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Inside The Currency Market: Eonia, Euribor To Contain EUR/USD Ranges

ByBrian Twomey
Published 09/16/2014, 09:18 AM
Updated 09/03/2023, 03:41 AM

Yesterday's Eonia and Euribor one week rates revealed negative 0.016 and Minus 0.021. Further analysis affirms EUR/USD is not only contained between 1.2503 - 1.3403 but the ranges are actually much tigher.

Eonia, Euribor and EUR/USD are not only oversold but all are heading higher based on 45 day and yearly MA studies. Euribor is expected to remain positive although barely over the short and long term while Eonia is ecpected to remain negative short term and positive long term. The Eonia range at extremes over the longer term is found between Minus 0.0884 - + 0.0087. A disjunction is occurring in the near term.

With positive Euribor at 1 week rates, funds must deposit for minimum 1 week to earn interest while banks in the near term must still compete against negative overnight funds. The disjunction mirrors the 2012 Greek crisis when the EUR/USD hit 1.2756 lows and the ECB rescued the EUR/USD by liquidity injections through the Securities Market Program by purchses of government bonds. Positive Eonia and Euribor over time may reveal the new Targeted Long Term Refinance Operation auctions may see a positive outcome and again rescue the EUR/USD.

If 45 day and yearly targets for Eonia, Euribor and EUR/USD is factored, EUR/USD ranges are found between 1.3363 - 1.2739 with an average price of 1.3051. Factor from 45 day averages based on Eonia, Euribor and EUR/USD, ranges reveal 1.3393 - 1.3060 with an average price of 1.3226.

If Eonia, Euribor and EUR/USD yearly targets are viewed, EUR/USD remains in a 1.3634 - 1.3145 range with an average price of 1.3389. If yearly averages are considered, EUR/USD ranges again remain between 1.3037 - 1.2842 with an average price of 1.2939.

Not only will the EUR/USD find shallow ranges in the near term but yesterday's reported 1.2500, 1.3400 and1.3452 lines are today 1.2503, 1.3403 and 1.3449. The 1.2503 and 1.3403 lines are rising while the 1.3449 line descends. A showdown is developing and will further contain EUR/USD in the near to medium term until the 1.3449 line resolves itself.

Immediate supports within ranges: 1.2940, 1.2817, 1.2775, 1.2503.

Immediate resistance within ranges: 1.3098, 1.3110, 1.3403, 1.3449.

Brian Twomey, Inside the Currency Market, btwomey.com

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