Market Action

USDX: 93.90

Dollar Index has battled with the 94 handle and has traded back off that ceiling a few times this week.

The big story creating the main sentiment for the USD is the Tax Reform progress., which I still fear will flop next week.

Whilst it has passed the first stage, it is still a very big potential catalyst for more USD pain if that fails, driving a possible run back to 93 for USDX.

USD JPY: 112.25

USDJPY came alive on Monday following the Treasuries rally, but at 112.70 turned back for the most part yesterday.

USDJPY taking a run to 112 looks obvious from here, then it’s over to the US Tax Reform story.

We have an aimless trade direction because we are not likely to get any clear pathway for the US Tax Reform until next week, after the US Thanksgiving Day bank holiday.

For that reason, expect a move to 112 then possible support to allow drifting price action around 111.80 – 112.20.

EUR USD: 1.1740

Euro under pressure after the German election headlines yesterday, but the trading range has narrowed significantly in all trading sessions yesterday.

I can see this story dragging on the EUR in the very short term, possibly as low as 1.1700 before bargain buyers might step in.

There is still quite a strong chance that a breakdown under 1.17 occurs this week, but it is slow moving awaiting more clues and direction from the German election, so I won’t get too excited.

Anything positive from that story will see a bounce back towards 1.18 very quickly, even though I favour the downside play.

GBP USD: 1.3250

Sterling came back off this week’s high after the Inflation Report release in the London session yesterday.

Furthermore, GBPUSD got an uptick back up to 1.3250 ahead of the Budget release tonight – so expect this level to hold for most of today.

Can we finally break 1.33 and gain upward momentum that lasts again?

Quite possible and a great way to play may be the EURGBP as per my Weekly Outlook Video for easyMarkets on Monday, as well as the Long side ideas around GBPUSD.

We just need some trading patience with these trades heading into the US Bank holiday and further tax reform developments expected next week.

AUD USD: 0.7585

The Aussie came off it’s 3-month lows overnight on the back of the RBA Governor speech in the London session.

He fired up the outlook for AUD but I am not convinced that this will last from 7585.

The likelihood of the US rate hike next month is being priced at around 90% probable, so I do expect the Aussie to make its way to 7500 before the year-end.

There are a lot of super-bearish calls on the Aussie after this week’s Quarterly report, but I maintain my view that we are headed for 75c then a 2018 recovery story back towards 7750.

The Aussie 2-year SWAP spread has turned negative so expect the selling to resume for AUDUSD.

NZD USD: 0.6840

The NZDUSD got a lift off the 68c base yesterday in a soft USD move more than a Kiwi-Dollar move.

I can see the Kiwi upside being capped firmly under 6850, so expect some possible selling pressure to close off this week.

The Bank holiday in Japan on Thursday and the US on Friday thins out the market liquidity, so a familiar slide lower for NZDUSD seems most likely.

From these levels, the only saviour in a slide to 6750 will be the US tax story to flop totally, which is certainly not guaranteed.

Look for 6750 this year before buyer’s step in.

USD CAD: 1.2770

Dollar-CAD took a hit lower overnight in the NY session amid USD softness.

Gold ticked back above $1,280 and Oil back above $57 supports the CAD rally, hence USDCAD was Offered lower sharply.

I prefer to look for some more stable price action, in a grind higher to 1.2800 before real direction becomes clearer, inside a familiar range of 1.2700-1.2850.

Quite a volatile pair to trade lately.

VIX: 9.73

VIX slipped back under 10 overnight because SP500 and the DOW got a solid uptick.

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.

It will be a shock to the markets if it does get passed, and will then lift SP500 wildly, VIX could see a move back under 9.70, but I favour the Tax Plan to miss the mark.

Expect the VIX to trade higher looking towards 14 over the next 4 weeks on the US Tax Story falling apart, along with Equities.

GOLD: $1,282

Gold performed solidly amid the USD soft tone ion overnight dealing, seeing a move above $1280- again.

This was a good example of the USD sentiment having a swift impact on GOLD futures positioning, and I am calling a move to $1,320.

The extended timeline on the US Tax Reform will add a lot of buyers into Gold – I certainly favour long positioning in GOLD looking for $1,300, over the next 2 to 3 weeks, as per the above.

OIL (WTI): $56.45

Oil has settled back above $57, and staring at the OPEC commentary and further cuts prepared may keep this momentum turning higher-highs out.

Price action suggests that we may consolidate around the $57 level for now, still looking to grind higher to end this year towards $60 or even higher.

BITCOIN (BTC): $8,075

Bitcoin came back from 8200 to 7750 amid a reported theft of $31M worth of Crypto, which may become a more familiar story in the future of cybercrime.

That can cause some negative sentiment and jolts lower in Bitcoin, but we must commend the recovery yesterday.

The pullback was short-lived and weekend trade has jumped Bids back (above) 8000 again, a very bullish sign of what’s to come for the year-end trade.

Crypto investors have raced into the bargain levels, and we are now aiming for the psychological $10,000 level. Only a matter of time, or are we set for another correction?

I remain very bullish towards $10,000 price target after the fact that traders have shrugged off the pullback coming on the back of the cancelled Bitcoin fork last week.

Macro Themes in Play

• AUD 2-year yields turn negative but AUDUSD whipsaws on RBA comments
• USD Traders looking to FIOMC meeting minutes ahead of Thanksgiving Day holiday.
• Gold higher, Oil higher and Copper very strong in commod’s.