Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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FX Breakout Monitor: GBP pauses, NOK stumbles after recent breaks
John J. Hardy
Chief Macro Strategist
Summary: Choppy range trading markets on an inability to find a sustainable market narrative have spelled treacherous conditions for momentum traders, as breakouts have almost universally failed to lead to pronounced new trending moves in recent months.
The link below takes you to the latest FX Breakout Monitor, a concise PDF overview of all current and recent price breakouts for the short and medium term for major FX pairs and spot silver and gold.
Today’s Breakout monitor
Compressed volatility and the inability to sustain any faith that it is worth reacting to the ups and downs/headlines on what my colleague Ole Hansen has called the US-China trade deal “hamster wheel” have led to impossible conditions for momentum traders. In fact, any trader who had faded the average new (first in a week) breakout signal in our universe of FX pairs, would have made a mint as so few recent breakout signals have led to significant extensions in the price action. The latest signals to stumble, if not yet reverse, are in sterling pairs, while last Friday’s EURNOK breakout to the downside backed up badly in today’s action.
We have not real visibility on when volatility will pick up more broadly and for breakouts to signal the start of more determined trends in the market, though current conditions warrant zooming out to the bigger pivot levels where the longer term (for example, our 49-day) breakouts are in play. Also, an expansion in trading ranges and new fundamental catalysts are likely necessary to shock this market into gear.
Today’s Breakout Highlight: GBPJPY
Sterling pairs have actually stumbled a bit from the most aggressive extension higher in sterling yesterday as the market eyes a strong Tory victory at the December 12 election and a smooth path to Brexit. A typical pair is one like GBPJPY, where we nominally saw a new 19-day high close, but not yet one that cleared the daily high closes just prior to that time frame – underlining that sterling needs to firmly close above the relevant pivot high – at least above 140.75 or even the intraday high near 141.50 – and it wouldn’t hurt to have a GBPUSD close above 1.3000 as well – the clear psychological barrier for that pair.
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