FX Breakout Monitor: Strong dollar triggering solid breaks

Chart: AUDUSD

This is a fairly clear-cut break on a weak close today below the 19-day break level of 0.7190, which opens up the bottom of the range. The action next week will be highly sensitive to US-China trade negotiation headlines and the FOMC meeting.

Chart: USDNOK

Here we have both a 19-day and a larger, 49-day breakout potentially unfolding as USDNOK challenges its highest levels in over 18 months. The highest level reached back in early 2016 was right around 9.00, the ultimate resistance; this level may attract on a break higher in a strong USD environment.

Chart: EURUSD

EURUSD break is technically valid locally, but the ultimate cycle low is still lower at 1.1216. Still, if the FOMC fails to wax sufficiently dovish next Wednesday, a clear break lower here could lead to a test into the next big round level (EURUSD has an affinity for round levels) at 1.1000.

FX Breakout Monitor overview explanations

The following is a left-to-right, column-by column-explanation of the FX Breakout Monitor table:

Trend: a measure of whether the currency pair is trending up, down or sideways based on an algorithm that looks for persistent directional price action. A currency can register a breakout before it looks like it is trending.

ATR: Average True Range or the average daily trading range. This calculation uses a 50-day exponential moving average. The shading indicates whether, relative to the prior 1,000 trading days, the current ATR is exceptionally large (deep orange), somewhat elevated (lighter orange, normal (no shading), quiet (light blue) or exceptionally quiet (deeper blue).

UP and DOWN Break Levels: These columns show how close, in ATR terms the current price is from breaking the highest and lowest prior 19- and 49-day daily closing levels, with the “breakout level” indicating the actual level of that highest or lowest close. If a breakout is getting close in ATR terms, it is highlighted in yellow or bright yellow (very close). If the current price is trading above or below the breakout levels, in other words, has just broken out, an “X” is shown to indicate this rather than an actual ATR reading.

NEW Breakouts: These are indications of whether, at the time of the snapshot of the market, the currency pair is trading above or below the breakout level. NOTE: it is key that the intention here is to highlight NEW or initiail breakouts, as a pair that has been trending consistently and has set multiple (more than two) new highs/lows will not be highlighted. This is done to avoid too much noise on the chart and focus on new information. 

Number of breakouts for prior 8 days: This is merely a counter to indicate the number of days in which the pair has posted a new daily 19-day or 49-day high or low close. It will flag currency pairs that have been trending strongly recently but aren’t actively breaking out at the time of the snapshot of the model and/or aren’t highlighted in the NEW Breakouts part of the table

Recent New 19-day Signals: this gives the reader a chance to see if any recent 19-day breakout signals were registered over the prior three days for perspective on recent developments. The prior day’s signals particularly interesting if waiting for daily closes before deciding whether to trade a breakout on the following day. If there have been more than three prior signals over the past eight days, no signal is shown in order to reduce the “noise” on the overview (though all signals are tallied in the “number of breakouts…” column to the left).