FX Breakout Monitor: CAD breaking down, JPY still firm FX Breakout Monitor: CAD breaking down, JPY still firm FX Breakout Monitor: CAD breaking down, JPY still firm

FX Breakout Monitor: CAD breaking down, JPY still firm

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  The sudden JPY strength from Friday remains largely intact as we watch for whether continued weak risk sentiment will drive a sizable move in JPY crosses. Elsewhere, the weakest link among G10 currences at the moment is CAD.


For a PDF copy of this edition, click here.

The sharp JPY rally that materialised Friday remains the most notable development of the last couple of sessions, clearly driven by Friday’s large shift in sentiment and the post-Federal Open Market Committee meeting rally in US treasuries. The latter faces an interesting test in the coming days with large auctions of 2-, 5- and 7-year US treasuries. The risk-off tone is going the US dollar no favours, as NZDUSD is actually oddly trying at breakout levels today even with an ugly risk off tone in early US trading hours. This is not the FX market of years past! But the biggest loser of the moment is CAD, where its exposure to concerns about the US economy and a dovish Fed and its weak data on Friday perhaps are weighing.

Breakout signal tracker

We added a USDJPY short on Friday – hoping for the first successful USD major trending move in a long time.

Source: Saxo Bank
Today’s FX Breakout monitor

Page 1: Several JPY crosses remain near the breakout levels from Friday – always tough to trade JPY upside moves due to their often spiky nature – it looks like the 110.00 area is important in USDJPY as we discuss below and the same goes for the 124.00 area (near the 49-day low) for EURJPY. Note that USDCAD remains near an upside breakout level while NZDUSD does the same as NZD and CAD head in opposite directions – note EURCAD, etc. AUDNZD is poking lower yet again today as well – but with the RBNZ up this week and with very low volatility, we’ll refrain from chasing.
Source: Saxo Bank
Page 2: The Friday risk-off move has caught EM longs the wrong way around for the moment – though far too early to tell whether the recent EM rally will fully reverse – and USDZAR looks like a break higher candidate that we will keep our eye on in coming days (more below). Otherwise, gold id trying to have a look higher – but in the shadow of the bigger top up at 1340+.
Source: Saxo Bank
Chart: USDJPY

The coming couple of sessions vital for USDJPY bears for a sense of whether the Friday was a one-off move or the beginning of something bigger. Note the 111.00 pivot area taken out on the way down and the Ichimoku cloud level and psychologically important 110.00 level.
Source: Saxo Bank
Chart: USDZAR

The ZAR looks like an EM currency worth watching for downside risks if the current weak risk sentiment continues, having notably failed to participate recently when other EM currencies were enjoying a period of strength. A break and close clear of the cycle highs above 14.50 could set in motion a move higher to 15.00 and more.
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) 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
Australia

Contact Saxo

Select region

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) 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.