FX Breakout Monitor: Waiting for FOMC-inspired breakouts

FX Breakout Monitor: Waiting for FOMC-inspired breakouts

Forex 5 minutes to read
John J. Hardy

Global Head of Macro Strategy

Summary:  The Fed, the dollar, EURSEK, and EURCHF in focus.


For a PDF copy of this edition, click here.

Most of today’s developments, like CHF and SEK weakness, and JPY weakness to a degree as well, are extensions of prior developments we have noted this week and late last week. It’s important to reserve judgment on the latest move until we see the post-Federal Open Market Committee action this evening, as this is an event with significant impact to change the narrative across markets, particularly if the Federal Reserve dramatically disappoints anticipation of a more dovish shift in forward guidance on its balance sheet reduction, or QT, programme.

Today’s FX Breakout monitor

Page 1: EURJPY continues to toy with resistance, but JPY is likely one of the more sensitive currencies to the FOMC meeting tonight – let’s see where we close the day. Elsewhere, EURCHF bulled through the key 1.1350 break area yesterday and extended today.

The USD outlook is potentially pivotal today as well for pairs like NZDUSD, AUDUSD and USDCAD,  all of which could post new breakouts on a daily close basis today if the USD is sold over the FOMC meeting – these pairs certainly look like stand or fall situations for the USD.

Source: Saxo Bank
Page 2: A sea of colour here as we have seen trending in a number of USD/emerging market pairs as the market anticipates a dovish FOMC shift and China has boosted its currency as fresh US-China trade talks get under way – gold and silver clearly linked to that development as well. Will the Fed deliver the message these trends are looking for tonight?

On the weak SEK front today, a notable break of important EURSEK resistance today sets things in motion there.
Source: Saxo Bank
Chart: EURSEK

EURSEK pulled above the 200-day moving average more forcefully, and managed to clear the range highs below 10.38 as well today. The resistance levels above start perhaps with the 10.50 round figure ahead of the multi-year highs north of 10.70 and SEK is very cheap in long term valuation terms – further gains may prove merely tactical.
EURCHF
Source: Saxo Bank
Chart: EURCHF

We flash the EURCHF chart again today after the pair took out resistance yesterday and extended higher, hardly caring (remarkably enough) that Brexit developments late yesterday saw a chunky correction to recent sterling strength as we surmised that GBPCHF might be a significant driver of recent CHF weakness.

The next resistance level here comes into view already around 1.1460 in the case of the 200-day moving average, but 1.1500 looks a more pivotal chart level, this being the top of the range since last summer.
EURCHF
Source: Saxo Bank
Chart: EURCHF

EURCHF having a look at the well-demarcated break level around 1.1350 today – a further rally in sterling (unwind of Brexit safe-haven flows) and risk appetite from here would likely aid the pair’s case to the upside.
REFERENCE: FX Breakout Monitor overview explanations

The following is a left-to-right, column by column explanation of the FX Breakout Monitor tables.

Trend: a measure of whether the currency pair is trending up, down or sideways based on an algorithm that looks for persistent directional price action. A currency can register a breakout before it looks like it is trending if markets are choppy.

ATR: Average True Range or the average daily trading range. Our calculation of this indicator uses a 50-day exponential moving average to smooth development. The shading indicates whether, relative to the prior 1,000 trading days, the current ATR is exceptionally high (deep orange), somewhat elevated (lighter orange), normal (no shading), quiet (light blue) or exceptionally quiet (deeper blue).

High Closes / Low Closes: These columns show the highest and lowest prior 19- and 49-day daily closing levels. 

Breakouts: The right-most several columns columns indicate whether a breakout to the upside or downside has unfolded today (coloured “X”) or on any of the previous six trading days. This graphic indication offers an easy way to see whether the breakout is the first in a series or is a continuation from a prior break. For the “Today” columns for 19-day and 49-day breakouts, if there is no break, the distance from the current “Quote” to the break level is shown in ATR, and coloured yellow if getting close to registering a breakout. NOTE: although the Today column may show a breakout in action, the daily close is the key level that is the final arbiter on whether the breakout is registered for subsequent days.
 

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.