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Head of Fixed Income Strategy
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FX Breakout Monitor: Risky currencies jump as USD rally fades
John J. Hardy
Chief Macro Strategist
Summary: Yesterday’s broadening USD strength fizzled today, while the smaller G10 currencies are firming against the weakest of the G3 currencies, including the JPY, with Japan’s financial year ending today.
A very brief update today as we prefer to look at the close of the week and action early on Monday for judging the quality of the breakout and we risk further Brexit developments late today that could shift price action either way, and dramatically so.
Breakout signal tracker
Our EURAUD short looking better still today (back to break even!) as the euro is suffering under the weight of strong risk appetite and the market thinks that the Reserve Bank of Australia is likely to hold rates steady at next Tuesday’s meeting.
Breakout signal tracker
Our EURAUD short looking better still today (back to break even!) as the euro is suffering under the weight of strong risk appetite and the market thinks that the Reserve Bank of Australia is likely to hold rates steady at next Tuesday’s meeting.
Today’s FX Breakout monitor
Page 1: EURUSD dipped close to the brink today but the day proved indecisive as of this writing – Brexit could weigh on the euro in either direction indirectly as well. Elsewhere, the upside AUDNZD breakout hopes look constructive and we also note the EUR weakness versus not only AUD, but also CAD today.
Page 1: EURUSD dipped close to the brink today but the day proved indecisive as of this writing – Brexit could weigh on the euro in either direction indirectly as well. Elsewhere, the upside AUDNZD breakout hopes look constructive and we also note the EUR weakness versus not only AUD, but also CAD today.
Page 2: Here we note the EURSEK eyeing a low close for the cycle, something we could be interested in following up on next week, as we discuss below.
Chart: EURSEK
EURSEK has a fairly compelling set up with the local break level well defined here around 10.40, but the tricky bit for bears is that we are still within the longer-term range. Next week looks pivotal for the pair in any case.
EURSEK has a fairly compelling set up with the local break level well defined here around 10.40, but the tricky bit for bears is that we are still within the longer-term range. Next week looks pivotal for the pair in any case.
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.
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