Trader Talk

USDX: 93.25

USDX has broken out higher as the overnight after Tuesday’s Hawkish commentary from Janet Yellen was enough for the USD bulls to buy Dollars.

Her comments set the backdrop for USD strength plus Trumps Tax Reform plans help give weight to the long Dollars trade.

Essentially Janet Yellen is pushing the idea of a Rate Hike for the US in December and seems to be pushing hard for that to happy with a small disclaimer on the inflation target of 2%.

Watch for higher highs on USDX in the coming weeks as we stare down the barrel of Non-Farm payroll data for the US next week too.

This rally may continue so look for USDX to point higher.

I remain quite Dollar bullish, particularly as Janet Yellen has signalled her intentions fairly clearly to the Dollar traders this week.

USD JPY: 112.85

USDJPY has taken off on the news of Janet Yellen talking about right time for moving on rates in December, plus the Tax Reform speculation is also gaining ground for the Dollar Bulls.

The news of the Russian meeting with North Korea regarding the NoKo crisis is a very big positive for the markets.

Like I said in the weekly video, USDJPY may make a run for 114. It is already taking on 113 having nudged to highs overnight around 113.25 as I called in last night’s LIVE trading webinar.

The USDJPY story is one with momentum building fast so let’s see how today plays out with BOJ Kuroda set to speak just about 3.30pm Tokyo time today, just before the London open.

Possibly a good chance to be positioned in this pair beforehand.

EUR USD: 1.1750

Euro took a hit yesterday as the ECB Draghi commentary hurt the outlook towards the ECB timeline to tweak their QE unwind/ Monetary policy, seeing lows in the EUR around 1.1715.

The big driver is also the German election results being a little unclear, plus the big rally in the USD.
EURUSD has bounced back to 1.1750 and may rest a little before a more decided leg lower, potentially towards 1.1680.

Please also note that ECB Draghi speaks again on Friday but generally we may see the USD take control of the momentum for EURUSD in the meantime before then, as with FOMC & Janet Yellen’s ability to spur USD buying.

GBP USD: 1.3400

The Sterling was alive yesterday breaking down under 1.3400 being a 2-week low.

The downgrade of UK on Friday hurt the GBP generally, in relation to their Brexit process, but the main catalyst in the GBPUSD being Offered, was the USD strength and the Theresa May speech in Europe on Friday evening, hurting sentiment & outlook.

The USD strength played out against the major FX pairs, and GBP was hit yesterday too.

A minor recovery off lows in GBPUSD around 1.3360 occurred to end the US dealing session, but very ominous slides lower in the price action yesterday suggest more downside may prevail.

BOE Governor Carney is set to speak on Thursday and may give more clues and lift the GBP if they choose to, otherwise, the USD data this week (and Yellen’s Speech) may drive the overall sentiment for GBPUSD towards the 1.3450 level.

AUD USD: 0.7850

The recent RBA Governor Lowe speech was still in Traders’ minds, but overshadowed somewhat as headlines became dominated by the Tax Reform speculation out of the US, driving Bids higher in USD & thus seeing AUD sell down towards 7830.

AUDUSD got slammed lower late last week, as RBA Governor Lowe talked about the RBA not needing to “..follow the US Fed in raising rates anytime soon..” but recovered a little on Fridays dealing sessions to end the week around 7950.

It has been a downhill slide so far this week.

The AUDUSD is trying its best to bounce back from that level I called being a key level (at 7830) but stalling at the 7850 (option) barriers today, in early Asian session dealing.

I think the RBA will move on rates, but not necessarily on Tuesday coming (next week) so the AUD may find its way towards 7800 before bouncing back.

I can see the AUDUSD bouncing back, but in the short-term, more downhill slide very likely, particularly if the RBA do NOT talk up the Aussie next Tue.

NZD USD: 0.7215

The NZ elections this past weekend was unconvincedly won by the Nationals, but not enough to govern outright, dragging NZD lower to start this week.

Uncertainty for a week or so will likely drag NZDUSD lower, but we have seen levels below 7200 already this week, which is an ominous sign for Kiwi, in the short-term. Yesterday it was crunched lower to see 7165 before a minor bounce back up.

NZDUSD is likely to benefit and get back up off the canvas when the Election results are clearer, but in the short-term, it seems that this pair is getting Offered because of the USD strength in the market.

Ranging between 7250 and 7100 looks likely in the coming week leading into key US jobs data next Friday.

USD CAD: 1.2475

Dollar-CAD got a lift to 1.2475 very sharply yesterday after the BOC Governor Poloz speech hurt the CAAD, plus the looming USD strength.

The FOMC delivered for the USD bulls so USDCAD lifted towards 1.2500 but fell & stalled just short of that level in the US session overnight.

If we see a miss in GDP data on Friday that will help support a bounce back for USDCAD in the near-term, above 1.2500.

I prefer to play on the long side of USD this week, so look for 1.2500 or even higher particularly as the FOMC & Janet Yellen may once again, lift the USD, leading into NFP week next week.

Until we get a breakthrough above 1.2515 the Average weekly range seems limited to 1.2400 -1.2600.

VIX: 9.87

The volatility index fired up by 6.5% earlier this week after the North Korean provocations and talks of shooting down US bombers, however, that story has quickly subsided.

VIX is still low and looking like a move higher imminent, or at least very possible if this combative exchange of words grows more & more serious but be careful as the Russian meeting with NoKo may fizzle out some of the aggression from the North Korean issue, holding VIX low.

Janet Yellen and her press conference earlier this week did spur some higher Volatility, but stocks seem fearless currently as we approach the next phase of levels for SP500.

VIX at this level usually signals that a sharp change is imminent so be nimble, and patient.

GOLD: $1,284

Gold jumped into action and slammed lower yesterday as the USD strength was underestimated in a big way, catching traders off guard.

The combined forces of North Korea simmering down the risk theme plus the USD Story, saw Offers in Gold sharply lower, from 1313 in a sustained sell down to 1284.

The US pathway towards another rate hike, in December, is the major catalyst in the sharp Gold selloff, and it may find support around 1285 but not for long.

I would prefer to say that the USD will win this battle thus crunching lower lows for Gold over the coming week.

OIL (WTI): $52.15

Oil found very solid support overnight gaining traction above $51.50 to make its way closer to 52.50.

The Oil Inventories data was supportive but the bigger themes for Oil are driving higher highs.

The $52 price area is always a key one (at least in recent times) so let’s see how this week plays out now that we are above $52 on the back of news surrounding Turkey looking to cut flow from the Kurdistan region.

I can see a potential move towards $55 or higher.

BITCOIN (BTC): $4,185

Bitcoin has traded sharply higher yesterday, as I called, up from $3700 towards that headline next resistance at $4370.

In the short-term, a break through the $4000 level is key for sustained moves higher, but we must be careful because Volatility is extreme, such is the price action back to 3900 after yesterday’s highs around 4260.

Where to from here? Buyers may nibble at this rally now that the $4000 level was breached again (on the upside) overnight.

Momentum can be seen in the 4-Hourly chart so I prefer to suggest that Buyers may step in again to Bid this back towards $4370.

Be careful, not for the faint hearted.

Macro Themes in Play

• Yellen & Trumps Tax Reform plans spur a Sharp USD rally
• USD pressing highs for the month as Tax Reform talks help USD, hurts GOLD.
• Euro spooked by the uncertainty around the German election, back to 1.1750.