Head of FX Strategy
Summary: The US dollar is breaking higher in places, but is doing so in slow motion, perhaps lacking conviction on any directional move until the other side of the FOMC meeting next Wednesday. Market volatility remains moribund and another sign of the market finding directional trades difficult was the reversal of the attempt to take sterling higher today.
Today’s Breakout monitor
The FX Breakout Monitor is 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.
A PDF of today’s Breakout Monitor
Below is a snapshot of the full list of currency pairs we track for the breakout monitor. Much of the USD strength today is as much about euro weakness in the wake of the ECB meeting, as EURUSD helped USDSEK and USDNOK to new local high closes as well without much interest in EURNOK or EURSEK on the side. Besides a USDTHB in EM, the only other active break at the moment is EURCHF.
One other currency that bears watching in coming days is the Japanese yen, especially in connection with any further risk contagion from the coronavirus story, which has only seen very weak transmission into currencies. It is a difficult issue to quantify for markets, but suspect the ongoing bid in safe haven treasuries is one indicator suggesting some level of concern. EURJPY is the JPY pair closest to having a look at new downside breaks.
Today’s Breakout Highlight: EURUSD
EURUSD continues to move in slow-motion after breaking to new lows for the year in the wake of the ECB meeting, and next week sees the FOMC meeting up on Wednesday, which may either confirm or reject this latest break. In the bigger picture – the 1.1000 level looks more important than the level just broken ahead of the final cycle lows. Traders looking for momentum in this pair have been regularly burned over the last eighteen months or more, but this record low volatility may not last for long.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
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