Trader Talk

USDX: 93.15

Dollar Index collapsed lower, reflecting the sharp USD selloff overnight.

The big story was the concerns regarding inflation in the FOMC meeting minutes which is not about hindering the December US rate hike, but the forward guidance for the ability to move on rates multiple time throughout the 2018 calendar year ahead.

The 93 level looks like it may be the new support, so I can’t see that breaking down, particularly ahead of the Bank holiday in the US tomorrow.

USD JPY: 111.25

USDJPY came under huge pressure as the USD sold down through key levels.

I think we will see a very quiet end to the week for USDJPY as Japan are off today and the US are off tomorrow, but also the Tax Reform progress is unlikely to change until next week.

For that reason, expect a consolidative move towards 111.50 today, then a quiet range.

EUR USD: 1.1815

Euro got a strong Bid higher yesterday in the in US session amid USD selling.

There is the possibility of the US Tax Reform progress next week spurring a huge spike in EURUSD either way.

Anything positive from that story will see a bounce back towards 1.19 very quickly, even though I favour the downside to play out back under 1.17.

There is some Tier 2 Eurozone data tonight on the London open, so expect some volatility, but last night’s move was all about the USD forward guidance.

GBP USD: 1.3315

Sterling came alive in a move higher that could be the sign of more to come.

As per my Weekly Outlook Video for easyMarkets on Monday, I pointed out that the GBPUSD was at 1.3640 just 2 months ago, so watch out if the Brexit story is positive (and it is about to possibly get some positive headlines around the increased UK payment).

The GBPUSD took out the 1.33 handle and may form a base here for more runs higher towards 1.35 in my view.

AUD USD: 0.7615

The Aussie came alive and so did Copper yesterday, well Bid higher after being oversold lately.

The RBA speech on Tuesday did refer to the next move for the RBA to be an increase of rates, but that wasn’t the main catalyst here, it was USD sentiment turning negative.

The likelihood of the US rate hike next month is being priced at around 90% probable, but the forward guidance into 2018 rate hikes is a little lower after FOMC meeting minutes.

The Aussie 2-year SWAP spread has turned negative so expect the selling to resume for AUDUSD, more likely next week though.

NZD USD: 0.6875

The NZDUSD got a lift off the 68c base yesterday in a soft USD move more than a Kiwi-Dollar move.

I can see the Kiwi upside being capped firmly under 69c, so expect some possible selling pressure to close off this week, amid lighter volume with the US bank holiday.

From these levels, the only saviour in a slide to 6750 will be the US tax story to flop totally, which is certainly not guaranteed.

The Kiwi range should remain 67-69c.

USD CAD: 1.2700

Dollar-CAD took a hit lower overnight in the NY session amid USD softness.

Gold ticked back above $1,290 and Oil back above $58 supports the CAD rally, hence USDCAD was Offered lower sharply.

Quite a volatile pair to trade lately, and expect more of the same in tonight’s session as we get the Canadian Retail Sales data.

The slide has stopped at 1.27 for now, but the US Debt Ceiling and Tax plan pressure may drive USDCAD under 1.2650 again soon.

VIX: 9.88

VIX holding low sub-10 overnight because SP500 and the DOW were resilient even with the USD sell down.

The US Tax Reform in its current form, it very unlikely to provide a result for Team-Trump, so the potential for US Stocks to give back some of this year’s gains is very high, but the rally grinds ahead in the mean-time.

Expect the VIX to trade higher as it always spikes (sharply) when the levels are too low for too long.

GOLD: $1,291

Gold performed solidly amid the USD soft tone ion overnight dealing, seeing a move to $1295.

This was a good example of the USD sentiment having a swift impact on GOLD futures positioning, and I am calling a move to $1,320.

The extended timeline on the US Tax Reform will add a lot of buyers into Gold – I certainly favour long positioning in GOLD (with the risks of the US Debt Ceiling also looming) looking for $1,320, over the next 2 to 3 weeks, as per the above.

OIL (WTI): $58

Oil has settled back above $58, and staring at the OPEC commentary and further cuts prepared may keep this momentum turning higher-highs out.

Price action suggests that we may consolidate around the $57.50 level for now, still looking to grind higher to end this year towards $60 or even higher.

The fast moves to $58 are a bullish signal, but no surprise to me, as I have been calling $60 since we broke out of $52.50.

BITCOIN (BTC): $8,250

Bitcoin came back from 8200 to 7750 amid a reported theft of $31M worth of Crypto, which may become a more familiar story in the future of cybercrime, but that story has been fast forgotten.

The pullback was short-lived and weekend trade has jumped Bids back (above) 8200 again, a very bullish sign of what’s to come for the year-end trade.

Crypto investors have raced into the bargain levels, and we are now aiming for the psychological $10,000 level. Only a matter of time, or are we set for another correction?

I remain very bullish towards $10,000 price target after the fact that traders have shrugged off the pullback coming on the back of the cancelled Bitcoin fork last week.

Macro Themes in Play

• AUD jumps with Copper rally and Soft USD
• USD Traders dissecting the FOMC meeting minutes cautious tone towards inflation
• Gold higher, Oil firm amid USD heavy trading sentiment.