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The recent JPY volatility has hyperextended trading ranges in all JPY and AUD crosses, making fresh breaks a difficult proposition in many forex pairs for now. Next week should prove more interesting for the USD as trading themes for the year develop and on well-defined in some key pairs.
Earlier this week we noted the upside JPY breakout, which suddenly developed into a virtual flash crash in JPY crosses and then subsequent hard bounce that makes life difficult for traders looking for a trending move (impressive gains were available for those pouncing on the JPY move, but unless limit orders were placed, a few minutes away from the screen saw large potential profits left unrealised).
With the strong US jobs figures today and bond yields backing up again, the tactical risk for JPY is now perhaps to the downside and the ranges are now so distended in JPY crosses that clean new breakout signals in JPY crosses will be a long time in coming.
The same goes for the AUD in the opposite direction, as AUD pairs were clearly at the center of the JPY move – with even the likes of AUDUSD and AUDCAD suffering under the apparent weight of JPY flows via AUDJPY. Elsewhere, Brexit headline risks mean treacherous conditions for sterling traders until we have concrete developments. Today’s FX Breakout monitor Page 1
: No fresh signals today and it will be difficult to argue in favour of compelling JPY signals for a time on the aggravated volatility this week. AUD pairs are in the same state after the crazy extension lower and subsequent neutralising bounce. More interesting for next week is EURUSD, where the range is quite well defined – arguably the 1.1308 19-day level is less compelling than the levels we discuss below to the downside, while the upside level 19-day break at 1.1467 looks more interesting if exceeded.