FX Breakout Monitor: EURUSD eyes breakdown FX Breakout Monitor: EURUSD eyes breakdown FX Breakout Monitor: EURUSD eyes breakdown

FX Breakout Monitor: EURUSD eyes breakdown

Forex 4 minutes to read
John Hardy

Head of FX Strategy

Summary:  The euro (versus USD and JPY), GBP, and AUDNZD in focus today.

For a PDF copy of this edition, click here.

The greenback continues to show resilience and is eyeing a breakout versus the EUR today, though we argue that the break must sustain post-ECB on Thursday for further downside prospects. Tonight, we get confirmation or rejection on the recent AUDNZD break over NZ Q4 CPI.

Weak risk appetite spilling over from Asian and into the European and early US trading sessions sees the JPY rather sharply stronger again, though we need the prior late JPY cross flash crash spike to fade out of view or strong new momentum to trigger new JPY upside breaks (downside JPY cross breaks). Our favourite eventual candidates for JPY strength expression are AUDJPY and EURJPY.

For now, our chief focus is on the USD outlook as additional USD pairs are eyeing fresh 19-day highs, including EURUSD and USDSEK today, though we argue that a broader USD upside break view needs to see EURUSD downside through 1.1300 on the other side of the ECB meeting on Thursday.

Today’s FX Breakout monitor

Page 1: EURUSD has probed beyond the 19-day low close at 1.1344 today, but we have argued recently that the key level is 1.1300 and post-ECB price action. Elsehwere, GBP has rejoined the rally path, but the move is hampered a bit today by generally weak risk appetite (which tend to favour USD and JPY).

Still, GBPAUD is eyeing a new 19-day high close on the day and EURGBP is a candidate for more downside on a dovish ECB meeting and further hopes that we are headed for no Brexit or a soft Brexit. The AUDNZD situation needs resolution either way tonight over the New Zealand Q4 CPI report after the recent attempt to break above the 1.0620 area.
FX Breakouts
Source: Saxo Bank
Page 2: Note USDSEK pushing on the 19-day highs today, though the technically interesting areas are more like 9.10 and we would also like to see EURUSD breaking down through 1.1300 for interest there post-ECB. The recent USDRUB break lower has been a disappointment for follow-through.
FX Breakouts
Source: Saxo Bank

We showed this chart a couple of times recently, noting that the 1.0620 area close was a solid level for building an upside break on a technical break. Tonight’s New Zealand CPI looms large as a key event risk for making or breaking this recent attempt higher. Another factor is sentiment linked to China, which may tend to feed into the AUD more readily than the NZD, due most likely to its proportionally larger export exposures to China.
Source: Saxo Bank

Not a break candidate just yet, but a turn to weaker risk appetite and a dovish outlook from the ECB on Thursday (more risks there than the Wednesday BoJ, where we see low odds of fresh developments) could conspire to add downside pressure here and the pair found resistance at the bottom of the key 125.00-50 zone. The downside break for now is 122.67 – the low close on the day of the flash crash spike. 
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.

The Saxo 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 is not intended to and does not change or expand on this. 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 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 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 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 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 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-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.