FX Breakout Monitor: GBP strong, USD meandering ahead of FOMC
Head of FX Strategy
Summary: The US dollar failed to completely break down recently despite a push lower versus stronger currencies recently like the kiwi and especially sterling, and has thus largely failed to generate momentum, though still near breakdown levels in many crosses ahead of the FOMC tomorrow. The biggest mover today was NOK, which weakened sharply on data catalysts.
The link below takes you to the latest FX Breakout Monitor, a concise PDF overview of all current and recent price breakouts for the short and medium term for major FX pairs and spot silver and gold.
Today’s Breakout monitor
Below is a snap of the full list of currency pairs we track for the breakout monitor. Volatility has picked up a bit in fits and starts, but most pairs in our universe continue to show very compressed trading ranges as evidenced by the deep blue shadings of the ATR field in the majority of pairs in our universe. The recent volatility bright spots in spot gold and silver have reverted to normal trading ranges (no shading in the ATR field), which is perhaps not a major surprise with so many other markets showing little volatility and high complacency.
Few currencies are on the move, with the most notable of these over the last two weeks sterling and kiwi, both of which have rallied strongly. Sterling faces a key test late Thursday as the results of the UK election begin to roll in. See our latest thoughts on the UK election and sterling.
Specifically today, EURNOK jumped suddenly to a new 19-day high intraday on NOK weakness in the wake of today’s Norwegian November CPI release and Regions survey from the Norges Bank. This bears watching into the close as the last resistance level from here is the all-time highs above 10.25 as we discuss below.
The US dollar, meanwhile, looks awfully inert after a recent spate of weakness failed to follow through into a larger development. We have the FOMC meeting up tomorrow evening, the next chance for a surprise. Among EM pairs, we are noting interesting divergences, with USDRUB recently edging toward downside breakouts while USDTRY closed yesterday at a 19-day high and USDZAR is close to doing the same today.
Today’s Breakout Highlight: EURNOK
EURNOK has given traders a case of whiplash recently, buffeted by oil market volatility that saw a previous attempt higher rejected until today’s fresh go at the 10.18 area high close for the last 19 days. Also note that the pair never took out the key 61.8% Fibo retracement area - a key pivot level around 10.20. And just before we are set to publish this piece, we get the “news” that Chinese sources claim the Trump administration will delay the December 15 tariffs against China to allow for further negotiation of the “phase one” trade deal – no confirmation from the Trump administration on this, but it has capped the upside of today’s move in this global growth-sensitive pair.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.