Trader Talk

Daily Trader Talk – Thursday 6^th July.

What Happened on Wednesday > Top 3?

>FOMC Meeting minutes add doubts. December hike still likely.

>Oil Turns lower again, taking CAD with it.

>USD Up, and EUR down for the 4^th straight day on broadly Bid tone in USD

Outlook

+ US rate hike priced at 20% probability September, 55% for December hike.

+ Australian Trade Balance in the Asian session.

+ Focus shifts to the ADP Interim jobs numbers on the US open.

Data & Event Risk Today?:

• (AUD) Trade Balance – 11.30am Sydney.
• (EUR) ECB Monetary Policy Meeting Accounts – 9.30pm Sydney.
• (USD) ADP Interim Jobs Numbers & Unemployment claims – 10.15pm/10.30pm Sydney.
• (CAD) Trade Balance – 10.30pm Sydney.
• (USD) US Manufacturing & Crude Oil Inventories – 12am/1am Sydney.

USDX: 96.05

The Dollar Index recovered on Wednesday to 96.22 before settling back at the 96 level once again.

The FOMC meeting minutes did point out inflation concerns but offered a great insight into the fact that Janet Yellen was wanting to announce balance sheet reduction plans in June.

USDJPY: 113.00

Dollar-Yen was Bid higher yesterday catching up to the recent gains seen in the US 10-year Treasury yields.

The Interim jobs data out tonight on the US market open, along with the unemployment data are crucial for the momentum of USDJPY.

 I favour the downside for USDJPY after a technical breakdown below 111.80.

EURUSD: 1.1345

The Euro traded softly on Wednesday, drifting lower on renewed USD strength, making it an interesting pivotal level for the Euro bulls.

There are a lot of reasons to be buying Euro against the Greenback currently, as the market expects the US jobs data to be mild, not wild.

For now, EURUSD is holding the 1.1300/1.1350 price range and needs a break through 1.1450 to be convincing on the topside.

GBPUSD: 1.2932

Sterling drifted slightly lower yesterday as did all of the major currencies against the greenback.

The Cable is sideways at the 1.2930 level, certainly looking like it’s a wait and see holding pattern awaiting the headline US data this week.

I can see a renewed Upside on Sterling particularly against the USD to end off this week.

Look for moves above 1.3000.

AUDUSD: 0.7600

AUD Trade Balance just hit the news wires and was a big solid beat of estimates.

The fact that the Aussie did not really respond to this solid data release displays to me that we have a lot of Sellers in the AUDUSD market currently.

This should be the trade of the week as continued headlines also surface relating to possible sanctions for North Korea (again) possibly causing a risk off market sentiment.

NZDUSD: 0.7275

NZDUSD has taken a turn lower and maintained that bias as USD steam builds up.

We are yet to see a big move lower in the Kiwi but I feel that it is ripe for the Short Sellers, particularly once the 7250 level breaks down.

USDCAD: 1.2975

USDCAD is at the exact same level as we were in the Asian market open yesterday.

The BOC are tipped to raise rates by 25 basis points next Wednesday so Short USDCAD may be the best way to play out the USD data hitting the wires tonight and tomorrow.

Bear in mind that tonight we see Trade Balance data for Canada so that will be of growing importance also to build that story behind BOC moving on rates.

I think we will see a sharp breakout lower for USDCAD between now and next week.

VIX: 11.07

Volatility Index slightly lower again but holding around 11.

A move higher to 14 will drag breakout ranges in trades across multiple asset classes, but for now we are awaiting big moves.

GOLD: $1,225.00

Gold responded to the USD catching a Bid tone higher yesterday by getting downward pressure to a low of 1217.

The buyers stepped back in to drive a small recovery for Gold to 1224 and more upside is very likely in my view.

Oil (WTI) : $45.40

Oil turned lower last night as Russia commented on cooling their production cuts.

This is bad news for the Oil bulls and we will likely see moves towards $42/$43 area tonight in US trade. Watch the Oil inventories data too, that will be the catalyst.

Macro Themes in Play

• Odds for December 2017 rate hike still around 55%
  • EURUSD pulls back 4^th straight day, Buyers are being patient.
  • CAD Lower with Oil but key rate decision next week