Tariffs and trade war are the key factors afoot in world markets following last week's central bank-driven volatility. Emerging markets find themselves in the crosshairs with economies linked to Chinese exports hardest hit.
Article / 31 August 2016 at 14:23 GMT

FX Board: USD higher still in places, sterling squeeze short-lived

Head of FX Strategy / Saxo Bank
By John J Hardy

Key developments in FX today

  • The USD was generally firm to stronger in a broad sense, though volatility was muted across markets and the key US data point for the week is up on Friday. USDJPY was one of the more notably movers on the day, reaching as high as 103.53.
  • Elsewhere, sterling sprinted higher in early trading, only to stall and erase a good portion of the day's games by the time of this writing – especially in GBPUSD. This is an interesting setup for bears, though important US data can have an effect either way through the end of the week.
  • Gold prices limped lower through the 1,313 area, opening the way for the last major support level of note at 1300, where a break could spell a move to the next support near 1250.


EURUSD merely ground down to a new marginal low today as traders seem unwilling to commit here relative to USDJPY ahead of the important US data. 
 Source: SaxoTraderGO

Cable burst higher in early trading, but the action thus far looks like a temporary squeeze as it was quickly capped and the sellers came back in later and took it south of 1.3100 again. Bears may like to get involved again here, looking for a fresh breakdown through 1.3000, though the Friday US jobs data can certainly take the action sharply in either direction.
 Source: SaxoTraderGO
Gold is having a look at the last support area toward 1,300 here, with a break putting the bigger rally in jeopardy, perhaps toward the 1,250 level or even lower if the USD continues stronger and possibly crowded gold longs are squeezed for a round or two.
 Source: SaxoTraderGO

– Edited by Clare MacCarthy


John J Hardy is head of FX strategy at Saxo Bank 
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FX Board for Wednesday, August 31, 2016


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