Trader Talk Friday

What Happened on Thursday > Top 3?

• Volatility jumps 33% as more Trump instability shines through
• December Rate Hike probability drops along with USD sentiment
• Risk-Off themes dominate, as Stocks tumble and safe Havens Bid higher

Outlook

• The Team Trump instability is hurting Risk sentiment, felt mainly in Stocks selling
• Canadian CPI data is the major event risk on today’s calendar
• Safe havens may continue higher

Data & Event Risk Today?

• (CAD) Canadian CPI Data – 10.30pm Sydney
• (USD) FOMC Member speaks – 12.15am Sydney

USDX: 93.60

The USD was sold down for most of the US trading session overnight as news hit that Trump s advisor Cohen was seeking to resign.

Instabilities in the Trump presidential team plus the FOMC member talking down the USD hurt the risk appetite for investors, seen very clearly in the VIX jumping and Stocks selling down.

USDJPY: 109.30

USDJPY slammed lower from around the 111 handle on the back of FOMC meeting minutes suggesting that the US Fed can afford to be patient in their Interest Rate-hike path.

Dollar-Yen is always the best moving pair, in large and fast trading ranges when the USD sentiment turns, which is exactly what we saw again yesterday.

I think a drift lower into 109.00 price area is quite possible today as the risk-off theme sees safe havens such as Yen being Bid.

EURUSD: 1.1725

Euro traded lower overnight as the ECB Monetary Policy Meeting Accounts were released, but also the news of the Terror attack in Barcelona hit the newswires.

EURUSD made a low of 1.1660 before getting back above 1.1700 after the ECB minutes noted that “policy will need to remain expansionary”.

The commentary from the ECB minutes referring to the Euro rate being higher and risk of it overshooting, saw EURUSD sell down, but that reversed late in the trading session.

GBPUSD: 1.2870

Sterling had a solid Retail Sales data release yesterday but still traded in a tight & quiet trading range.

That signals to me that the GBP is undermined very badly by the CPI (Inflation) Data miss earlier this week, weighing it down.

Risk on sentiment shouldn’t hurt the Sterling too much, but as always this pair is lacking a little direction as Brexit negotiations progress gradually.

AUDUSD: 0.7885

The Aussie dollar took a tumble overnight moving from 7960 earlier this week to a low on the Asian trading open today around 7870.

The simmering geopolitical issue in North Korea helped the Aussie earlier this week, but the risk sentiment turned south again yesterday led by team-Trumps latest instability.

7890 is not really a key level for the AUD so look for some decent trading ranges to be in play today, particularly in the Asian & London sessions to close out a volatile week.

NZDUSD: 0.7290

NZDUSD benefitted greatly this week as the twin forces of the FOMC meeting minutes’ release plus the North Korean situation simmering down helped risk sentiment.

That changed gradually across all three trading sessions yesterday, dragging the kiwi back under the 7300 handle.

The kiwi looks like holding around 7250 but as always, it’s important to be nimble because the risk -off moves can be fast and they can be sharp, dragging on the risk currencies such as NZD.

USDCAD: 1.2675

USDCAD bounced like a trampoline off the 1.2600 level yesterday to find its way back to 1.2680.

The flight to safety trade theme yesterday saw the USD dollar win the battle against the commodities currencies and the CAD was no exception.

Tonight, we have key CPI data for Canada so will be a volatile pair to trade on the US market open as that news hits with the potential to propel a move back to 1.2750 or consolidation to the 1.2600 level if the numbers are solid.

VIX: 15.55

The Volatility index jumped 33% as the Stock sell-off got into full swing in the US dealing session.

A sign of more to come?

GOLD: $1,287.50

Gold found strong Bids higher yesterday, as the risk off theme dominated trade.

Gold is hovering around 1288 and looks cautious heading to the 1291 highs of last week.

The sentiment towards risk and towards the USD were not helped at all by more headlines around Trump’s team, so look for volatility to continue for some time.

Oil (WTI): $47.20

Oil came back up a little in overnight trade as it drifted around the $47 marker.

The $46/$48 range should maintain for now until we get any OPEC related headlines to give a clearer direction.

That’s my point, Oil price is lacking a direction currently.

Macro Themes in Play

• Risk assets sell down, dragging Stocks to tumble as Trump’s instability reigns.
• Washington turmoil plus Terror attack in Barcelona drags risk-off market action
• FX Majors see moves into haven assets such as JPY.