Video

John J Hardy
Saxo Bank’s head of FX strategy John Hardy takes a closer look at trends and moves in today’s forex charts, including EURUSD, USDJPY, AUDUSD, and EURSEK.
Article / 29 December 2017 at 14:44 GMT

FX Board: USD in year-end tailspin, sets up pivotal first week of 2018

Head of FX Strategy / Saxo Bank
Denmark

By John J Hardy

Key developments in FX this week:

  • The only real salient observation in the major currencies is that the USD is ending the month and year on a sour note and bumping up into pivotal areas in key pairs - most notably the key 1.2000 area in EURUSD. Elsewhere, the USD decline has been rather steep as well - notably against the commodity dollars, while USDJPY volatility has lagged as the yen is also weak.

  • The first few trading days of the New Year will be critical for judging the quality of this USD move as liquidity returns with the roll of the calendar year next week, as we discuss in the USD charts below.

Charts
EURUSD
EURUSD is ending the year up against the pivotal and big round 1.2000 level - the rough stopping point of the prior rally into early September. We'll call this the bull-bear line, even if the nominal highs are closer to 1.2100. A strong weekly close this week looks technically bullish, only somewhat tempered by the timing of the move here at year-end (let's recall the calendar pivot last year in EURUSD and on a few prior occasions as well-when the switch to a new calendar year meant the sudden end of trends).
eurusd
Source: Saxo Bank 

EURJPY
EURJPY is looking at actual new highs for the cycle after the very persistent prior range between 131.50 and 134.50 after the Bank of Japan insisted that it will maintain its policy course last week while the ECB will taper its asset purchases by 50% starting in January. The upside looks wide open if the price action above 134.00/40 is maintained and especially if long bond yields look higher to start the year. Next upside targets would start at around 140.00.
eurjpy
Source: Saxo Bank 

AUDUSD
AUDUSD is fairly typical of the commodity dollars, all of which have squeezed sharply higher versus the greenback at the end of the year. Structurally, we are arguably still focused on the downside as long as we remain below the 61.8% Fibo retracement up just under 0.7900, but bears will want to see a quick and fairly decisive turnaround early next year to get the downside back on the agenda. 
audusd
 Source: Saxo Bank 

EURSEK
EURSEK has explored the full extent of the range, but has managed to avoid a break of the 9.80-85 pivot zone - which is the downside trigger for bears in trading next week, a move that could open up for 9.50 in the first months of 2018.
eursek
Source: Saxo Bank  

XAUUSD - weekly
Gold has fully reversed the prior bear move, a development that neutralises the downside for now. 1300. The 1300-50 zone is still a heavy bit of range resistance that must be traversed before the bigger picture heats up for the bulls.
xauusd
 Source: Saxo Bank 

– Edited by Clare MacCarthy

 

John J Hardy is head of FX strategy at Saxo Bank

Download document

FX Board for Friday, December 29, 2017

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com 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 Tradingfloor.com 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 Tradingfloor.com 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 Tradingfloor.com or as a result of the use of the Tradingfloor.com. 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 Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com 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

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