Tuesday Trader Talk

Daily Trader Talk – Tuesday 11^th July.

What Happened on Monday > Top 3?

> Bond market selloff halts, Markets Uncertain about Fed.

> FX Markets quiet awaiting Janet Yellen’s testimony.

> Gold & Oil prices recovered a little.

Outlook

+ Bank Of England MPC Speakers will dominate direction for GBP

+ FOMC Speaker Brainard in the US Session

+ Treasury Yields watched closely for USD demand & direction

Data & Event Risk Today?:

• (GBP) BOE Monetary Policy Committee Speakers: Haldane & Broadbent – 8pm & 9pm Sydney.
• (USD) FOMC Speaker Brainard – 2.30am Sydney.

USDX: 95.85

The Dollar Index had a pretty quiet day floating around the 95.80 area after flirting with 95.95.

Markets are in a holding pattern ahead of Janet Yellen’s midweek Testimony.

USDJPY: 114.20

Dollar Yen held up very firmly above the 114 handle in Monday’s trade, touching highs of 114.30 and wandering back to 114.05.

The USD Bulls should send this pair to 115 on Wednesday I feel, because Janet Yellen is highly likely to be bullish on the US outlook in her Q & A session after her prepared US Testimony.

EURUSD: 1.1395

The Euro traded sideways on Monday in a tight 20 pip trading range either side of the 1.1400 level.

US Treasury yields had a wild week last week but have settled down to start this week.

The Euro is hanging around 1.1400 awaiting market direction in an obvious holding pattern before we hear from FOMC Speaker Brainard & Janet Yellen.

I am looking for a breakout higher this week but we need to break through 1.1450 on the upside first & foremost, taking out recent highs to form a new base for moves north.

GBPUSD: 1.2880

The Sterling looks vulnerable hovering at the 1.2875 / 1.2885 price area ahead of tonight’s BOE Monetary Policy Committee speakers.

BOE’s Haldane again has the ability to move the Sterling sentiment but unlikely to change his views but a mixed data picture for the GBP casts doubts around the timing of a rate hike for the UK amidst their key ongoing Brexit negotiations.

I favour a pullback lower in GBPUSD towards the 1.2750 price area.

AUDUSD: 0.7605

AUD has continued to be very resilient holding firmly at the 7600 level and is unchanged after Mondays trading sessions.

The metals story sees Iron Ore prices recovered to the $63USD/Tn which helps Aussie hold firm and it has been quite hard to pick direction after recent momentum fizzled out above the 7700 level.

It seems that Aussie is in a wait and see pattern, awaiting USD for directional momentum.

NZDUSD: 0.7275

NZDUSD traded lower to 7250 on Monday as I said it would test 7230 / 7250 this week in directionless trade for the Kiwi.

After recent rallies were sustained it seems ripe for a sharp pullback once a breakdown below 7200 occurs. A great trade against the Greenback for the USD bulls this week!

USDCAD: 1.2895

USDCAD moved higher yesterday to 1.2930 before turning back to close off around 1.2885 in choppy Monday trade.

The jobs data was released for Canada and was a bumper number for new jobs added plus Canadian unemployment ticked slightly better signalling an open door for a rate hike of 25Bps this Wednesday.

The key query is still, Has the market fully priced in this rate hike for Canada?

USDCAD price action has struggled to break down through the 1.2850 level now and in the past this has offered good resistance, but the August 2016 lows around 1.2780 may be seen midweek if the Q & A section of Janet Yellen’s testimony fails to inspire the USD Bulls.

VIX: 11.11

Volatility Index is still resoundingly low and traded lower again yesterday.

Stocks are still dangerously high and ripe for a correction but without any Risk-off flare from a Trump response to the North Korean issue, stocks are grinding on.

GOLD: $1,212.75

Gold is a big story this week and will break down below $1,200 if Janet Yellen fires up the USD bulls, but can also run back up to $1227 on Wednesday too, if she fails to talk about the Fed following through.

I think she will have to be bullish on the USD and that can derail Gold lower through $1,200 this week.

A great trade for the Commodities traders!

Oil (WTI): $44.70

Oil traded back up a little on Monday but is basically unchanged.

OPEC are trying to negotiate Oil production cuts with Nigeria & Libya which may see a bounce towards $47 in my view. I therefore favour buying at this level around ($44.50), with moves back towards $48.

Macro Themes in Play

• USD holding pattern, keenly awaiting Janet Yellen’s testimony.
  • USDJPY continues to see the biggest trading ranges amongst the major pairs.