Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
FX Breakout Monitor: December 12, 2018
John J. Hardy
Chief Macro Strategist
Summary: A relatively quiet day for the FX majors, but the SEK is showing a good deal of volatility on the latest CPI print while MXN is trying to perk up at the big 20.00 area versus USD.
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A relatively quiet day for the FX majors, but SEK showing a good deal of volatility on the latest Swedish CPI number and breaking resistance in EURSEK ahead of next week’s Riksbank session. MXN is also trying to perk up at the big 20.00 area versus USD.
Here are our latest snapshots of the FX universe we track for breakouts. The XAGUSD situation we discussed in yesterday’s post, and we look for at least a closing level clear of 14.75 for interest, even if 15.00 is the bigger level. Otherwise, today’s two currencies of interest were SEK in the wake of the latest CPI data.
A relatively quiet day for the FX majors, but SEK showing a good deal of volatility on the latest Swedish CPI number and breaking resistance in EURSEK ahead of next week’s Riksbank session. MXN is also trying to perk up at the big 20.00 area versus USD.
Here are our latest snapshots of the FX universe we track for breakouts. The XAGUSD situation we discussed in yesterday’s post, and we look for at least a closing level clear of 14.75 for interest, even if 15.00 is the bigger level. Otherwise, today’s two currencies of interest were SEK in the wake of the latest CPI data.
EURSEK on new 19-day high
Assuming the pair sticks the close above the 19-day 10.34 breakout level, we could see upside trading interest on the break back above the local highs and the 200-day moving average, but a strong message from the Riksbank next Thursday (market partially pricing a hike) and/or a more positive spin on Brexit could improve SEK’s fortunes, as could any general improvement in risk appetite.
Assuming the pair sticks the close above the 19-day 10.34 breakout level, we could see upside trading interest on the break back above the local highs and the 200-day moving average, but a strong message from the Riksbank next Thursday (market partially pricing a hike) and/or a more positive spin on Brexit could improve SEK’s fortunes, as could any general improvement in risk appetite.
USDSEK on new 19-day signal
We will need to watch the close for this one as it is well off intraday highs and it's quite clear that we don’t have a compelling situation as the near-term breakout is unfolding in a ranging chart ahead of both the Federal Open Market Committee meeting next Wednesday and highly anticipated Riksbank decision next Thursday.
We will need to watch the close for this one as it is well off intraday highs and it's quite clear that we don’t have a compelling situation as the near-term breakout is unfolding in a ranging chart ahead of both the Federal Open Market Committee meeting next Wednesday and highly anticipated Riksbank decision next Thursday.
USDMXN on possible new 19-day signal
The breakout technicals here are not particularly compelling given the prior large rise and recent range still intact into 20.00. Also, the price action may be quick to at least pause soon ahead of next Wednesday’s FOMC meeting. Still, momentum is rolling over fairly aggressively if we close below 20.00 today.
The breakout technicals here are not particularly compelling given the prior large rise and recent range still intact into 20.00. Also, the price action may be quick to at least pause soon ahead of next Wednesday’s FOMC meeting. Still, momentum is rolling over fairly aggressively if we close below 20.00 today.
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).
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).
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