Market Action

USDX: 92.85

Dollar Index traded steadily back off the 93.50 level midweek, seeing lows around 92.70 before a mild bounce.

The US Dollar is alarming soft amid all this hype surrounding the Tax Reform likely to pass through this week.

The US Dollar looks a little tentative and may likely trade in a narrow range from here with some traders doubting the impact of the new Tax Reform plans for the US.

USD JPY: 113.30

USDJPY looked bullish earlier this week, lifting to 113.60 highs and then drifted lower after the Bank Of Japan stood firmly on their same policy yesterday.

The Bank Of Japan didn’t offer surprises at all, and not expected to alter their path until 2019, so expect very little in the way of fireworks for USDJPY this week, on the Yen side anyway, so I expect a slow grind higher.

I think the USDJPY pair can hold up towards 113.50 this week as market liquidity thins towards the quieter last week of the calendar year.

EUR USD: 1.1865

Euro took out the 1.1900 level this week in a nice squeeze out of the USD buyers.

This move in Euro can certainly be seen as a great reflection of the USD softness as the US Tax Reform story seems priced in or has some level of doubt hanging over the impact.

Likely to see a quieter trading range to close out this week around that 1.1850 price point.

I am maintaining my outlook towards 1.1850 target price range for EURUSD for year-end, as we are seeing more Breaking News regarding the Catalan election move the Euro around.

GBP USD: 1.3385

Sterling traded back under the 1.3400 handle but then bargain buyers stepped up and drove GBPUSD back to 1.3385.

GBPUSD volatility is very high, and each time a blip lower is evident, the buyers race back into the Long side of GBPUSD.

I maintain my target of 1.3600 for GBPUSD particularly if we get agreement on the divorce from EU payment from the UK, within the coming weeks.

AUD USD: 0.7700

Aussie Dollar traded higher, taking out the 77c handle as the USD shorts squeezed.

Notably, the AUD USD has held above 7700 to open here in Asian session dealing today ahead of the final stages of US Tax Reform progress.

The RBA Meeting minutes were mixed as always leaving the USD in control for the most part on AUDUSD, but the Copper price rally through to 3.21 has helped support the commodity currency.

NZD USD: 0.7020

Kiwi-Dollar is firm, as are all of the commodity currencies (AUD-NZD-CAD), in overnight trading action.

The NZDUSD may see some follow through buying towards a ceiling of 7760 as I have been calling this past week, but I would suggest that this will fizzle out at the 7050/7060 area.

NZDUSD is a great reflection of the overbuying in the USD being reversed.

USD CAD: 1.2735

Dollar-CAD was absolutely crunched lower yesterday as the CAD retail sales and CPI data was a stellar result for the Canadian Dollar.

The Bank OF Canada comments from last week talking of a 50 Bps rate hike have not been forgotten, so the CPI data was the key link that saw USDCAD offered sharply from 1.2860 to see a low around 1.2700.

The USDCAD has dribbled back up slightly but we have more CAD data tonight so I favour a move towards 1.2650.

VIX: 9.62

US Stocks have pushed up to dangerously high levels, dragging the VIX to all-time Lows, sub 10 again.

The year-end volatility potential is always high, but we saw just a mild pullback off the record levels in SP500 overnight amid US Tax Reform.

VIX is slightly below 10, but basically unchanged and looking to breakout higher, the only question is when?

GOLD: $1,266

Gold is trading quite resilient this week, holding firmly towards 1267.

My year-end target of 1260 looks very likely to be the end of a volatile trading year for the yellow metal, even with the swift uptick to 1268 last night in the US session.

Gold has reflected the re-pricing in USD quite well this week, as the impact of the US Tax Reform is softening up the USD.

OIL (WTI): $58.25

Oil is trading back around $58.50 getting a leg up on the Crude Oil Inventories in overnight market action.

Price action suggests that we may see a bullish 2018 for Oil – getting bidders from the $58 level and then look to move towards $62 early in 2018 leading into the Saudi Aramco listing.

I have higher price targets but we won’t see that play out this year as trader’s wind down for the holiday season, this $58.50 seems like a price magnet.

BITCOIN (BTC): $15,600

Bitcoin kicked lower very sharply as I have been calling for a few weeks after a shocking headline surfaced that a Korean Exchange was hacked and has to subsequently file for bankruptcy.

The other huge driver in selling pressure, is a shift for some into Bitcoin Cash.

The BTC price seems destined to find lower lows in the very near term as it heads towards my target around $12,000.

The CME Futures have seen a soft open with price action seeing sellers dominate in what may be closely attributed to year-end profit taking as well as shifting into the Futures institutional positioning.

The buyers seem happy to step in each time there is a blip lower, but the recoveries seem far more shallow in the recent (3) trading days, which is a very bearish sign.

Macro Themes in Play

• USDCAD sees a huge swing lower amid Stellar CPI & Retail Sales for Canada
• Bitcoin selling pressure continues
• EURO becomes very interesting with the Catalan vote creating another Volatility talking-point in EURUSD.