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FX Breakout Monitor: Dollar limping into the weekend
John J. Hardy
Chief Macro Strategist
Summary: An attempt to get a broader USD rally going yesterday was quickly swatted away yesterday on the release of weak US Markit PMI surveys, with other recent trends showing signs of weakening today as well.
Click here for the full FX Breakout Monitor report.
The US dollar rally tried to stake out new territory to the upside yesterday and quickly failed to do so, with EURUSD closing on six-day highs after probing one-year lows. This weekend’s European Parliamentary Election results (available late Sunday) will be the next test for EUR crosses.
This leaves the USD outlook in a disarray for now and at risk of further backfilling. Elsewhere, the more risk-positive tone has taken some of the sting out of the JPY rally in places, while the Scandies have rallied enough to begin threatening a reversal, if not yet any breakouts – we’ll be on the look for NOKSEK as an interesting downside break candidate in the days ahead as we discuss in the chart below.
Breakout signal tracker
We paid the price for breaking the "wait until the end of the day" rule in taking a EURUSD short as we sold the break prematurely and were stopped out quickly. Likewise, the AUDUSD short reversed from well in the money to far less well in the money as we let the signal linger for a day too long, it seems.
The US dollar rally tried to stake out new territory to the upside yesterday and quickly failed to do so, with EURUSD closing on six-day highs after probing one-year lows. This weekend’s European Parliamentary Election results (available late Sunday) will be the next test for EUR crosses.
This leaves the USD outlook in a disarray for now and at risk of further backfilling. Elsewhere, the more risk-positive tone has taken some of the sting out of the JPY rally in places, while the Scandies have rallied enough to begin threatening a reversal, if not yet any breakouts – we’ll be on the look for NOKSEK as an interesting downside break candidate in the days ahead as we discuss in the chart below.
Breakout signal tracker
We paid the price for breaking the "wait until the end of the day" rule in taking a EURUSD short as we sold the break prematurely and were stopped out quickly. Likewise, the AUDUSD short reversed from well in the money to far less well in the money as we let the signal linger for a day too long, it seems.
Today’s FX Breakout monitor
Page 1: the EURUSD downside breakout didn’t survive intraday, so it never registered on our end-of-day based model. USDJPY is the most interesting new breakout candidate on the first page here, given yesterday’s significant sell-off as we see in the chart below.
Page 1: the EURUSD downside breakout didn’t survive intraday, so it never registered on our end-of-day based model. USDJPY is the most interesting new breakout candidate on the first page here, given yesterday’s significant sell-off as we see in the chart below.
Page 2: little shaking here, though it is remarkable that USDRUB remains near downside breakout levels despite yesterday’s semi-crash in oil prices and the overall risk-off tone.
Chart: USDJPY
USDJPY took a new dive yesterday as weak US data impacted both risk sentiment and pushed US yields sharply lower. Recent market action has required strong safe-haven seeking in bonds to drive the yen stronger. The next interesting level here is not far away at 109.30 for a potential downside breakout scenario.
USDJPY took a new dive yesterday as weak US data impacted both risk sentiment and pushed US yields sharply lower. Recent market action has required strong safe-haven seeking in bonds to drive the yen stronger. The next interesting level here is not far away at 109.30 for a potential downside breakout scenario.
Chart: NOKSEK
A downside breakout is interesting here due to the marked lack of momentum after a long uptrend – we will keep an eye out for a solid downside bar in the sessions ahead that takes NOKSEK to a new 19-day low close.
A downside breakout is interesting here due to the marked lack of momentum after a long uptrend – we will keep an eye out for a solid downside bar in the sessions ahead that takes NOKSEK to a new 19-day low 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.
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