Head of FX Strategy
Summary: USD traders are once again finding it tough to find sustained momentum as the recent USD breakout higher has reversed in most pairs in recent days and then today in USD versus EM pairs after the US payrolls data was more benign than the market was bracing for. The big USD is still in limbo ahead of next week while other developing situations, like those in the Scandies, have also failed to develop.
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
No “new” signals today as of this writing, as the market is suffering a confused reaction to today’s US jobs report, where payrolls were in line with expectations, revisions were positive and the household survey was very strong, even if earnings were on the weak side (though that data series is choppy). The USD has gone from attempting a broad break higher just a few sessions ago to now generally stumbling, if not yet fully reversing back to the weak side. One of the clearest USD break signals still in play was the upside break in USDCAD as we discuss below.
Elsewhere, the Scandies were on edge during the recent general episode of risk off, with EURNOK perched above 10.00 briefly and EURSEK having a look above recent highs, if not the highs for the cycle – but nothing has yet fully pulled through there either – an interesting subplot in the Scandies next week as we await whether global risk sentiment deteriorates further (likely leaving SEK and NOK out in the cold) or if it firms and keeps the ranges intact. Both Sweden and Norway report CPI next Thursday.
Today’s Breakout Highlight: USDCAD
USDCAD registered a solid close back higher today and a new 19-day high close above 1.3300, though it is not yet clear of the recent range, while the USD picture remains generally muddled. We’re keeping an eye out for USD direction next week and the potential for a downside reassessment of CAD if the 1.3300+ area break is sustained. The 49-day high close near 1.3340 has not yet been broken.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
