Monday Market Action

USDX: 93.90

Dollar Index traded quietly on Friday before a late session lift to spike towards 94 to close off the week.

The big story creating the main sentiment for the USD is the Tax Reform progress.

Whilst it has passed the first stage, it is still a very big potential catalyst for more USD pain if that fails.

The dollar-index may find support around 93.50 and is likely to be capped under 94.50 unless some resounding positives roll out of the progress in the US Tax Reform package.

USD JPY: 112.15

USDJPY made its way down to 112 after the softer USD tone played out against the JPY on Friday.

US Stocks finally drifting lower later last week helped support the USDJPY being Offered lower.

Likely to find support from here and drift back to 112.50.

EUR USD: 1.1750

Euro back to 1.1750 very sharply to start this week as the news rolled in surrounding Angela Merkel’s attempt to form a new government failed.

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.

A slide lower on the European open today is quite possible, with stop orders sitting on the 1.17 handle potentially accelerating the slide before a bounce back.

GBP USD: 1.3200

Sterling got a lift to 1.3250 as the USD softness played out on Friday, across all major FX counterparts.

We have seen a fast reversal back to 1.3200 to start this week but the upside potential is quite high regarding the Brexit negotiations progress.

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

UK Inflation report hearings are released in tomorrow’s London Trading Session, so look for some potential bullish moves from here, propelled by that report.

AUD USD: 0.7555

The Aussie is basically sitting 20 pips either side of 7550 after the slide back from 76c later last week.

The likelihood of the US rate hike next month is being priced at around 92% probable, so I do expect the Aussie to make its way to 7500 before the year-end.

I think that the 2018 picture for the Aussie is one of a recovery from the 75c base, back towards 77c as Australia chews on the idea of lifting interest rates too.

NZD USD: 0.6800

The NZDUSD was Offred consistently, finding its way back to 68c flat to finish last week.

This has been a grand-scale slide off highs earlier this year, and I have been saying for some time that the 6800 handle acts like a price magnet.

The Kiwi needs a catalyst if it is to recover, but last week displayed some very dovish signs.

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: 1.2780

Dollar-CAD got a lift to close off last week, in what was a volatile trading week for Oil, Gold & USDCAD.

USDCAD can easily get back towards 1.2850 assuming we get a surprise uptick in USD sentiment surrounding the US Tax plan progress through the US Senate.

I prefer to look for some more stable price action around the 1.2700 handle actually, as Gold towards $1300 is supportive for CAD, pulling USDCAD possibly back to 1.2700.

VIX: 11.43

VIX slipped back under 12 on Friday despite the US Equities trading softly!

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.

Expect the VIX to trade higher looking towards 14 or 15 over the next 5 weeks.

GOLD: $1,293.50

Gold lifted to 1297 on Friday as the USD sentiment is under pressure. Again.

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 weeks.

OIL (WTI): $56.70

Oil is turning north, now heading fast towards $57 marker.

Price action suggests that we may consolidate around the $56.50 level for now, still looking to grind higher to end this year towards $60, as I have been saying since $52 broke through.

BITCOIN (BTC): $8,020

Bitcoin shot up through $8,000 on Friday ($8,030 all-time high), before a swift retreat in the London session back towards $7700.

The pullback was short-lived and weekend trade has jumped Bids back to 8000 again, a very bullish sign of what’s to come.

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 fortnight.

Macro Themes in Play

• EUR hurt by political jitters and uncertainty -EURUSD Offered 1.1745.
• USD Traders on a knife edge surrounding Tax Reform progress.
• Gold aiming squarely at $1,4300 level as USD softness seems common