FX Breakout Monitor: Setups of interest ahead of FOMC

Forex 3 minutes to read

John Hardy

Head of FX Strategy

Summary:  JPY crosses even more than USD crosses could prove quite volatile into early trading tomorrow if the FOMC meeting later today sparks dramatic swings in US bond yields and risk appetite generally. The Bank of Japan follows shortly after the FOMC as USDJPY is trading near pivotal levels.


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

It is interesting to take a snapshot of the market here ahead of the onslaught of event risks that are the best chance in a while to break the currency market out of its recent torpor. Besides tonight’s FOMC meeting and the Bank of Japan meeting up overnight, we have important US data up Friday and early next week that could further spark a reassessment of risk appetite and/or the Fed policy trajectory from here. A few USD pairs have approached major support levels for the USD this week and even beyond in the case of some EM’s, but within the G10, USDCAD and AUDUSD are the closes to major breakout pivots (though USDCA less so today after the BoC).

Meanwhile, as we discussed extensively in today’s FX Update, while USDJPY has done the opposite, driven by rising bond yields. USDJPY already nominally broke to new highs for the cycle – but the key event triggers in coming days, not just the FOMC and BoJ later today and overnight, but also the US data – to which USDJPY is traditionally one of the most reactive USD crosses – all offer tests for whether the upside break unfolds in earnest or is stuffed back into the range – other major JPY crosses are also likely to show correlation and possibly higher betas to the moves in USDJPY. The EURCHF move toward and above breakout levels will also likely correlate with the direction of long bond yields and JPY crosses in the coming days.

Today’s Breakout Highlight: USDCAD
At the vanguard within the G10 of the softer US dollar recently is USDCAD and AUDUSD, with USDCAD having just completed a successful downside breakout (new 19-day low close on Oct 11 near 1.3200, with profit taking nine trading days (a few sessions ago) near 1.3070, so around 2.5 ATR, depending on entry levels. Now, breakout traders should be zooming out to the bigger picture, where the 2019 low daily close (1.3028) is in play if the Bank of Canada and FOMC combination today support the sell-off further – the Bank of Canada statement released just prior to the chart snapshot not CAD supportive as the BoC sounded a note of caution, but let’s see where the dust settles post-FOMC and post-US data on Friday.

Source: Saxo Group
Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)

Saxo Bank A/S - Representative Office
Boulevard Plaza - Tower 1
30th floor, office 3002
Dubai Downtown, Burj Khalifa area
Dubai
UAE

UAE

Trade responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.