Midweek Market Action

USDX: 93.85

USDX traded mixed on Tuesday, wiggling around the 9380 level as US yields rose above the key 2.4% level.

The speculation of the US Tax Reform is adding optimism to the USD outlook and is the main theme playing out in the Stocks & USD moves.

The probability is now around 99% for a December rate hike, so USDX moving towards 95 is quite possible, as it really hasn’t fully moved on that as yet, but it seems the 94 level may crack today.

USD JPY: 113.85

USDJPY filled the Monday open Gap and then turned north again yesterday, hitting highs around the 114-resistance level.

Now with PM Abe winning the weekend election, the Yen should remain softer for longer with the continuation of Abenomics.

Dollar-Yen was solid on Tuesday, tracking to rise in treasuries for most of the London & US dealing sessions.

I still favour a play towards 114.50 and then perhaps on towards 115.

EUR USD: 1.1755

Euro traded quite resiliently yesterday against a strong USD.
The LONG EURUSD trade seems quite crowded, holding EURUSD around 1.1750 leading into tomorrow’s key ECB meeting.

The range for EURUSD should stick around 1.1750 – 1.1800 with intraday sentiment and treasury spreads until the ECB is clear on the exact QE unwind game plan.

Expect extreme volatility on Thursday and a breakout of this range potentially making lower lows.

The risk is certainly skewed to the downside, but needs a break down below 1.17 to really unwind Long positions sharply.

GBP USD: 1.3120

Sterling took a hit against a strong USD yesterday, moving from 1.32 to 1.3120 in the blink of an eye throughout London dealing.
The downside pressure is growing in the GBPUSD but all this pair needs is some positive headlines surrounding Brexit and it will lift sharply. That doesn’t seem close though.

I favour a move back towards 1.3050, which is now only 70 pips away for this slide.

I think in the short-term you have to stay with the downtrend betting on the US Dollar winning this battle, particularly as PM May was on the newswires overnight with comments like: “No deal is better than a bad deal” regarding the Brexit process.

AUD USD: 0.7740

The Aussie slammed under 7750 price support in early Asian session dealing today on the back of the softer than expected Australian CPI data.

The key level of 7750 is still likely to hold even with this dip to lows around 7735.
We may see some buyers step in to lift back towards 7750 even with this data miss.

The AUDNZD flow was solid yesterday as this pair was Bid to highs around 1.1287 before turning back on this data missing expectations.

The Aussie is under pressure with this CPI number but support should step up shortly as it approaches key Option barrier levels.

NZD USD: 0.6895

The NZDUSD is on a knife-edge this week after NZ Election result puts Labour into power and puts NZDUSD dangerously close to breaking down towards 6850.

Yesterday saw sharp moves as the new Labour NZ team announced proposals that will hurt the RBNZs ability to raise interest rates unless the NZ labour market is robust.

These hurdles should keep the NZD Offered today and for the coming trading days as we see the cabinet announced for NZ Labour Government today.

The NZDUSD is likely to run down to 6850 then settle down.

USD CAD: 1.2680

Dollar-CAD provides a big opportunity this week in my view, as the USD find more and more Bidders with the US Tax Reform gathering pace.

I don’t think that the Bank OF Canada can move on rates this week, so I expect the USDCAD to lift higher.

USDCAD is cautious around 1.2680 and tonight will be make or break for key support price points.

The USD Strength is really shining though in this pair and the 1.2700 resistance has stepped up, but may not hold as a ruin towards 1.2750 still very much on the cards. Possibly even into the 1.28’s.

My weekly outlook video this week for easyMarkets looks at the Long USDCAD trade being the 2nd best idea after EURUSD.

VIX: 11.16

US Stocks traded higher last night late in the US session, but VIX pretty much unchanged.

VIX finally came alive earlier this week, but still very low in this environment. If the US Tax Reform story falls over, VIX will spike as the Trump-Trade is unwound and Stocks finally correct back.

I am still wagering that we see a spike to 13 or 14 (or even higher) led by a serious stock market selloff before this year ends.

GOLD: $1,276

Gold is trading very heavy this week, but clinging onto key 1275 supports.

Gold was Bid back above $1282 but then turned back as the US 10-Years lifting sharply in US sessions trade yesterday.

If the hawkish incoming Fed chairperson is appointed, namely Taylor, we may see Gold back at 1250, but with Powell the favourite, Gold should hold around 1280 levels.

OIL (WTI): $52.45

Oil was Bid yesterday and looks like moving higher again. Tonight’s Crude Oil Inventories may be the catalyst for moves towards $54.

Price action suggests that a new support base at $52 will help Oil prices lift again, in bullish signs.

The range for Oil may reset to $52-$55 depending on tonight’s data release & month-end positioning in the Futures markets.

BITCOIN (BTC): $5,470

Bitcoin trading aggressively lower yesterday as the Bitcoin Gold fork caused a reset in positioning for the Long traders.

A move to $5000 is likely before a reset in the uptrend returning.
Certainly seems like it wants to continue lower in today’s early price action.

Let’s see how the price action performs at $5,000. More buyers may step in at that key level in my view, for another turn higher again back to $6,000.

Macro Themes in Play

• GBP Still soft, seeing no Positive Progress from Brexit negotiations.
• EURO cautious ahead of the ECB tomorrow, USD Still quite strong across the board
• Aussie soft and back to key 7730 supports after CPI miss.