FX Breakout Monitor: Sterling on the brink

Forex 5 minutes to read

John Hardy

Head of FX Strategy

Summary:  Sterling eyes fresh lows nearly across the board on uncertainty over the Brexit endgame.


Click here for the full FX Breakout Monitor report.

Today presents a potpourri of new developments with no unifying theme. We have weak silver (and somewhat weak gold) and a weak ZAR on the one hand, while sterling is also soft and the Scandies continue to show resilience. The most across-the-board strength earlier today was in the Japanese yen, but this signal weakened later in the day as risk appetite improved from earlier weakness, though we are still at or near breakout lows in many JPY crosses, including EURJPY (see chart below).

The USD continues to stagger randomly, depending on the exchange rate in focus.

Breakout signal tracker

We will not add any new signals to the tracking list today, but have some interest in adding a USDCAD if the Bank of Canada sends a dovish signal tomorrow and the pair closes north of 1.3500. 
Source: Saxo Bank
Today’s FX Breakout monitor

Page 1: EURJPY is looking at new cycle lows today and USDJPY is not far away. USDCAD is looking the other way ahead of the BoC meeting tomorrow (incredible bottling up of that pair lately). Elsewhere, EURGBP has eyed local highs again today after only a brief respite over May’s downfall. GBPUSD is almost at a new low close as well – potentially opening up for 1.2500.
Source: Saxo Bank
Page 2: the Scandies are making their presence felt on the upside after a long run lower recently – it will take some more doing for a more compelling upside breakout in the EURSEK and EURNOK pairs to the downside. USDZAR is looking at key resistance today as we discuss below and XAGUSD continues to grind lower, though every new low for the last few weeks has seen considerable backfilling.
Source: Saxo Bank
Chart: EURJPY

The JPY remains on the strong side, though it has eased off its strength from earlier in the day as risk sentiment improved. German yields touched a new low for the cycle today below -15 basis points (only 5 bps from the all time lows). It is clear that the yen needs strong safe-haven seeking to thrive.
Source: Saxo Bank
Chart: USDZAR

USDZAR perched near cycle highs and widening risk spreads in EM are the likely driver; the risk is for a move higher still on a break after the recent election failed to sustain a hopeful ZAR bid.
Source: Saxo Bank
Chart: USDZAR

Emerging market currencies have taken the USD strength reasonably in stride lately, but USDZAR has bounced back today and is looking at the highs for the cycle again – we mark both the 19-day and 49-day highs here.
Source: Saxo Bank
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.

ATRAverage 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.
Disclaimer

The Saxo 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 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 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 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 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 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-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
3 Church Street, #30-00
Samsung Hub
Singapore 049483

All departments are available 08:30 to 17:30 Monday to Friday.

Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.