Head of FX Strategy
Summary: The yen has picked back up its safe haven status after a pronounced bout of weakness last week, a rather whiplash-inducing development, while G10 FX moves remain muted relative to the gyrations in risk sentiment. EM currencies are a different story, with the ruble in bad shape as oil markets came unglued again today on top of the weak risk sentiment.
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. It is amazing to note the “sea of blue” in the ATR heatmap for the currency pairs in the G10 universe, with EURNOK the first pair to register an elevated “light orange” high ATR reading – no surprise to see gold as the only other instrument showing up as elevated on the ATR heatmap. Notice the EM weakness evident at the bottom of the table, as well as another EURCHF break lower (if it closes below 1.0610 today).
The gold move extended aggressively today, but one of the biggest moves relative to recent volatility was in the ruble, as we look at below. And we continue to watch USDJPY for signs of a full reversal back lower as last week’s breakout hasn’t let to follow through higher and has seen deep backfilling amidst a backdrop of weak risk sentiment and strong safe haven bonds.
Today’s Breakout Highlight: USDRUB
Besides gold, the largest mover on the day in relative volatility terms was the Russian ruble in our universe, as the ruble exploded above 64.00 as it more firmly took out the 200-day moving average and likely on the pronounced further weakness in crude oil prices on top of the weak risk sentiment to start the week. As well, it is worth noting that the crude oil forward curve remains below the current spot price out into 2022, so the market is expecting weak demand to stretch a way over the horizon for now. The ruble was a popular carry trade until earlier this year so there may be plenty more downside risk from a positioning angle if oil prices continue lower from here.
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.
