Trader Talk

USDX: 92.40

USDX traded back up to 92.50 yesterday as Safe havens were Bid up across the board after the latest round of harsh and aggressive rhetoric from North Korea.

In the short-term, expect a range of 9200-9250 to potentially hold as markets look for clues form this week’s FOMC speakers plus Janet Yellen in the US session this evening (2.45am Sydney).

The markets are hot & cold on the Risk-off trade sentiment as we try hard to ignore the No Korean leaders team of instigators.

I remain quite Dollar bullish, particularly as Janet Yellen may fire up this week for the Bulls.

USD JPY: 111.60

USDJPY dribbled back off highs around 112.40 yesterday in a quiet Asian trading session despite the BOJ announcing a mild stimulus program.

The snap election announcement also for PM Abe did little except seeing the USDJPY dribble slowly under the 112 handle in early London dealing yesterday.

That was until the US session hit and the tirade of commentary from the No Korean Foreign Minister spiralled a risk-off mood in the markets after he said Donald Trump’s UN speech was tantamount to the “US Declaring War”.

Furthermore, the No Ko minister said that they “have the right to shoot down US bombers even if not in North Korean airspace”.

Wow. Not what the risk bulls wanted to hear, so USDJPY crunched to 111.60. The London session may see further downside pressure towards 110.80 unless markets choose to ignore this aggression and focus on the US planning Tax Reform and potential FOMC optimism.

EUR USD: 1.1860

Euro took a hit yesterday as the ECB Draghi commentary hurt the outlook towards the ECB timeline to tweak their QE unwind/ Monetary policy.

EURUSD found its way off the recent highs above 1.2000 to open the week around 1.1950 and had a sustained day of selling on Monday, seeing lows near 1.1830.

Please also note that ECB Draghi speaks again on Friday but generally we may see the USD take control of the momentum for EURUSD in the meantime before then, as with FOMC & Janet Yellen’s ability to spur USD buying.

I wonder if the 1.1850 level can form a base for a bounce? Maybe.

GBP USD: 1.3480

The Sterling was quite restrained in daily range to start this week as the USD strengthened up a bit against most of the major FX pairs.

The downgrade of UK on Friday hurt the GBP generally, in relation to their Brexit process, but the main catalyst in the GBPUSD being Offered, was the USD strength and the Theresa May speech in Europe on Friday evening, hurting sentiment & outlook.

A minor recovery off lows in GBPUSD around 1.3450 occurred, but very tight trading range so far, this week.

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 towards the 1.3500 price area.

AUD USD: 0.7945

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 quickly forgotten as the North Korean headlines dominates the NY dealing session seeing AUD sell down towards 7930.

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. We do need a breakdown of the 7950 level which is quite a strong magnet for price action it seems.

NZD USD: 0.7240

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

Uncertainty for a week or so will likely drag NZDUSD lower, but we have seen levels below 7230 already this week, which is an ominous sign for Kiwi, in the short-term.

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 lingering around the 7250 price levels regardless.

USD CAD: 1.2365

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, and still holds the 1.2370 level currently.

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, as does the risk-off flavour from the North Korean war of words.

I prefer to play on the long side of USD this week, so look for 1.2400 or even higher particularly as the FOMC & Janet Yellen may once again, lift the USD.

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

I maintain that range & comment from yesterday.

VIX: 10.21

The volatility index fired up by 6.5% overnight naturally as the North Korean Foreign Minister was a tad aggressive in his reply to Donald Trump’s address to the UN.

VIX is still low and looking like a move higher imminent, or at least very possible if this combative exchange of words grows more & more serious.

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: $1,311.80

Gold jumped into action as the risk-off trade was in full flight in NY dealing, seeing a move from 1288 to 1308 before the Asian session.

The US pathway towards another rate hike, in December, is the only thing that can derail this Bid higher in Gold.

Gold has opened strongly in Asian dealing today, getting back up to 1312 this morning in early Asian session dealing, now possibly aiming towards 1331 September 14 levels unless Janet Yellen does a very hawkish job of talking up the USD.

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): $52.40

Oil found very solid support overnight gaining traction above $51 to make its way closer to 52.50.

The $52 price area is always a key one (at least in recent times) so let’s see how this week plays out now that we are above $52 on the back of news surrounding Turkey looking to cut flow from the Kurdistan region.

I can see a potential move towards $55 or higher.

BITCOIN (BTC): $3,905

Bitcoin has traded sharply higher yesterday, as I called, up from $3700 towards that headline next resistance at $4000.

In the short-term, a break through the $4000 level is key for sustained moves higher, but we must be careful because Volatility is extreme, such is the price action back to 3900 after yesterday’s highs around 3960.

Where to from here? Small momentum can be seen in the 4-Hourly chart so I prefer to suggest that Buyers may step in again to Bid this back towards 4000.

Be careful, not for the faint-hearted.

Macro Themes in Play

• JP Yen will be in focus to start this week as flow into Safe havens is large
• USD whipsawing but pressing highs for the month as Tax Reform talks help USD
• Euro spooked by the uncertainty around the German election, back to 1.1850.