FX Breakout Monitor: JPY and CHF sink to the bottom FX Breakout Monitor: JPY and CHF sink to the bottom FX Breakout Monitor: JPY and CHF sink to the bottom

FX Breakout Monitor: JPY and CHF sink to the bottom

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  Most negative yielding currencies faring poorly today as risk appetite tries to bounce back from yesterday’s funk. A pivotal few days for global markets lie ahead, especially tomorrow’s FOMC meeting and a test of market sentiment as a key Chinese trade official visits Washington in coming days.

For a PDF copy of this edition, click here.

Exchange rates across the major and EM currencies show a market that is clearly gunning to take on risks in FX – even after a flurry of negative news that dented risk appetite yesterday. The market seems to want to find hope in the latest Chinese stimulus news and on the idea that the Fed will prove increasingly benign and is set to roll out a more dovish guidance message tomorrow at the Federal Open Market Committee meeting, particularly on its quantitative tightening schedule. The US dollar is weak against most emerging market currencies and elsewhere, the very weakest currencies are some of the negative yielders like JPY, CHF and SEK. 

On the strong side, sterling is back higher as the parliament is set to vote on a number of “amendments” this evening that could point to a delay of Article 50 and more. Most EM currencies are trading on the strong side, following China’s renminbi – note USDSGD and the usual suspect USDTHB looking at new lows as China has boosted the CNY to a new local high versus the US dollar as the key Chinese trade official, Liu He, is set to visit Washington tomorrow through Thursday.

Today’s FX Breakout monitor

Page 1: Even as the broad USD picture shows weakness against EM and especially sterling lately, remarkable to note that the key JPY pair USDJPY continues to range trade and remains close to the upside break level of 110.00 (a bit lower on a daily close basis, but the clear chart focus is on the big round 110.00 level).

EURJPY also looking above the 19-day high close since yesterday. Elsewhere, GBP pairs remain generally bid and AUDNZD is poking near the lowest closing level for the cycle after an ugly decline in an Australian business survey overnight and ahead of tonight’s Q4 CPI data.

Source: Saxo Bank
Page 2: We’ve discussed the weak Swedish krona over the last couple of trading days but EURSEK has yet to break fully above the range resistance above 10.37, which could set a bigger move in motion if that bar is cleared. Elsewhere, EURNOK continues to try to grind lower and gold and silver are strong on the firm renminbi and on hopes that global policymakers will do whatever it takes to print their way out of any recession risk.  Gold and silver ripped to new lows in a huge rally move on Friday, but will likely need a supportive FOMC meeting tomorrow to realise further gains from these levels.
Source: Saxo Bank

We recently covered AUDNZD’s attempt at a break higher through 1.0620, which was rejected and now has the pair poking near the lows for the cycle – at least on a daily close basis. The JPY cross flash crash also saw collateral damage in every AUD cross, so a bit difficult to gauge the “true low” of the range. Zooming out, there were several prominent lows stretching back to 2015 all the way down close to the multi-decade low near parity.
Source: Saxo Bank

USDSGD having a look at the lows since the summer, dragged lower by the weight of the USDCNY move. Will be interesting to see if the CNY strength is window dressing ahead of a key phase of talks or whether this is the beginning of a bigger move.
Source: Saxo Bank

EURCHF having a look at the well-demarcated break level around 1.1350 today – a further rally in sterling (unwind of Brexit safe-haven flows) and risk appetite from here would likely aid the pair’s case to the upside.
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.