Four FX charts: USD comeback needs another leg higher to seal the deal

EURUSD – eyeing the next leg lower on a break of pivot levels
Since EURJPY and USDJPY show a great deal of directional correlation, we are more  interested in the direction of EURUSD for a view on the USD than USDJPY. By plunging back below 1.1150, the EURUSD reversed the sequence above 1.1200 but has yet to follow through lower, a process that starts with a move below 1.1085 and 1.1066, the two local pivots, though a more profound bear move needs to challenge below the 1.1000 level that found support last November.

EURCHF – cut loose?
Yesterday, the US announced it was putting Switzerland back on the list of currency manipulator list for the first time since 2018, suggesting that the SNB will be far more constrained in intervening against further CHF strength and a possible wake-up moment for  the market’s assumptions about the currency’s volatility if the upside pressure continues from here amidst complacency. Another angle on CHF is the SNB’s large equity portfolio of some CHF 180 billion, which saw spectacular returns last year and reminds us that the bank is essentially running a huge. This might explain the total lack of CHF upside during the recent aggravated runup in risk appetite. The key test for this notion would be how the franc behaves in a sharp equity market correction scenario – for now we focus on the technical behavior at the new lows for the cycle (note key USDCHF range levels also nearby around 0.9650).

EURGBP – sterling struggling or not?
Sterling looked ready to struggle to the downside as GBPUSD traded below 1.3000 and EURGBP, shown below, trade toward the top of the recent range – but sterling is hanging in there so far. We have what resembles an upside-down head and shoulders formation here, with a neckline near 0.8600 that we will be keeping an eye on in coming sessions if sterling weakness remains pronounced.