Head of FX Strategy
Summary: JPY, NZD, MXN, and gold in focus post-FOMC.
For a PDF copy of this edition, click here.
The December 19 Federal Open Market Committee meeting has prompted considerable volatility and a number of interesting potential breakouts, although this time of year is often a difficult one for trend traders.
We present today’s breakout monitor with some trepidation as the USD situation is very volatile and could certainly change again by the end of the day or week as we go into the period of traditional very thin liquidity at the tail end of the year.
That being said, the most consistent price action in USD pairs in the period since the FOMC meeting has been USDJPY, which is attempting both a 19-day and 49-day breakout here (more in chart below). The EURUSD is also attempting a look higher, but the price action has been less consistent there intraday. Elsewhere, the recent break in EURCAD we highlighted recently is showing further progress.
Another new signal that looks compelling is spot gold, which has zipped above the 200-day moving average and the $1,250/oz resistance level.
Today’s FX Breakout monitor
Page 1: EURUSD is attempting a break higher, but seems clearly affected intraday by risk appetite swings; it would be more helpful to see stable risk appetite for a solid break higher. Note the chart discussion below. The USDCHF attempted break lower is technically inferior to EURUSD unless EURCHF stops rallying and the pair moves below the 200-day moving average.
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.
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