Trader Talk

USDX: 92.80

Dollar Index dipped to lows around 92.50 before a small recovery in overnight trade.

The main risk theme here is the progress in the US Tax Reform, which can certainly go either way.

The 92 level looks liable to break down unless the US Debt Ceiling & Tax Reform produce an optimistic result for the USD bulls.

I favour a possible fade-the USD scenario over the next 2 trading weeks with this event risk before the inevitable US Interest Rate hike in December.

USD JPY: 111.15

USDJPY traded softly on Monday which is a reflection of the mixed bias surrounding the USD outlook in this current market.

I think we will see a very quiet start to the week for USDJPY ahead of something resounding regarding the US Tax Reform and the Senate vote.

For that reason, expect a consolidative move around the 111.00-111.50 price range today.

The focus shifts to the US Debt Ceiling and Tax Reform this week so a move towards 110.00 is quite possible with the door wide open for a USD disappointment, which we saw a little overnight as USDJPY dipped under 111.

EUR USD: 1.1905

Euro drifted back to the 1.19 level in the US trading session amid a small pushback from the USD.

There is the possibility of the US Tax Reform progress next week spurring a huge spike in EURUSD either way, meaning 1.17 or 1.20+.

Anything positive from that story will see a bounce back above 1.20 very quickly, even though I favour the downside to play out back under 1.18.

I expect a breakout this week, however, in the meantime, a likely holding pattern around 1.1850-1.19 seems obvious.

GBP USD: 1.3320

Sterling is unchanged from this time yesterday but has seen some mixed action in the middle.

GBPUSD took off higher, seeing a fresh high around 1.3380 before doing a U-turn back towards the 1.33 level. It seems to be following EUR slightly softer in the very short-term.

The softer tone in the USD is yet to fully play out in my view.
The GBPUSD is crawling higher but still needs a big positive Brexit headline to jolt above 1.34 and on towards 1.35, which is how I can see this coming fortnight playing out.

AUD USD: 0.7605

Copper tilted sharply lower on the London open yesterday, and the Aussie looks heavy at these levels.

The AUDUSD stall at 76c seems like it wants to punch lower but support has formed.

We did see some North Korean headlines again pop their head up, which hurt the risk appetite in the market, so AUD pulled back, but mildly, not wildly.

The Aussie 2-year SWAP spread has turned negative so expect the selling to resume for AUDUSD, so expect the Aussie to trade back to 7530-7550 without too much effort.

NZD USD: 0.6925

The NZDUSD was a big surprise mover (higher) yesterday, as it retook the 69c handle in London & US session dealing.

The grind higher was continued on today’s Asian market open and with a lack of big event risk catalyst, NZDUSD seems destined to float around 6900.

The Kiwi range should remain 67.50 – 69.50c to close off this year even with the US Tax Reform story looming large over the Kiwi-Dollar sentiment.

USD CAD: 1.2760

Dollar-CAD was whipsawing yesterday, up & down like a yo-yo.

First move was lower, heading to the key support at 1.2670, but once it hit lows around 1.2680 it completed reversed, sharply.

There are huge risks this week in store for CAD as the Friday data is firstly met with big moves likely in the OIL price.

OPEC on Thursday can sway the OIL momentum wildly, which drags around the CAD sentiment too.

Quite a volatile pair to trade lately, so now that we have done a price re-set to 1.27 levels, I expect a breakdown under 1.27 as Oil should get an Uptick in my opinion (to above $60 WTI).

VIX: 9.87

VIX basically trading in a holding pattern, still at crazy-low levels under 10.

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: $1,294

Gold started this week to look very bullish, lifting to a whisker shy of $1,300.

The trading range for Gold has tightened up around the $1,295 level as it awaits the USD sentiment from this week’s risk events.

This can go either way, so be nimble, but I prefer the upside on a possible USD disappointment out of the US Tax Reform story, which I just cannot see passing in its current form.

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): $57.80

Oil decided to trade back under $58 overnight as rumours were on Reuters regarding the ability of Russia to meet the planned OPEC production cuts.

This Thursday is enormous with the OPEC meeting planned, and further cuts prepared may keep this momentum going, so I am not buying into rumours on Oil.

I maintain bullish bias for WTI.

Price action suggests that we may consolidate around the $58 level for now, still looking to spike higher to end this year towards $60 or even higher with Crude Oil Inventories this week as well as OPEC.

BITCOIN (BTC): $9,650

Bitcoin has ripped through orders at $9,000 over the weekend and become tentative $100 either side of $9,600.

The CME Futures coming hopefully next month will see the money flowing into Bitcoin shift from Retail speculation to the institutional side.

Crypto investors have raced into the bargain levels around $8,250 late last week, so I expect buyers to push this to $11,500, but the question is, will we get a pullback first?

The tentative price action ahead of $10k is not to be trusted, as I still feel a slide straight through $10,000 is imminent.

Macro Themes in Play

• Bitcoin holding onto huge rally gains, around $9,600.
• USD Traders looking for more clarify from US Tax Reform plans
• Oil looks Bullish but is in for a Volatile week, Gold starting to show Bullish signs too