USD Trumped Again – Trader Talk

Daily Trader Talk – Wednesday 12^th July.

What Happened on Tuesday > Top 3?

> Trump Jr. Email debacle torpedoes the USD.

> FOMC Speakers confirm Fed’s plans on track

> Gold & Oil prices both trade higher.

Outlook

+ Bank Of Canada Rate decision

+ Janet Yellen testimony crucial for Fed outlook

+ Crude Oil Inventories data

Data & Event Risk Today?:

• (GBP) UK Jobs report – 6.30pm Sydney.
• (USD) Janet Yellen Testimony – 12am Sydney.
• (CAD) Rate Decision & Press Conference – 12am & 1.15am Sydney.

USDX: 95.40

The Dollar Index reflects how badly the USD was sold off yesterday across the board.

USDX traded down from 96 to a new low of 95.35 and looks dire from here caused by the email debacle showing collusion & contact between Russia and the Trump campaign during the US Presidential Election last year.

USDJPY: 114.20

Dollar Yen got hit lower on the Trump Jr. email news release in the US Session after firstly looking like moving towards 114.50 it turned south very quickly.

The issue here is not only the doubts cast around Trumps presidency but also the US tax cuts planned to be released by the Whitehouse are totally undermined and so is the USD outlook.

I can see this issue overshadowing the Janet Yellen testimony even if she is quite hawkish around the Feds outlook so lower lows are expected at least in the short term for USDJPY. A move to 113 is very likely in the London session today.

EURUSD: 1.1480

The Euro benefitted greatly on the back of the Trump sage, which torpedoed the USD, seeing moves in Euro from 1.1380 to 1.1480.

The Euro will benefit more than other currencies as it also becomes the favoured funding currency in the wake of this evidence casting doubts over the USD and the ability of team Trump to navigate their way out of this mess.

I can see the Euro moving towards 1.1550 before taking a breather but so far, the 1.1500 level is offering great resistance so caution is warranted. It will be interesting to see how high Euro can run up against the Greenback, so don’t rule out a move to May 2016 highs of 1.1615.

GBPUSD: 1.2850

The Sterling is showing just how vulnerable it is with the latest selloff in the USD being largely missed against the GBP.

Last night we saw BOE voting member Haldane’s hawkish commentary yet again but that did nothing to spur a GBPUSD rally.

Next up is Janet Yellen’s testimony which I expect to be reasonably hawkish for USD so look for a move back towards 1.2800 for Cable regardless of the other scandalous headlines.

AUDUSD: 0.7655

The Aussie benefitted greatly from the overnight woes of the USD jumping back up 50 pips and holding just above the 7650 level.

With no Australian data this week the focus now shifts to Janet Yellen’s testimony and the markets are likely to hold AUDUSD around this level regardless. The Aussie has been very resilient recently and continues to hold recent gains with any excuse to buy coming into play.

The Aussie versus Kiwi is also very interesting as the NZD was crunched lower yesterday in a slide lower before this latest Trump sage hit the newswires anyway, so the carry traders are loving the AUD at the moment.

NZDUSD: 0.7225

NZDUSD traded lower towards 7200 before a small bounce back in a sustained move lower across all trading session’s yesterday.

The resistance to fall below 7200 is quite strong but a breakdown of that level will see technically a move to 7165 become quite probable.

It is hard to Buy the NZDUSD at this level but it does appear oversold on the back of yesterdays slide.

USDCAD: 1.2900

USDCAD is very firm around 1.2900 leading into the BOC rate decision & press conference tonight.

The oil price recovery and USD selloff overnight should have seen bigger moves lower for USDCAD so the fact that it has struggled to move below 1.2900 is a good indicator of how oversold it already is.

I am holding my SHORT positions for USDCAD as the divergence trade is in full swing now that we can’t expect US tax cuts to be taken with any confidence of Whitehouse solidity in the wake of the Election scandal.

It is a worrying sign that USDCAD is oversold already as the rate hike of 25 Bps is priced in at around 95% already so caution is needed around tonight’s event risk on both the USD & CAD side of this trade.

VIX: 10.89

Volatility Index lower again, now under 11 for the first time in recent weeks.

The Dow traded resiliently in the fact of this recent USD selloff but I expect the VIX to move higher tonight as Janet Yellen gets the chance to talk up the USD outlook yet again in her Q & A section after the scheduled testimony.

GOLD: $1,219.23

Gold traded higher naturally as the USD sold off sharply in the US trading session after a weak Asian session saw lows around $1,208.

Gold may run into resistance around the 1230 level but still fell short of trading to that price anyway, awaiting Fed commentary tonight.

I prefer to stay Long on Gold now but it is a tough trade in the face of potentially hawkish commentary this evening.

Oil (WTI): $45.80

Oil made a move higher yesterday, fast approaching the $46 level again.

Oil inventories data is scheduled for release right in the middle of the Janet Yellen testimony and has the potential to propel a sustained move back towards $48 as I called yesterday.

Macro Themes in Play

• Trump Torpedos the USD
• USDJPY tanks as EURUSD spikes higher, battling with key levels such as 1.1500.