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Risk sentiment is tilting to the weak side once again, and this time more severely as we have taken out support in the US S&P 500 index as of this writing. But the real intensity in safe-haven seeking is to be found in global sovereign bonds, where German bunds (10-year) are gunning for the all-time lows from 2016 of -20 basis points and 10-year US yields have cratered as much as 20 bps over the last week.
EURJPY and AUDJPY (and NZDJPY, though we don’t track it on our overview) look like compelling breakouts on further weakness in risk appetite and strength in safe-haven sovereign bonds.
As for the US dollar, the menu of potential breakout is similar to the menu for JPY crosses, but we will focus on AUDUSD, NZDUSD and USDCAD for now – and use EURJPY rather than EURUSD to track the potential for a weak euro within the G3. Breakout signal tracker
We add a EURJPY short today for a test lower still and would like to add a USDCAD, but the Bank of Canada is meeting as we are writing this, so we’ll hold back for a close today above 1.3500, risk a large move if the BoC waxes particularly dovish.
AUDNZD is another candidate for the long side if we see a strong close today. NOKSEK is also on the candidate list – see chart below.