14 February 2018 at 15:30 GMT
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.
- Combination of high inflation and weak consumption rocks markets
- Nervousness as US yields poke back to the highs of the cycle
- Risk appetite response is likely the key to currency markets' next move
By John J Hardy
This is the most important chart across major FX now that USDJPY has actually executed a break of the lows. If risk appetite crumbles again to new lows, the pressure remains likely to the downside – possibly all the way to 100.00. The only combination that might bring support – at least relative to other USD crosses – could be stable to higher yields together with a stronger return of risk appetite after today's US data was an important test of market sentiment. If risk appetite surges back higher, USDJPY declines may prove more sluggish. The upside pivot zone looks like 107.50.
The commodity dollars have fared rather poorly in the wake of the US data today – the tactical outlook likely depends on whether risk appetite can stabilise and head back higher. Today's closing levels look critical in that regard and tonight we have Australia jobs numbers. If both risk and the jobs report are weak, we could see a move through the pivotal 0.7750 area Fibonacci retracement and 200-day moving average. A strong NY session today in equities and a reasonably in-line to stronger than expected Australian jobs report, on the other hand, look positive for a go back at the top of the cycle.
Source: Saxo Bank
– Edited by Clare MacCarthy
John J Hardy is head of FX strategy at Saxo Bank