Trader Talk – Wild Moves in USD

Daily Trader Talk – Thursday 13^th July.

What Happened on Tuesday > Top 3?

> Janet Yellen’s Testimony Dovish for US Dollar  

> Huge moves lower for USDCAD, as BOC hikes rates 0.25%

> Janet Yellen points to US Inflation data being critical for the Feds next moves

Outlook

+ China Trade Balance data in Asian Session

+ US Unemployment data on the US Session open

+ Key FX Pairs traded Mixed – Look for AUD & EURO to play catch up.

Data & Event Risk Today?

• (AUD) China Trade Balance – Tentative.
• (USD) US PPI & Unemployment data – 10.30pm Sydney
• (USD) Janet Yellen Testimony continues– 12am Sydney
• (USD) FOMC Speakers Brainard & Evans – 1.30 & 3am Sydney

USDX: 95.40

The Dollar Index had a wild day, as to be expected over the Janet Yellen testimony.

She pointed out concerns over raising interest rates too fast and that was enough to sell USD, but the biggest part was her indication of watching Inflation data closely.

USDJPY: 113.15

Dollar-Yen got hit yesterday after Janet Yellen’s testimony was dovish for USD.

Markets were expecting Yellen to lean on the recent solid jobs data from last week, but she didn’t, and in fact pointed to the upcoming Inflation data with an air of caution. Not what the USD bulls wanted to hear!

Where to next for USDJPY? Seems slightly overdone, and can reverse higher if Friday’s Retail Sales & CPI for the US are solid, but until then USDJPY is a Sell.

Look for a move under 113 towards 112.50 / 112.75.

EURUSD: 1.1435

The Euro traded sharply lower even though the USD was Offered against most major pairs.

EURUSD has consolidated around 11435 since the whipsaw from last night’s action in the US session and now looks like a great BUY level from my experience.

I am looking for another run up to 1.1500. I want to be LONG and sit & await the US CPI data tomorrow night to propel a breakout of that data disappoints.

GBPUSD: 1.2897

The Sterling found bidders as the USD fell out of form last night in the US session.

GBPUSD moved higher, but not much, capped around 1.2900 on the upside, which is another reflection of the weakness in Sterling.

Better opportunities playing GBP again cross pairs exist at the moment, such as GBPJPY & GBPAUD.

AUDUSD: 0.7680

The Aussie continued the grind higher towards 7700 last night as USD softness helped the Aussie Bid up to 7688 highs.

The AUD is ripe for a pullback but where can it get to first before turning south?

That depends on the CPI data (and Retail sales data) for the US, but perhaps 0.7730 before heading back.

I am still SHORT AUDUSD with breathing space in that trade…

NZDUSD: 0.7265

NZDUSD traded strongly as it played catch up with the Aussie yesterday, in most part due to USD selloff.

NZDUSD hit highs of 7280 after the Press release of the Janet Yellen prepared testimony and then consolidated on the back of her Q & A responses regarding the US inflation outlook target.

The Kiwi is ripe for a sustained pullback, so look to get Short from levels around 0.7230 with a view to see 0.7180 / 0.7200 to resume.

USDCAD: 1.2745

USDCAD was the BIG mover yesterday as I called lower from 1.3000 as the Canadian fundamentals have been building up, hence BOC raised interest rates last night by 0.25%.

The USDCAD totally collapsed lower, in a brilliant trade straight down from 1.2955 to 1.2680 before bouncing a little!

Careful from here, it may fill some of that gap (by moving back up to 1.2800) as the Bank Of Canada signalled possibly NO more rate hikes for a while.

VIX: 10.30

Volatility Index slightly lower as the Fed signalled delaying rate hikes on the back of mixed data.

The all-important inflation data tomorrow will fire up the Volatility in the markets as the big money end of town looks to reprice the USD and Equities after that number hits.

GOLD: $1,222

Gold traded higher naturally as the USD sold off sharply in the US trading session after Janet Yellen threw doubts about continued rate hikes for the US.

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 and a miss on CPI tomorrow.

Oil (WTI): $45.40

Oil inventories data saw a spike up Oil to $46.50 before a drag lower to 45.30.

Oil is very choppy now as it turns towards $45 but I still favour upside moves back to $48.

Macro Themes in Play

• Markets reprice the USD outlook on Yellen’s dovish commentary.
  • USDJPY sold down as Yellen signals a Balance sheet reduction coming soon