Talking Points:
• Breakout scenarios are most often identified by technical patterns, but fundamentals play a key role
• A break that doesn't develop around a unifying catalyst has a much higher probability of a quick stall
• Follow through is further heavily dependent on the fundamental current that carries it
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Is USDJPY's massive breakout destined to extend its run or will it suffer the same fate as AUDUSD which saw its 0.79 breakout stall almost immediately? While many concern themselves only with the 'break' part of breakout scenarios, it is the follow through that determines whether there is a significant trading opportunity at hand. For AUDUSD, the 0.7900 break was a remarkable technical break from a period of extended consolidation; but its effort to generate traction contradicted the impact of an RBA rate cut. Further, monetary policy divergence between the Aussie and US Dollars provided a serious headwind to follow through. What does the fundamental backdrop look like for USDJPY moving forward? We discuss that in today's Strategy Video.
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