FX Weekly: OIS, interest rates, 14 currencies

A swap rate is an OIS rate and an OIS rate is a swap rate. The terms are synonoymous yet discard the term and concept of swap in favor of OIS.  The OIS rate is the most important component  of market discourse as it relates to levels of interest rates and future changes. The calculation to OIS rates is very simple as the central banks inform by examples.  The central banks also educate how to factor OIS for every central bank meetings 1 year ahead.

Most vital is the 30 to 35 day inter bank meeting periods to know exactly if the central bank will move interest rates at each meeting. The start of the period after the central bank meeting always looks terrific but as days progress and interest rates trade , OIS rates change. The next Fed meeting is 18 days and 15 days for the BOJ.

The BOJ April meeting factors a 7% possibility to an interest rate adjustment and 9% for June. The 7% and 9% won't change by much as April  and June draws closer. BOJ interest rates must change massively to move OIS rates to a point to reveal changes. For 2024, the BOJ won't touch interest rates to the September to October meeting.

Since November, money supplies nor interest rates moved to any significance from central bank to central bank. The revelation is OIS rates for every central bank also didn't move. The central banks haven't given one thought to adjust rates nor are future changes considered.

The Fed's SOFR rate since last August traded 5.30 to 5.39 while Fed Funds since July traded 5.12 to 5.33. The Fed's M1 money supply since August 2022 traded from 20,000 to 18,000 and M2 from 21,000 to 20,000.

The BOJ's Monetary Base traded 6,700,000 to 6,600,000 from 2022 to 2024 and interest rates barely traded 10 poins.

Under no movement to interest rates nor to the opposite in money supplies, OIS rates remain dead to reveal no movements forecasted in the past and in the future.

Inflation is most irrelevant as Inflation is a market rate and doesn't move interest rates by 1 point.  Inflation's drop from 9.0 to 3.00 failed to move interest rate and money supplies.

The disjunction between market reporters and analysis is growing wider. But the central banks are just as guilty to drive the world to the 2% target. What is so special about the 2% target except it was adopted by all central banks around 1998.

   Weekly

EUR/USD's big line remains 1.0901 and the 5 year average at 1.1142. Overbought begins at any price above 1.0850 to target shorts to 1.0826 then further shorts below 1.0816.

GBP/USD Lower must break 1.2636 and 1.2608 to target 1.2573. Overbought begins at 1.2655. Big lines above are 1.2799 and the 5 year average at 1.2834. GBP/USD trades 1.2500's to 1.2799.

USD/JPY overbought targets the break below 149.85. GBP/JPY targets 189.25 then 188.00's, EUR/JPY 161.82 and CAD/JPY 111.07 then 110.51.

AUD/USD trades 0.6553 to 0.6769. Overbought begins at 0.6600's and the bottom at 0.6521.

NZD/USD trades deeply overbought inside a range from 0.6287 to 0.6122. Above 0.6287 targets the range from 0.6287 to 0.6457.

EUR/NZD and GBP/NZD remain deeply oversold.

GBP/AUD 1.9239 and EUR/AUD 1.6505 remain vital lines for the week. EUR/AUD trades below while GBP/AUD sits just above. We want both pairs to trade in unison as a disjunction existed over last weeks.

GBP/CAD and NZD/CAD trades massive overbought for the week while USD/CAD trades longs and shorts at 1.3493.

CHF cross pairs trade deeply overbought as GBP/CHF, AUD/CHF and NZD/CHF.

For the EUR/USD universe, oversold applies to EUR/NZD, EUR/AUD and EUR/GBP. GBP's universe trades oversold to GBP/CHF and GBP/NZD.

AUD trades oversold to AUD/NZD