Quarterly Outlook
Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu
Jacob Falkencrone
Global Head of Investment Strategy
The FX Trader: USD rally fizzles. Can AUD stick a new uptrend?
John J. Hardy
Global Head of Macro Strategy
Summary: A brief US dollar rally never amounted to much and was handily reversed, setting up a fresh focus on the lows for the cycle for the greenback. AUDUSD is trying to take the lead, trading its highest level since late 2024 on the focus on hard asset prices and AU rates.
What to know It’s still a low volatility market, but some interesting new developments as USD rally reverses and AUD and SEK test compelling levels. The shock US extraction of now former Venezuelan president Maduro had no apparent FX angle, as not even oil prices could really decide what to do with this news after chopping around. And FX is not in focus in general, as the fresh surge in risk sentiment in equity markets and new surge in metals prices steal the headlines. The latter, together with solid CNH strength and the rate outlook for Australia’s RBA are likely helping drive the Aussie higher here, and AUD has posted new highs versus all of the G3 currencies here after AUDUSD finally tried clearing 0.6700+ with a bit more oomph in Asia’s Tuesday session. We’ll need the Australia November CPI release early in the Wednesday session in Asia for confirmation that something bigger is afoot after AUDUSD’s long walk in rangebound desert. (more on AUDUSD in chart discussion below.) Elsewhere, SEK is quietly firming and EURSEK is posting its lowest levels since last April below 10.75 early Tuesday. In fact, it has not closed below that 10.75 level since late 2022. With a better growth outlook for Europe this year and German fiscal expansion, SEK is one of my top G10 picks for the year. Some follow through in GBP higher. The start of the year is also seeing a firmer sterling – with EURGBP confirming the recent bearish reversal and will soon be testing the 200-day moving average if it drops through 0.8650. CNH – how much more? The Chinese authorities allowed USDCNH to slice down through 7.00 in the very steady appreciation move in CNH. Hard to know what their plans are here, but allowing that 7.00 level to fall is signal in itself. The next area of interest is 6.80, but might require broader-based USD weakness to get there. Note that EURCNH rallied on Monday after trying to test below multi-month lows near 8.17. Chart focus: AUDUSD
AUDUSD tested the big cycle highs since late 2024 above 0.6700 in the last days of 2025, and has tried higher again here – as noted above on the combination of the RBA rate outlook, firmer CNH, and the metals rally and perhaps also the increased potential for inbound investment into critical materials. A stick above 0.6700-0.6725 after the November Australia CPI release early Wednesday could open up the range to the 0.6942 high of late 2024, but the pair may have more potential still for the balance of the year, deep into the 0.7000-0.7500 range as the currency is one of our top picks in a “run it hot” global economy this year. On the other hand, if the USD fails to remain under pressure and we get a reversal deep back into the range, it will have proven yet another false signal.
Technical and other observations for key pairs.
EURUSD – yesterday’s rejection of the dip below 1.1700 was an important signal for the bulls, but EUR is rather weak in the crosses and not much in focus here. Still, next step for bulls would be a close above that 1.1800 level that held the rally back the last time around.
JPY pairs – Monday saw some BoJ Governor Ueda hawkishness and new highs for JGB yields - with this latest bout of higher yields seeing a slightly firmer JPY rather than a weaker one on Monday. There was some JPY softness Tuesday in Asia but early European hours is seeing the currency firming again. A lot of wood to chop to get a more constructive view on JPY upside, but EURJPY is a place to start after yesterday’s sell-off.
GBPUSD and EURGBP – Sterling has started off the year with a bang as EURGBP sold off sharply. Is the market smelling a geopolitical UK re-alignment or rapprochement with Europe? The very unpopular Starmer is making the case, but the issue itself is not necessarily unpopular.
AUDUSD and AUD pairs – AUD has made a key move higher here versus the US dollar, but is also strong versus the Euro. Key for the AUDUSD move to hold through the Asian session Wednesday if we are finally to develop a real trend.
USDCAD – the market tried to trade a “switcheroo” on CAD on the US extraction of Venezuela’s Maduro, selling CAD on the idea that eventually more Venezuelan heavy will flow to the US, possibly threatening the pricing of Canadian heavy and oil sands-derived grades. That’s probably thinking too far ahead, but certainly something to monitor. 1.3800 area looks like key resistance.
FX Board of G10 and CNH trend evolution and strength.
Note: If unfamiliar with the FX board, please see a video tutorial for understanding and using the FX Board.
AUD and SEK top the leader-board as 2026 gets underway, while the JPY and the US dollar bring up the rear. Volatility is in the deep freeze – would help to get a slight pick up in ATR readings to confirm the latest potential trending developments.
Table: NEW FX Board Trend Scoreboard for individual pairs. 2026 will be the year where the EURJPY bull trend dies, but when, after 216 remarkable days with a positive reading? Elsewhere, EURNOK has triggered a bearish trend signal that looks compelling on the chart. Note the incredible -12.5 reading for USDCNH – remember that FX Board readings are vol-adjusted, showing how significant this move has been since November relative to the USDCNH’s usually very muted action.
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The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
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