easyMarkets Trader Talk

USDX: 93.06

USDX came under pressure yesterday as the Feds release of bearish wages report dragged on US Treasuries and interest rate projections for the Fed rate hike path.

The markets are now trying to preempt the next commentary tone for Janet Yellen coming out of this week’s Jackson Hole economic symposium for a renewed Bid in USD, but there are no guarantees of that.

USD JPY: 109.25

USDJPY had another volatile trading day to start this week being Offered in Asian and London dealing down to lows around 108.65 and then staging a strong recovery in NY and Asian open today.

This pair will be one of the most volatile in the coming week as investors and traders position themselves in the right side of the USD sentiment, which is not that easy to detect.

Today’s Asian open has seen Bids for USDJPY after the Tokyo open, but that momentum may fizzle out in my view as the USD comes under pressure, along with the renewed North Korea tensions hitting the newswires. A move to 108 is still quite possible.

EUR USD: 1.1815

Euro showed its hand yesterday being the biggest mover against the USD, jumping from 1.1750 to highs of 1.1820 for what is noted as pre-emptive dealer positioning before the ECB commentary tomorrow.

When the ECB decide to signal to the market that QE unwinding is possibly on the agenda, the EUR can scream much higher particularly against the USD and JPY.

The timing of this coming into reality is still unclear but if Mario Draghi uses this week to talk of the upbeat projections for Eurozone recovery, then a move higher towards 1.1900 is likely.

GBP USD: 1.2895

Sterling went higher against the Greenback yesterday, along with all the other major FX pairs, but the upside was capped at the 1.2900 handle.
The moves in yesterday’s trade can be attributed mainly to USD softness, but Janet Yellen can propel a reversal in that sentiment this week if she comments on the stronger data points in the USD and Feds rate hike path.
A number of traders see 1.3000 technically as a strong resistance point, but currently it seems that 1.2900 is the ceiling in the near-term.

AUD USD: 0.7930

The Aussie dollar had a buoyant day on Monday fuelled by another solid rally in the Iron Ore price, moving up 2.6%.

I find it quite hard to see AUD not take a turn south from here, with 7950 acting a firm resistance in this current market.

With AUDNZD testing (towards) the 1.0900 handle again, Aussie is seeing strong holding pattern around 7950. Will it change and head south this week?

NZD USD: 0.7325

NZDUSD moved higher to kick off this trading week but is now trading in a tight trading range around the 7320 price.

With US milk supply continuing to grow steadily (1.5 to 2%) and lower USD making exporting more attractive, Europe remains NZ’s largest direct competitor in Dairy, but the outlook is optimistic which helps maintain the NZD price stability.

It will take a risk-off market theme, possibly from North Korean headlines to drag the NZD back from here, as it has found a solid base around 7300.

USD CAD: 1.2560

USDCAD came under downside pressure again yesterday as the Gold price helped the CAD and USD were dragged lower.
The Canadian CPI data was as expected last Friday, but the pair is moving lower fuelled by Oil price recovering again towards $48 at the same time of the USD market weakness.
The 1.2550 level may find technical support for an attempt at a bounce but that will need fuel such as Janet Yellen this week.

VIX: 13.19

The VIX slid back again on Monday but is still holding the 13 level as Stocks rebounded Monday.
All eyes will be on the Jackson Hole economic speakers this week but we also have South Korean military drills infuriating the North again, which can spike VIX higher and derail this Equities rally, potentially soon.

GOLD: $1,289.30

Gold moved higher again on Monday as the USD was soft.

Once again we saw Gold stall around the 1291/1293 area to settle back today in early Asian trade.
Gold is going to be very volatile this week as the markets await ECB and Janet Yellen commentary, but the likelihood of plus 1300 moves seems high.

OIL (WTI): $47.70

Oil traded sharply higher on Friday to run up to 48.85 but has filled that gap by pulling down again yesterday.

This price level of 47.50 is a familiar one, but I am surprised we aren’t closer to $50 as I read stats showing 94% OPEC production cut compliance.

Typically, the compliance has been around 70 or 75% so when I see 94% compliance that should mean less Oil in the marketplace and a move in underlying price towards $50. Time will tell, a great time to trade for bigger trading ranges here in Oil.

Macro Themes in Play

• Risk assets remain attentive to North Korean headlines
• EURUSD shows strength jumping up the most against a Soft USD
• Fed Rate Hike probability is sliding, now around only 30%, dragging USD lower generally.