Trader Talk

USDX: 92.50

USDX continued strength on Wednesday as the twin forces applied from US CPI positioning as well as Trump’s tweets about speeding up Tax Reform through US Congress spurred the USD bulls.

We correctly called this yesterday and it may continue; “I can see the potential for the USD bulls to get right into Long greenback positioning because the talk of Trumps potential to pitch US Tax reform is healthy for the USD sentiment.”

The big danger to this trade is an aggressive move from N Korea in retaliation to the newer UN sanctions proposed on Monday this week. Let’s remember though that the US Inflation story is the big looming event risk as CPI becomes the new NFP headline release for the US rate hike probability.

USDX likely to trade sideways around 92.50 until tonight’s data.

USD JPY: 110.70

USDJPY saw bullish momentum higher to 110.70 last night spurred by another solid data release for US PPI as well as the tax reform chatter.

The twin forces of no weekend N Korean headlines coupled with the solid projected CPI data for tonight, led the USDJPY Bulls off the sidelines for the start of this week, dragging massive Buying in this pair.

The Asian session may be quiet for USDJPY around this key level at 110.70 awaiting CPI later in the US Session.

We correctly called that exact level yesterday for all clients: “There seems more upside momentum towards 110.70 in the short-term.”

The US CPI may push USDJPY back firmly above 110, so be prepared for a momentum shift into long dollars if we get simmering silence from the N Korean issue, and a strong inflation read.

EUR USD: 1.1875

Euro traded quietly after the sharp selloff on Tuesday, until the stronger USD bids kicked into gear, pulling EUR back under 1.1900.

The EURUSD was hit lower to 1.1875 after another strong US data point creates a reason for the rate hike possibility to remain for December for the Fed.

This move back under 1.200 is mainly a USD move, but also can be attributed to the uncertainty around the ECB QE unwinding, giving some indecision on this pair. A reset back to 1.1830 is possible on the back of solid US data tonight if we see CPI numbers firm.

The 1.1850 level may find support for this pair, but we do have a strong expectation for US CPI data tonight to create some EURUSD volatility.

GBP USD: 1.3205

The Sterling was a big mover yesterday pulling back of highs above 1.3320 to rest 1 big figure lower on the back of weaker than expected Wage growth data for the UK.

The GBP Inflation was very good on Tuesday, helped by the lower recent rates of Sterling, and should not be discounted, but USD strength has played a part in this pullback for GBPUSD.

Tonight, we have positioning leading into this week’s Key Bank Of England Interest Rates decision (Thursday), and GBPUSD is reset to 1.3200 so look for Bids potentially on a hawkish rate hold for the BOE.

I am seeing the potential for US CPI strength to propel GBP lower but also there is a great change of a move back to 1.3300 on BOE commentary.

AUD USD: 0.7995

AUDUSD has had a wild morning to start the Asian session today after ridiculous Aussie jobs data released. We just saw 54K new jobs added,

Apparently, 40K full time (Versus 17k projected) which I find hard to believe.

Also, we just had a miss on data for China industrial production dragging Aussie a little, but still 80c.
The follow through from that China data miss may very well drag AUD lower in the London dealing session too.

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 below 80c, potentially towards 7950 or even 7900.

NZD USD: 0.7250

The Kiwi came back of recent highs yesterday with no real data driver except general USD strength.

NZDUSD seems strong but is in a holding pattern to some extent before the US headline event risk tonight.

The USD is in the driver’s seat once again for the next leg higher or lower on NZDUSD.
It’s quite tough to see this pair outside the 7250/7300 range for now.

7200 flat is a likely level for the next move if US bulls get into the optimism from Donald Trump’s recent Tweets. The danger will be that we see 7300 or higher is that CPI misses the markets’ expectations.

USD CAD: 1.2170

Dollar-CAD has held under the 1.2200 handle this week after a small run up that reversed on USD strength, which tells me that the markets are ready to get back into LONG USDCAD if the US data gives enough optimism that a US rate hike is still on the cards.

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.

This pair is another in a wait & see mode before tomorrow in my view.

VIX: 10.50

The volatility index is holding recent lows as the Trump tax reform story helps to get equity buyers pulling the trigger.

This is absolutely ripe for a correction. Look for a move back towards 14/15 in the VIX which may Drag stocks too, for now though, it’s holding firmly as the Trump trade keeps the fear Index contained.

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.
Careful regarding Stocks if N Korea really gets aggressive!

GOLD: $1,322.50

Gold has been Offered this week on pure USD plays gaining strong market momentum.

Large moves in Gold seem to be the norm in this market so I maintain my view that $1357 may win the day in the near-term, fuelled by growing tensions in the N Korean conflict, but we need a CPI miss in the short-term to refresh the Bids higher in Gold prices.

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 1320, but still favor a wider target on the upside from here.

Sadly, I think that N Korea will continue to drag the risk sentiment lower, possibly in the coming weeks, particularly now that we have tougher UN sanctions stirring up the North Korean leader.

OIL (WTI): $49.25

Oil has continued higher nicely this week, back above $49 as we said earlier this week, calling the recovery back above familiar price ranges. Of $46-$48.

Oil prices got a lift overnight from the Oil inventories data, but mainly this week due to the news that OPEC revises demand outlook higher helping to lift Oil higher once again.

Macro Themes in Play

• USD Very well, Bid across the board as Trump fires up speculation of Tax Reforms
• Gold consolidating and the Oil recovery seeing a continuation higher.
• Top Macro theme remains USD strength. GBP Slides back on Wage growth data miss.