Day: August 5, 2023

Last week, DXY failed to achieve overbought status at 103.00’s nor trade to oversold at 101.00’s. DXY matched EUR/USD’s 134 pip performance last week and this week will trade a repeat production to a lackluster exercise.

DXY’s close at 102.01 begins the week dead center to overbought 103.00’s and oversold at 101.00’s and positions currency markets to not only neutral situations but under severely compressed ranges.

EUR/USD for example trades from vital 1.0955 to overbought 1.1046 while GBP/USD ranges from 1.2677 to overbought 1.2856. USD/JPY trades 143.00’s to 141.00’s.Not only are ranges in compression mode but vital break are required to trade a fairly normal market this week.

DXY is the driver this week and as the market leader , not only is range trading expected but major breaks at vital levels will fail. A range market is just as good to trades and profits as trend situations.

Currency market positions. The question to positions refers to price locations. EUR/USD for example traded 134 pips this week but EUR/USD begins this week in the exact same position where it started last week. The only change to EUR/USD was the exchange rate number but the position remains exactly the same.

Same situation for GBP/USD. If one currency trades in the same locations then all have a tendency to also trade in the same position.

To understand positions and locations automatically allows for analysis to types of traded markets to ranges Vs trend, information to vital breaks and assists to entries and targets.

The Week

Applied this week is the same standards since December / January by short DXY and USD and long EUR, GBP and non USD as DXY will eventually again challenge and break 99.00’s. From 102.00 and 300 pips to 99.00’s , EUR/USD and GBP/USD conforms to 300 pips higher.

GBP/USD Runs into a brick wall at 1.2856 and 1.2875. GBP/USD ranges from 1.2677 to 1.2856 and 1.2875.

EUR/USD trades 1.0955 to 1.1046 and 1.1078. Most vital to EUR/USD is the usual level at 1.0967. At 1.0967 decides EUR/USD ranges from 1.0955 to 1.0967 or 1.0967 to 1.1127.

AUD/USD and NZD/USD remains massive oversold. A good trade strategy is trade GBP/USD and AUD/USD together to double range profits as both are not only the same currency but AUD/USD maintains daily and weekly pip ranges in conjunction to GBP/USD.

AUD/USD requires a break at 0.6697 to travel higher and NZD/USD 0.6193.
USD/JPY The BOJ informs trade ranges from 143.60 to 141.63. USD/JPY higher must break 142.26.

GBP/JPY big break for lower is located at 177.25. GBP/JPY averages are moving lower yet slowly. We remain short only strategies to JPY cross pairs.

EUR/CAD remains last on the trade list as EUR/CAD contains severe range problems. GBP/CAD short is the preferred trade.

USD/CAD watch the break at 1.3326 for lower. The current USD/CAD price at 1.3379 doesn’t exist as the price is missing. No such concept as long USD/CAD exists for at least the last 80 and 90 pips.

Preferred trades for best profits this week: GBP/AUD, EUR/AUD, GBP/NZD, EUR/NZD

USD/EM

USD/EM currencies is a reflection to DXY as the driver currency this week.

USD/CZK trades massive overbought and targets easily 21.9248 then 21.8930.

Brian Twomey

30, 90 and 180 day Tona charts and the best public view available but also the best that may ever be seen.

Correct = 30 day in red trades above Blue 90 and 90 day trades above Green 180 day. The 30 day is descending while 90 day Blue is rising. As Shinici highlighted in the August 2nd speech, the BOJ controls short term interest rates and won’t allow the 30 and 90 day crossover as the consequences for USD/JPY is enormous in big movement terms. The BOJ will come to the USD/JPY rescue in order for USD/JPY to trade 200 pip weekly ranges and trade lower on a slow gradual basis.

Brian Twomey

The BOJ’s release of the PPI Index occurs Saturday on the 12th and the question will the BOJ disclose Japan’s most vital source of information Friday, the 11th.

The Import side of the Index was not only positive for all 2022 but Imports surpassed Exports by 5 X and 10 X on a Yen and Contract currency basis based on monthly and yearly changes. The massive adjustment lower from persistent highs began in November 2022 however Imports ran 2 X to Exports. Imports fairly normalized to Exports in February and March 2023 yet Imports remained higher.

Japan’s June 3.3% Inflation rate derived from Imported Inflation due to the high cost to imports and the many ancillary factors associated with high Inflation Rates. Inflation is a deeply lagging indicator but if the puzzle pieces are combined, Inflation rates are seen in advance.

The first component was USD/JPY skyrocketed from 114.00 to 146.00’s and rose alongside DXY. JPY/USD was cheaper but entailed a higher cost for Imports and enough to harm and surpass the export side. A fine line exists to the Exchange rate vs Imports and Exports as all must balance to contain and normalize Inflation.

WTI as a vital Import to Japan rose from 70.00’s to 130.00’s for 2022, Copper and Steel rose for all 2022, Soybeans as an insatiable consumer good for Japan and Asians, rose for all 2022. Semi Conductor prices rose for all 2022. Electronics, Metals, Textiles and Lumber rose for all 2022.

Producer Prices for all 2022 were extraordinarily high and peaked in December 2022 as the cost of goods to manufacture for exports suffered substantially. Imports for December 2022 ran 2 X to Producer Prices on a yearly basis and 5 X to imports from May to October 2022.

May and June 2023 began a fairly normalized relationship between Producer Prices and Imports to Exports. On a balanced relationship as is the current alignment, the BOJ correctly forecasts a lower Inflation rate for all 2023.

USD/JPY at 141.00’s is fairly in line with BOJ estimates. A lower Inflation rate and lower import prices would see the Export side rise substantially above Imports.

Powell and the Fed offered nations higher prices, interest rate rises and Imported Inflation as all nations suffered higher Interest and Inflation Rates.

The question to BOJ interest rate changes occurs only if Inflation remains persistently high and this is not seen. From Shinici speech August 2nd, the YCC bands expanded in December 2022 due to high Inflation rates and higher rates expected. YCC band expansion derived to contain Japan’s Inflation rates.

Brian Twomey