FX Breakout Monitor: USD resurgent, CHF and smalls wilt

Forex 5 minutes to read

John Hardy

Head of FX Strategy

Summary:  The US dollar has rediscovered a modest bid today in the wake of yesterday’s FOMC minutes. The Swiss franc, meanwhile, has weakened sharply, possibly as safe haven bids linked to Brexit have faded after news of the long delay to the UK's departure from the EU.


For a PDF copy of this edition, click here.


The US dollar found buyers today after shrugging off the Federal Open Market Committee minutes last night, which largely merely confirmed the Fed’s intent to stand pat on the rate outlook until incoming data and/or market turbulence indicate otherwise.

The anticipation and now reality of a long Brexit delay has seen collapsing implied volatility for sterling options and the sharp weakening of the Swiss franc in recent sessions may be linked to the same phenomenon.

We highlight the USDCHF trading at new 19-day highs since yesterday in our signal tracker today. Elsewhere, we’re more interested in adding to USD longs in the form of a NZDUSD short if that pair trades below the 19-day and 49-day low closes, which are in play already today. 

Breakout signal tracker

With G10 small currencies offered today and a suddenly resurgent US dollar, our confidence in the EURNOK short has dropped sharply, but we’ll leave it in place for now. We also add a USDCHF long at the current market price with a rather wide stop in ATR terms due to very constricted recent trading ranges.
Source: Saxo Bank
Today’s FX Breakout monitor

Page 1: USDCHF is extending fairly aggressively higher as CHF makes a rare show of multiple days of trading in the same direction (weaker). The AUDUSD break higher yesterday, meanwhile, is already on the ropes today as a close near 0.7100 would keep bulls sitting on their hands. We focus below on the NZDUSD setup for a break lower, now that the USD is firming again.
Source: Saxo Bank
Page 2: No good follow through lower for EURNOK today, perhaps held back to a degree by EURSEK failing to follow suit in the wake of Sweden’s CPI release today. Note the precious metals are trading a bit heavy again to say the least, especially silver at that 15.00 area.
Source: Saxo Bank
Chart: USDCHF

Always tough to trade a new “breakout” that is within the range, but given a bit of momentum in CHF weakness after a key event risk (Brexit extension) and the USD perking up, we’ll follow this one with interesting, though the obvious bigger level is that top of the cycle area above 1.0100.
Source: Saxo Bank
Chart: NZDUSD

Very interested in tracking a possible breakout lower here due to the clarity of the range and the sense that NZD has turned the corner lower in broad terms as it finds itself under the Aussie’s thumb. Next major level lower is really the 0.6500 zone.
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.