FX Breakout Monitor: AUD tries to get something going
Head of FX Strategy
Summary: Sterling droops on dovish dissenters at the BoE today, but the breakout picture not yet compelling. Elsewhere, the reaction to the purported US-China trade negotiation breakthrough was rather modest and shows weak transmission into currencies. Still, the AUD and JPY have reacted as one would expect and EURAUD is a standout pair in recent weeks.
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 FX Breakout Monitor
The hoped for US-China trade-deal is getting priced more like a done deal at this point, as bonds swooned and US equity futures ripped to new historic highs in the wake of this morning’s announcement from Chinese official sources that the US and China have agreed to lift. The reaction in currencies markets was clear if rather constrained – the JPY was sharply weaker and the USD was initially weaker but firmed later.
So as we watch the follow-on reaction to this latest round of trade-related “news” unfold, it is interesting to note the divergent trajectories of two USD pairs: AUDUSD (still close to the upside breakout level after never achieving a follow-on rally after the breaks higher from last week) and USDJPY, which is still mulling an upside break for the greenback as US yields poke on new highs for the cycle here. Continued trade-deal hopes, risk sentiment melt-up and rising yields could see the USD moving in different directions in these crosses. Avoiding the USD, AUD also looks interesting versus the Euro, as EURAUD saw a successful break lower last week that is trying to follow through lower here below the 49-day low as well (see chart).
Elsewhere, momentum traders may have generally low conviction after such a high percentage of recent signals have failed, but the breakdown in EURSEK over the last couple of sessions – now extending to a 49-day low intraday today, looks interesting as well.
Today’s Breakout Highlight: EURAUD
AUD strength has been prominent in recent sessions and US-China trade headlines looks supportive here for further AUD resilience. EURAUD has taken a distinct turn for the worse in recent sessions and broke lower already last week locally, with a larger break of the 49-day low close quite clearly etched on the chart as well, should the smaller currencies continue to perform well against the euro here on ongoing optimism.
Latest Market Insights
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.