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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 09 November 2017 at 15:41 GMT

FX Board: Global risk asset volatility sees limited FX spillover

Head of FX Strategy / Saxo Bank
Denmark

By John J Hardy

Key developments in FX today

  • The Japanese yen turned stronger after a zany session for equity traders in Japan, as the Nikkei index had an intraday range of some 3.7% before closing almost unchanged on the day, some suggest on volatility into options expiry tomorrow after a brutal run to new 25-year highs in the index. During today's European session, equities took a sour turn in Europe and in the US futures, and the JPY was dragged higher. But at the same time, bonds were offered, a development normally favouring a weaker JPY, so there's plenty of confusion for JPY traders here until we can sort out whether risk-off support for JPY is more important than  JPY-negative higher bond yields.

  • Elsewhere, the action was relatively muted. EURUSD squirted through local resistance near 1.1625, but the move was erased by the time of writing, and other USD pairs saw similar action intraday, as the squeeze on USD bulls' positions has not yet led to a full capitulation.

  • The kiwi was stronger after the Reserve Bank of New Zealand meeting, but the NZDUSD resistance remains in place, and a close below 0.6920 could inspire fresh short kiwi interest on the bearish implications of new highs meeting a strong, dark cloud cover reversal. 
Charts - hourly

EURUSD

EURUSD saw a bit of intraday mischief above the local resistance, but has so far reversed back lower - or has it? We need a close back below 1.1600 to offer bears a bit of tactical hope that the upside will continue to find rejection, though volatility is so compressed lately that it's hard to see these moves as decisive.
eurusd_h

Source: Saxo Bank


USDCAD

Much like many other USD pairs and the other USD/commodity dollars, USDCAD tested below support, but bounced back into the range. For USDCAD the support was found right at the 21-day simple moving average, one of our favourite, basic trend indicators. If it can't hold the bounce, the focus shifts to the 1.2600 area pivots.
usdcad
Source: Saxo Bank


 — Edited by John Acher

John J Hardy is head of forex strategy at Saxo Bank

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FX Board for Thursday, November 9, 2017

2y
Madjid Madjid
EURUSD the neckline is at $1.1750 in my opinion, we are likely to see a short squeeze, that will take us there for a final retest .

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