FX Breakout Monitor: NOK break extends, spotlight on USDJPY FX Breakout Monitor: NOK break extends, spotlight on USDJPY FX Breakout Monitor: NOK break extends, spotlight on USDJPY

FX Breakout Monitor: NOK break extends, spotlight on USDJPY

Forex 7 minutes to read
John Hardy

Head of FX Strategy

Summary:  EURNOK, USDJPY and EURCAD in focus.

For a PDF copy of this edition, click here.

EURNOK and USDNOK extended sharply higher after their recent range breaks while USDJPY has tried to crop up on our breakout radar ahead of tomorrow’s Federal Open Market Committee meeting and amidst weak risk sentiment that has boosted the yen.

The US dollar situation remains dicey until we get a signal on the other side of the FOMC meeting tomorrow evening, but USDJPY was trying to make a move ahead of that event nonetheless while EURJPY has likewise dipped to interesting levels at times today. These breaks are likely to register a more compelling breakout signal only if the market decides that whatever the Fed is bringing to the table tomorrow will keep US yields lower but nonetheless is not positive for risk appetite (risk sentiment and bond yields are the two key drivers for JPY as long as Bank of Japan expectations are nil).

Elsewhere, we saw a strong extension in the NOK sell-off today after yesterday’s big break higher in EURNOK and recent break higher in USDNOK, both covered recently. The NOK move was apparently triggered this week by the cessation of Norges Bank purchases of NOK, which ended Friday and won’t pick up until the new calendar year rolls into view. The end of 2017 saw a similar aggravated spike lower in NOK that ended just before the holidays, so unless we are on the verge of another ugly extension lower in risk sentiment and the oil price, further NOK weakness could peter out quickly.

Today’s FX Breakout monitor

Page 1: The USDJPY break attempt here is interesting if that pairs closes weakly today, but do of course note that the FOMC meeting is such a critical risk for this pair that we are unwilling to find a signal compelling until the other side of that particularly event risk (with the further risk that it will have moved significantly before the next signal – alas that is the nature of event risks).
FX Breakouts
Source: Saxo Bank
Page 2: AUDJPY is a repeat today, but not much has happened there – that pair’s fate is likely to track the direction in risk appetite and is complicated by the CNY’s lack of volatility, which is providing considerable gravity for much of Asian FX, especially those countries that export into China. EURNOK and USDNOK continue to extend NOK weakness, as does NOKSEK (not highlighted because it is not a new development, this being the fourth time the pair is looking at a new 19-day and 49-day low close in the last eight days). We look at the EURCAD situation below as well.
FX breakouts
Source: Saxo Bank

The breakout level for today’s close is 112.67, but as we note above, the FOMC event risk is too important here to start trading a small break on today’s close. As well, note the other technically interesting levels like the actual recent range low around 112.25 and the important Ichimoku cloud level that has also been challenged frequently of late. Surely the pair makes a technical statement either way ahead before the Friday close.
Source: Saxo Bank

EURNOK has run away to the upside, no doubt in part due to weak liquidity and lack of Norges Bank bid. Unless we are about to see a considerable aggravation of global liquidity risks or weak risk sentiment, the bulk of the move lower in NOK may already be behind us and we may see the pair reversing quickly in the New Year.
Source: Saxo Bank

This is a technically compelling break if the CAD weakness holds on the other side of the FOMC meeting tomorrow evening. Note the range levels and the 200-day moving average. Note also that EURCAD and EURUSD have an r-squared (indicator of correlation) of almost 0.25 over the last 100 trading days, so a further rally and success of this breakout may require a weak USD after the FOMC.
Source: Saxo Bank
FX Breakout Monitor overview explanations

The following is a left-to-right, column-by column-explanation of the FX Breakout Monitor table:

Trend: a measure of whether the currency pair is trending up, down or sideways based on an algorithm that looks for persistent directional price action. A currency can register a breakout before it looks like it is trending.

: Average True Range or the average daily trading range. This calculation uses a 50-day exponential moving average. The shading indicates whether, relative to the prior 1,000 trading days, the current ATR is exceptionally large (deep orange), somewhat elevated (lighter orange, normal (no shading), quiet (light blue) or exceptionally quiet (deeper blue).

UP and DOWN Break Levels
: These columns show how close, in ATR terms the current price is from breaking the highest and lowest prior 19- and 49-day daily closing levels, with the “breakout level” indicating the actual level of that highest or lowest close. If a breakout is getting close in ATR terms, it is highlighted in yellow or bright yellow (very close). If the current price is trading above or below the breakout levels, in other words, has just broken out, an “X” is shown to indicate this rather than an actual ATR reading.

NEW Breakouts
: These are indications of whether, at the time of the snapshot of the market, the currency pair is trading above or below the breakout level. NOTE: it is key that the intention here is to highlight NEW or initiail breakouts, as a pair that has been trending consistently and has set multiple (more than two) new highs/lows will not be highlighted. This is done to avoid too much noise on the chart and focus on new information. 

Number of breakouts for prior 8 days
: This is merely a counter to indicate the number of days in which the pair has posted a new daily 19-day or 49-day high or low close. It will flag currency pairs that have been trending strongly recently but aren’t actively breaking out at the time of the snapshot of the model and/or aren’t highlighted in the NEW Breakouts part of the table

Recent New 19-day Signals
: this gives the reader a chance to see if any recent 19-day breakout signals were registered over the prior three days for perspective on recent developments. The prior day’s signals particularly interesting if waiting for daily closes before deciding whether to trade a breakout on the following day. If there have been more than three prior signals over the past eight days, no signal is shown in order to reduce the “noise” on the overview (though all signals are tallied in the “number of breakouts…” column to the left). 

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.