FX Breakout Monitor: Plot shifts on China’s credit growth

FX Breakout Monitor: Plot shifts on China’s credit growth

Forex 5 minutes to read
John J. Hardy

Global Head of Macro Strategy

Summary:  Currencies lurched into a new gear today on the release of the March credit data out of China, which showed a massive new round of stimulus. This sent the USD and JPY lower and the euro and commodity dollars higher.


The latest March credit data from China was released at 08:00 GMT this morning and set in motion a sudden wave of classic risk-on patterns across markets, with global safe haven bonds selling off heavily (US 10-year benchmark now at a pivotal level above 2.50% –watching closely for further JPY cross implications to the upside if yields continue to rise.) and equities lurching into a fresh, steep ascent. This scrambled yesterday’s developments to a degree, sending the back-and-forth AUD back higher and the pushing the US dollar and especially the yield-sensitive Japanese yen back lower. 

The latest price action scrambles the USD picture, as the greenback was generally weak outside of strength versus the yen. The euro picked up a strong bid today, perhaps on the idea that the outlook for EU exports to China will picked up strongly on China’s stimulus (Europe far more leveraged to exports than the more isolated US economy) and on a less bad than expected Eurozone Industrial Production print.

Breakout signal tracker

The churning market does our fresh new signals no favors, though the NOK did firm in the wake of this morning’s risk rally and should stand to benefit from oil trading at new local highs. And if US yields continue to rise, this may support USD versus the lowest yielders like CHF and JPY. A strong close in AUDJPY today merits a look for adding to the list on Monday.
Source: Saxo Bank
Today’s FX Breakout monitor

Page 1: The JPY crosses we track here and on Page 2 are all threatening new range breaks save for GBPJPY. Here, the EURJPY rally was sharper than the USDJPY rally, though the latter is closer to taking out the important local range for a possible test higher. 
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 Turkey’s underperformance despite the supportive risk backdrop and strength in most of the major EM peers (though Asian EM appears more anchored to the virtually non-moving CNY (in USDCNY terms). Gold and silver remain heavy despite the somewhat weak US dollar as US treasuries are under pressure.
Source: Saxo Bank
Chart: USDJPY

USDJPY poking up against major resistance into the 112.00 area, which if broken opens up the range towards 114.50, a level that was a major resistance level stretching back to early 2017. The key coincident indicator here is the US treasury market, where further weakness is likely to coincide with a pressure on the JPY broadly – if somewhat less so here than in other crosses – see AUDJPY below, for example.
Source: Saxo Bank
Chart: AUDJPY

One of the biggest movers on the day was AUDJPY as the yen suffers under the double weight of strong risk sentiment and weak bonds, which expand the carry disadvantage of holding the yen. On the AUD side, the market is responding to the idea that strong Chinese stimulus will feed into demand for Australia’s key commodity exports.
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.

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992