FX Update: Currencies not participating in sentiment shift, save for JPY

The G-10+CNH rundown

It’s been far too long since I have penned a G-10 rundown as I did in the days of yore – so here goes.

USD – as noted above, the USD not fitting with the idea we are seeing a recovery in sentiment – a weaker USD needed for any sentiment rally to extend significantly, particularly for EM.

CNH – China keeping policy tight still, but has loosened the RRR for banks as the first move in the easing direction in a long time. And questions loom over the fate of leveraged corporates like the too-big-to-fail and currently very troubled Evergrande. Meanwhile, China is also trying to put out fires in rising commodity prices. It seems happy to have the CNH trade with lo direction beta with the U dollar.

EUR – discussed above – ECB and whether EURUSD set to break down the next step.

JPY – traders seem glued to the direction in safe haven bond yields. USDJPY has rallied back above 110.00, but a very choppy chart there and 111.00+ seems unlikely unless we get a major pop in yields.

GBP – sterling edging higher today, but is severely damaged on this latest run lower – 1.3500 the next existential level in GBPUSD. Covid concerns overblown if the pressure on the hospital system in the UK remains low.

CHF – sight deposits have edged higher as the EURCHF decline has largely matched the decline in yields, though stagnating recently well ahead of the important 1.0700-50 area.

AUD – as pointed out recently, the AUD is the lowest yielding of the six highest yielding G10 currencies as RBA sits on the front of the yield curve and recent Covid distractions with a slow vaccination roll-out holding back the Aussie. Will be a boomerang story eventually.

CAD – 1.3000 is the next really major chart area after the remarkable lift-off from the lows – plenty of value in CAD between here and there, assuming oil stabilizes not more than a few dollars lower.

NZD – finding fresh support against the hapless AUD, but to get a broad rally in line with the recovery of NZ short yields, we need to see a broader shift back to a more optimistic outlook for the global economy.  Watching NZDUSD for the status of the break lower that unfolded yesterday.

SEK – value in SEK here versus the Euro above 10.20 assuming we aren’t set for a major meltdown in the outlook – the prior pivot high is just south of 10.30 and could trigger a run higher for 10.50 or more if equity markets suffer another major downdraft.

NOK – for whatever reason, seems the highest beta currency to the recovery and reflation outlook, and certainly entering the value zone as EURNOK moved above 10.50, but a more significant setback for oil could yet see another spike higher.

Table: FX Board of G10 and CNH trend evolution and strength
Few changes since yesterday, although the JPY will quickly losing relative altitude versus the USD if USDJPY stays above 110. Note the further loss of momentum in Aussie and the CNH really firmly tracking the USD direction of late.

Table: FX Board Trend Scoreboard for individual pairs
Gold (XAUUSD) is threatening a flip to negative trend today again if the price action remains here solidly back below 1,800 today. The JPYNOK uptrend has pushed to nearly a reading of 10 – a rarity.