20 March 2017 at 15:21 GMT
- USD remains under pressure, outlook pivotal given post-FOMC reaction
- Cable slips away from 1.24 on news that Article 50 will be invoked March 29
- AUDUSD hesitation may reflect political uncertainty ahead of Obamacare vote
Thursday's vote on the repeal of Obamacare may be this week's
pivotal moment for the greenback. Photo: Shutterstock
By John J Hardy
Key developments in FX today
- It's a Monday so expectations have been minimal for the action today, but it is certainly worth noting that the USD remains under pressure and has looked at a couple of interesting levels in GBPUSD and AUDUSD as we note in the chart analyses below.
- Otherwise, the action has been rather muted and we note that the USD outlook likely looks the most pivotal given last week's strong reaction to the Federal Open Market Committee meeting and the proximity of key levels. As well, the NZD looks a bit pivotal as it has consolidated a bit after an extensive selloff ahead of this Thursday's Reserve Bank of New Zealand meeting.
- Please see the latest updates to the Notes of Interest for the major pairs in the attached FX Board PDF.
Cable has arched above the locally important 1.2350-1.2400 area that was also the focus on the way down, albeit in the bigger picture. Today's modest rejection of the rally keeps us all in suspense on whether the pair can get back to challenging the 1.2700-plus resistance that is far more important for the strategic outlook.
The news that March 29 will see the invocation of Article 50, which sets the formal Brexit process in motion, seemed to temper the enthusiasm of the sterling rally, which came about on the back of last week's more hawkish than expected Bank of England meeting.
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Source: Saxo Bank
AUDUSD pulled higher after last week's orderly consolidation, having a look at the long-standing trendline and the zone into the 0.7835 top from 2016. The modest rejection and hesitation here likely reflects the fact that the broad USD outlook this week may pivot on Thursday's political developments in the US (when the vote to repeal Obamacare hits the House of Representatives).
The bulls need to see a strong daily close above the entire resistance zone to pop the cork on the pair's 0.8300-0.8500 potential. Until then, the chart is in a ranging limbo and a bearish hook would require an extension higher with a subsequent strong rejection or a move all the way back through 0.7600 to start (but really 0.7500).
Source: Saxo Bank
— Edited by Michael McKenna
John J Hardy is head of FX strategy at Saxo Bank