Article / 14 July 2016 at 14:45 GMT

FX Board: JPY crosses rip higher — pear-shaped kiwi

Head of FX Strategy / Saxo Bank


Cable was lifted today after the Bank of England held off from cutting rates. Photo: iStock

By John J Hardy

Key developments in FX today

  • JPY crosses continued storming higher on strong risk appetite and anticipation of new policy initiatives from Japan, but EURJPY and GBPJPY are looking overdone, with the latter precisely testing the 38.2% Fibo today of the huge selloff from the May-31 highs.

  • Sterling jumped higher on the Bank of England's failure to cut rates, but the action quickly faded and bears/longer term sellers have re-emerged at technically interesting levels, particularly in GBPUSD just ahead of the 1.3500 level.

  • Kiwi was crushed lower as the Reserve Bank of New Zealand announced an economic assessment for July  21 that has the market anticipating dovish guidance risks. This has combined with momentum divergence, particularly in AUDNZD, but also in NZDUSD to a degree to suggest that the kiwi's days as an outperformer are over.

  • Gold continued to correct and the bulls will need to find support either at $1,308/oz or at the ultimate range support at $1,300/oz to keep the structural bullish case intact. Silver, meanwhile, has maintained a very sideways profile during its consolidation - a promising sign thus far for bulls.

USDJPY through 105.0

The pair blasted through the 105.00/50 after only a brief pause, theoretically opening for more upside.

The 61.8% retracement of 111.50 to 100.00 comes in near 107.00 and the Ichimoku daily cloud gets interesting in the weeks ahead for possibly signalling a trend change, though a chart like this could take considerable time to point to a trend change after the brutal move off last year's highs.

Is USDJPY signalling a trend change?
Source: SaxoTraderGO
GBPUSD capped

Cable topped out just ahead of the pivotal 1.3500 area. If that structural level has a difficult time keeping a lid on the action, bears may find themselves under pressure for a squeeze into the 1.3800/1.4000 zone.

To the downside, the first level of note is 1.3000.

GBPUSD was unable to strike beyond 1.3500
 Source: SaxoTraderGO

GBPJPY surge

Note the enormous 1,000+ pip rally only took the pair to a surgical test of the 38.2% test of the first major Fibonacci retracement level form the May 31 highs to the recent lows. 

 Source: SaxoTraderGO

NZDUSD divergence

Signs of momentum divergence here and a general failure to take out the key 0.7300 level in recent days have the bears looking for more here, with the bigger picture structural level at 0.7000 to the downside.

 Source: SaxoTraderGO

AUDNZD higher

AUDNZD has come storming back higher after the final meltdown leg triggered by the S&P ratings agency's downgrade to Australia's sovereign debt.

 Source: SaxoTraderGO

— Edited by Martin O'Rourke

John J Hardy is head of forex strategy at Saxo Bank
Download document

FX Board for Thursday, July 14, 2016


The Saxo Bank Group entities each provide execution-only service and access to 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 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 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 or as a result of the use of the 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. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. 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 ourtrading 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 Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail