background image background image background image

FX Breakout Monitor: Commodity dollars breaking down

Forex 5 minutes to read
Picture of John Hardy
John Hardy

Head of FX Strategy

Summary:  The commodity dollars are on the defensive again after a weak GDP print from Australia and on fears that the Bank of Canada will wax more dovish today. Elsewhere, we await tomorrow’s ECB meeting for signs of life in EURUSD and when the long established range will fall.


For a PDF copy of this edition, click here.

Plenty of focus now on AUD crosses that we have also looked at in recent trading sessions after a weak Q4 GDP print overnight that took short Australian rates close to the lows for the cycle. The AUDUSD has broken to a new local low and momentum looks reasonably compelling as we discuss below, but the obvious chart focus is a bit lower still around the pivotal 0.7000 level and China’s maintenance of a firm CNY brakes the potential for more downside at the margin.

USDCAD is in a similar place as AUDUSD ahead of today’s Bank of Canada statement (which will be out before this article reaches pixel time). The highs for the cycle there still some 2% above recent highs and this local break will hinge on the reaction to the BoC statement. 


Breakout signal tracker

Our most recent signal to track – the EURGBP downside breakout – was stopped out as nervousness settles in ahead of key parliamentary votes next week linked to Brexit.
060319 breakoutr_sigs
Source: Saxo Bank
Today’s FX Breakout monitor

Page 1: USDCAD is higher after having broken out yesterday – key BoC meeting today determines whether break holds. AUDUSD also mulling a break today to the downside, as is AUDNZD (once again!). AUD and CAD weakness also showing up in the crosses.
060319 breakoutr_01
Source: Saxo Bank
Page 2: TRY the only EM currency to string together a series of new lows versus the USD in recent days – some heavy carry in that pair to lean against, but a bigger move today in the wake of the Turkish central bank’s rate decision. Gold is mulling new lows here and note the bigger break level a bit lower discussed in the chart below.
060319 breakoutr_02
Source: Saxo Bank
Chart: AUDUSD

We are looking at fresh 19-day lows today, but the bigger key is the cycle low close just below 0.7000 and whether the broader US picture continues to support the downside view here.
060319 audusd
Source: Saxo Bank
Chart: XAUUSD (spot gold)

Some fresh 19-day lows over the last couple of session on a rather brutal move lower – the bigger level looks like the $1,275 area and the actual 49-day low comes in around there as well – stay tuned – a strong US jobs report and a fresh treasury sell-off combined with USD strength the most potent possible combination for USD downside.
060319 xauusd
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.

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.

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. This content is not intended to and does not change or expand on the execution-only service. 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/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. 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

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

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