Daily Outlook

Daily Outlook – Tuesday 6^th June

What Happened on Monday >Fast Version > Top 3? 

>Middle East chess moves, as Saudi Arabia & neighbours cut off Qatar, Oil Dips Lower.
>Volatility is down, and so is the lead for Theresa May in UK Elections polling
>AUDUSD Bid higher along with GBPUSD even with soft UK data overnight.

Outlook
+Asian Session will be very interesting with Australia’s RBA likely to hold interest rates.
+Volatility (VIX Index) is still quite low but Asian session should see bigger moves in USDJPY & AUDUSD
+Traders seem happy selling the USD leading into Comey’s Testimony, UK Elections & ECB uncertainty.

Key Data & Event Risk? :
1) (AUD) RBA Interest Rate – 2.30pm Sydney

USDX: 96.80
USD Index held losses as traders sold off USD across the board, against all of the major currencies.

Notably was USDJPY holding losses and sticking to the 110.50 level.

USDJPY: 110.45
Dollar-Yen was sold off aggressively on Friday’s jobs report and held losses on Monday dealing sessions.

This is a very big signal of USD weakness leading into key event risk on Thursday – particularly the Comey testimony in relation to Donald Trump’s influence in FBI Director investigations.

As we felt late last year, the geopolitical headlines are driving macros for most markets.
The markets are wary particularly USD traders and we can see a shift towards the 110 level for USDJPY.

EURUSD: 1.1258
The Euro benefitted again yesterday as USD was soft.
EURUSD traded to 1.1290 before retracing a little to where we sit now.

Euro is in for a big week as markets are trying to decipher if the ECB will talk down the Euro and talk of Tapering off their easing program.

EURGBP becomes a very interesting cross pair this week as UK elections are looking very close, which affects the Brexit process and Euro sentiment too.

I still favour the upside for EURUSD.

GBPUSD: 1.2865
Sterling took off higher even though the Services PMI data from the UK was soft last night.
Fierce short covering of GBPUSD occurred, pushing the cable up to 1.2943.

This is a USD move along with Short covering before Thursday’s Election on GBPUSD trade and may very well likely turn around anytime before the UK elections become a clear result.

The upside above 1.3000 is possible but I still favour the downside on Sterling.

AUDUSD: 0.7448
RBA Tuesday today should see a HOLD for Aussie rates.

The Aussie benefitted yesterday on the back of a broad USD selloff.

I am not buying into the idea that Australia will benefit from Qatar being cut off as Australia is a key player in the global Liquefied Natural Gas (LNG) market along with Qatar.

I think the Aussie may spike higher then turn lower on uncertainty after the RBA holds interest rates.
A move above 7500 may happen this afternoon, but we are still leading into major uncertainty this week and the Aussie is vulnerable to reverse LOWER.

NZDUSD: 0.7125
The kiwi had the exact same trading momentum as the AUDUSD did yesterday.

The NZDUSD pair took on the 7150 level before only a mild pullback.
This price action seems unreliable & undecided in my experience.

USDCAD: 1.3477
USDCAD back down to sub 1.3480 after news from the Middle East regarding Qatar yesterday caused a spike higher of 1% in Oil before settling down.

The uncertainty here is very big and likely the trading range for USDCAD slows down now leading into Oil inventories numbers later this week (Wednesday US Session).

If Oil spikes higher and the Comey Testimony tests the USD, the USDCAD will make a run (lower) to 1.3400.

VIX:10.07

Volatility Index is treading water, making it hard for day traders to be certain of market direction or reasonable daily trading ranges.

With the ECB & UK elections this week, we are bound to see a breakout higher in volatility bringing a lot of trading opportunities, so the UK polls are being monitored very closely.

The lead is down to about 1% now so the UK election will be close and VIX will spike midweek.

GOLD: $1,280
Gold drifted around yesterday but essentially held onto the 1280 level very firmly.

This is another brilliantly clear indication of USD uncertainty.
Feels more like a holding pattern until the US Comey Testimony on Thursday clears up the market sentiment/direction.

Oil (WTI) : $47.30
Some wild price swings yesterday saw a 1% spike back to $48 yesterday on the news of Qatar being cut off by its neighbour nations including Saudi Arabi.

Traders very quickly resumed the selling pressure for Oil and we settled back in London dealing.
A bounce to $47.50 likely but not much more until the Inventories data hits the wires midweek.

Macro Themes in Play & Trade of The Day
• Dollar down and major uncertainty reigns supreme
Look for AUD to move back today after taking on 7500 handle.