Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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FX Breakout Monitor: JPY, CHF, EM are the high-beta movers
John J. Hardy
Global Head of Macro Strategy
Summary: JPY and CHF crosses have consolidated some of their losses today after the swoon late last week and into early trading today.
Click here for the full FX Breakout Monitor report.
Friday’s session saw a meltdown in JPY and CHF crosses and in select EM currencies on safe-haven seeking after the Trump administration announced new tariffs on Mexican imports amidst accusations linked to migrants crossing the US-Mexico border. The general negative risk sentiment and strong JPY and CHF continued into early trading in today’s Asian session but has yielded to a hard bounce in risk appetite, leaving JPY and (to a degree) CHF consolidating in places and EM currencies – especially Asian EM FX – enjoying a very strong turn today.
The direction changes are not the stuff momentum traders’ dreams are made of, but JPY crosses are still generally at the low end of recent ranges.
The US dollar was generally weak though we’re still far from being able to detect a sustained directional move. Tonight’s Reserve Bank of Australia meeting is the next test for AUD pairs, as the Aussie has consolidated some of its recent weakness even as a rate cut is universally expected at the meeting. Guidance on whether the cut is seen as a one off or the first in a series will be crucial.
Breakout signal tracker
We pull down the stop on our EURJPY short signal to breakeven after the signal went strongly into profit on Friday and in early trading today, though the latest price action already threatens a stop-out on the euro’s resurgence.
Friday’s session saw a meltdown in JPY and CHF crosses and in select EM currencies on safe-haven seeking after the Trump administration announced new tariffs on Mexican imports amidst accusations linked to migrants crossing the US-Mexico border. The general negative risk sentiment and strong JPY and CHF continued into early trading in today’s Asian session but has yielded to a hard bounce in risk appetite, leaving JPY and (to a degree) CHF consolidating in places and EM currencies – especially Asian EM FX – enjoying a very strong turn today.
The direction changes are not the stuff momentum traders’ dreams are made of, but JPY crosses are still generally at the low end of recent ranges.
The US dollar was generally weak though we’re still far from being able to detect a sustained directional move. Tonight’s Reserve Bank of Australia meeting is the next test for AUD pairs, as the Aussie has consolidated some of its recent weakness even as a rate cut is universally expected at the meeting. Guidance on whether the cut is seen as a one off or the first in a series will be crucial.
Breakout signal tracker
We pull down the stop on our EURJPY short signal to breakeven after the signal went strongly into profit on Friday and in early trading today, though the latest price action already threatens a stop-out on the euro’s resurgence.
Today’s FX Breakout monitor
Page 1: the EURUSD trading range has become some compressed that we are already fairly close (less than 30 pips, though it doesn’t look as close in ATR terms as the ATR has collapsed to an unbelievable 49 pips) to an upside break after today’s modest rally – tough to invest much confidence in directional breaks there for now until bigger levels like 1.1100 and perhaps 1.1300 break to the upside.
The next test for EUR pairs is this Thursday’s European Central Bank meeting. USDJPY broke free of a major level on Friday at 109.30; EURGBP is looking higher again after a hesitant move on Friday (more on this below).
Page 1: the EURUSD trading range has become some compressed that we are already fairly close (less than 30 pips, though it doesn’t look as close in ATR terms as the ATR has collapsed to an unbelievable 49 pips) to an upside break after today’s modest rally – tough to invest much confidence in directional breaks there for now until bigger levels like 1.1100 and perhaps 1.1300 break to the upside.
The next test for EUR pairs is this Thursday’s European Central Bank meeting. USDJPY broke free of a major level on Friday at 109.30; EURGBP is looking higher again after a hesitant move on Friday (more on this below).
Page 2: Gold jumped to attention on Friday and has registered both a 19-day and now 49-day high close if it closes north of 1309, though there are still a couple of range levels for a bigger break (see below). Elsewhere, USD/Asia looks heavy in places and USDSEK is trying to reverse the uptrend – a bit more wood to chop there in the bigger picture.
Chart: EURUSD
EURUSD is not far now from a 19-day high close, but the price action is so compressed that arguably we need a break above 1.1300 and even higher to impress to the upside, while the downside level is more clearly etched around 1.1100 – the difficulty there being multiple failures to stick lower on the previous attempts to break to new lows.
EURUSD is not far now from a 19-day high close, but the price action is so compressed that arguably we need a break above 1.1300 and even higher to impress to the upside, while the downside level is more clearly etched around 1.1100 – the difficulty there being multiple failures to stick lower on the previous attempts to break to new lows.
Chart: EURGBP
Sterling pushed back against the attempt to take it over the edge on Friday, but was back to the weak side today as EURGBP poked back above 0.8850. The UK May Manufacturing PMI came in at a weak 49.4 today, its weakest level since around the Brexit vote back in 2016. The UK Services PMI release on Wednesday should carry more weight.
Sterling pushed back against the attempt to take it over the edge on Friday, but was back to the weak side today as EURGBP poked back above 0.8850. The UK May Manufacturing PMI came in at a weak 49.4 today, its weakest level since around the Brexit vote back in 2016. The UK Services PMI release on Wednesday should carry more weight.
Chart: XAUUSD
Spot gold has leapt higher as real yields come under heavy pressure on the collapse in major bond yields late last week and on safe-haven seeking. The rally has seen the chart clear the closest couple of pivot levels, with the focus now on the last remaining pivots just above $1,320 and then $1,340/oz. The $1,350-75/oz area is of major consequence stretching back to 2014.
Spot gold has leapt higher as real yields come under heavy pressure on the collapse in major bond yields late last week and on safe-haven seeking. The rally has seen the chart clear the closest couple of pivot levels, with the focus now on the last remaining pivots just above $1,320 and then $1,340/oz. The $1,350-75/oz area is of major consequence stretching back to 2014.
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.
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