Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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FX Breakout Monitor: Post FOMC USD breakout yet to convince
John J. Hardy
Chief Macro Strategist
Summary: The US dollar broke down in the wake of the FOMC meeting, but relative to the dovish surprise we got, the move is so far modest. We’ll look to tomorrow’s weekly close for clues. Elsewhere, sterling traders holding collective breath ahead of a critical week ahead.
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The very dovish Federal Open Market Committee meeting inspired a knee-jerk USD swoon, but the weakness quickly yielded to a bounce in the greenback’s fortunes today – and if that bounce extends just a bit more it deserves the label of “reversal”, continuing the inability of USD traders to sustain a direction move of any notable duration. We’ll have a look at the quality of the closing levels today and tomorrow for a sense of whether USD bears will have their way or suffer a defeat even despite the dovish Fed.
Elsewhere, further NOK strength today on a hawkish Norges Bank sees further NOK extension higher.
Today’s FX Breakout monitor
Page 1: The US dollar breakdown in ready evidence here – at least versus the NZD, CHF, and EUR yesterday and today, with the USDJPY not far from a break level as well (see below). But the price action looks a bit hesitant after so many directional feints in the USD that have led nowhere this year. EURCHF breaks lower – an interesting move – possibly on Brexit stress worries. If so, headline risks next week could prove brutal in either direction.
The very dovish Federal Open Market Committee meeting inspired a knee-jerk USD swoon, but the weakness quickly yielded to a bounce in the greenback’s fortunes today – and if that bounce extends just a bit more it deserves the label of “reversal”, continuing the inability of USD traders to sustain a direction move of any notable duration. We’ll have a look at the quality of the closing levels today and tomorrow for a sense of whether USD bears will have their way or suffer a defeat even despite the dovish Fed.
Elsewhere, further NOK strength today on a hawkish Norges Bank sees further NOK extension higher.
Today’s FX Breakout monitor
Page 1: The US dollar breakdown in ready evidence here – at least versus the NZD, CHF, and EUR yesterday and today, with the USDJPY not far from a break level as well (see below). But the price action looks a bit hesitant after so many directional feints in the USD that have led nowhere this year. EURCHF breaks lower – an interesting move – possibly on Brexit stress worries. If so, headline risks next week could prove brutal in either direction.
Page 2: More unadulterated enthusiasm for EM here versus the US dollar in USDMXN and USDRUB, where recent breaks have led to a solid directional move. The Norges bank rate hike today thoroughly contrasting with dovish central banks elsewhere and supporting an extension of NOK strength across the board.
Chart: EURUSD
While EURUSD pulled above a local channel boundary and a nominal recent high, breakouts in both directions have led nowhere for months – a stronger surge-and-hold is needed for a sense that this will lead somewhere – the next round of resistance is up into 1.1800 if 1.1500 falls.
While EURUSD pulled above a local channel boundary and a nominal recent high, breakouts in both directions have led nowhere for months – a stronger surge-and-hold is needed for a sense that this will lead somewhere – the next round of resistance is up into 1.1800 if 1.1500 falls.
Chart: NZDUSD
The NZDUSD chart trying to break higher today, though intraday price action not terribly convincing and really, an unambiguous break above at least the December high close around 0.6930 needed here to excite interest in an upside break.
The NZDUSD chart trying to break higher today, though intraday price action not terribly convincing and really, an unambiguous break above at least the December high close around 0.6930 needed here to excite interest in an upside break.
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