR/USD will severely struggle to go higher from 1.1263. EUR maximum today is 1.1279. Shorts the tops to target 1.1244.

Watch EUR this afternoon as it informs the remainder of the week.

Watch GBP/USD 1.2724 break line for a ride to 1.2753. Mind the Gap as 1.2790 is next. Massive supports were instituted by the BOE today at 1.2564 and 1.2630. The new intervention is money market rescues. Its intervention on the cheap.

USD/JPY 109.46 and 109.40 is rock solid. USD/JPY already hit 110.26 and 4 pips above resistance at 110.22. Next up is 110.42 and 110.69. Caution longs as overall big breaks are located at 111.27 and 111.83. Breaks 111.27 and 111.83 is needed to target 112.32.

Brian Twomey

AUD/USD. Supports 0.7540 and 0.7495. Extremes above 0.7608, 0.7610 and 0.7622. Below 0.7488, 0.7334.

AUD/JPY. Resistance 83.42, 84.37, 85.71. Above to extremes 83.76, 84.03 and 84.26. Below 81.37, 81.32 and 81.23.

AUD/CHF. Resistance 0.7371 and 0.7500. Above 0.7378 to 0.7389. Below 0.7147, 0.7126 and 0.7098.

The smart trade with AUD/USD is AUD/CHF and AUD/EUR.

AUD/CAD Supports 1.0135 and 1.0086. Supports stair step to 9500 and below. Break 1.0135 then 1.0247, 1.0253 and 1.0283. Below 1.0013, 0.9913, 0.9910 and 0.9893.

AUD/NZD. Resistance 1.0592 and 1.0751. Above 1.0543 and 1.0574. Below 1.0387, 1.0364 and 1.0267.

Brian Twomey