Trader Talk – Cut Through The Market Noise

USDX: 93.80

USDX traded higher overnight amid commentary from FOMC speakers and supportive US data.

San Francisco Fed President Williams sees inflation rising to 2% and believes the Fed is able to raise rates (but was less specific on timing) noting that “Favorable employment numbers, combined with the findings on inflation and the steady pace of growth, are all behind my confidence that rates will need to rise to their new normal levels.”

The Fed is still expected to lift interest rates in December, now priced at 84% probability, which may see higher highs in the Dollar-Index over the near term, in my view.

I can see a bounce higher through that key 95 level if the US headline jobs data, particularly the Average Hourly Earnings numbers are where analysts expect at +0.3%

USD JPY: 112.80

The Nikkei just traded to a 1-year high, as we speak, but USDJPY was very restrained in overnight trade.

USDJPY is above the key 112.50 level, hovering around 112.80 for most of the US dealing session overnight as we got more FOMC speakers talking of inflation-linked confidence in the US feds next rate hike.

Interim Non-farm payroll was on par which gives me a great deal of optimism for the headline numbers, which should mean that there is potential for a breakout above 113.

Support seems strong at 112.50 and may be tested if that headline data is a miss or we see any crazy I still lean towards moves towards 114 particularly with the Hawkish Kevin Warsh being the frontrunner for the race for the next Fed Chair place to be announced over the coming two weeks.

EUR USD: 1.1715

Euro traded lower overnight with the USD strength coupled with the slightly dovish ECB:

The latest ECB minutes continued to have dovish undertones. Although officials spoke about the Asset Purchase Programme, it was noted that “Any reassessment of the monetary policy stance should proceed in a very gradual and cautious manner, while maintaining sufficient flexibility.

With no Eurozone data remaining on this week’s calendar, this pair is driven by the USD sentiment.

The QE unwind will be in focus again in the coming weeks and traders will position for that accordingly, so watch the daily range to change for EURUSD remarkedly as we get a clear path for the next US Fed chair and timeline out of the ECB.

How do you play it in spot FX? Look for a breakout of 1.1680 on the downside before getting to excited to follow this pair lower.

GBP USD: 1.3105

The Sterling is in a dangerous slide this week, crunching lower amid Brexit negotiations dragging on., plus the speculation and uncertainty about PM Theresa Mays stability really hitting GBP overnight.

When we have USD strength, plus political infighting in the UK, GBPUSD gets sold sharply, last night reflecting that seeing 1.3230 quickly change to 1.3110.

That is a large signal of GBP weakness, so the slide may continue towards that 1.3000 if the US Data is very strong this evening in the US session.

The Daily charts certainly point lower, but anything is possible in NFP US data week for the new month.

The prospect of delayed tightening (Bank Of England raising interest rates) is high amid the political uncertainty, so GBPUSD can see lower lows from here potentially.

AUD USD: 0.7840

The RBA did little to lift the prospects for a move higher in Aussie rates, keeping their tone in the RBA statement almost identical to September.

The Aussie has seen a gradual slide lower, from 8100 amid the USD strength in the market.
A great trade for September, seemingly continuing to start this month.

The Retail Sales data miss is another factor of energy waiting to play out in this pair moving lower, but the markets have not yet fully reacted, seeing AUDUSD sub 78c now.

The next moves for the US fed are likely to be a lift in rates in December, and markets have not waited to price that into the fair value of many FX majors, AUD being no exception.

The RBA putting the holding pattern in place, for the time being, has put the USD in the driver’s seat, so the AUD may find its way towards 7780 before any signs of a bounce.

Support and Buyers are likely to hold the AUDUSD level around 7800 leading into US Non-Farm payroll headline data at the end of this week.

A lot of stop orders may sit around 7750 so will be an interesting end to the week for the AUDUSD if the US Jobs data is solid, seeing AUD slide lower once again.

NZD USD: 0.7110

The NZDUSD had continued lower in Thursdays trading sessions, now clinging to the 7100 handle, just hitting a 90 day low.

The move higher in 10-year US treasuries boosted the USD and hit the commodity currencies such as CAD, AUD & dragging NZD lower too.

For NZDUSD a break below 7100 may start some large Offers back down even lower towards the 7000 handle for the Kiwi, in the short-term.

This pair is under extreme pressure, but bear in mind we may get Election results coming this coming weekend.

USD CAD:

VIX:

GOLD:

OIL (WTI):

BITCOIN (BTC):

Macro Themes in Play