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FX Breakout Monitor: USD firm after mixed US jobs report

John Hardy

Head of FX Strategy

Summary:  An interesting setup ahead of next week as the USD stays firm near interesting breakout levels into the end of the week after a mixed US jobs report. Sterling also possibly poised for a break if it becomes clear next week that a long further Brexit decision delay awaits.


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The US jobs report didn’t provide any unambiguous signals. On the positive side was the strong bounce-back in payrolls in March (+196k and a +14k revision of prior two  months versus expectations of circa +175k) from the very weak February drop-out print of +20k. But a very weak +0.1% month-on-month rise in average hourly earnings has inflation watchers yawning and the participation rate dropping back -0.2% spoils the interesting bounce in that measure in February. All in all, the report keeps the Fed very “patient” and benign, while not showing the kind of weakness that points to a growth slowdown.

Source: Saxo Bank
Today’s FX Breakout monitor

Page 1: We’re still close to that EURUSD perma-range downside breakout level – seeing is believing there. Elsewhere we note the NZDUSD and GBPUSD pairs for possible significant breaks if USD strength prevails, the former charted below. 
Source: Saxo Bank
Page 2: AUDJPY worth a look next week if it can clear the  bigger 49-day high (given the long established range) and also worth noting the jarring contrast of USDZAR looking lower while some USD/Asia EM is testing topside resistance, including USDTHB.

Gold and silver still suffering near breakout levels as yields rise (although as of this writing they have pushed back lower after two-way post-US jobs report action) and risk appetite is strong, but haven’t quite punched through to the downside – also worth watching early next week.
Source: Saxo Bank
Chart: NZDUSD

An almost too-well defined range in NZDUSD as we await a USD direction. Will we get any notable USD/Asia or USD/Antipodean action until we  see the US-China trade deal announcement, possibly not for many more weeks? In any case, early next week, we will keep an eye on the 200-day moving average and range low here in NZDUSD and note that much of it is being driven by NZD weakness more than USD strength locally – as we noted earlier today, the kiwi now has turned the corner to the downside versus the AUD after the extension of AUDNZD above 1.0500.
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.

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