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: Sterling has a go above breakout levels
John J. Hardy
Chief Macro Strategist
Summary: Sterling rushed higher through resistance as investors downgraded the No Deal scenario for Brexit today. Meanwhile, a slight souring of risk appetite and oil prices offers a modest boost to the yen and headwinds for EM and the commodity dollars.
For a PDF copy of this edition, click here.
Sterling has challenged below long-established range lows in EURGBP and was trading close to a significant longer-term resistance line in GBPUSD as Labour leader Jeremy Corbyn voiced support for a second referendum if the Brexit plan didn’t shape up as hoped and prime minister May today promised a vote to avoid a No Deal and an option to delay Article 50 until the end of June if whatever new terms for her existing deal she can agree with the EU fails a vote on either March 13 or March 14.
In other pairs, a more defensive stance in risk appetite despite some additional euphoria produced by hopes for a US-China trade deal have driven a dose of JPY strength and risky currency weakness from yesterday’s extremes.
Breakout signal tracker
We have no open signals on our tracker. We may consider a GBP long trade versus CHF depending on the quality of today’s closing levels.
Sterling has challenged below long-established range lows in EURGBP and was trading close to a significant longer-term resistance line in GBPUSD as Labour leader Jeremy Corbyn voiced support for a second referendum if the Brexit plan didn’t shape up as hoped and prime minister May today promised a vote to avoid a No Deal and an option to delay Article 50 until the end of June if whatever new terms for her existing deal she can agree with the EU fails a vote on either March 13 or March 14.
In other pairs, a more defensive stance in risk appetite despite some additional euphoria produced by hopes for a US-China trade deal have driven a dose of JPY strength and risky currency weakness from yesterday’s extremes.
Breakout signal tracker
We have no open signals on our tracker. We may consider a GBP long trade versus CHF depending on the quality of today’s closing levels.
Today’s FX Breakout monitor
Page 1: yesterday we noted the potential EURJPY breakout – one that could stumble quickly if risk appetite is rolling over here. Elsewhere, it’s all about a clean sweep of potential breakouts in sterling to the upside if today’s price action more or less holds into the close of trading today.
Page 1: yesterday we noted the potential EURJPY breakout – one that could stumble quickly if risk appetite is rolling over here. Elsewhere, it’s all about a clean sweep of potential breakouts in sterling to the upside if today’s price action more or less holds into the close of trading today.
Page 2: GBP breakouts in evidence here, with GBPCHF possibly breaking the 49-day high today if it closes anywhere near current levels or higher. EM has gone quiet and the USD has generally firmed in EM pairs on a bit of risk off yesterday – with USDTRY actually close to a new 19-day high close for the first time in 35 trading days (it’s been 149 trading days since the last 49-day high in USDTRY).
Chart: GBPCHF
Together with EURGBP, the GBPCHF breakout looks technically compelling if the developing situation doesn’t throw up any fresh headline risks over the next one to two weeks (we generally look at a maximum holding period of 9 days and we will look to track the GBPCHF breakout starting tomorrow if the close is reasonably strong today above the 1.3115 break level (would be nice for the price action to hold reasonably close to 1.3200 into the close to avoid too much “upper shadow”, i.e., retracement from intraday highs that point to less impulsive strength than a stronger close).
Together with EURGBP, the GBPCHF breakout looks technically compelling if the developing situation doesn’t throw up any fresh headline risks over the next one to two weeks (we generally look at a maximum holding period of 9 days and we will look to track the GBPCHF breakout starting tomorrow if the close is reasonably strong today above the 1.3115 break level (would be nice for the price action to hold reasonably close to 1.3200 into the close to avoid too much “upper shadow”, i.e., retracement from intraday highs that point to less impulsive strength than a stronger close).
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.
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.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer