Article / 02 March 2012 at 16:09 GMT

G10 FX Charts – USD comeback?

John J Hardy John J Hardy
Head of FX Strategy / Saxo Bank
Denmark

The USD may be honing in on an interesting weekly close today, but how do the G-10 currencies look in the bigger picture? Let’s have a look at our G10 mega charts to reveal the bigger picture.

(follow me on Twitter: @johnjhardy)

Now that we’re past the last/first day of the month circus and now that we’re past the ECB LTRO/Bernanke testimony, the market may be showing that the “hooray for liquidity” rally has played itself out for now as we don’t really have sufficiently imminent prospects for easing on the horizon.

Using our “QE as morphine” paradigm, it may be time for a cycle of withdrawal now that the highs from the previous liquidity fixes are fading. Too boot, we had a couple of disturbingly bad data points out of the US this week (Jan. durable goods orders and Feb. ISM) that may be a harbinger of momentum coming out of the US economy, something that may be happening anyway from higher energy prices. As well, we have geopolitical risks that have largely been ignored, as our Chief Economist Steen Jakobsen adresses in his piece discussing the market’s recent momentum and whether it’s sustainable.

As well, we’ve seen a handful of interesting technical developments today in USD crosses that will confirm the tentative USD rally if the greenback manages a strong close for the week after today’s US session. The USD pairs have been a bit choppy and inconsistent of late, but if we stay below 1.5900 in GBPUSD, 1.3300/25 and AUDUSD keeps its closes well below 1.0825, there may be room for a further USD comeback. Stay tuned.

In the meantime, let’s look at the bigger picture with a look at our longer term G10 charts that show the G10 currencies vs. evenly weighted baskets of the rest of their G10 peers.

(Note: data source for all charts is Bloomberg with indexing to 100 from 2500 trading days before the present)

Be sure to click on the charts below for a nice expanded view!

USD
The EURUSD rally was delivered a knockout punch as EURUSD slipped below the 1.3300/25 area today, and GBPUSD is back below 1.5900. In the bigger picture, the greenback has merely reversed the latest smidge of downside, but its comeback materialized right at the 200-day moving average.USD

EUR
Back to the weak side after a chunky rally, though I wouldn’t expect the single currency to fare the worst if risk appetite sours dramatically. (As some look on it as a carry trade funding currency, with somewhat negative correlation to risk conditions if any panic develops).EUR

JPY
The big mover of late – will remain nervous on high oil prices, though one has to wonder in a negative risk appetite scenario whether the battered yen could get some support for a while. JPY

GBP
Someone wake us up when something happens…interesting that the 200-day moving average is in play against the USD and EURGBP has seen a huge reversal.GBP

CHF
Has shown no real independence from the Euro lately. It’s a waiting game with the SNB, who will likely move just when everyone is convinced they will wait forever.CHF

AUD
Has eased off the rally in many places lately, though it is still incredibly elevated. The RBA is up next week – market not looking for a cut. As a derivative of China, AUD would be very heavily affected by geopolitical risks stemming from the Persian Gulf, because 85% of Persian Gulf crude heads to Asia and Australia is widely considered a commodity satellite of China.AUD

CAD
Finally on the move as the most undervalued of commodity currencies has woken up from its slumber on the huge move in oil prices. There is likely more upside here against the Antipodeans (AUD, NZD) in weeks and months to come, particularly if geopolitical risks are further aggravated.CAD

NZD
The kiwi is at the top of its longer term range, a result of the risk-on environment and celebration of global money printing. Note the interesting weekly candlestick for NZDUSD (if it closes where it is trading as of this writing below 0.8350,NZD

SEK
The SEK rally has come undone, largely because the currency is closely linked to the Euro’s fate and as we have seen a couple of weak data points from Sweden. As well, the clock is ticking on the country’s housing bubble. SEK

NOK
NOK has finally started to shine a bit more as a safe haven as it should. There may be more upside to come, even if the rally has become overdone in the short term.NOK

2y
vic_elc vic_elc
i'd like to see a USD weekly close above 70 level , it will confirm breaking the down trend line from 2009, and i think this time it will be a very strong comeback, not a normal market correction, with weak JPY , EUR and signs of gold weakness it feels that there something big gonna happen.

thanks you sir for sharing your view

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