Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
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Head of Fixed Income Strategy
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FX Breakout Monitor: September 9, 2020
John J. Hardy
Chief Macro Strategist
Summary: Sterling weakness has persisted today and both silver and gold are eyeing a break lower if they close on a weak note today. Elsewhere, the US dollar continues to eye breakouts to the upside in places, today actually approaching a local breakout level against the Singapore dollar, the first USD-Asia pair to register on our radar in some time.
Today’s Potential New Breakout Signals
Today we highlight three potential breakouts today that could prove valid on today’s close of trading (breakout signals only registered on successful closes beyond the breakout level). Note that today we add silver to the list as has traded at a 19-day low close today.
Table: Seven potential breakouts today and methods for trading
We post the potential gold breakout lower again today as yesterday failed to see the price closing below the 19-day low close. We lower the entry level to 1906, justifying this with the fact that yesterday’s larger sell-off to below 1907 requires a bit more range in today’s open to close levels to show more determined downside momentum. Silver is in a similar situation as we discuss below.
Chart highlight: EURJPY
The technical situation in EURJPY is rather similar to EURUSD, which posted its lowest close in almost a month yesterday. Really, the pair needs to push down through the 124.50 area to suggest a larger breakdown risk – one that could be triggered in party by the euro absorbing some of the concern linked to the sudden return of hard Brexit risks this week. The reaction to tomorrow’s ECB meeting will be the deciding factor.
Chart: XAGUSD
Spot silver is in largely the same situation as spot gold – here we suggest a close below 26.00 today, or soon, begins to show downside momentum risks picking up. We place the entry level for the example breakout trade setup at a level below the nominal 19-day low close of 26.44 because yesterday’s intraday price action took the pair below 26.00 for a brief few minutes and a closing level back toward that level suggests far more weakness than trading below the prior 19-day low close, which is still up in the area of the recent trading range.
Table: Today’s Breakout Monitor
The breakout monitor below offers an overview of recent daily breakouts (a close above or below the prior 19-day highs or lows and 49-day highs and lows to give an indication of whether it there is also a medium term development). Note GBPCHF is looking at a new 19-day low, adding to the picture of broadening sterling weakness.
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