Head of FX Strategy
Summary: USD traders are once again finding it tough to find sustained momentum as the recent USD breakout higher has reversed in most pairs in recent days and then today in USD versus EM pairs after the US payrolls data was more benign than the market was bracing for. The big USD is still in limbo ahead of next week while other developing situations, like those in the Scandies, have also failed to develop.
The FX Breakout Monitor is back, and it is expanded with "autosignals" that show examples of how to trade new breakouts, defined as new 19-day high or low closes not preceded by a breakout in the same direction in the prior week. Click on the link below for a look at the full PDF of the table overview and the Recent New Breakouts tables. See further below for a couple of chart highlights related to today's monitor.
Today’s Breakout monitor
No “new” signals today as of this writing, as the market is suffering a confused reaction to today’s US jobs report, where payrolls were in line with expectations, revisions were positive and the household survey was very strong, even if earnings were on the weak side (though that data series is choppy). The USD has gone from attempting a broad break higher just a few sessions ago to now generally stumbling, if not yet fully reversing back to the weak side. One of the clearest USD break signals still in play was the upside break in USDCAD as we discuss below.
Elsewhere, the Scandies were on edge during the recent general episode of risk off, with EURNOK perched above 10.00 briefly and EURSEK having a look above recent highs, if not the highs for the cycle – but nothing has yet fully pulled through there either – an interesting subplot in the Scandies next week as we await whether global risk sentiment deteriorates further (likely leaving SEK and NOK out in the cold) or if it firms and keeps the ranges intact. Both Sweden and Norway report CPI next Thursday.
Today’s Breakout Highlight: USDCAD
USDCAD registered a solid close back higher today and a new 19-day high close above 1.3300, though it is not yet clear of the recent range, while the USD picture remains generally muddled. We’re keeping an eye out for USD direction next week and the potential for a downside reassessment of CAD if the 1.3300+ area break is sustained. The 49-day high close near 1.3340 has not yet been broken.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
