FX Next Week

The BOJ released Producer Prices today and the number is positive 0.1 from -0.1. As written, the range was 0.3 and producer prices reported expected results within range. Higher Producer prices will elevate exports for next months report.

Exports at 0.1 Vs Imports at -0.3 is closely balanced on a Yen basis and no reason for BOJ intervention. We will hear the wrong forecasts and usual drumbeats of intervention next week.

To understand the BOJ, they monitor extremely close USD/JPY, EUR/JPY and EUR/USD as largest export markets.

DXY remains in a trap to tiny ranges and DXY traded overbought all week. Overbought DXY explains ultra highs to USD/JPY, JPY cross pairs, EUR/AUD, GBP/AUD, GBP/NZD, EUR/NZD, USD/CAD. All are affected by DXY because all are DXY under a different name and number.

DXY traded 73 pips this week to 90 ish for EUR/USD. USD/JPY traded 260 pips to DXY 73. USD/JPY traded 3.5 pips to DXY and EUR/USD.

The BOJ automatically sets daily a 2 pip differential for USD/JPY to DXY and EUR/USD. The BOJ sets a 4 pip differential to EUR/JPY.

From the BOJ and recorded on my site, the BOJ set USD/JPY’s daily range at 201 pips Today’s range at 201 pips, 144.24 – 142.23.

Friday’s range at 193 pips trades from 144.20 to 142.27. Such analysis.
DXY tiny ranges are killing movements to AUD/USD, USD/CAD, NZD/USD and EUR/USD.

DXY next week trades the same 4 week range from overbought at high 102.00’s and low 103.00’s to oversold 101.00’s. A range at this capacity is a license for USD/JPY to trade freely in wide ranges.

EUR/USD next week trades dead from 1.0941 to 1.1052. The big line for higher and lower is located at 1.0964.

GBP/USD trades from 1.2657 and 1.2672 to overbought 1.2873.

Massively overbought EUR/AUD, GBP/AUD, EUR/NZD and GBP/NZD. Overbought to GBP/CAD and EUR/CAD.

USD/CZK target at 21.9248 and 21.8930 traded to lows at 22.0004 so far from high Tuesday at 22.2220.

G10 currencies contain 28 pairs and barely 14 currencies are worth the trade effort. The central banks are severely killing off market movements.

Brian Twomey

CPI and One World Economies

What is monetary policy and the contributing factors is answered by no difference exists to monetary policy as each central bank is an exact replication to each other. Each central bank calculates economic releases in the exact same manner with the same contributing inputs.
The results across every central bank is the exact same for every central bank across the world. The numbers to economic reports maybe slightly different from central bank to central bank but economic categories and conclusions are the exact same.
Every central bank contains high Inflation, High domestic prices, High Import prices, low exports, low Producer Prices, raise interest rates, labor shortages, Wage problems, low GDP.
Every 10 year to 3M yield spreads are inverted except Japan to warn of recession ahead.
How did we arrive at a one world economic concentration where every economic release is the same across small and large economies. How does small economies of New Zealand, Australia and Japan match Inflation, producer prices, Imports, GDP and Wage problems as Europe and the United States.
Economic forecasts from central bank to central bank for 2023 and 2024 reads as one world economic concentration. Every central bank informs Lower Inflation, Lower Interest rates, GDP at depression era 1%, lower import prices, higher exports, higher producer prices.
Read one central bank report is the same as reading all economic releases and forecasts for every central bank.
How can markets trade and exists under one world economic convergence when financial instruments are derived and invented to trade from a divergence of movements based on economic releases. Markets are stagnant and completely dead due to one world economic compression.
Economic releases and interest rate changes lack any impact to market prices. Tomorrow’s CPI release lower or higher will inform to all central bank CPI direction. If CPI reports lower then all central bank CPI releases will report reductions.
The commonality to currency prices for EUR/USD from January is a 700 pip range in 7 months or 100 pips per month and 50 pips per week. Are market prices a reflection of one world economics and lack ability to move, are market prices so off kilter to economics and abandoned the principle to follow and price economics correctly.

The speculation to how economies arrived at concentrations is derived from Trade and prices as trade and prices is the commonality across all large and small economies. What is traded nation to nation is unknown so the question is the distribution of good and services balanced and priced correctly.
The good side commonality is the manufactured imports required for each nation such as Copper, Steel, Machinery, textiles, chemicals, oil.
Higher import prices for all nations led to a higher cost and imported inflation across all economies. What if the category of healthcare rose for CPI but the reason was the import to a specialized heart machine. As the cost to the import rose so must the wages and capital involved to consume, transport and apply the machine. The ripple effects across an economy is staggering to economics as the price level must maintain the balance.
The chart below is representative to every nations import prices only to a greater steepener

GDP as the BOJ states makes up 60% of consumption. Trade has the ability to obliterate consumption and cause a contagion effect throughout an economy. CPI and GDP are vital to an economy but minor in relation to the domino reverberations of trade.
The commonality to all nations is the steady trend line rise to import prices from 2021 to 2022. yet high inflation is answered by the raise to interest rates and without resolution to a lower CPI after 10 raises and 2 years by the Fed. GDP dropped from 5% in 2021 to 1% for 2023 yet Import prices remain severely elevated.

For simplicity, the GDP price deflator is factored by division of the GDP index value by real dollar GDP. The GDP Price deflator excludes imports. Unit labor costs measures units of output to wages and answers the question to productivity as how many goods are produced per hour of labor.
The BOJ found in the July 2023 Outlook report, Unit labor costs skyrocketed in the United States as a result to large wage increases to attract labor while Europe unit labor costs rose due to firms increase of profit margins. Japan’s Unit Labor costs is blamed strictly on high import prices.
The Fed’s 2 year journey to lower Inflation not only failed and forced all nations down the same road of failure but the focus to lower CPI correctly and much quicker was never addressed.

Brian Twomey