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: Quiet USD pairs ahead of US jobs report
John J. Hardy
Chief Macro Strategist
Summary: The US dollar has backed off from recent highs only slightly and continues to eye a break higher in places ahead of the US March jobs data tomorrow. Elsewhere, precious metals are in a funk and so is the kiwi.
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The USD has backed off slightly after hopeful news on the trade front overnight, especially that the US might give China as long as until 2025 to comply with some terms of a coming trade deal. Tomorrow’s US jobs report might be decisive for the US dollar, particularly interesting if it jolts US treasuries into motion and takes the key EURUSD pair into a breakdown mode below the low close for the cycle of 1.1193. Elsewhere, the weak precious metals are likely to get weaker still if US treasuries sell-off on the jobs report tomorrow.
Breakout signal tracker
Today we take profit on our EURAUD short – modest pickings, to be sure at only 0.36 of the initial risk, but it is day seven and our maximum holding period is nine days, with tomorrow’s US jobs report offering two way risk for all risk exposed currencies like AUD. We are poised to have a look at long USD trades on a sufficiently strong close to the week, even if choosing a USD direction has been a fool’s errand in recent months.
The USD has backed off slightly after hopeful news on the trade front overnight, especially that the US might give China as long as until 2025 to comply with some terms of a coming trade deal. Tomorrow’s US jobs report might be decisive for the US dollar, particularly interesting if it jolts US treasuries into motion and takes the key EURUSD pair into a breakdown mode below the low close for the cycle of 1.1193. Elsewhere, the weak precious metals are likely to get weaker still if US treasuries sell-off on the jobs report tomorrow.
Breakout signal tracker
Today we take profit on our EURAUD short – modest pickings, to be sure at only 0.36 of the initial risk, but it is day seven and our maximum holding period is nine days, with tomorrow’s US jobs report offering two way risk for all risk exposed currencies like AUD. We are poised to have a look at long USD trades on a sufficiently strong close to the week, even if choosing a USD direction has been a fool’s errand in recent months.
Today’s FX Breakout monitor
Page 1: a sense of rather eerie quiet as the USD majors and minors aren’t yielding any clues at the moment. The AUDNZD breakout is the most prominent development in recent days and a solid close above 1.0500 there suggests a more notable trend change risk after the long-standing downtrend of almost six months. Note that EUR, JPY and oddly, NZD, are all within striking distance of new lows versus the US dollar ahead of tomorrow’s US jobs report.
Page 1: a sense of rather eerie quiet as the USD majors and minors aren’t yielding any clues at the moment. The AUDNZD breakout is the most prominent development in recent days and a solid close above 1.0500 there suggests a more notable trend change risk after the long-standing downtrend of almost six months. Note that EUR, JPY and oddly, NZD, are all within striking distance of new lows versus the US dollar ahead of tomorrow’s US jobs report.
Page 2: Here we note that EURSEK is making another sluggish try at the 200-day moving average just below 9.40 and eyeing a possible new low close for the cycle today – would like to see a bit more momentum there to work up any interest. And then we have the South African rand suddenly eyeing an upside breakout versus the US dollar in recent sessions (more below), possibly on a major platinum breakout today.
Chart: USDZAR
The USDZAR has lurched in choppy fashion from weakness versus the USD to notable strength, possibly on the very important 875 area resistance in platinum falling today on high momentum. South Africa is far and away the world’s largest producer of platinum, supplying some two thirds of world production. Whether the move can continue will likely prove highly dependent on whether global risk sentiment stays supported here, though a sufficiently wild ride for platinum could sway the price action all on its own. Note as well the 200-day moving average near the current price action.
The USDZAR has lurched in choppy fashion from weakness versus the USD to notable strength, possibly on the very important 875 area resistance in platinum falling today on high momentum. South Africa is far and away the world’s largest producer of platinum, supplying some two thirds of world production. Whether the move can continue will likely prove highly dependent on whether global risk sentiment stays supported here, though a sufficiently wild ride for platinum could sway the price action all on its own. Note as well the 200-day moving average near the current price action.
Chart: EURUSD
We watch the weekly close here with interest, as we would like to take the sell signal if the pair closes below the 1.1200 level tomorrow.
We watch the weekly close here with interest, as we would like to take the sell signal if the pair closes below the 1.1200 level tomorrow.
Chart: AUDNZD
Impressively persistent upside action in recent days in AUDNZD, where a move above 1.0500 really starts to break down the down trend and will leave us interested in future upside breakout signals – hopefully not all of the upside arrives on this move here but in a future wave of buying action…
Impressively persistent upside action in recent days in AUDNZD, where a move above 1.0500 really starts to break down the down trend and will leave us interested in future upside breakout signals – hopefully not all of the upside arrives on this move here but in a future wave of buying action…
Chart: XAUUSD
The precious metals merit watching here over tomorrow’s US jobs report as strong jobs numbers and a jolt higher in US yields would likely provide the most pressure to the downside here as traders capitulate at new lows and possibly set up a run to the bigger 1250 level.
REFERENCE: FX Breakout Monitor overview explanations
The following is a left-to-right, column by column explanation of the FX Breakout Monitor tables.
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 if markets are choppy.
ATR: Average True Range or the average daily trading range. Our calculation of this indicator uses a 50-day exponential moving average to smooth development. The shading indicates whether, relative to the prior 1,000 trading days, the current ATR is exceptionally high (deep orange), somewhat elevated (lighter orange), normal (no shading), quiet (light blue) or exceptionally quiet (deeper blue).
High Closes / Low Closes: These columns show the highest and lowest prior 19- and 49-day daily closing levels.
Breakouts: The right-most several columns columns indicate whether a breakout to the upside or downside has unfolded today (coloured “X”) or on any of the previous six trading days. This graphic indication offers an easy way to see whether the breakout is the first in a series or is a continuation from a prior break. For the “Today” columns for 19-day and 49-day breakouts, if there is no break, the distance from the current “Quote” to the break level is shown in ATR, and coloured yellow if getting close to registering a breakout.
NOTE: although the Today column may show a breakout in action, the daily close is the key level that is the final arbiter on whether the breakout is registered for subsequent days.
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