Market Action

USDX: 92.35

Dollar Index traded down to see lows around 92.25 as the US Dollar sell-off carried on throughout all trading sessions.

The US Dollar is quite soft as Traders try to price in the forward guidance relating to the number of US rate hikes in 2018.

The US Dollar has had the door open for a pullback in this lighter trading volume period, but remember we have headline payrolls data next week.

Expect a slim range around 92.50 this week amid much lighter trade volume in the holiday period.

USD JPY: 112.95

USDJPY fell off a cliff yesterday as the Dollar selling combined with Nikkei 225 selloff.

I think the USDJPY pair can hold up towards 113.30 this week as market liquidity thins towards the quieter last week of this calendar year, but don’t expect much more.

The slide accelerated yesterday in the Asian session, printing a low of 112.60 before a reversal back to 113.

EUR USD: 1.1940

Euro was Bid higher like a steam train on Thursday, gaining traction above 1.1930 before fading out around 1.1960.

This move in Euro is a good reflection of the USD softness as the US Tax Reform story seems priced in, so EURUSD can make a run for 1.2000 without too much effort.

EURUSD certainly slowed down ahead of the key 1.2000 price point, as a firm ceiling was in place at 1.1960 as per the above.

I am maintaining my outlook towards 1.2000 target price range for EURUSD in the near-term, as we are seeing more and more revised forecasts lower for the USD outlook into 2018.

GBP USD: 1.3440

Sterling added 40 pips above the 1.34 handle, much like the Euro rally – it was fuelled mainly by the USD softness.

Theresa May will meet with Marcon from France regarding EU separation terms re Brexit, so this is still the big driver of the Sterling recovery.

GBPUSD volatility has slowed down a little, but overall it certainly still is displaying Bullish signs (of wanting to move higher).

I maintain my target of 1.3600 for GBPUSD particularly if we get Brexit progress in the positive direction.

In the meantime, expect the GBPUSD to close out this year 30 pips either side of the 1.34 price point, likely above.

AUD USD: 0.7795

Aussie Dollar traded solidly higher, grinding through key resistance at 7750 to find its way to 78c, before a firm fade out.

Notably, the AUD USD has benefitted like all of the Commodity currencies have against the USD, lifted by Gold & Copper steamrolling higher.

I think that this run-up in the Aussie Dollar can fizzle and fad back towards 7730-7750 (now that it has hit 78c).

NZD USD: 0.7095

Kiwi-Dollar another currency/FX pair benefitting greatly from the commodity block rally, essentially getting to 71c against the Greenback.

The NZDUSD may see some follow-through buying towards a ceiling of 7100 but I would suggest that this will fizzle out likely next week as the US tier one data is released possibly firing up the USD again., which is where we sit right now.

Can the NZDUSD power ahead, or will it turn south like I feel it can?

USD CAD: 1.2560

Dollar-CAD was one of the biggest market movers over the past few trading days, as I have been calling for the chart of the day to all of my Aussie & Singapore clients, fuelled by the Oil price rallying, Gold rallying and a softer USD generally.

The Bank OF Canada comments from last week talking of a ‘50 bps rate hike’ have not been forgotten, so the USDCAD is a reflection of CAD buying driving USDCAD lower towards my target 1.2650.

Watch for lower lows in my view as Gold squeezes higher, with no end in sight until 1.2500.

When USDCAD moves, it can do long runs as we are seeing this trading week.

VIX: 10.18

US Stocks have pushed up to dangerously high levels, dragging the VIX to all-time Lows, just above 10 again, but are we about to finally see some cracks appear in this rally?

The year-end volatility potential is always high, and the SP500 does look ‘Toppy’, so I still maintain my view that VIX will pop higher and breakout in a big run.

VIX is slightly above 10, but basically unchanged and looking to breakout higher, only question is when?
Certainly not this year.

GOLD: $1,295

Gold is trading solidly higher seeing yet another rally overnight to the benchmark 1300 level.

My year-end target is now revised to be 1295 as the softer USD has fuelled a move from 1268 to 1296 very quickly for Gold.

Gold has reflected the re-pricing in USD, as analysts scramble to estimate how many rate hikes are likely from the US for 2018.

Analysts are doubting the 3 rate hikes that we are expecting from the US Fed next year.

OIL (WTI): $59.90

Oil is solidly again, dangerously close to my $60 target for WTI, but drifted back ever so slightly in the US Session on Wednesday.

Price action suggests that we may see a bullish 2018 for Oil – getting bidders from the $59.50 level and then look to move towards $62 or $64 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 $59.50 level seems like a price magnet for a settled year-end close.

BITCOIN (BTC): $14,400

Bitcoin had a wobbly trading day yesterday, getting back from 16300 to lows of 13500 before flipping higher, again.

The BTC price seems destined to grind its way back towards $18,000 to close off this year, in my view, even if the rally is slower than earlier in December.

The slide lower yesterday was caused by the headlines around South Korea looking to “review cryptocurrency exchanges”.

That caused the sharp $2k drop but it has since recovered, which is why I am maintaining my bullish biased view.

The CME & CBOE Futures have seen an increase in Contracts traded as the huge 40% price swing would have had a lot of bargain hunters running to their Buy button.

The buyers seem happy to step in each time there is a blip lower, so I do anticipate a grind higher slowly towards $18,000 from here.

Macro Themes in Play

• Commodity Currencies powering higher against the USD, notably USDCAD slammed down through resistance
• Sterling back to 1.3440 & Euro back to 1.1940 as USD Softness is clear
• Gold moving towards $1,300 as the USD selling maintains momentum