Head of FX Strategy
Summary: Sterling could remain a treacherous currency to trade until the final shape of Brexit is known the reaction to headlines today made clear. The US dollar continues to tread water without conviction, while rising risk appetite on US-China rising on Chinese comments today saw EM currencies putting up a fight after a drubbing yesterday.
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
Sterling went full circle today – first rallying after yesterday’s meltdown, but only to circle right back to where it came from and remind us of the danger of trading headlines until we know the final shape of Brexit. GBPUSD has poked below the 19-low close at 1.2219 today.
Elsewhere, the revival of trade hopes after comments from China on hoping for a limited trade deal buoyed risk appetite and reversed some of yesterday’s developments, including the weakness in EM and the strength in the JPY, showing how headline prone this market may prove over US-China trade deal/no-deal headlines through the end of this week. (Trade negotiations set to get underway tomorrow.).
The move in Scandies continues to impress, with EURSEK carving out new highs for the cycle and EURNOK poised at a level matching its highest daily close for the cycle above 10.05.
Today’s Breakout Highlight: AUDNZD
The recent AUDNZD rally has been consolidating for so long that the pair managed a new 19-day low close yesterday, though the setup for a breakout is not terribly compelling, given the lack of a clear downside pivot level. Still, given the recent outpacing of the RBA over the RBNZ in sending a dovish signal to markets, there could be room for a further drop to the next areas of support, whether a Fibonacci retracement or back toward the 200-day moving average, currently below 1.0550.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
