The EUR/USD concern is German 10 year Yields below 1%, Euribor and Eonia at or approaching 0 and German bonds 1 - 3 year yields approaching negative territory. This lineup wasn't that bad during the Greek crisis and German yields haven't seen these levels even during the Great Depression. If Draghi takes on QE, he ensures further drops in interest rates, yields and the EUR/USD. But where.

  Most significant ranges are found between 1.2481 - 1.3397, 1.3467. Possible bottoms are then found between 1.2800 - 1.3000's. Vital points are found at 1.2768, 1.2802, 1.2813, 1.2863, 1.3029. Any lower forecasts will take quite some time to achieve because those bottom averages must drop. The problem again is any approaches to 1.2700's, 1.2800's leaves level at 1.3397 overbought yet severely oversold vs 1.2400. Intraday to long term, EUR/USD is oversold, further drops only leaves EUR/USD more oversold. 

 Intraday target is 1.3373 and still below vital 1.3397. Fundamenally, if US CPI hits or surpasses PCE at 2%, this could drop EUR/USD far lower. The strategy moving forward is cautious sell rallies. My concern so far is we are within a few hundred pips from a significant bottom unless Draghi takes on a QE or some such disaster. That ensures EUR/USD remains at current lower levels for quite some time bouncing between 1.2481 - 1.3397. 

 Below levels: 1.3225, 1.3143, 1.3102, 1.3086, 1.3085, 1.3029. 1.3863, 1.2813, 1.2802, 1.2768. Above: 1.3252, 1.3264, 1.3371, 1.3397, 1.3467. 

 Factor the USD/JPY scenario, 104.34 must break to go higher. Currently severely oversold and needs correction

 More trades posted on this post post during the week. Questions, comments, feel free anytime. 

   Brian Twomey  Inside the Currency Market, btwomey.com

Views: 1261

Comment by Daologic on August 25, 2014 at 6:05am

After the end of QE in October, even with 0 rates policy, the markets will normalize. A prolonged and 3 rounds of QE has distorted the market behaviour favouring risk over a more balanced aproach. On the other way, the 0 rate policy has started a runn for yeld with almost any cost. This two factors, combined, have strongly distorted the markets leading to overinflation on stocks, emerging stock markets and emerging currencies.

With QE gone and ECB looking for inflation the new range in EU would probably be 1.35 - 1.25 in the next 2 years.

Comment by Brian Twomey on August 25, 2014 at 9:12pm

EUR/JPY A 134.54 line exist before 132.44, both lines are way oversold. My current work involves market structure and periodic changes in currency pairs and its why constant focus on EUR/USD, USD/JPY and EUR/JPY as the most widely traded pairs. When exactly the next period forms will be seen in these 3 pairs. Our next period will take us from Risk off due to 2008 to risk on. I don't want to miss this colossal event because its not seen often in currency markets. Last time we saw this was 2008 then 1998. The change is forming as I write but its won't solidify until breaks occur.

 My current scenario is possibly EUR/JPY breaks 134 then the realignment is done. That takes EUR/USD and EUR/JPY far higher and USD/JPY far lower since USD/JPY becomes as is already the case not only miles overbought but its a floater currency pair with a lost price. Since EUR/USD broke, I must rerun the numbers to determine exactly where we stand in the realignment scenario. Trust this. We want this realignment because we enter the period of risk on and that gives us far higher volatility.

 

Comment by Brian Twomey on August 25, 2014 at 10:42pm

USD/JPY Blame this pair for no volatility since 2008 and risk off markets. Blame U/J for 1980's Louvre and Plaza Accords. Blame allies 308 Fix intro. Blame failed monetary policies since 1900, the Fix to GBP/USD in the 1930's, internationalization is 1998. What a disaster pair USD/JPY

Comment by ceasar on August 26, 2014 at 12:07am
Hi Brian would appreciate your inputs on Aud/Usd...been in a tight range between .9230-.9330..though we have headlines of Iron Ore prices below $89 etc...
Comment by Brian Twomey on August 26, 2014 at 12:52am

Hi Ceasar, AUD/USD  must break 0.9272 to see more downside, this is a big line break. Momentum will then build to next vital line at 0.9200. The big intraday line above is 0.9288. I would stay short and sell any rallies. AUD should be contained in the 0.9325, 0.9335 and 0.9343. areas. AUD has a lag to EUR/USD so be patient, shorts are okay. You did well Ceasar following Iron Ore, that's the big export. Lower Iron Ore usually translates to lower AUD. Watch Gold as well, the correlations between AUD and Gold is resiliently strong. 

Comment by ceasar on August 26, 2014 at 2:40am

Thanks brian, being from Oz one get's a bit stuck with the local news and sentiments whereas your prospective is always much appreciated..as you rightly pointed out AUD lags to EUR/USD especially with iron ore prices at 2 years low, Unemployment at historic highs, Gold below 1280, Crude oil below 95 and not so hot data out of China..in NORMAL times all this would have more or less crushed AUD/USD and should be around .86-.88 but the so called PLAYERS are keeping a thight leash on the pair...let us see what happens and the latest news is that "Western Australia stripped of top credit rating by Moody's" (not that many countries/state enjoy the top credit rating)..

Comment by Brian Twomey on August 26, 2014 at 2:42am

EUR/USD, EUR/JPY break of 134.54 won't force realignment but it represents a big break. Points 132.97 and 132.44 may do it. If 134.54 breaks, we can look for 132's. The EUR/USD and EUR/JPY relationship hasn't changed within the last 2 months except for a 78 pip drop in the slope line. The overall relationship has held steady for 19 straight months. The EUR/USD  USD/JPY relationship holds steady as well, the slope line moved down 58 pips. We'll look at USD/JPY Vs EUR/JPY for a complete picture tomorrow. EUR/USD is vastly oversold Vs EUR/JPY and USD/JPY . EUR/USD vs USD/JPY is coming to a EUR/USD bottom and USD/JPY top. That's quite obvious. Its as I suspected, we're looking at 200 - 300 hundred pips on the downside and upside for each Max then we see a reversal. Again I caution regarding USD/JPY longs. That's absolute insanity.

Comment by Brian Twomey on August 26, 2014 at 10:11am

To rise above in trading, understanding markets and price movements, disregard pure bunk that markets are rigged, controlled, after stops by small players and / or cartels with big money, even supply / demand zones. Accept this principle, learning, growth and understanding stops dead. Shame on such people to even think then write such myths and poison. Markets aren't a test of wills between you and markets nor are markets your enemies. Markets scream loud and clear, please take this money that;s offered. Understand this principle, anyone will see markets are your best friend. 

Comment by Brian Twomey on August 26, 2014 at 10:18am

AUD/USD  Point at 0.9200 is vital break because it changes the distribution from 0.8800 - 0.9200. This break comes with big catalyst because bigger lines exist below at 0.8800, 0.8700 and further down. The larger picture reveals AUD is actually quite oversold and will see far higher prices over time. 

Comment by Brian Twomey on August 26, 2014 at 11:07am

AUD/USD  Note the point reported last night at 0.9272, today its now 0.9273, that must break to see lower prices, it held, so far, above we got 0.9291 from last night 0.9288,  0.9325, 0.9335, 0.9345 from last night 0.9343, allow a 2-4 pip violation at reported levels, 

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