Daily Outlook

Daily Outlook – Tuesday 13^th June

What Happened to start the week > Top 3?

>GBP Turns lower post-election as Theresa Mays position unstable.

>USDJPY leads the USD weakness. Tech Stocks take a hit. US rate Hike fully priced in?

>Volatility gains, leading me to see big moves ahead in FX this week.

Outlook

+Volatility (VIX Index) came alive yesterday and is now up to 11.46. Higher trading ranges in FX majors & Cross pairs expected…

+Traders are looking to the US FOMC rate hike and then press conference for forward guidance.

+Huge week of central bank action from US FOMC, BOE, BOJ & SNB.

Data & Event Risk? :

1) (GBP) UK CPI on the London open (5.30pm Tokyo/6.30pm Sydney/9.30am London)

USDX: 97.17

USD Index essentially treading water on Monday holding firmly on the 97 level.

Until we see the USD index breakout of 96.50 / 98.50 markets seem somewhat cautious.

This week may be the catalyst.

USDJPY: 109.90

Dollar-Yen took off lower throughout the London dealing session and remained offered in New York too.

The US 10-year yields traded slightly higher yesterday, so no real reasoning for the slide in USDJPY, but it does signal to me that more downside is very likely.

I can see more moves lower leading into FOMC but Janet Yellen’s wording in Thursday press conference, will completely be driver for USD direction.

EURUSD: 1.1195

The Euro was Bid higher most of Monday trade in a quiet Asian session. It got as high as 1.1230 before very quickly dipping under the 112 handle once again.

With a lack of EU data this week, the USD will be driving this pair leading into FOMC super Thursday, in the aftermath of ECB last week

GBPUSD: 1.2670

Sterling seemed like it was going to resilient in the post UK election trade kicking off yesterday.

No economic data of critical importance was out yesterday but Cable decidedly turned south and traded lower, taking GBPJJPOY along too. GBPUSD got down to the lows which we saw over the UK election, which from my experience signals more pain ahead.

I feel that Theresa May’s job security is extremely low and a knee jerk selloff of Sterling may be the first reaction if she is under pressure to resign.

Brexit talks are stalled and I can only see downside (for GBPUSD) coming from that uncertainty.

AUDUSD: 0.7545

The Aussie is being very resilient, trading in a stubborn 7530 / 7550 range to kick off this wild week of data.

Aussie Jobs data lands on the news wires late morning in Sydney on Thursday, after the US FOMC assumed rate hike so the AUDUSD may see the 7400 handle again later this week.

The risk sentiment has held up quite nicely throughout last week’s long list of risk events.

NZDUSD: 0.7210

The kiwi traded to a 3-month high last week to 7200 and has held very firm since.

Much like the Aussie the NZDUSD grinded higher slowly and hasn’t looked like turning back. The kiwi may trade into the 7250 area this week but more likely to range trade until midweek.

USDCAD: 1.3305

USDCAD was slammed lower yesterday as Oil recovered 1% but mainly caused by speculation of the first rate hike in 7 years for the Canadian Dollar.

USDCAD has been very happy holding around 1.3440 to 1.3520 but broke down yesterday and fell out of bed.

The long-term charts point to a slide towards 1.3030 area but more likely a settle around 1.3250 likely in the near term.

The Oil recovery story also plays a part in driving USDCAD lower, as Oil rally spells lower lows for USDCAD.

VIX:11.46

Volatility Index came alive yesterday which is timely considering that this week has huge data event risk with US Fed rates on Thursday, US FOMC press release following that, Bank Of Japan on Friday, Swiss National Bank also, as well as Aussie Jobs & Key Retail & CPI data from the US.

All of this event risk spells much larger breakout ranges ahead, likely this week in FX.

Naturally we can see Volatility jumping back up this week with a lot of action from central banks to offer forward guidance.

GOLD: $1,265.40

Gold was looking for a reason to sell off last week, and Gold didn’t disappoint.

Slamming back from just about 1300 as the markets essentially shrugged off the US Comey Testimony.

USD yields will be in focus this week so we can Gold having another wild week ahead. Gild drifted lower yesterday but no significant change in theme.

Oil (WTI) : $46.23

Oil was Bid back up to 46.70 area yesterday after last week’s bottoms of 45.20. More direction will stem from

Oil Inventories data set for release mid-week.

Macro Themes in Play

• Markets are looking to the key working in the US FOMC press conference to provide markets with forward guidance on USD outlook, but in the meantime, we still have Geopolitics dominating risk themes, particularly for the UK.

GBP Turned negative yesterday, along with some noteworthy moves lower for USDJPY.