Trader Talk – Cut Through The Market Noise

USDX: 93.00

USDX traded mixed on Friday as traders digested the US data reports that still see 83% probability of a December rate hike for the US.

A volatile and whipsawing USDX range is to be expected between 9250-9400 in the aftermath of the miss on Retail Sales expectations & CPI.

The 93 level is holding for now as Janet Yellen reassured the markets on Sunday (US time) that the wage growth numbers last fortnight were pleasing, and essentially, she gave a lot of assurances that the Inflation will get on track, even if the latest data was a miss of target.

USD JPY: 111.90

USDJPY made its way back off last week’s highs as the US 10-year yields dipped after a slightly disappointing inflation number.

The risk sentiment has not been helped at all by the ongoing North Korean headlines as they obviously dislike the planned US/South Korean military exercises that are planned.

USDJPY is trading in a very restrained trading range between the key 111.80 and 112.50 as we head towards a light US data week ahead, so consolidation is likely around the 112 handle.

EUR USD: 1.1815

Euro dropped back to the 1.18 level on Friday but held its ground around that price area support.

The big data story from Friday was surrounding the Retail Sales & CPI both coming in below analysts’ expectations, seeing EURUSD spike briefly to 1.1880 before turning south.

The Eurozone final inflation numbers for September will be released tomorrow but no change is expected, so I anticipate a narrow 50 pips range around the 1.1830 level for EURO against the greenback.

Overall the positioning should be LONG in Euro heading into Oct 26th ECB meeting, with my feeling being that we see another run higher above 1.1900.

Technically we need to see a break above 1.1885 for a move higher, but I feel that it will happen over the next two trading weeks.

GBP USD: 1.3295

The Sterling was a wild child last week, slamming lower from 1.3250 to 1.3120 before a complete reversal higher on softer USD.

The GBPUSD lifted off the canvas to rise back towards 1.3300 even in the face of ongoing muddled Brexit negotiations, even dealing as high as 1.3330 before settling down again.

This level may be a great level to get back into Short Sterling-Dollar positions for the year-end run higher for USD led by Fed moves in rates versus the ongoing Brexit uncertainty.

This week has the event risk of UK CPI (Tuesday in the London session) and is tipped to be solid, so I expect a high chance of disappointment and remain bearish, looking for 1.3150.

AUD USD: 0.7880

AUDUSD got a huge lift on Friday as the as the USD softness unwound a lot of Short AUDUSD positioning.

I noticed today on the Reuters terminal that Copper has traded higher for 5th straight day but also looking at the overbought indicators on AUDUSD being stretched, giving a mixed signal for the outlook from 7880.

I have seen many times in the past that the key 7850 level usually acts like a price action magnet so expect a drift lower today as we head into China PPI & CPI data in Asian session trading.

The longer-term outlook will solely rest on the Aussie Jobs data on Thursday, as we have a light US data week ahead.

Furthermore, the RBA meeting minutes hit the newswires on the Asian open tomorrow so I am being brave actually and therefore positioning Short AUDUSD looking for a move back towards 7800.

The Aussie treasurer was out today with comments that interest rates are at “appropriate levels for the current Australian economy” which relieves some pressure on the RBA to move too fast.

NZD USD: 0.7185

The NZDUSD followed the Aussie dollars momentum trading higher on Friday with strong Bids through the 7150 level to hit highs around 7200.

The Kiwi elections are dragging on in terms of the side dealing required to form a Government which may play out with Kiwi-Dollar strength in my view.

I can see a run up towards 7300 for NZDUSD once we finally get a result but expect more volatility tomorrow early in the Asian session as we get the CPI data for New Zealand, which is expected to be solid.

I can possibly see 7350 this week as more switching of sentiment may play out in the long KIWI positioning in Spot FX & Futures markets.

USD CAD: 1.2480

Dollar-CAD is in for an interesting week as we have Gold rallying, Oil seeing a big story today out of Iraq (which should boost Oil very sharply), as well as softer USD in the very short-term in the wake of the data miss on Friday.

1.2480 seems like a level that won’t last based on my experience in this pair.

A reset lower may be very likely if the Oil rally plays out the way I am seeing it this week, plus the continuation of the USD softness potentially.

This Friday we get Retail Sales & CPI for Canada to top off what I expect to be a big trading week for the CAD, so look for CAD strength to possibly drag USDCAD back towards 1.2365.

VIX: 9.61

The Stocks rally is still very much in play in the US Equities markets, driving the fear index/ VIX under 10 again.

The war of words is at a new high for North Korea but Traders seeking Yield in Stocks shrug that risk off and continue to pile into the Long Stocks positions.

The tax reform speech from President Trump today is holding up the sentiment for the trump trade of Long Stocks, but he needs a win, and not sure that this Tax Reform will work in the current state of US politics.

In the meantime, the softer yields in US Treasuries should help stocks rally higher, but where is the Top?

GOLD: $1,303

Gold traded higher again on Friday, Bid above 1300 and aiming at 1310 on the back of a dip in Treasury yields and some soft USD sentiment.

Follow the trend for GOLD, that’s the only way as we are poised to see +1310 now that the CPI & retail sales underwhelmed based on analysts’’ expectations.

Buyers may see a continuation grinding higher in Gold rather than sharp moves because we have a thin economic calendar for the USD this week, except for the FOMC speakers.

I will look for a break above 1310 before following this Trend.

OIL (WTI): $51.90

Oil is trading higher to start this week due to news of Iraq PM spurring actions in the middle east plus the fears of the US imposing more sanctions against Iran.

The $52 barrier should breakout very quickly and Oil may run up towards $55 early this trading week.

We do not often see big headlines with this much potential to lift Oil prices land in the same week, so be careful this week, as volatility should be high.

I will be very surprised if the $53 handle doesn’t appear very quickly, but this is a developing story out of Iraq.

BITCOIN (BTC): $5,710

Bitcoin ripped higher last week as I called that it would, above $5150 then accelerated on towards resistance at $6000!

The softening of stance from China regarding Bitcoin gave a huge Rally enthusiasm which was like a runaway train.

It has settled back to 5700 but likely will get through the $6,000 barrier in coming days/weeks.
We have a huge Bitcoin event at Sydney Hilton Wednesday 25th October.

Reach out to me to secure your place.

Macro Themes in Play

• USD softens and Gold lifts above $1300 after key US data misses slightly.
• Oil markets getting interesting ass headlines drive Bids higher.
• EURO gives back gain ahead of ECNB later this month.