Midweek Trader Talk

What Happened on Tuesday > Top 3?

• USD mixed after ISM Manufacturing data
• GBP Solid after Manufacturing data, Euro & AUD slide lower
• Kiwi Jobs & Dairy numbers a big miss, slamming NZD

Outlook

• Construction PMI data for GBP
• Oil Inventories will be interesting
• Interim (ADP) Non-Farm Jobs data for the US

Data & Event Risk Today?

• (GBP) Construction PMI Data – 6.30pm Sydney.
• (USD) ADP Interim Jobs Data – 10.15pm Sydney.
• (OIL) Oil Inventories – 12.30am Sydney.

USDX: 92.90

Dollar Index traded lower in the London session despite a reasonable US manufacturing PMI number was released.

We did see a bounce off the lows around 92.60 to 92.90 in the US session but the markets are essentially ignoring the Whitehouse claims of proposed Tax cuts for 2017. The Jobs data for the US will be very important if the USD is to stage a decent comeback to finish this week.

USDJPY: 110.35

USDJPY rolled over in the Asian session yesterday getting down to 110 flat, before a fast bounce back.

The US 10-year yields drove USDJPY under 110 briefly, seeing 109.85 then reversing back above the 110 handle convincingly to end the day around 110.30.

I think this market really wants to sell USDJPY down towards the 108 level so watch the interim (ADP) & headline US jobs data closely.

EURUSD: 1.1815

Euro slid lower amid the spread differential in German Bund yields and the US 10-years.

This pull back to 1.1800 seems short-lived particularly leading into key Jobs data indications tonight from the ADP numbers. The shadows around the US economy are growing darker and the Euro should be the biggest benefactor if the headline numbers are a large miss.

In the meantime, the EURUSD looks technically like it has found a solid base footing at the 1.1800 handle, making this a great time to Buy and be patient.

GBPUSD: 1.3215

Sterling crashed higher again last night and looks like the trade call on Monday to BUY GBPUSD once 1.3200 breaks will be a brilliant call.

Last night’s rally for cable was driven by the solid manufacturing data released on the London market open, taking sterling to fresh highs around 1.3240 against the greenback.

EURGPB stalled yesterday as GBPUSD found a base above the 1.3200 key technical level to finish the US session.

This pair can scream higher if US jobs data isn’t a resounding beat of analysts estimations so it is best to be Long now and have ambitious targets around 1.3300 as I said yesterday.

AUDUSD: 0.7965

The Aussie dollar drifted higher before the RBA held rates yesterday, printing a daily high around 8040.

The RBA statement was a familiar tone talking about the high Aussie dollar rate complicating Australia’s economic transition away from the mining boom.

Speaking of mining, the Iron Ore price ripping higher lately has been the fuel to the AUD rally, but the fate of AUDUSD is now more so a USD story, awaiting NFP data from the US.

Look for a move towards 0.7880 on the release of the US jobs report on Friday.

NZDUSD: 0.7435

The NZD was ripe for a pullback as I called since Monday, and we weren’t disappointed.

Kiwi crunched lower on the Asian open today fuelled by soft dairy trader’s numbers overnight and the big miss on the Jobs data for NZ this morning.

The selloff stalled when NZDUSD hit 0.7420, but this move brings LONG AUDNZD into play now that the Iron Ore story is outperforming Dairy in the Commodity battle. Look for AUDNZD to move back to 1.0800.

USDCAD: 1.2545

USDCAD recovered nicely as Oil slammed lower once again under $49.

The USDCAD pair is the most oversold pair in the market and will snap back (higher) very sharply if the US Jobs data fires uthe market’s sentimentnt towards the Greenback. I think a speculative Long on this pair is a great way to look for a big move of 150 pips.

VIX: 10.09

The VIX just cannot get higher as the Stock market frenzy hit fresh all-time highs again last night, seeing Dow futures hit 22,000.

I love the long VIX trade looking a stock market correction anytime soon, although I have been saying that for a few months. It is just a matter of time (and patience).

GOLD: $1,267.70

Gold essentially unchanged, albeit slightly lower on yesterday’s levels.

Don’t expect big moves until the Non-Farm payroll data hits the newswires, but I favour fading the US economic data, and thus am a strong Gold Bull.

Oil (WTI): $48.85

Oil was off yesterday as Libya production data displays that they are pumping oil at very high levels, capitulating oil from moving to 51, now back sub 49.

The $48 level is always key for a move higher or reversal back towards the familiar $43 area.

Macro Themes in Play

• Commodities currencies pullback against USD. AUD & NZD off highs.
• Sterling & Euro very strong fundamentally Versus the USD
• GBPUSD very solid after another good data point leading into BOE.