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The US dollar is rallying on fresh Brexit uncertainty that is now dragging down the euro possibly as much as it is sterling, as well as weak Chinese data and soft French PMI data after a rather gloomy European Central Bank meeting yesterday. If the market closes where it is currently, the USD is actively attempting a break higher against the AUD, NOK and EUR as well as a couple of emerging market currencies.
As we are close to important breakout levels in other USD pairs like USDCHF, note the levels in the FX Breakout Monitor chart below and the proximity for USD pairs that have not yet broken.
The tricky caveat for USD breaks right here is that action may get bottle up ahead of the Federal Open Market Committee event risk next Wednesday and the risk that the FOMC waxes more dovish than expected (though a fairly dovish shift looks to be priced in). Still, the technical quality of these breaks is reasonably solid ahead. We have a look at the three potential G10 USD pair breakouts, but do note that USDZAR and USDTRY are attempting breakouts and conditions for EM don’t look very friendly given weak economic data out of China and ongoing signs of weak risk appetite.
As well, note the possible NOKSEK break lower heading into next week after the recent post-big-slide consolidation. Strategies for trading breakouts
We’ll follow up more on this front in future posts, but one strategy is to enter a position sometime early Monday assuming the breakout is confirmed on today’s close and then holding for seven to nine trading days and taking profit (multiple partial profits certainly a strategy) on any large surges in that time frame that takes the profit more than two or more times the risk on the strategy. The risk on the strategy (distance to the stop from entry) can be scaled to a bit more than one ATR (indicated on the FX Breakout Monitor tables for each pair) or a bit more if entry is established well beyond the break level. Stops can be moved to reduce risk once the position has moved than an ATR into profit, though arguably shouldn’t be trailed one-to-one with the price action.
We include a description of the FX Breakout Monitor tables below the charts.