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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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FX Breakout Monitor: USD breaking higher in slow motion
John J. Hardy
Chief Macro Strategist
Summary: The US dollar is breaking higher in places, but is doing so in slow motion, perhaps lacking conviction on any directional move until the other side of the FOMC meeting next Wednesday. Market volatility remains moribund and another sign of the market finding directional trades difficult was the reversal of the attempt to take sterling higher today.
Today’s Breakout monitor
The FX Breakout Monitor is a concise PDF overview of all current and recent price breakouts for the short and medium term for major FX pairs and spot silver and gold.
A PDF of today’s Breakout Monitor
Below is a snapshot of the full list of currency pairs we track for the breakout monitor. Much of the USD strength today is as much about euro weakness in the wake of the ECB meeting, as EURUSD helped USDSEK and USDNOK to new local high closes as well without much interest in EURNOK or EURSEK on the side. Besides a USDTHB in EM, the only other active break at the moment is EURCHF.
One other currency that bears watching in coming days is the Japanese yen, especially in connection with any further risk contagion from the coronavirus story, which has only seen very weak transmission into currencies. It is a difficult issue to quantify for markets, but suspect the ongoing bid in safe haven treasuries is one indicator suggesting some level of concern. EURJPY is the JPY pair closest to having a look at new downside breaks.
Today’s Breakout Highlight: EURUSD
EURUSD continues to move in slow-motion after breaking to new lows for the year in the wake of the ECB meeting, and next week sees the FOMC meeting up on Wednesday, which may either confirm or reject this latest break. In the bigger picture – the 1.1000 level looks more important than the level just broken ahead of the final cycle lows. Traders looking for momentum in this pair have been regularly burned over the last eighteen months or more, but this record low volatility may not last for long.
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