Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Access all our platforms from a single account.
FX Breakout Monitor: Dollar dithers while AUDNZD stirs
John J. Hardy
Chief Macro Strategist
Summary: The dollar remains reluctant to make a statement with AUDNZD the most interesting new technical development of the day.
For a PDF copy of this edition, click here.
The US dollar has weakened further after Friday’s watershed with Federal Reserve chair Powell and trades at new lows versus a number of emerging market currencies while most G10 pairs have more wood to chop before registering a USD breakdown.
Today’s market saw little volatility, with generally tight trading ranges. The most interesting fresh breakout development over the last couple of days has been AUDNZD’s attempt to break above the lower range. EURUSD closed nominally at a new high yesterday by a few pips, but not clear of the range as the market seems reluctant to follow up on the impulse of USD selling in the wake of Powell’s comments on Friday.
Today’s FX Breakout monitor
Page 1: USDCAD traded below the lowest 19-day close (a reminder that 19 days is less relevant than a slightly longer time period given the holiday period of trading), but this development comes the day before tomorrow’s Bank of Canada and lacks a clear pivot for now – could develop nonetheless but would like confirming price action after the BoC meeting tomorrow and signs of a weaker USD elsewhere.
The US dollar has weakened further after Friday’s watershed with Federal Reserve chair Powell and trades at new lows versus a number of emerging market currencies while most G10 pairs have more wood to chop before registering a USD breakdown.
Today’s market saw little volatility, with generally tight trading ranges. The most interesting fresh breakout development over the last couple of days has been AUDNZD’s attempt to break above the lower range. EURUSD closed nominally at a new high yesterday by a few pips, but not clear of the range as the market seems reluctant to follow up on the impulse of USD selling in the wake of Powell’s comments on Friday.
Today’s FX Breakout monitor
Page 1: USDCAD traded below the lowest 19-day close (a reminder that 19 days is less relevant than a slightly longer time period given the holiday period of trading), but this development comes the day before tomorrow’s Bank of Canada and lacks a clear pivot for now – could develop nonetheless but would like confirming price action after the BoC meeting tomorrow and signs of a weaker USD elsewhere.
Page 2: USDTRY was bid to a new local high on political concerns while USDMXN continues to head lower. EURNOK has fallen sharply but is just now getting to new 19-day low territory and the important 9.75-80 zone.
Chart: AUDNZD
The move in AUDNZD is easily the most interesting new technical development as the pair closed clear of the quite well-defined local range over the last couple of days and in the context of having rejected the major prior 2018 low just below 1.0500; the pair could now eye higher levels after rebounding from AUD flash crash lows.
The next key area higher is perhaps into the 200-day moving average, just ahead of the big 1.0800-50 area.We noted the key EURUSD level not far away in EURUSD (1.1467, the highest 19-day and 49-day closing level) as significant for the wider USD outlook. In USDNOK, a technical breakdown back through old highs around 8.60 is already unfolding as the USD is weakening on the Fed’s change of rhetorical stance and NOK is rallying on the resurgence in oil prices.
The move in AUDNZD is easily the most interesting new technical development as the pair closed clear of the quite well-defined local range over the last couple of days and in the context of having rejected the major prior 2018 low just below 1.0500; the pair could now eye higher levels after rebounding from AUD flash crash lows.
The next key area higher is perhaps into the 200-day moving average, just ahead of the big 1.0800-50 area.We noted the key EURUSD level not far away in EURUSD (1.1467, the highest 19-day and 49-day closing level) as significant for the wider USD outlook. In USDNOK, a technical breakdown back through old highs around 8.60 is already unfolding as the USD is weakening on the Fed’s change of rhetorical stance and NOK is rallying on the resurgence in oil prices.
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).
Latest Market Insights
Quarterly Outlook
-
-
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
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... -
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...