12 October 2017 at 14:54 GMT
- Capitulation below 1.18 could see EURUSD to cycle lows
- Weak close could see cable re-test the key 1.30 area
- EURSEK rallies hard on weak Swedish CPI release
Sterling is underwater again on the Brexit stalemate, but a push downclose to the 1.3250 level saw buyers emerge. Photo: Shutterstock
By John J Hardy
Please see today's FX Board PDF attached to this post for the latest Notes of Interest, Trend and Trend Heat readings, as well as a few thoughts on key chart developments below.
EURUSD teased above the 1.1835 pivot line and 21-day SMA without much volatility after the Federal Open Market Committee minutes late yesterday. The lack of follow-through should perhaps not come as a surprise as we await big news from the US, like the identity of who President Trump will nominate to head the Federal Reserve from next February.
A capitulation back well below the 1.1800 level could see bears out for at least another tactical go at the lows for the cycle and a bit beyond. In the meantime, we expect the usual uncertainty as long as we are in low volatility and below perhaps 1.2000.
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Source: Saxo Bank
Cable saw an ugly follow-through bar lower after today's highs just grazed the old pivot area above 1.3250. If we close on a weak note, the pair could go on to probe the recent lows and the psychologically important 1.3000 area.
EURSEK rallied hard after a weak September CPI print from Sweden today. The action took the pair back above the 200-day moving average and if we sustain a rally above here (and perhaps above 9.60) we could go on to challenge the 9.75 area eventually as a weakening CPI is likely seen as providing insufficient evidence for the Riksbank to shift its very accommodative stance.
NOKSEK is an interesting one after the weak Swedish print as both EURNOK dropped and EURSEK rallied hard. The pair has been in a channel for an eternity, but a break higher could raise interesting in a bigger theme developing.
Source: Saxo Bank
— Edited by Michael McKenna