Head of FX Strategy
Summary: The US dollar is hardly showing impressive momentum by historic standards, but is following up a bit on the strength that market the initial days of trading this year and this will take the US dollar close to breakout levels higher in a number of currency pairs if it continues.
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. USDJPY is the only major USD pair that has worked free of the recent range, but a number of other USD pairs are getting close here -especially some of the USD/G10 small pairs – after a spate of solid US data, including an absurdly strong US Housing Starts number from today.
Aside from interesting in USD breakouts, we note that the EURCHF breakout status is still in play after its recent move below 1.0800, but that the USDCHF breakout has backed up badly in line with the firmer US dollar, creating a divergent momentum setup if the pair closes strongly today. Other standouts include USD/EM breaks in USDZAR and USDTHB, while the EURSEK break of the 19-day high yesterday looks somewhat questionable from a technical perspective.
Today’s Breakout Highlight: EURUSD
Implied volatility in the options market for EURUSD is having a go at the all-time lows for virtually every major tenor today as the market has given up on major moves in the pair after the last 18 months or more of treacherous trading conditions for trend traders. Since the early October lows last year – the pair has tried to put together a structural base, but a move through local lows and especially a move below 1.1000 would begin to suggest that this basing assumption is under fire. For now, the local 19-day low close is just below 1.1100 – near where we currently trade, and the local pivot low around the same area looks a bit more relevant in a breakout context.
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.
