Trader Talk RBA Tuesday

What Happened on Monday > Top 3?

• Trump fires his (new) Communications Director, spins USD lower
• EURO & GBP Slam higher as divergence trade in full swing Versus USD
• Eurozone data helps spur EURUSD through a 2 ½ year high at 1.1830

Outlook

• RBA Rate announcement today
• Bank Of England rate announcement on Thursday
• Non-farm Payrolls Friday will be very pivotal to Rate Hike expectations

Data & Event Risk Today?

• (AUD) RBA Interest Rate Announcement – 2.30pm Sydney.
• (GBP) Manufacturing PMI Data – 6.30pm Sydney.
• (USD) ISM Manufacturing PMI Data – 12am Sydney.

USDX: 92.65

Dollar Index broke down through some key support lines in the US session overnight, as the Chicago PMI data slightly below consensus, but the bigger issue being sentiment has totally deteriorated against the USD.

Trump fired his Communications Director after only (10) days in the job which makes Wall Street doubt if he can muster his team to follow through on the tax reform election promises, which is reflected in the Long USD “Trump Trade” being unwound.

USDJPY: 110.40

USDJPY saw another move lower on the safe-haven Yen buying to finish the month end.

The softer inflation data recently for the US, coupled with more political wobbles spells pain for the USD Bulls. The USD can be saved a little this evening if the US ISM Manufacturing PMI data is a solid beat of expectations, but there is no guarantee of that.

So, for the keen USDJPY traders, look to sell at 110.50 as I feel we will see a small bounce before another run lower, to under 110 this week.

EURUSD: 1.1825

Euro slammed higher for two simple reasons:

• Eurozone CPI was a positive data print which reinforces the divergence trade between softer USD and recovering EURO.
• USD sentiment favours the downside as US data points show growing doubts on the US data even through the Fed are “telling the market” that they will change rates.

As per yesterday’s comments: “I can see the uptrend resuming from this level as the bull’s rush in for a fresh run towards the 1.1800 handle this coming week.”

I have a revised target of 1.2000 for EURUSD, because I have seen it rip higher many times in the past when haven flows coupled with soft USD is the dominating market theme.

GBPUSD: 1.3200

Sterling crashed higher last night as a sharp unwinding of USD long trades against the GBP were occurred in the US session.

Thursday sees a Bank Of England rate announcement which is still likely to produce no change in rates but the upside potential for Sterling seems possible, towards 1.3330 price level (Sept 2016 Levels).

It will be interesting to see the BOE inflation report as that will be a great indicator of just close to target the UK are in possible rate hikes in the remaining quarters for some big moves higher.

AUDUSD: 0.8000

The Aussie dollar finished the month strongly and is lingering at the 80 c handle.

As per last week’s comments: “AUD will likely take a breather around 0.8000 for now, leading into RBA on Tuesday. “

We know that the RBA won’t move on interest rates today, considering last week’s commentary & soft inflation data, but I feel the Aussie may be ripe for a pullback, with risk sentiment being challenged by North Korea’s challenge to global patience.

Look for a move towards 0.7880 before the US jobs report (Friday).

NZDUSD: 0.7510

The NZD is hanging around the 7500 level which displays the strength in the Kiwi, but also weakness in USD.

The momentum in this uptrend remains very strong leading into the Kiwi jobs data on Wednesday morning.

The estimates suggest a mixed result for employment data but the USD side of this story may be the bigger driver.

I favour a move to 7450.

USDCAD: 1.2505

USDCAD had a volatile Monday trading day on the back of Fridays solid CAD GDP data coupled with Oil dribbling above $50.

This pair is driving UP into the SELL zone in my view. If we see Solid ISM Manufacturing data tonight, USDCAD moves back to 1.2600 sharply, but if Traders are patient and await that number to be on par or miss, then USDCAD will move towards 1.2400.

I would suggest awaiting the ISM number at midnight tonight then follow the trend, now that Oil seems like running higher (helping CAD Strength and thus USDCAD lower).

VIX: 10.26

The VIX blipped slightly higher but still awaits an imminent breakout above 12 before we see any serious corrective moves in US Equities.

GOLD: $1,268.20

Gold saw profit taking on Monday, as to be expected after the sharp run up to 1270/1272 on Friday.

ISM Manufacturing data may spill into some more profit taking, causing a small pullback in Gold tonight, so be careful if LONG.

Oil (WTI): $50.22

Oil has had a solid trading week and turned very positive technically.

Can it break through $52, or will it turn lower now or keep going?

As per last Friday’s comment: “The headlines are helping Oil recover and I think that we will see $52 by (this) week.”

Macro Themes in Play

• USD Lower as doubts are growing on the US data & political stability.
• Sterling & Euro breakout to fresh highs against the USD, with more to come.
• EURUSD zooming higher fuelled by strong Eurozone CPI data