Market Action

USDX: 93.05

Dollar Index fell to the 93 handle overnight and has stalled.

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 and lighter volumes than normal.

USD JPY: 111.30

USDJPY came under huge pressure this week, but has stalled at 111 amid the Japanese bank holiday yesterday.

I think we will see a very quiet end to the week for USDJPY as the US are off, 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 to close off the week.

The focus shifts to the US Debt Ceiling and Tax Reform next week.

EUR USD: 1.1850

Euro got a strong Bid higher yesterday climbing back to 11850 amid stronger PMI data out of the Eurozone plus the German elections are getting clearer.

There is 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.

GBP USD: 1.3305

Sterling traded very quietly across all trading sessions yesterday, holding around the 1.33 handle.

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.

No change to yesterday’s comments.

AUD USD: 0.7625

The Aussie came alive and so did Copper yesterday, again.

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, so the reversal was sharp as the USD bulls unwound some short Aussie positioning.

The likelihood of the US rate hike next month is being priced at around 95% probable, but the forward guidance into 2018 rate hikes is much lower after FOMC meeting minutes, dragging the USD back, across the board.

The Aussie 2-year SWAP spread has turned negative so expect the selling to resume for AUDUSD, so expect the upside to be capped under 7650.

NZD USD: 0.6885

The NZDUSD saw an uptick yesterday towards 69c but the softer Trade Balance data for NZ this morning settled down the buying momentum.

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.

The Kiwi range should remain 67-69c to close off this year.

USD CAD: 1.2715

Dollar-CAD saw some action overnight as the Canadian data was not supportive, but Oil & Gold are strong.

Firstly, USDCAD dribbled down to lows around 1.2670 then lifted back up sharply as the CAD was sold.

Quite a volatile pair to trade lately, so now that we have done a price re-set to 1.27 levels, expect the volatility to calm down.

The USD will get back into the Driver’s seat for this pair next week.

VIX: 9.88

VIX unchanged ahead of the US Thanksgiving Day bank holiday.

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.
I still anticipate a lift to 14 or higher this year.

GOLD: $1,291

Gold performed steady price action as the FOMC meeting minutes was the big story to digest earlier this week.

Gold looks now to be in a holding pattern, awaiting US Tax Reform progress.

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): $58.40

Oil has traded solidly 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 $58 level for now, still looking to grind higher to end this year towards $60 or even higher.

All of the reading I am seeing about Oil outlook looks to support a further grind higher.

BITCOIN (BTC): $8,080

Bitcoin came back to 7900 early today in Asian trade, but has bounced back mildly higher once again.

Crypto investors have raced into the bargain levels, so I expect buyers to enjoy the $8,000 entry level.

We are now aiming for the psychological $10,000 level.
Only a matter of time, in my view.

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 fortnight.

Macro Themes in Play

• EUR strong amid German elections and local PMI data
• USD Traders dissecting the FOMC meeting minutes cautious tone towards inflation
• Gold higher, Oil firm amid USD heavy trading sentiment.