FX Breakout Monitor: JPY, AUD switch horses

Forex 5 minutes to read

John Hardy

Head of FX Strategy

Summary:  Today we are looking at AUDCAD and JPY movements against a background of US Treasury demand.


For a PDF copy of this edition, click here.

The focus of the day today is more on a reversal in direction for AUD and JPY rather than new breakouts, as most exchange rates are in continuing trends (especially SEK) or consolidating/reversing.

The AUD has reversed so hard in its price action overnight that it is already breaking lower versus CAD and threatening to do so versus the AUD – stay tuned there.

Breakout signal tracker

USDJPY hasn’t approached its stop but it feels in danger given the reversal in JPY crosses elsewhere and the strong rally in US Treasuries – we remove this signal and book a loss of about 30 pips, or about 0.38x the risk taken on the position (P/L as a percentage of size to original stop).

We add the AUDCAD signal at just above 0.9400, using a stop assumption of 0.9485 and set to hold for seven to nine days, depending on how the price action develops.
Source: Saxo Bank
Today’s FX Breakout monitor

Page 1: Reversals were the order of the day in JPY crosses, leaving USDDJPY bulls guessing although USDCHF remains near or above parity today. Elsewhere, AUD reversed hard and broke down versus CAD (we have added this to our signal list) and is close to a break lower in EURAUD – we’ll follow up on that one tomorrow if it proves of interest.
Source: Saxo Bank
Page 2: Here, SEK continues to suffer, while emerging market currencies pulled back from new break levels in most cases, save for the pesky USDTHB, which remains surprisingly heavy.
Source: Saxo Bank
Chart: AUDCAD

We highlighted AUDCAD as a potential breakdown candidate prior to the Reserve Bank of Australia meeting, but the immediate reaction was back to the upside;this time, the signal looks a bit more profound as Australian rates reacted sharply to RBA Governor Lowe’s dovish rhetoric overnight. Next target area is down toward 0.9200. We add this position to our curated breakout list above as well. 
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.

Disclaimer

The Saxo Bank 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 Bank 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 Bank 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 Bank 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 Bank 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 Bank 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)

Saxo Capital Markets HK Limited
Rooms 2001-02, 20/F York House
The Landmark
15 Queen's Road Central
Hong Kong

Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract) and Type 3 Regulated Activity (Leveraged foreign exchange trading) licenses (CE No. AVD061). Registered address: Rooms 2001-02, 20/F York House, The Landmark, 15 Queen's Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.