Trader Talk Tuesday

What Happened on Tuesday > Top 3?

• Very quiet trading ranges for most major FX Pairs
• FOMC Voting member talks down the USD slightly
• NZD, AUD & CAD all lower against the Greenback

Outlook

• AUD Business Confidence number from NAB today
• China Trade Balance today
• Markets looking ahead to RBNZ Thursday & US Inflation Friday.

Data & Event Risk Today?

• (AUD) NAB Business Confidence – 11.30am Sydney
• (AUD) China Trade Balance– 12 noon (Tentative) Sydney

USDX: 93.28

The USD held onto most of the gains we saw on Friday last week to start this week.

The USD pulled down slightly as FOMC voting member Kashkari talked down the USD reflecting on the low inflation environment, which pushed down the rate hike probability towards 40% for December, from 45%.

USDJPY: 110.75

Can the USDJPY find a base above 111 or drift back?

With a lack of US data risk events, a driftwood floating level around 110.75 is very likely again today.

I would be cautious around getting long USDJPY from here due to the North Korean headlines having the potential to shift USDJPY much lower if the war of words turns into heated military action.

USDJPY will hold firm until Friday’s all important Inflation data in the US session.

EURUSD: 1.1805

Euro over the longer term will move higher however, I entered new Short positions yesterday as the USD has a huge potential to have a sharp comeback this Friday with CPI data set for release.

I want to be positioned for that potential move lower for EURUSD.

The level around 1.1730 looks likely before next week so I will reset my outlook for this pair when the markets are closed on Saturday, noting that there is very thin EUR data for this week & next, however the USD side will drive the sentiment.

GBPUSD: 1.3040

Sterling consolidated in yesterday’s trade sessions after briefly flirting towards 1.3000.

The BOE has done a marvellous job of jawboning the sterling down from recent highs and the markets are happy to sit and hold these 1.3020/1.3050 levels.

We expect another day of tight trading ranges, leading into the CPI data for the end of the week, with 1.3050 the likely magnet for price action.

AUDUSD: 0.7915

The Aussie dollar drifted down to 0.7900 before a minor bounce to kick off today’s Asian dealing session.

Today we have NAB business confidence as well as China Trade balance which will jolt the Aussie, so look for 7850 today.

Mid-term I think we will be back at 7750 even though we saw Iron Ore up 3% again yesterday!

NZDUSD: 0.7350

Yesterday’s comments on the Kiwi were spot on:

“The NZD looks like the best opportunity today, particularly after the Quarterly inflation report is released.

The markets are looking for a reason to bring NZDUSD back from recent highs, but the Kiwi is being very resilient so far.”

RBNZ is Thursday, so expect to see lower lows towards 7250 this week.

USDCAD: 1.2670

USDCAD was a great trade call yesterday, from 1.2650 with a target of 1.2750 still in play.

USDCAD reached as high as 1.2710, just shy of my target, but I am patient with this pair.

The Canadian data was a mixed bag on Friday night, but as always was overshadowed by the US Jobs data released simultaneously. Again, look to stay LONG, back to 1.2750.

VIX: 9.93

I have two points for the VIX.

Firstly, it is at ridiculously low levels, under 10.

Also, look to sell SP500 Futures as the North Korean crisis will be the catalyst for a sharp US Equities correction. You don’t want to miss this trade.

GOLD: $1,258.90

Gold is virtually unchanged on Monday in a very quiet trading day.

Gold has pulled back into the BUY zone for this week.

Be careful of the US CPI data on Friday, but I can see a sharp move higher coming soon.

Oil (WTI): $49.30

Oil traded very wildly yesterday, firstly up to 49.40 then spiking down to 48.50 before a total reversal to get back where it started.

It is as stable as a rollercoaster lately as again this week we have a key producers meeting happening today in Dubai.

Look for headline driven moves back to about $46/$47.

Macro Themes in Play

• USD on shaky ground as FOMC members talk of USD CPI concerns
• Markets still pricing a 40% chance of December rate hike for the US
• Commodity currencies all sharply lower versus USD on Monday (AUD, NZD & CAD)