FX Breakout Monitor: USD limping post-FOMC, SEK rally continues

Sterling strength has backed off again after a surprisingly aggressive run just ahead of today’s UK election and the results coming in this evening – offering a test for sterling traders’ conviction on any outcome – i.e., whether a Tory majority outcome is already in the price or how much downside risk there is for sterling if the Tories barely squeak through or, likely worst of all for sterling longs, if we see a hung parliament result.

Note that EURUSD, AUDUSD and GBPUSD all closed at new highs for the cycle yesterday, but the first two of these still need a bit more to establish the longer-term 49-day breakout status – something we’ll be watching closely over the next few session as these level are close. The trading environment in general early next week should help us establish whether momentum is developing here in USD downside and otherwise as we will have to know by then the fate of the December 15 US tariffs on China and have at least a status check on ongoing trade negotiations. Our assumption is that détente is USD negative, but the proof either way will be in the price.

Today’s Breakout Highlight: AUDUSD
A number of USD pairs have witnessed a further breakdown here, and prominent among those is AUDUSD, where not only is the USD weak, but AUD has received a bit of a boost on strong commodity prices like copper and iron ore and on some spin that . A détente in the US-China trade row would likely be a must for a significant extension higher here – but regardless, watch the coming couple of sessions and the 0.6900+ area for whether this break unfolds as this would also break the dominant chart feature of the descending channel.