FX Breakout Monitor: GBP the momentum trade of the week

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Sterling was the clear momentum trade this week, though it has paused today as we await key further developments over the next seven trading days. Elsewhere, we’ve seen teases from EURNOK, AUDNZD and EURCHF, without notable follow-through just yet.

After its very strong run, sterling ran into some resistance after GBPUSD hit 1.3000 as the market guns for a Brexit reversal or at least an extension of Article 50. Elsewhere, the other breakout candidates we have discussed in recent days have teased through key levels but have yet to follow through – more below on that.

Among these, NOK could get interesting next week on Norges Bank and euro volatility could pick up on the European Central Bank meeting after the recent rhetorical shift to the downside. As for AUDNZD, which has paused today after breaking a key level yesterday, momentum traders will likely get an answer over New Zealand CPI data Wednesday and Australia’s employment data the following day.

Sample trade: AUDNZD long

On AUDNZD’s close at a new 19-day high and above the prior pivot level, a straightforward way to trade the development is a long position around 1.0625 with a stop at perhaps 1.0545 (about 1.2 ATR), holding for seven to nine trading days or until the price rises above 1.0800, and trailing the stop about 1.2 ATR from any new high low closes.

Today’s FX Breakout monitor

Page 1: Sterling stopped its run of higher closes today, but remains well free of former resistance as we await developments starting on Monday with Prime Minister Theresa May’s presentation of her "Plan B". Elsewhere, the EURCHF breakout is pushing for momentum, but this could be linked to Brexit headline risks and the euro faces a key test next week over the ECB meeting.

USDCHF, meanwhile, is perched near a new 19-day high, though one without pronounced technical significance. AUDNZD remains an interesting breakout candidate, as we have discussed.