Monday, October 3, 2016

USD O/N Deposit Rates Indicates USD-Liquidity Squeeze

                                            USD O/N deposit rates has exploded higher

                                          EUR/USD - Triangle consolidation to end soon

                                          GBP/USD - Downside thrust out of a triangle

The USD O/N deposit rates has exploded and is currently near 1.90%, which indicates a major USD-liqudity squeeze going on. This should benefit the USD against all the major currencies. 

Looking at just EUR/USD, a major triangle consolidation has been unfolding since March 2015, but it looks as it's coming to an end very soon. The first indication that the triangle consolidation finally is complete, will be seen upon a break below minor support at 1.1120, while a break below important support at 1.0911 will confirm a downside thrust towards at least 0.9850 and possibly even lower. 

The UK Pound is currently the weakest of the major currencies and has already trusted out of its triangle consolidation indicating a decline towards 1.1793 to complete its wave 3. 

The long term picture calls for even more downside pressure. 

However, the downside thrust in Cable (GBP/USD) is the first good indication that a stronger USD should be expected near term. 

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