Head of FX Strategy, Saxo Bank Group
Summary: It was reversal time yesterday for the US dollar, and for EURUSD in particular after the ECB rhetoric yesterday and the weakest ever core CPI reading for the Euro Zone. But today we take a look at interesting new developments for the major CHF pairs, wondering if sudden CHF weakness is once again a brief affair or something that sustains.
Today’s Potential New Breakout Signals
With the reversal in price action for most USD pairs late yesterday, we have no new breakout signals of note as this was one of the chief sources of recent breakouts. We do highlight below the potential for a EURCHF breakout to the upside that is possible on another stronger close higher today. In other developments, with the USD reversal and a sharp weakening in the CHF yesterday, USDCHF has very suddenly switched gears and deserves watching in the days ahead.
Chart highlight: EURCHF
EURCHF has ripped higher since yesterday with no real development of note behind the move – in fact, arguably the very low Euro Zone CPI reading suggests that traders will be looking forward to more forceful easing from the ECB and the ECB’s Lane even mentioned that the EURUSD rally is important as EURUSD teased 1.2000 – both of which are euro negative. On the other hand, and perhaps more importantly in the longer run – deflationary risks could trigger more generous EU fiscal stimulus which is usually more FX positive. In any case – the notable area on the EURCHF chart is the 1.0825-1.0850 area series of highs that turned back the action on every prior occasion, and quickly so. So far today, this pattern appears to be repeating – so the price action needs to stick above 1.0835 into today’s close to register a proper break.
Breakouts on the radar: USDCHF and EURCAD
Chart: USDCHF
An upside break for the USDCHF is actually not terribly close (as of this writing about 0.6 ATR further to the upside), but it is somewhat remarkable that it is less than 1 ATR (average true range) away given that the pair just posted multi-year lows recently. The action of the last two sessions has been driven by both USD strength and CHF weakness since early yesterday.
Chart: EURCAD
Not a heavily traded pair, but interesting to note the scale of EUR weakness being felt here as well as in other euro pairs. A boost in the oil price would be helpful for bears here looking for further CAD appreciation.
Table: Breakout Monitor
The breakout monitor below offers an overview of recent daily breakouts (a close above or below the prior 19-day highs or lows and 49-day highs and lows to give an indication of whether it there is also a medium term development).
The market is trying to get back to the pre-Covid and pre-war times, but that model is broken. A new dawn is here and the financial world needs to adapt.
Steen Jakobsen,
Chief Investment Officer
A political switch in China towards less tough control of its people and companies may kick things back into gear.
Redmond Wong,
Market Strategist
While the economic situation in Europe may not be as bad as feared, there's still a plethora of things to fix.
Chris Dembik,
Head of Macroeconomic Research
As the world turns increasingly bipolar, equity markets face harsh times as they transition into the new reality.
Peter Garnry,
Head of Equity Strategy
New alliances and collaborations outside of China may lead to prosperous times in Asia.
Charu Chanana,
Market Strategist
For years, it was thought that the balanced portfolio was a thing of the past. But recent developments may have changed that.
Peter Siks,
Investment Coach
Following a dramatic and volatile 2022 with good returns, a lot of this year's commodity performance may be driven by Chinese politics.
Ole S. Hansen,
Head of Commodity Strategy
2023 could be a tough year for currencies but EUR and JPY may have some upside.
John J. Hardy,
Head of FX Strategy
The commodity-heavy Australian market may have a good start to 2023, as the Chinese focus on growth signals demand for Aussie resources.
Jessica Amir,
Market Strategist
From a near-perfect environment for speculative assets before 2022 to the opposite, crypto faces fundamental challenges.
Mads Eberhardt,
Cryptocurrency Analyst
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)
