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 / 17 April 2018 at 7:02 GMT

FX Update: USD continues to lose altitude, GBPUSD eyes post-Brexit top

Head of FX Strategy / Saxo Bank
  • USD extends descent after slightly disappointing retail sales report 
  • Cable hits intraday high as post-Brexit trade talks begin
  • Risk sentiment boosted by Trump's rejection of more Russia sanctions now
 Sterling gains as Britain and the EU-27 start to hammer out the shape of their future relationship.
Photo: Shutterstock

By John J Hardy

The USD is weaker to start the week, though the drama level remains pegged at a minimum. At the margin, the slight disappointment in the retail sales data perhaps weighed, as did the weak, most forward looking components of the regional Empire Manufacturing survey, but the USD tends to not do well if risk appetite is recovering in the absence of any shift in the expectations for the Fed rate path. 

Boosting risk appetite, in turn, was the news that Trump overruled his own officials in delaying any further Russia sanctions, with some of the spin indicating a desire to withhold these until/unless Russia launches some form of cyber or other attack in response to the existing sanctions. Russian USD-denominated bonds were back toward the recent highs in yield yesterday before this latest announcement, so it will be interesting to see how these respond for whether the recent RUB comeback attempt is justified or if some asset managers simply want to reduce Russia exposure for public relations reasons or simply to avoid the hassle. 

Sterling marched to new local highs versus the USD, poking at the intraday highs since the 2016 Brexit vote as the post-Brexit trade discussion got underway yesterday, with neither leaks nor official statements nowhere in evidence. Sterling is the most energised currency this week and the recovery in sentiment has largely mimicked the price action, as sterling speculative longs in the US futures market are near their highest since 2014. At 43k contracts (as of the last reporting data last Tuesday), it should be noted that this is far smaller than the -100k contracts from early 2017 when sterling sentiment was at its nadir.

Chinese economic data, for the very little it is worth, showed growth in line with expectations save for the quarter-on-quarter number slightly missing, as did the industrial production figure for March (the largest miss at 6.0% year-on-year versus +6.3% expected). Meanwhile, the latest US Treasury data on foreign holdings of US treasuries showed China registering its largest monthly increase in almost a year.

Looking forward to today’s calendar, we’re looking forward to the German ZEW Expectations survey, which has been a leading indicator of solid calibre in the decades past and comes as the EU economy is clearly decelerating. As the forward expectations from the European Central Bank have largely declined to nil in recent weeks, we’re not sure that it serves as any major catalyst, but the ability of the single currency to maintain altitude versus the US dollar despite that unwind in ECB expectations on a string of weak data suggests to me a further rally potential, with a clearance of the 1.2400 area in EURUSD as a first indicator that something is afoot ahead of the 1.2500+ top.

Cable is eyeing the highs of the post-Brexit cycle, with the next major resistance up towards 1.4500 and not really that far away. It may take some real progress on Brexit and further signs of a data pickup in the UK (these risk being slow in coming) to see significant progress beyond the 1.45-46 area.
 Source: Saxo Bank

The G-10 rundown

USD – the greenback is struggling and getting close to levels that look pivotal forpossibly setting more seeling in motion, like the 107.00 area in USDJPY and the 1.2400 area in EURUSD.

EUR – as discussed above, we have concerns about EU growth for the longer haul, but these don’t necessarily mean that the euro can’t rally.

JPY – the USDJPY rally has faltered and looks in danger of a fuller retreat on a close south of 107.00. Wages in Japan’s new financial year have risen by the most in decades, according to a survey by Nikkei.

GBP – sterling remains in rally mode, with the next test over the data today and Wednesday (earnings/employment and CPI, respectively) as well as any official statements or leaks from Brexit talks this week,which are dealing with the trade relationship between the UK and the EU post-Brexit, the issue most affecting the UK’s economic future.

CHF – EURCHF creeping higher and could be eyeing 1.2000 if risk appetite maintains a head of steam. Nothing of interest in yesterday’s latest Swiss National Bank sight deposit data. USDCHF has survived multiple attacks on the 200-day moving average area, though it doesn’t look weak unless 0.9550/00 gives way.

AUD: Australian short yields tried to stretch a bit higher in reaction to the Reserve Bank of Australia minutes, which suggest the bank sees the Australia growth rate exceeding potential in 2018, but the move was quickly retraced and the Aussie is treading water this morning.

CAD – CAD going sideways as traders await to pounce over the Bank of Canada meeting tomorrow (will the caution on the trade front continue to see a cautious tone or are factors like high inflation beginning to weigh more in the balance?).

NZD: The kiwi trading slightly weaker relative to peers as AUDNZD tried a slightly ambitious rally over the last couple of sessions that will disrupt the descending channel if it continue much longer, with the next resistance not far away either at around 1.1650/60. Thursday’s NZ Q1 CPI will be pivotal for NZD crosses.

SEK – if broad market sentiment remains solid, we wonder if EURSEK might finally start carving out top here, though we’re not exactly holding our breath as the krona is widely reviled. This does mean that it wouldn’t take much prompting to engineer a squeeze on shorts, however.

NOK – the action getting increasingly bogged down in the range in EURNOK, awaiting 9.50 or 9.70 breaks for a test of sentiment. A weak QoQ house price index number this morning doing the krone no favours.

Upcoming Economic Calendar Highlights (all times GMT)
  • 0830 – UK Feb. Average Weekly Earnings / Unemployment Rate 
  • 0900 – Germany Apr. ZEW Survey 
  • 1230 – Canada Feb. Manufacturing Sales 
  • 1230 – US Mar. Housing Starts/Building Permits 
  • 1315 – US Mar. Industrial Production 
  • 1315 – US Fed’s Williams (Voter) to Speak 
  • 1400 – US Fed’s Quarles (Voter) to Speak 
  • 2140 – US Fed’s Bostic (Voter) to Speak 

– Edited by Clare MacCarthy

 John J Hardy is head of FX strategy at Saxo Bank


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