Quarterly Outlook
Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
You can access both of our platforms from a single Saxo account.
FX Breakout Monitor: JPY rattles its cage
John J. Hardy
Global Head of Macro Strategy
Summary: The post-FOMC reaction across markets has offered a rather confusing backdrop for currency trades – but today’s JPY move sends the clearest signal of the week that our focus for potential breakouts should be on JPY crosses.
For a PDF copy of this edition, click here.
A very confusing couple of sessions for currency traders as we first saw a USD sell-off and risk appetite shoulder shrug in the immediate wake of the Federal Open Market Committee decision and then saw an enormous risk-on rally yesterday, followed by today’s sudden reversal of almost equal magnitude less than an hour after the US market opened today. One suspects some of this may be linked to the quadruple witching, or expiry, of futures and options contracts. But today’s JPY signal provides suddenly clarity if we close today anywhere near the levels as of this writing and today’s FX Breakout Monitor snapshot.
A further strengthening of US Treasuries combined with any continuation in the ugly sell-off in equities could feed a powerful move – especially given widespread signs of complacency. Risk appetite weakness spreading to EM like it did today is potentially additional fuel for JPY upside. Investors and traders may find it unsettling if even this latest violent swing to a more dovish stance from the Fed can’t support the equity market.
Breakout signal tracker
We’ll add a USDJPY short position to our signal tracker as the most straightforward way to look at the potential for additional JPY strength. We place the stop above the 111.00 area.
A very confusing couple of sessions for currency traders as we first saw a USD sell-off and risk appetite shoulder shrug in the immediate wake of the Federal Open Market Committee decision and then saw an enormous risk-on rally yesterday, followed by today’s sudden reversal of almost equal magnitude less than an hour after the US market opened today. One suspects some of this may be linked to the quadruple witching, or expiry, of futures and options contracts. But today’s JPY signal provides suddenly clarity if we close today anywhere near the levels as of this writing and today’s FX Breakout Monitor snapshot.
A further strengthening of US Treasuries combined with any continuation in the ugly sell-off in equities could feed a powerful move – especially given widespread signs of complacency. Risk appetite weakness spreading to EM like it did today is potentially additional fuel for JPY upside. Investors and traders may find it unsettling if even this latest violent swing to a more dovish stance from the Fed can’t support the equity market.
Breakout signal tracker
We’ll add a USDJPY short position to our signal tracker as the most straightforward way to look at the potential for additional JPY strength. We place the stop above the 111.00 area.
Today’s FX Breakout monitor
Page 1: USDJPY smashing down through the local breakout level today and deserves additional focus next week for more downside risk. EURJPY is doing the same after today’s very weak Eurozone PMIs. Elsewhere we note the directional sympathy in EURCHF, which is nearing a major support level in 1.1200.
Page 1: USDJPY smashing down through the local breakout level today and deserves additional focus next week for more downside risk. EURJPY is doing the same after today’s very weak Eurozone PMIs. Elsewhere we note the directional sympathy in EURCHF, which is nearing a major support level in 1.1200.
Page 2: Today saw an ugly reversal in risk appetite as EM trades consolidate on the sudden shift in the risk appetite after a long run of strength in anticipating Fed dovishness. Note that AUDJPY is also looking at a downside break and even GBPJPY despite a firmer sterling today.
Chart: USDJPY
USDJPY tried to bounce yesterday as the JPY has a hard time appreciating when both of the important coincident indicators – bond strength and risk off – aren’t operating in the yen’s favour. USDJPY is the most straightforward way to trade the JPY and could head for 108.00 or lower here on a more significant deleveraging across markets.
USDJPY tried to bounce yesterday as the JPY has a hard time appreciating when both of the important coincident indicators – bond strength and risk off – aren’t operating in the yen’s favour. USDJPY is the most straightforward way to trade the JPY and could head for 108.00 or lower here on a more significant deleveraging across markets.
Chart: EURJPY
EURJPY came suddenly alive on the weak flash Eurozone March PMIs today – this sudden injection of momentum could finally lead to a more notable directional move after a long period of rangebound behavior and false breaks.
EURJPY came suddenly alive on the weak flash Eurozone March PMIs today – this sudden injection of momentum could finally lead to a more notable directional move after a long period of rangebound behavior and false breaks.
Latest Market Insights
Quarterly Outlook
Q3 Macro Outlook: Less chaos, and hopefully a bit more clarity
Quarterly Outlook
-
-
Quarterly Outlook
Q3 Macro Outlook: Less chaos, and hopefully a bit more clarity
John J. Hardy
Global Head of Macro Strategy
After the chaos of Q2, the quarter ahead should get a bit more clarity on how Trump 2.0 is impacting... -
Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ... -
Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever
Jacob Falkencrone
Global Head of Investment Strategy
-
Quarterly Outlook
Commodity Outlook: Commodities rally despite global uncertainty
Ole Hansen
Head of Commodity Strategy
-
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
-
Quarterly Outlook
Equity Outlook: The ride just got rougher
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
China Outlook: The choice between retaliation or de-escalation
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
Commodity Outlook: A bumpy road ahead calls for diversification
Ole Hansen
Head of Commodity Strategy