Trader Talk

USDX: 93.25

USDX recovered nicely in the London & US trading sessions to start this week.

The Dollar got a lift by a slight uptick in treasuries as well as the news that a planned diplomatic meeting in Russia between the US & North Korea would take place. Mixed reports followed this actually with North Korea media agencies saying that they are not ready to sit down with the US.

Another story lifting the USD was the speculation that Donald Trump likes Taylor as the news US Fed Chairperson, and he should be a Dollar-positive choice.

Resting now at 9325 means that a drift back above 9350 is likely.

USD JPY: 112.20

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 112.50.

This pair was lifted above 112 as the speculation of the diplomatic US & NoKo meeting hit the newswires, but don’t underestimate the ability of the new Fed Chair story to also boost the USD, taking USDJPY higher again.

Dollar-Yen is very reactive to the North Korea tensions as the power of the Yen buying as a safe haven is enormous, so it must be noted that North Korea actually came back with a reply that referred to Nuclear war.

Markets ignored that as just “words” again, but the USDJPY can see a restrained range below 112.50 in my view because of the cautious trading vibe.

EUR USD: 1.1775

Euro dropped back to the 1.18 level on Friday and slipped further below that key handle to start this week.

The big data story dragging the EUR is all about the ECB’s next moves and an announcement regarding QE unwind. What that means is that the ECB have a number of options, such as changing the assets that they buy each month, not just strictly Bonds.

Furthermore, it has been seen that ECB Draghi may announce a program buying half the amount (monthly) but more details will play out in the coming days/weeks.

It is possible that the Bund yields dipping had a bigger impact but that is all pre-moves trying to price in the ECB changes that are due for likely 26th October announcement.

Whilst the EURUSD is under 118 it is liable for a slide lower amid growing Bids into the Long USD trade also helping pull EURUSD back towards 1.1730.

GBP USD: 1.3245

The Sterling came back off Friday’s highs amid USD buying seeing GBPUSD Offered back to lows around 1.3230.

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, firmly back to 1.3250 as NO News came out of the Brexit story overnight that was resoundingly positive.

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.

What that means is barring any clear progress in the UK & EU Brexit negotiations that GBPUSD will move lower as the USD strengthens up, but the likelihood of positive Brexit announcements does also seem on the cards, making this week make or break for the GBP.

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: 0.7835

AUDUSD is trading very heavy off highs after this morning’s RBA meeting minutes on the Asian open.

The RBA commentary is mixed but also the Aussie is hurt as the USD buyers get back into Long Dollar positioning.

I noticed today on the Reuters terminal that Copper has traded higher for 5th straight day but also today at 3year tops, so that can be a good indicator of solid demand from China’s growth story in construction flowing through.

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 in the London session, but finding support at 7800 is likely.

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

The Aussie treasurer was out yesterday 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.

The 7820-7880 should only break if the Aussie Jobs on Thursday are outside the projected outcomes.

NZD USD: 0.7170

The NZDUSD followed the Aussie dollars momentum trading higher last week and also poked its head briefly above 7200 this morning after the solid NZ CPI data hit.

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 in the election, but a lot of speculation still rolling through, so expect more volatility as the markets digest the power of that increased CPI number for New Zealand.

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.

The NZDUSD needs to recover back above 7200 for that to be possible, only likely on NZ Election results or a USD pullback.

USD CAD: 1.2530

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.

USDCAD bounced back through that 1.2550 level in Monday’s trading sessions but is steady now.

A reset lower may be very likely if the Oil rally plays out the way I am seeing it this week.

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: 9.91

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

VIX moved slightly higher but not significantly at all overnight still lingering below 10.

I would have thought that the fear index would have seen better price action volatility amid the positive headlines for the North Korean peninsula but there isn’t much space for VIX to move lower!

Furthermore, once the NoKo media responded so quickly saying that they are not, in fact ready for Diplomatic talks with the US, it undermined the credibility of that original story and Stocks carried on.

GOLD: $1,293

Gold slammed back from 1306 yesterday to lows around 1290 amid Positive USD moves and a knee-jerk reaction to the positive NoKo diplomatic headline release.

The spike lower in Gold was a sharp move and opens the door for the Buyers to step in, that seems far more likely in a light US data week.

I will look for a break above 1310 before following this Trend on the upside, and similarly look for a break below 1283 before getting too enthusiastic about getting on the Sell bandwagon.

These sharp knee-jerks a very out of the blue so breakouts with a continuation look more likely to pay dividends with a longer run move in price action.

OIL (WTI): $51.80

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 Iraqi PM sending forces to Oilfields has already slowed down production but the Oil price hasn’t responded. That can change.

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.

Also, the midweek Oil Inventories always have an impact too, so I am remaining Bullish on WTI from 51.70-51.80.

BITCOIN (BTC):

Macro Themes in Play