Head of FX Strategy
Summary: The Friday USD surge has partially faded as traders are perhaps unwilling to commit to fresh longs ahead of the FOMC meeting this Wednesday. Elsewhere, a fairly typical Monday, though NOK is looking at new major lows today versus the euro.
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The USD breakout situation was muddied already late Friday as the greenback didn’t stick the close higher versus the EUR, though it did manage a break on market close elsewhere against the G10’s weakest links, including AUD and NOK. A recent break higher in USDCAD has been brewing for a week, but has yet to follow through or find rejection.
As we noted in Friday’s post “The tricky caveat for USD breaks right here is that action may get bottle up ahead of the FOMC event risk next Wednesday and the risk that the FOMC waxes more dovish than expected (though a fairly dovish shift looks in the price).”
Today’s FX Breakout monitor
Page 1: Note that USDCAD remains perched at breakout levels – probably awaiting the Federal Open Market Committee outcome for whether to challenge higher to 1.3800 or have this latest breakout attempt rejected by a more dovish than expected Fed. Otherwise, there are no new breakouts save for the AUDUSD break lower triggered on the Friday close.
2024: The wasted year
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.
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.
