FX Breakout Monitor: GBP whiplash, JPY rout

Forex 3 minutes to read

John Hardy

Head of FX Strategy

Summary:  Sterling has rocketed to new multi-month highs on a Brexit negotiation breakthrough that is likely to lead to a last minute deal. This, together with hopes for a US-China trade deal ahead of the weekend have risk appetite and the smaller currencies generally bid, while safe havens, especially the Japanese yen, are sharply weaker.


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

Sterling began reversing sharply back to the strong side yesterday, a move that followed through impressively today on clear signals from the EU side in Brexit negotiations that the UK has made sufficiently new and impressive concessions to get back to the negotiation table and likely leading to a last-minute deal before the October 31 deadline. All of the sterling pairs we track are currently trading above 19-day and 49-day highs in favour of sterling, even GBPCAD after a very impressive Canadian jobs report.

While sterling is strongest, we also note strength and a number of breakouts to the upside in many EM currencies and the smaller G10 currencies versus safe havens as the market is also banking on a US-China trade deal.  Note USDMXN having a go at a breakout lower today, AUDJPY flying higher (if not yet at 19-day high…but closing in). Within the G3 currencies, the firmer EUR is felt in EURJPY currently trading above it’s 19-day and 49-day high and the EURUSD closing in on a 19-day high close as well (currently 1.1073).

Today’s Breakout Highlight: GBPUSD
GBPUSD has rallied aggressively on the sudden breakthrough in negotiations between UK Prime Minister Johnson and his Irish counterpart Varadkar, which will lead to intensive talks with EU Brexit negotiators next week and likely to a last-ditch deal ahead of the October 31 deadline. Having broken the 1.2500 area, GBPUSD has poked toward its 200-day moving average above 1.2700 today, while the ultimate resistance is much higher into the 1.3380 area highs from March and the historically important level above there around 1.3500 (a level with significance stretching back to the global financial crisis and before). Of course, a sudden reversal or collapse in talks would risk a catastrophic reversal - still plenty of danger if things don't go as the market now expects.

Source: Saxo Group
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.