FX Chart Highlights: Pivotal charts ahead of FOMC, BoC and BoJ

Forex 4 minutes to read

John Hardy

Head of FX Strategy

Summary:  We pull out a few interesting pairs that are near pivotal levels and could be on the move in coming sessions on central bank meetings, especially the FOMC meeting tomorrow and the Bank of Japan on Thursday. The USDJPY chart looks particularly ready to shake out of recent torpor in the sessions ahead.


The Deutsche Bank 3-month FX implied volatility index has dipped below 6%, an extremely low measure by historic standards, with the record just above 5.0%, achieved briefly during the summer of 2014. This fits with the backdrop of very strong risk sentiment, which faces a test over the coming sessions as we first have a look at important central bank meetings tomorrow (FOMC) and Thursday (Bank of Japan) followed by important US economic  data on Friday (jobs report and ISM Manufacturing) and into early next week, as well as possible further breaking news on the US-China trade deal at any time, if recent noise on that front proves correct. Below are a few charts that could be set to pivot in coming days on incoming event risks as well as due to pivotal chart setups.

USDJPY – pivotal levels ahead of FOMC and BoJ
The USDJPY price action has been particularly moribund of late, but the pair is now staring down a critical chart level into 109.00 ahead of the FOMC meeting tomorrow and the Bank of Japan meeting just a few hours later, with this BoJ meeting set up as an important one by the BoJ’s promise of a policy review and the market pricing slightly below 50/50 odds of a 10 basis point rate cut. The 109.00 level is an important absolute level with implications stretching back many months and the 200-day moving average only adds interest. Arguably we also have an upside down head and shoulders formation, with the neckline somewhat difficult to define.

Source: Saxo Group

USDCAD weekly – Does 1.3000 offer any support?
An important test for this pair tomorrow over the FOMC meeting and the Bank of Canada meeting already earlier in the day tomorrow. Already, dramatic rate spread widening in favour of CAD, where two-year rates are now several basis points above their US counterparts suggests that the pair should be trading lower, but the key area on the chart for CAD to prove itself against the big dollar is the 1.3000 area, the lowest level in just over 12 months. With both currencies facing potential surprises, the USDCAD will bear watching for whether a full-fledged breakdown unfolds here.

Source: Saxo Group

AUDNZD weekly
The Aussie is one currency that could prove particularly leveraged to US-China trade deal outcomes that look more promising and bring a more profound sense of détente than expected. Already, the AUD is on the move here versus its smaller Antipodean counterpart, the kiwi. A long speech yesterday from RBA governor Lowe suggests that the bank is against negative interest rates, perhaps adding a bit of a boost to AUDNZD, where the chart looks constructive for longer term gains and is on the move here locally as well. A close at new local highs here would suggest potential for the next layer of resistance starting with perhaps 1.1000, but possibly extending to the longer-term range high of interest near 1.1300.

Source: Saxo Group

EURSEK – last tactical resistance levels in view
EURSEK saw a sufficiently large sell-off recently to warrant some attention from bears as the sequence above 10.85 was rather robustly rejected, the last leg of selling come as the Riksbank’s most recent meeting showed a determination to get the policy rate back to zero even with the economic outlook not seen improving meaningfully. But for the bears to win the day sooner rather than later this latest bounce-back needs to fade around 10.80-85, otherwise the bearish case will have to await further developments. Stay tuned.

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.