Trader Talk

USDX: 94.45

Dollar Index punched lower as the news of the likely delay of the US Tax Reform in 2019 hit the newswires overnight.

USDX may trade in more restrained ranges this week ahead of next week’s US Inflation data release, however, this developing news around the Tax Plan possible delay can drag USDX lower in the short-term.

That has played out exactly as I have been saying, with yesterday finally seeing a jolt lower in stocks, and the USD, seeing USD Index back to 94.35.

It does look heavy and may trade down lower from here, but with a bank holiday in the US today, we are looking ahead to next week.

USD JPY: 113.40

Dollar-Yen has been a basket case this week, but downward momentum played out strongly on the London & NY dealing sessions yesterday.

USDJPY has suffered at the hands of USD selling, caused directly by the delay in the US Tax Reform, which was always a key risk to derail the US Stocks rally.

The BOJ commentary this week plus the soft US Tax story is likely enough of a catalyst to see USDJPY Long traders unwind positions, seeing possible moves below 113 to close off this week.

EUR USD: 1.1650

Euro came alive yesterday, benefitting as the USD was sold off mildly.

I can’t see a plus 1.17 move but can see a lift higher to finish this trading week, perhaps more likely is 1.1650-1.1680 but first, we need a spark.

I am watching the Bund yields closely for the possible spark to fire up this EURUSD pair.

The Fed Funds Futures are still pricing the US Rate hoke around 97% for December, so upside may be capped in the above range.

GBP USD: 1.3140

Sterling was wobbly in Thursday’s trade, lifting towards that familiar 1.3150.

The support kicked in at the 1.3100 level and GBPUSD potentially formed a base here, although it does seem like a directionless pair once again.

The recovery sees GBP back around key level but I am doubtful that it can achieve the 1.3200 level, so look for a gentle and settled move to rest around 1.3150 leading into the UK this evening on the London open.

Really no change from yesterday in terms of sentiment so the range should be limited to 1.3050-1.3150 this last part of the trading week.

AUD USD: 0.7675

The Aussie came down slightly after this morning’s release of the quarterly Monetary Policy Statement, showing some downwards revisions.

Once again, the RBA commentary referred to the higher AUD hurting the growth story, but we have heard that line for a long time now.

The RBA commentary was much of the same but the Bulls were left looking for more, as RBA highlighted increased property debt risks for Australia.

I still favour a move higher back to 7730 but there are not too many catalysts for a break of that 77-handle resistance.

NZD USD: 0.6950

The NZDUSD is holding around the 6950 price area.

What the RBNZ did change this week, that was significant, is the overnight cash rate outlook (forward guidance) which was the hawkish reason behind the jump higher and it has held onto those gains.

I can see a turn lower next week, but I don’t think we will see any wild moves today with the US bank holiday and the markets still catching their breath from the wild volatility in the Equities markets overnight.

I think it can get close to the 70c handle but then likely to turn back (lower) from there, as we head into next week’s crucial US Inflation data (Thursday).

USD CAD: 1.2670

Dollar-CAD nailed the Bulls in the past week, as it has sustained the slide lower, now heading towards 1.2650.

Over the mid-term it still looks a great trade to consolidate higher from here, but the Oil rally has been very supportive for CAD, as has the Gold rally.

I cannot see an end in sight for the Oil rally (towards $60) so expect USDCAD to be a little restrained in the 1.2650-1.2750 range.

VIX: 10.50

US Stocks finally showed a sign of cracking lower overnight, spurring up the VIX higher.

I wonder if some of the Trade-War commentaries from Donald Trump’s visit to China today can spur a change of theme in US Equities and jolt the VIX?

Not likely, but the US Tax Reform story being delayed WILL hurt the stock rally.

Expect the VIX to trade higher looking towards 13.

GOLD: $1,287

Gold saw a nice continuation higher yesterday, punching to 1288.

The USD will be looking for the Inflation data next week to stop this Gold move towards $1300.

The extended timeline on the US Tax Reform will add a lot of buyers to Gold.

Watching that story very closely.

Traders are looking ahead to the US CPI next Thursday, but expect the US to raise rates in December regardless, holding GOLD back to around 1250 to close off this year in my view potentially.

Short-term gains are likely though.

OIL (WTI): $57.10

Oil has seen a great deal of upward momentum shift strong Bids higher the past week or so.

Last night we saw another strong move in the US session, trading to 57.40 before settling.

The continuing story around OPEC planned production cuts, particularly from Russia & Nigeria, was a big driver for Oil price rally, but it seems that the Saudi political upheaval is also seeing bids higher in Crude and WTI prices.

Price action suggests that higher highs will maintain, towards $60.

BITCOIN (BTC): $7,310

Bitcoin traded back off 7900 levels quite fiercely on Thursday, grinding lower all day towards 7000.

The momentum turned to profit taking very quickly, as the reversal was also fierce.

CME Futures & ETF for Bitcoin are both also coming soon so my call of $7,500 by year-end is very much in play.

Today, we will likely see Buyers step in again at $7,250/ $7,300 and push through $8,000 next week in my view.

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Macro Themes in Play

• US Tax Reform is a huge story, the pushback in timeline will hurt USD
• Equities seeing wild volatility, more to come
• Oil still looks strong and Gold coming alive as USD softens