Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
FX Breakout Monitor: SEK and gold making waves as majors dither
John J. Hardy
Global Head of Macro Strategy
Summary: A weak CPI print has the Swedish krona breaking down all over while the major currencies continue to dither within tight ranges. And gold has broken free again to the upside over the last couple of sessions
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It appears FX traders are awaiting important catalysts like the outcome of US-China trade negotiations and Brexit and perhaps the next rounds of macroeconomic data that will prompt greater anticipation of coming policy moves from the major central banks. Today, the currency most pointedly on the move was the Swedish krona, as the currency fell to new local lows across the board on a weak CPI print. We’ll watch whether this move holds into today’s close for a possible sell-off of the krona versus the USD or EUR tomorrow morning. Gold is on the bid as well even as silver is left back in the range.
Breakout signal tracker
Our AUDCAD barely avoided a stop-out yesterday and rolled conveniently back lower as we take it off for less than half of the distance to the original stop. The EURUSD short is going nowhere now several days after we entered the position near current levels. We will consider SEK shorts tomorrow depending on the quality of the market close today in EURSEK and USDSEK.
It appears FX traders are awaiting important catalysts like the outcome of US-China trade negotiations and Brexit and perhaps the next rounds of macroeconomic data that will prompt greater anticipation of coming policy moves from the major central banks. Today, the currency most pointedly on the move was the Swedish krona, as the currency fell to new local lows across the board on a weak CPI print. We’ll watch whether this move holds into today’s close for a possible sell-off of the krona versus the USD or EUR tomorrow morning. Gold is on the bid as well even as silver is left back in the range.
Breakout signal tracker
Our AUDCAD barely avoided a stop-out yesterday and rolled conveniently back lower as we take it off for less than half of the distance to the original stop. The EURUSD short is going nowhere now several days after we entered the position near current levels. We will consider SEK shorts tomorrow depending on the quality of the market close today in EURSEK and USDSEK.
Today’s FX Breakout monitor
Page 1: Prospects seem moribund for the immediate term in most FX pairs – still awaiting whether EURUSD makes a more concerted effort lower after the recent break signal.
Page 1: Prospects seem moribund for the immediate term in most FX pairs – still awaiting whether EURUSD makes a more concerted effort lower after the recent break signal.
Page 2: Gold continues to poke to new highs for the cycle, though without much impulsivity – still it is making a statement relative to the deadbeat majors here – see more below. The other prominent mover is SEK, with prominent new lows today in reaction to the weak Swedish CPI data. And all quiet on the CNY front allows USDTHB to look at a new low as well – while USDZAR looks the other way as South Africa credit spreads have recently pulled back wider.
Chart: USDSEK
The Swedish krona was in for a drubbing today on a weak CPI release that took the currency to new lows across the board. Note that the horizontal line near 9.40 here is the highest daily close back in late 2016 (and before that since 2002). Important to watch whether the move holds into today’s close for a sense of whether the krona is in for a new bout of trending weaker.
The Swedish krona was in for a drubbing today on a weak CPI release that took the currency to new lows across the board. Note that the horizontal line near 9.40 here is the highest daily close back in late 2016 (and before that since 2002). Important to watch whether the move holds into today’s close for a sense of whether the krona is in for a new bout of trending weaker.
Chart: XAUUSD
Impressive that gold continues to make a statement by poking to new highs for the cycle, but less than impressive that it is doing so with an Average True Range close to the very lowest registered over the last several years. The most prominent chart points higher are the range highs from $1,366/oz up to $1,375/oz, the highest levels since 2014.
Impressive that gold continues to make a statement by poking to new highs for the cycle, but less than impressive that it is doing so with an Average True Range close to the very lowest registered over the last several years. The most prominent chart points higher are the range highs from $1,366/oz up to $1,375/oz, the highest levels since 2014.
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 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.
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