Forex 5 minutes to read

FX Breakout Monitor: JPY stealing the spotlight

John Hardy

Head of FX Strategy

Summary:  The USD rally has stumbled a bit today on a mixed US jobs report, but JPY strength has been more consistent in recent sessions, accelerated by the ECB’s dovish surprise yesterday and weak equity markets.


For a PDF copy of this edition, click here.

Yesterday’s huge break lower in EURUSD is already experiencing a test of confidence today on a mixed US jobs report (most clearly strong was household survey and unemployment rate drop, least positive was the +20k payrolls versus +180k expected. Earnings rose sharply to a new high for the cycle, but were flattered by a fractional and likely random drop in average weekly hours).

Today’s close will be very important for that pair and for the USD outlook into next week. 

Elsewhere, JPY crosses are showing the most volatility on a suddenly resurgent JPY. But as the JPY has transitioned from weakest to strongest over the last week, it is only just now challenging breakout levels among the JPY crosses we track – EURJPY and AUDJPY look to be the first to break lower as we discuss below. USDJPY could quickly take over the market focus if the USD rally falters elsewhere.

Breakout signal tracker

We added EURUSD and AUDUSD shorts yesterday and the decent follow through lower allows us to pull down the stop in EURUSD from the initial level. 
Source: Saxo Bank
Today’s FX Breakout monitor

Page 1: the EURUSD break lower yesterday was critical stuff, but it needs follow-through and a participation from other USD pairs. Elsewhere, we note the more determined break lower in AUDNZD and EURCHF joining EURJPY in looking at new local lows today.
Source: Saxo Bank
Page 2: The Scandies are putting in a very weak showing today, looking at new cycle lows even against a weak euro. Emerging markets also remain on the defensive on the weak risk appetite. AUDJPY is trading near the breakout level lower.
Source: Saxo Bank
Chart: EURJPY

We add EURJPY to the watchlist as the pair has pushed to a new local low – though the critical range low is a bit lower still around 124.00. Further risk-off could favour the JPY more than the USD, judging from the price action of the last few sessions.
Source: Saxo Bank
Chart: EURSEK

At the bottom of the heap today in G10 FX are the Scandies, apparently taking their lead from the ECB implications on their own central banks’ ability to normalise. Weak risk appetite is likely another immediate driver. EURSEK is rapidly running out of range ahead of the 10.729 top from last August (and the highest daily close back then was south of 9.70).
Source: Saxo Bank
REFERENCE: FX Breakout Monitor overview explanations

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

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 if markets are choppy.

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

High Closes / Low Closes
: These columns show the highest and lowest prior 19- and 49-day daily closing levels.  

Breakouts
: The right-most several columns columns indicate whether a breakout to the upside or downside has unfolded today (coloured “X”) or on any of the previous six trading days. This graphic indication offers an easy way to see whether the breakout is the first in a series or is a continuation from a prior break. For the “Today” columns for 19-day and 49-day breakouts, if there is no break, the distance from the current “Quote” to the break level is shown in ATR, and coloured yellow if getting close to registering a breakout.

NOTE: although the Today column may show a breakout in action, the daily close is the key level that is the final arbiter on whether the breakout is registered for subsequent days.
Disclaimer

Saxo Capital Markets (Australia) Pty Ltd 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 Combined 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.

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) Pty Ltd.
Level 25, 2 Park Street
NSW 2000
Sydney
Australia

Australia

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) Pty Ltd 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 & Combined Financial Services Guide & Product Disclosure Statement 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. Trading in leveraged products such as CFDs and Margin FX products may result in your losses surpassing your initial deposits. 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.

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.