Head of FX Strategy
Summary: The yen, and to a degree the euro, continue to trade on the strong side, with USDJPY and other JPY crosses poking around at breakout levels to the downside again today. A shift back to a negative tone also has a number of EM currencies on the defensive and gold is pushing the upside of the envelope as well. General market energy levels are increasing markedly.
Today’s Breakout monitor
The FX Breakout Monitor is a concise PDF overview of all current and recent price breakouts for the short and medium term for major FX pairs and spot silver and gold.
A PDF of today’s Breakout Monitor
Below is a snapshot of the full list of currency pairs we track for the breakout monitor. We employ a 50-day EMA for measuring the ATR and the market energy is showing far more determined signs of picking up here – with the top half showing fewer “deep blue/low ATR” readings and the bottom half beginning to show the serious pick up in trading ranges.
In fitting with the tilt back lower into a weak risk sentiment regime today (every day seems to bring a change of direction on that front), the USDJPY pair is poking at the cycle lows, just as EURUSD is mulling the 1.1200 level, while several USD/EM pairs are gunning higher and gold is trading just below its highest daily close for the cycle as of this writing..
Today’s Breakout Highlight: EURUSD
EURUSD is poised at a major level here around 1.1200, a resistance area that held on several prior occasions and deserves watching as a bull/bear pivot level now that the price action has neutralized the recent run to the lows of the cycle in short order. The next area opened up to the upside stretches toward 1.1400 on a solid break.
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
