Trader Talk

USDX: 92.10

USDX traded back from highs to finish the week almost dead on 92, as we called last week.

The Fed Funds Futures are now pricing the probability of a December rate hike for the US at 75%, up from 70% post FOMC, but the USDX is trading lower after the spike we saw on Thursday.

Dollar Index looked poised to break higher after the Fed announcement of their QE wind down commencing next month by way of reducing their balance sheet.

In the short-term, expect a range of 9200-9250 to potentially hold as markets look for clues form this week’s FOMC speakers.

USD JPY: 112.35

USDJPY made its way lower last Friday on the back of aggression from the NoKo issue, dragging on risk sentiment and pulling Bids into the Yen safe-haven.

The UN Speech from President Trump spurred a war of words as the NoKo leader was humiliated by the latest provocations from the US side of this issue, spurring fast aggressive replies, hurting USDJPY from 112.50 back to lows around 111.60.

That was last week and it hasn’t stopped over the weekend, however, Traders are now focused on this afternoons Bank Of Japan, Governor Kuroda scheduled speech just before 4pm Sydney time today and again on Thursday.

Bank of Japan stood firm yesterday in their Monetary Policy settings, and I am expecting PM Abe to announce a snap election on Monday afternoon Tokyo time.

We are now trading around 112.40 and the likely announcement of either a snap election or 2-Trillion Yen stimulus (Economic Package. Same thing) will lift USDJPY higher.

Expect extreme volatility in this pair, this week.

EUR USD: 1.1930

Euro bounced around like a ping-pong ball in last week’s volatile moves leading into the weekend German elections.

EURUSD found its way off the lows of 1.1865 to claw back to 1.2000 in Fridays NY dealing session before opening softly this morning after German election was NOT resoundingly clear for Merkel to form a government.

That means 1.2000 is likely again in the London session, particularly if the Eurozone data is solid, namely the German IFO data just after London opens today.

Please also note that ECB Draghi speaks in the coming 24 hours so be aware that there is a potential for a snap back above 1.2000 on the back of that too.

GBP USD: 1.3525

The Sterling was sold off sharply as PM May spoke on Friday, dragging Cable back from 1.3585 to trade at lows around 1.3450.

The catalyst the caused the sharp selloff in the GBPUSD was the USD strength and the Theresa May speech in Europe on Friday evening, in relation to the progress with Brexit negotiations.

A quick recovery has occurred on GBP-USD as the Buyers raced in to the lower levels, driving Bids back to 1.3530.

There are a lot of overall Bullish biased signals on this pair from what I can see, as the 1.3600 handle becomes a target once again.

BOE Governor Carney is set to speak on Thursday and may give more clues and lift the GBP if they choose to, otherwise the USD data this week (and Yellen’s Speech) may drive the overall sentiment for GBPUSD.

AUD USD: 0.7965

AUDUSD got slammed lower late last week, as RBA Governor Lowe talked about the RBA not needing to “..follow the US Fed in raising rates anytime soon..” but recovered a little on Fridays dealing sessions to end the week around 7950.

The RBA Gov Lowe speech was well anticipated but his comments were quite dovish considering the recent data points for Australia do point to the potential for the RBA to move rates in the coming months.

Nevertheless, Gov. Lowe talked down the AUD and traders ran with that, Offering AUDUSD back from 8100 to 7930 in a sustained sell down, halted by some profit taking to close off the week.

The AUDUSD is in a familiar price range now, sitting firmly under the 80c handle in a strong USD data week ahead.

I can see a move towards 7900 this coming week being possible after the war of words re NoKo may drag on the risk sentiment once again.

NZD USD: 0.7280

The NZ elections this past weekend was unconvincedly won by the Nationals, but not enough to govern outright.

What does this mean for the keen NZD traders?

Uncertainty for a week or so will likely drag NZDUSD lower, as we have already seen to start this week, Offered from 7330 last week to trade around the 7280 levels as we speak.

NZDUSD has had a sustained slide lower from that spike to 7435 earlier last week, now seriously heading south and aiming for support again at 7250.

The 7250 level seems like a magnet for the Kiwi, so look for smaller trading ranges until more Election certainty hit the newswires, but they look like dragging towards 7250 price levels regardless.

USD CAD: 1.2330

Dollar-CAD got a lift to 1.2350 on Friday night, as we called last week, as the Canadian Inflation data (CPOI) was below expectations.

The FOMC delivered for the USD bulls so USDCAD lifted to 1.2390 so this slight miss in CPI helps support a minor bounce back for USDCAD in the near-term.

I prefer to play on the long side of USD this week, so look for 1.2350 or even higher once we get that CAD CPI data later tonight in the US Session. That comment was spot-on from last Friday, and the potential for more trade higher in the pair is quite reasonable.

Until we get a breakthrough above 1.2600 the Average daily range seems limited to 1.2300 – 1.2380.

VIX: 9.59

The volatility index is very low, ticking lower, still, sub 10 to close off last week as stocks were mixed.

The latest aggressive words from North Korea can possibly fire up the fear index, as I have been saying for a long time though.

Janet Yellen and her press conference on Thursday may spur some higher Volatility, but stocks seem fearless currently as we approach the next phase of levels for SP500.

VIX at this level usually signals that a sharp change is imminent so be nimble, and patient.

GOLD: $1,292.80

Gold tumbled lower to finish off last week around 1295 as traders digested the FOMC hawkish rate hold on Thursday morning.

Their pathway in the US towards likely December rate hike is lifting the Dollar, which savagely pulls Gold down, played out very quickly under the 1300 handle.

Gold has opened softly this morning in early Asian session dealing, now aiming towards $1293 but I feel a move higher, above $1300 will play out this week.

The NoKo crisis seems on a knife edge, so it will be pivotal to watch the headlines again this week regarding Risk-off sentiment in the markets.

OIL (WTI): $50.60

Oil did very little on Friday, bar consolidation around the 50.50-50.75 level.

The $52 price area is always a key one (at least in recent times) so let’s see how this week plays out if/when we approach that level, not looking too likely to breakthrough just yet.

Oil seems to want to recover but it is a slow grind back above $50.

I still favour long positions with a move above $52 in coming weeks.

Macro Themes in Play

• JP Yen will be in focus to start this week if BOJ announce Economic Stimulus or Election
• USD whipsawing around as risk-off theme seems undecided
• Euro back towards 1.2930 after German election uncertainty dargs on sentiment