FX Breakout Monitor: Recent JPY breaks extend, USD bounces

Page 2: AUDJPY and GBPJPY are at new lows for the cycle, but as for EURJPY, these are already breaks that unfolded before Christmas and the latest extremes are extensions of existing moves. Note the USDTHB poking at new lows again – this is likely a function of China insisting on maintaining a firm CNY, likely as a good faith measure during the trade negotiations period with the US – thus we don’t see extension lower as likely if USD firm elsewhere. Gold and silver are at new highs for the cycle in recent days, but not highlighted as fresh breakouts. Finally, USDTRY is looking at a new 19-day high, but a move above 5.50 would look more technically significant in the days ahead.

Chart: EURJPY

Given a USD resurgence as the New Year gets under way, other JPY crosses may have more to offer in JPY upside terms. Note the EURJPY posting fresh lows here since the summer of 2017, a major break.

Chart: AUDUSD

AUDUSD is clearing major levels intraday today, possibly setting up at least a go at the major lows for the cycle back in early 2016 that come in below 0.6850.

Chart: AUDCAD

The break lower here – assuming we hold below the range lows into the close today – looks technically compelling for an extension lower – perhaps towards a 61.8% retracement of the prior rally, which comes in around 0.9365. 

REFERENCE: FX Breakout Monitor overview explanations

The following is a left-to-right, column by column explanation of the FX Breakout Monitor table.

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.

ATR: Average True Range or the average daily trading range. This calculation uses a 50-day exponential moving average. The shading indicates whether, relative to the prior 1,000 trading days, the current ATR is exceptionally large (deep orange), somewhat elevated (lighter orange, normal (no shading), quiet (light blue) or exceptionally quiet (deeper blue).

UP and DOWN Break Levels: These columns show how close, in ATR terms the current price is from breaking the highest and lowest prior 19- and 49-day daily closing levels, with the “breakout level” indicating the actual level of that highest or lowest close.  If a breakout is getting close in ATR terms, it is highlighted in yellow or bright yellow (very close). If the current price is trading above or below the breakout levels, in other words, has just broken out, an “X” is shown to indicate this rather than an actual ATR reading.

NEW Breakouts: These are indications of whether, at the time of the snapshot of the market, the currency pair is trading above or below the breakout level. NOTE: it is key that the intention here is to highlight NEW or initiail breakouts, as a pair that has been trending consistently and has set multiple (more than two) new highs/lows will not be highlighted. This is done to avoid too much noise on the chart and focus on new information. 

Number of breakouts for prior 8 days: This is merely a counter to indicate the number of days in which the pair has posted a new daily 19-day or 49-day high or low close. It will flag currency pairs that have been trending strongly recently but aren’t actively breaking out at the time of the snapshot of the model and/or aren’t highlighted in the NEW Breakouts part of the table.

Recent New 19-day Signals: this gives the reader a chance to see if any recent 19-day breakout signals were registered over the prior three days for perspective on recent developments. The prior day’s signals particularly interesting if waiting for daily closes before deciding whether to trade a breakout on the following day. If there have been more than three prior signals over the past eight days, no signal is shown in order to reduce the “noise” on the overview (though all signals are tallied in the “Number of breakouts…” column to the left.