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 / 13 February 2018 at 8:36 GMT

FX Update: USD wilts again – USDJPY crossing the Rubicon?

Head of FX Strategy / Saxo Bank
  • USDJPY in early European hours below the pivotal 108.00 
  • Key range supports in USDJPY below 108.00 are not far away
  • A significant move lower could unleash more substantial volatility in FX
jpy crosses
 Today, all eyes on the JPY crosses. Pic: SHutterstock

By John J Hardy

The bounce on Wall Street from late Friday extended on Monday, though global sentiment has weakened a bit again overnight and JPY crosses – typically the FX flavour of risk on/risk off – remain rather heavy, with USDJPY in early European hours threatening below the pivotal 108.00 area and the nominal range support levels below (there was only a single day in 2017 that USDJPY traded below 108.00, posting an intraday spike low at 107.32.) Similar to the US S&P 500 , the Nikkei 225 has come close to its 200-day moving average, a critical support area (also a major 2015 high just below there in the Nikkei). It doesn’t feel like this market is about to recover from the recent bout of market nerves and USDJPY and other JPY crosses are the key barometer. 

We’re supposed to focus today on the UK CPI, but last Thursday, the Bank of England took a rather clear hawkish turn. After an initial boost to sterling, the market shrugged off the implications of higher odds of a May rate hike and EURGBP finds itself pushing at the top of the range ahead of this release. A miss looks very sterling bearish today, while a it’s hard to understand how a slightly higher than expected print does much to support.

In South Africa, a meeting of the ANC leadership yesterday produced an ultimatum for president Jacob Zuma to step down within 48 hours. There were signs yesterday that Zuma won’t go down easy. ZAR has been an EM darling since December on hopes that Zuma is on his way out. The ZAR was our spotlight currency of the week in our Emerging Market FX Weekly for this week.

Chart: USDJPY - weekly
The USDJPY chart is one we have flashed before and one that is becoming increasingly important for FX broadly as it is a sign of risk contagion from the recent equity meltdown to see JPY crosses in a meltdown. The nominal low in 2017 was 107.32 and not much in the way of support on the chart until the 100.00 area if risk appetite suffers another backdraft across markets.
 Source: Saxo Bank

The G-10 rundown

USD – the greenback weaker again as the US equity session closed on the strong side – interesting that despite Trump’s nonsensical budget and supposed interest in even further fiscal profligacy that US treasuries are hanging in there after a weak start in early trading this week.

EUR – the euro bouncing versus a weak USD and EURUSD testing back into the 1.2300-25 pivot zone. Hard to see euro outperforming the greenback in a proper risk aversion move, simply due to positioning (and in light of positioning, we have also mentioned EURJPY downside risks).

JPY – all eyes on JPY now as USDJPY pushes below 108.00 and a proper bout of JPY volatility is a strong sign that risk contagion is spreading into macro.

GBP – sterling eyeing the CPI today, but how much can this impact the outlook, given the backdrop and the foreknowledge that the BoE has turned more hawkish? GBPJPY looks ominous and a break below 147.50-00 even more so.

CHF – weak safe haven bid at the margin, perhaps, but the franc is not in the spotlight at the moment.

AUD – the bounce has been less than inspiring in the Aussie, though we need the next leg down through the 0.7750 area in AUDUSD to argue that the bear threatens to re-emerge from hibernation.

CAD – USDCAD is in limbo – we look higher as long as 1.2500 or slightly lower remains supported – with 1.2630 (on daily close) a tactical upside pivot level.

NZD – as JPY crosses meltdown this morning and the NZD rises merrily against the US dollar, the cognitive dissonance is almost too much to bear – NZD is not a safe haven! Awaiting the reality check…

SEK – The Riksbank up tomorrow – in this environment, we suspect that only a major shift in guidance would give the SEK a notable bid, with further noncommittal comments from the Riksbank and further risk aversion possibly seeing EURSEK revisiting 10.00.

NOK – the 9.70 area in EURNOK looks tactically pivotal for whether we risk another spike higher or if the lower range comes back into view.

Upcoming Economic Calendar Highlights (all times GMT)

  • 0930 – UK Jan. CPI/RPI/PPI 
  • 1300 – US Fed’s Mester  
  • 2350 – Japan Q4 GDP Estimate 

– Edited by Clare MacCarthy


John J Hardy is head of FX strategy at Saxo Bank

AlexF AlexF
May take some profit at 107.32 level then


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