Trader Talk

USDX: 91.55

USDX was absolutely crunched lower on Friday in a very aggressive USD selloff particularly in the Asian & London dealing sessions.

Dollar Index dipped as low as 90.95, dangerously low before bouncing back to 91.50.

This occurred because Trader’s started to price out the December rate hike probability for the US after the ISM Manufacturing data was a miss on expectations, plus FOMC speaker commentary suggesting that the US rate hikes are “hurting the US recovery”.

Today’s open in the Asian session has seen a reversal in USD pushing USDX back to 91.50.

USD JPY: 108.35

USDJPY reacted swiftly on Friday to the ominous threats from North Korea to fire off more missiles over the weekend, as Saturday marked the foundation day anniversary for N Korea. (September 9th)

The twin forces of the FOMC speaker commentary talking down the likelihood US rate hikes this year, plus the rush into safe-haven Yen caused a very sustained & sharp move lower in USDJPY from levels around 109.00 to see lows near 107.30.

USDJPY is certainly skewed to the downside and 106.50 still very likely if the North Korean response to the UN sanctions plays out with aggression, however, to open the Asian session today – due to the lack of fresh missiles over the weekend – USD reversed (higher) dragging USDJPY back to 108.50.

This week will be key for two reasons, firstly the potential for N Korea to grab headlines and grab the risk off tone is high, however also the US CPI may save the USD selloff and push USDJPY back to 110. Get ready for big trading ranges and a spike in Volatility.

EUR USD: 1.2010

Euro traded sharply higher on Friday in a sign of what is possible if the USD Inflation data miss’s expectations this week.

The EURUSD pair took off like a rat up a drainpipe on Friday, as the USD was unwound, seeing EURUSD Bid to 1.2085 before cooling a little to close off the week.

This move is mainly a USD move, but also can be attributed to the ECB failure to clearly lay out a path (last week) to their QE unwinding, which helped the Euro lift.

In the short-term though, the EUR has come back to 1.2000 as the USD came back hard to open this fresh week, but I can see a move back towards 1.1850 if US Inflation data is a solid result for USD, as trader’s will once again get long dollars leading into the implied US Rate cycle hike.

There is no profound EUR data on this week’s calendar, so the EUR may jump back towards 1.2100 only if the US inflation is a bitter market disappointment.

GBP USD: 1.3170

The Sterling was a big mover last week as everything rallied against the Greenback, GBPUSD found highs of 1.3215.

This move higher in the Sterling against the Greenback certainly is fuelled by softer USD, but also some big money pre-positioning leading into this week’s Key UK Inflation (Tuesday), Labour market earnings data (Wednesday) and Bank Of England Interest Rates decision (Thursday).

A great pair to look at and be positioned for, leading into very crucial UK data this week, ensuring whipsaw ranges, so be prepared for movement both sides of the 1.3150 level.

Will the 1.3200 handle be a new ceiling for a USD come back and GBP retrace again? I think that this is quite likely for GBPUSD.

AUD USD: 0.8050

AUDUSD has had a wild week, taking off to 8130 on Friday’s dealing sessions, even in the face of potential Risk-Off moves led by N Korea’s threats the Aussie was bought up sharply because the USD was dumped!

This morning the AUD came back to Earth, settling on 8050 after the Asian open saw big reversals in the USD sentiment. The AUDUSD looks quite strong, but needs the US Inflation to be a miss against Analysts expectations to get back to 8100.

The challenge here is that the US Inflation is tipped to be solid, which drags AUD back down, so I can see a potential move back to 8000.

The Aussie is ripe with potential for volatility again this week, and bear in mind that we get the Aussie jobs data on Thursday so expect extreme swings to propel intra-day opportunities for the brave traders midweek.

The RBA held the cash rates for Australia but Gov. Lowe also in his speech on Tuesday evening pointed to the next move being higher for AUD rates, even if not soon, another reason that the mid-term trend is higher for AUDUSD.

NZD USD: 0.7260

The Kiwi seems capped around 7250 despite the sharp move higher on Friday, as the US Treasuries dipped dragging USD lower against all of the major FX pairs.

Whenever we see the N Korean headlines dissipate into the background a little, the game changes fairly quickly for the risk theme, which affects the commodity currencies such as the AUD & Kiwi.

The fact that we saw the breakout above the 7300 handle on Friday can give the NZDUSD bulls some optimism, but I have seen in my trading experience over many years that the USD can very swiftly make a comeback so I am mindful of the chance to Sell here for a move back to 7150, assuming that the US CPI fuels that USD comeback.

The USD is in the driver’s seat once again for the next leg higher or lower on NZDUSD.

USD CAD: 1.2135

Dollar-CAD was absolutely crunched last week (from 1.2375 to 1.2100) as the Bank Of Canada raised interest rates to 1.00%.

Market speculation & the data points to another potential hike later this quarter, as per my research.

That is a huge story for the USDCAD and maybe we can get down to 1.2000 if another set of solid CAD data is released.
Remember, we hit 1.2050 before a bounce on Friday so the market has no issue buying CAD now that the BOC (Central Bank OF Canada) has proven that they will act, not talk, regarding rate hikes.

Oil dragged back under $48 on Friday but Gold was very sharply higher which helps lift the CAD and drag USDCAD lower as we know. This pair, like most majors, will continue recent trends UNLESS the US CPI (Inflation) data is very strong.

VIX: 12.12

The volatility index may just come alive this week fuelled by Trump’s speculation regarding the Tax Reform for the US, or even regarding the North Korean tensions.

The North Korean tensions don’t seem to be simmering down at all, in fact, they have said that the US will be met with force if they pressure the UN to impose further (stronger) sanctions against them.

The truth is that we know that the UN is likely to impose this, so the likelihood for Stocks to correct lower and the VIX to snap higher is very probable, but perhaps not this week.

GOLD: $1,337

Gold traded sharply last week as the USD Long traders were squeezed.

Large moves in Gold seem to be the norm in this market so I maintain my view that $1357 or $1400 may win the day in the near-term, fuelled by growing tensions in the N Korean conflict.

I am mindful of the idea of some diplomatic headlines from the US or the CPI data for the USD helping pull Gold back towards 1330, but still favor a wider target on the upside from here, because sadly I think that N Korea will continue to drag the risk sentiment lower.

OIL (WTI): $47.90

Oil is holding firmly around $48 price area as another severe Hurricane heads towards the Gulf coast in the southern US.

What an amazing series of events for that part of the world in the past 2 weeks, dragging Gasoline & Oil prices into wild trading ranges.

Risk-off market themes also skew the Oil price to the downside, and thus $46-$48 seems very likely this week as the dominant price level, but expect volatility, so be careful.

Macro Themes in Play

• USD Sees extreme volatility, Selling off sharply on Friday, Reversals today
• Gold consolidating huge gains last week, with N Korea still grumbling in the background
• Bank of England & US CPI this week are the biggest catalysts for next FX Moves