Head of FX Strategy
Summary: Las week ended with a rash of breakouts across FX as the US dollar weakened and the Japanese yen has gyrated wildly in both directions on the announcement that Prime Minister Abe is set to resign. But the clearest signals were most concentrated in the USD pairs we track as we look ahead at a busy calendar this week.
Today’s New Breakout Signals
Today, we have so many new signals – new 19-day highs or low closes for a given FX pair – that we merely highlight a couple of breakouts of interest and leave the full list for farther down in this post. The high number of signals is mostly down to a significant move lower in the US dollar to a new low for the cycle after a bit of rangebound behaviour in places last week, but there are other breakouts afoot as well.
Breakouts and auto trade setups
Auto trade setups are taken on the principle that a “new” breakout signal is the first signal in five days and a stop is established at 1.05 average-true-range from that closing level.
SIGNAL: GBPUSD closes at new 19-day high
Example auto-trade setup: buy on breakout close at 1.3353, stop at 1.3230, target: hold for new high in days 7-9 (Sep 8-10)
Chart: GBPUSD
GBPUSD broke to a new cycle high and has only traded above current levels for very brief episodes stretching all the way back to early 2018.
Signal: NZDUSD closes at new 19-day high
Example auto-trade setup: Buy near Friday breakout close at 0.6743, stop at 0.6673, target: hold for new high in days 7-9 (Sep 8-10)
Chart: NZDUSD
The setup here is similar to many USD pairs, though AUDUSD was a bit ahead of NZDUSD in breaking higher – interesting to note here, as with GBPUSD; that NZDUSD is looking at levels that have proven the highs for quite some time – stretching well back into 2019 in the case of NZDUSD.
Breakouts on the radar
As can be seen in the table below, we have a few possible new breakouts on the radar today – chief among them EURUSD, which as of this writing was trading above its 19-day high closing level and USDCHF which has a similar setup (new low close). Elsewhere, NOK features prominently with a major new cycle low if the break lower holds, and similarly NOKSEK if the price level holds above the prior high. For trading setups, traders can taking the closing price today if it is above/below the price break and employ a stop of, for example as we use in our automatic setups, 1.05 ATR, with the latest ATR shown for each currency pair.
Chart: EURUSD
While many USD pairs have broken higher, the main one – the big EURUSD – has so far failed to stick a new high close since a failed breakout on August 18. A close above 1.1931 today would be the highest for the cycle.
Chart: EURNOK
Note that EURNOK has powered to a new 19-day low close and indeed, is mulling the lowest closing level since before the oil price crash that unfolded during the COVID-19 panic phase and crashed NOK with it.The 2019 high was just above 10.31 and the round 10.00 level was a constant resistance point before that stretching back to late 2018.
Table: FX Breakout Monitor
Table: Most recent new breakout signals for each currency pair.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
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