Trader Talk

Daily Trader Talk – Wednesday 19^th July.

What Happened on Tuesday > Top 3?

> Major USD selloff sparked by Trumps Healthcare Reform bill failure

> Gold pushes higher as markets reprice USD lower

> Euro & AUD sharply higher against USD

Outlook

+ Tier 2 US data tonight & Oil Inventories

+ Aussie Jobs data tomorrow will be key for a run to 0.8000 or reversal

+ Markets looking ahead to key Central Banks: BOJ & ECB on Thursday

Data & Event Risk Today?

• (USD) US Building Permit Data– 10.30pm Sydney.
• (OIL) Oil Inventories – 12.30am Sydney.

USDX: 94.50

The Dollar Index fell out of bed yesterday as the failure of Trumps proposed Healthcare Reform casts doubts on the ability of the proposed new Tax reform to come into reality.

The timing is not good on the back of weaker than expected Retail Sales & Inflation data to close off last week. More pain in store for the USD.

USDJPY: 111.95

Dollar-Yen traded to a 30 day low of 111.70 yesterday after peaking around 112.80 in the Asian session before the USD sell off kicked in.

USDJPY most likely will trade lower today in a continuation of the USD Bearish outlook, before the BOJ policy announcement tomorrow.

The 2-day Bank Of Japan meeting is in full swing and crucial for Yen outlook as always, but no groundbreaking changes are expected to come out of that.

I think a move to 111.15 is very likely to finish off this week.

EURUSD: 1.1550

What a great trade that was yesterday, buying EURO against the capitulating USD.

Once the news of the US healthcare reform failure hit the newswires in the Asian session, the Euro had no hesitation at Bidding straight through the 1.1500 handle and made it as high as 1.1580 before resting at 1.1550.

I love this trade Long but careful of the ECB talking it down tomorrow in the London dealing session, during their press conference.

GBPUSD: 1.3055

Where do we start for the Sterling?

A roller coaster Tuesday is the best description, starting with a solid Asian trading session seeing strong Bids higher from 1.3000 all the way to highs around 1.3120.

Then came the weaker than expected CPI data to kick off the London session and to kick off the reversal for GBPUSD back down to 1.3000, before resting at 1.3030.

Still a great upside potential now that the USD weakness & Fiscal uncertainty is in full swing.

AUDUSD: 0.7930

The Aussie Buying was unrelenting to a 2 year high yesterday, moving from 7790 to 7930 as Iron Ore was Bid and the RBA minutes inspired huge waves of sustained buying.

The AUD is a runaway train and likely to test the key 80 cent barriers, possibly as early as tomorrow when the Aussie Jobs data is released.

I am not rushing to the BUY button on this one, as the Aussie jobs data could be the perfect excuse for the market to take profits and move the AUDUSD back towards 7850, but let’s wait & see.

NZDUSD: 0.7350

The NZD was a wonderful Trade of The Day yesterday as the SHORT NZD traders loved the soft Inflation data that propelled NZD to jawbone sharply lower.

That was just in time before the Healthcare Reform headlines hit, and the Sell button was hit for USD, causing a sharp reversal higher in Kiwi.

Bottom line, the NZDUSD started at 7360, crunched to 7260 then did a U-turn back to 7350.

USDCAD: 1.2630

USDCAD had restrained trading ranges in yesterday’s dealing sessions as USD softness was the theme across the board.

The Canadian CPI data is out on Friday but that is a long way off in this trading environment.

It’s hard to sell USDCAD at these levels as it’s extremely extended, so I favour a bounce and buying it back to 1.2700.

VIX: 9.89

Volatility Index is maintaining its low sub 10 levels, as we again saw Nasdaq stocks trade higher, surprisingly.

I am stalking the US equities markets for a correction and thought last night may have been the start for the Fear Index to spike higher, but it is still very low.

GOLD: $1,242

Gold was a great BUY yesterday and should continue higher to 1250 without a great pause.

The USD has fallen out of favour and until that changes, Gold will remain Bid.

Oil (WTI): $46.46

Oil is pretty much unchanged after a small blip higher in the US session.

We see the Oil inventories data tonight so unlikely to run up towards $48 until that data release.

I have the patience of a monument on this LONG trade, looking for Inventories to fuel a spike higher.

Macro Themes in Play

• USD Offered sharply, across the board.
  • EUR looking strong ahead of ECB super Thursday, and the AUD is a runaway train benefitting wildly from the USD crunch.