FX Breakout Monitor: Select EM FX breaking higher ahead of FOMC

For a PDF copy of this edition, click here.


A quick update today as we view signals early this week with an added dose of scepticism after weeks of mostly treacherous false breaks in the major pairs and with two critical event risks this week – possibly pivotal Brexit votes over the next day or two (likely less pivotal if May’s deal doesn’t pass or isn’t brought to a vote because of a third sure defeat) and Wednesday’s Federal Open Market Committee meeting.

The USD weakness of the last few sessions has arrived after a former period of strength, so few USD pairs are in breakdown mode, although a resurgent NOK has been poking at local breakout levels versus both the USD and EUR and some EM currencies, especially RUB but MXN as well, are gunning for new highs versus the beleaguered greenback ahead of what is expected to be a dovish FOMC.  Certainly, the FOMC will have to deliver to send the big USD over the edge, or else we risk simply churning back the other way.

Today’s FX Breakout monitor

Page 1: The US dollar is still relatively weak, and some of the local breakout levels to the downside (for example that 19-day high close of 1.1289 in EURUSD) are not particularly inspiring as we they are still within the longer-term ranges that have suffocated volatility for months now. The FOMC will have to trigger a real narrative changer and/or volatility will need to swing into a higher gear to excite directional interest in the USD. Elsewhere, JPY crosses continue to show the effects of strong risk appetite, although we have yet to see a range break signifying more determined JPY weakness.