Volatility Jumps – Trader Talk

Daily Trader Talk – Friday 7^th July.

What Happened on Thursday > Top 3?

>Interim US Jobs & Unemployment data disappoints

> Caution around North Korean crisis & Oil turns lower again.

>Euro Bid strongly on ECB Monetary Policy Meeting Accounts.

Outlook

+ Equities see sharp selloffs, Oil price slide to continue.

+ Geopolitics watched closely at the G20 meeting.

+ USD outlook Crucial as Headline US Jobs data release due.

Data & Event Risk Today?:

• (ALL+) G20 Meetings in Germany – All day.
• (GBP) Manufacturing Production – 6.30pm Sydney.
• (USD+) US Headline Hobs Data – 10.30pm Sydney.
• (CAD) Employment Data – 10.30pm Sydney.
• (GBP) BOE Carney Speaks – Tentative.

USDX: 95.70

The Dollar Index sold down as the Interim (ADP) payroll data missed expectations.

The USD Bulls are on edge as the ADP data missed as well as Unemployment Claims & continuing claims pointed negative. The headline numbers are always far more impactful but the USD may selloff unless the average hourly earnings show solid growth.

USDJPY: 113.70

Dollar Yen was driven higher for most of the London session yesterday. Today the BOJ intervened in bond buying sending USDJPY from 113.20 to just shy of 113.85.

Reality will bite the USD hard if we see a big miss in US wage growth on tonight’s jobs data release, as the Fed is preparing to announce its next moves to run off Bond purchases from its balance sheet.

I prefer to sell USDJPY at 114 for a risk-off move post NFP data, leading into next week.

EURUSD: 1.1414

The Euro saw heavy Bids yesterday as the ECB was less Dovish in its monetary policy meeting accounts.

I love the Euro crosses, and favour LONG EUR/AUD and LONG EUR/NZD which is a play on the weaker commodity & risk currencies against the strengthening Euro.

Looking for buyers to step in EURAUD around 1.5030 and a move to 1.5200.

As for EURUSD I think that a move to 1.1500 is very likely, particularly post NFP.

GBPUSD: 1.2975

The pound showed signs of life as the USD faltered last night.

GBP is ripe for a breakout on tonight’s BOE Carney speech or USD data as it is crawling very close to the key 1.3000 resistance level.

AUDUSD: 0.7587

AUD has continued the bear slide lower even with the solid Trade Balance data that was released yesterday.

The risk off moves seen in Bond markets selloff, Oil price slide and sharp Equities selloffs does little to help the risk currencies even if the USD uncertainly is on the other side.

We must be very ready & mindful of the possibility of Trump response to North Korea outside of market hours causing risk off gapping to open next week too, as Putin prepares to Meet Trump at the G20 this weekend.

NZDUSD: 0.7280

NZDUSD is relatively unchanged but did trade as low as 7245 before a recovery to 7285 this morning in the Asian session.

The kiwi has seen choppy price action as the markets are trying to price in the USD positioning.

I think we need to see a breakdown of the 7200 handle before bigger breakouts are possible.

USDCAD: 1.2995

USDCAD traded lower then recovered because the Oil priced spiked lower, dragging on the CAD.

I can still see 1.3000 a great level to Sell the USDCAD leading into next week’s Bank of Canada possible rate hike.

VIX: 12.54

Volatility Index jumped 13% in the face of a sharp Equities sell down.

More increase in Volatility very likely.

GOLD: $1,220.68

Gold sold down in overnight dealing sessions and looks very heavy resting at the 1220 price level.

A US data disappointment may lead a rebound in Gold to $1235 +

Oil (WTI) : $44.96

Oil was crushed lower in a sharp move last night from around $47 to just under $45.

Global production cuts lead by OPEC countries were undermined this week by Russia’s comments about following through leaving the oil price vulnerable to a further slide.

Macro Themes in Play

• ECB Tapering hints propel EUR bid through 1.1400
  • US Jobs Data may disappoint but never read too much into ADP numbers.
  • North Korean crises tensions build pressure on Risk assets.