Trader Talk

USDX: 93.60

USDX traded higher overnight amid commentary from FOMC speakers and supportive US data.

San Francisco Fed President Williams sees inflation rising to 2% and believes the Fed is able to raise rates (but was less specific on timing) noting that “Favorable employment numbers, combined with the findings on inflation and the steady pace of growth, are all behind my confidence that rates will need to rise to their new normal levels.”

The headline US jobs data was less than expectations, as to be expected from the US Hurricanes, but the Unemployment rate dropped as well as also positive Wage Growth signalled more bullish bias for the USD.

Dollar Index is holding around 93.50 ahead of this week’s key FOMC meeting minutes and Inflation data at the end of this week.

A volatile and whipsawing USDX range is to be expected.

USD JPY: 112.50

The Nikkei traded to a 1-year high on Friday, but USDJPY was very volatile to end last week.

USDJPY is trading right at the key 112.50 level, coming back off highs on Friday around 113.40.

The breakout higher on Friday was on the back of the Wage Growth & Unemployment data beating expectations, despite that headline new jobs data being a miss.

The growing speculation surrounding the next North Korean missile test did hurt the sentiment & risk appetite to open this new week for USDJPY, seeing lows of 112.30 before a bounce.

I get the feeling that markets will shrug off the latest Tweets from President Trump because they were mixed amongst more local drama’s, not just aimed at the North Korean issue/crisis.

I expect this week to kick off with dealing around 30 pips either side of the 113 handle.

EUR USD: 1.1740

Euro traded lower on Friday to 1.1665 as the US labour market data supported some USD optimism and strength.

With no key Eurozone data on this week’s calendar until ECB’s Draghi speaks on Thursday in the US session, this pair is driven by the USD sentiment.

The QE unwind will be in focus again in the coming weeks and traders will position for that accordingly, so watch the daily range to change for EURUSD remarkedly as we get a clear path for the next US Fed chair and timeline out of the ECB.

The rangebound Euro is likely to gravitate towards the 1.1750/ 1.1780 level ahead of the CPI data for the US on Friday, unless comments from Draghi drops a hint about QE unwind.

That being the case, the EURUSD will lift back above 1.1830 quite quickly.

GBP USD: 1.3090

The Sterling is in a dangerous slide this week, crunching lower amid Brexit negotiations dragging on, plus the speculation and uncertainty about PM Theresa Mays stability really hitting GBP last week.

The GBPUSD was my chart of the week last week in the easyMarkets Weekly outlook and it didn’t disappoint.

The sharp selloff continued to close off last week around 1.3020 before a bounce back up towards the 1.3100 handle.

Last week’s price action was a large signal of GBP weakness, so the slide may continue towards that 1.3000 or even lower if the US Data (Inflation data is Friday evening in the US Session) is very strong.

The Daily charts certainly point lower, but anything is possible when such a sharp selloff has occurred.

The prospect of delayed tightening (Bank Of England raising interest rates) is high amid the political uncertainty, so GBPUSD can see lower lows from here potentially.

AUD USD: 0.7775

Last week saw a sustained slide lower for the AUD, signalling a market shift to a bearish bias.

The Aussies sell down through to key support at 7750 was driven by the twin themes of strong USD plus the RBA giving some bearish signals in relating to their attitude towards raising rats for Australia.

The Retail Sales data miss is another soft sign in the data points for Aussie Dollar trader’s as they reassess their positioning in AUDUSD leading into this week’s FOMC data which will affect the US rate hike outlook almost as much as the CPI data will.

Support and Buyers are likely to hold the AUDUSD level around 7750 leading into US Inflation headline data at the end of this week, which is forecast to be very solid for USD.

I won’t be surprised if we get a bounce to 7800 but the USD can pull the AUDUSD back towards 7700 to finish this week.

NZD USD: 0.7070

The NZDUSD had continued lower to finish last week, heading for that headline 7050/ 7000 price level, as traders took the Non-farm payroll data as Dollar positive last Friday, hurting NZDUSD.

Like I said last week, this pair was driven by the USD sentiment.

The move higher in 10-year US treasuries boosted the USD and hit the commodity currencies hardest, such as CAD, AUD & dragging NZD lower too.

This pair is under extreme pressure, but bear in mind we just got a little more clarity from the NZ Election results which may be supportive for NZD bargain buyers.

The charts display a solid bounce off 7050 support lines but only mildly, with the potential for more downside still quite possible in my view foe the week.

The 0.7000 level will be a tough area to break down below so sellers may be patient on this pair and wait for better entries before downtrends resume.

USD CAD: 1.2540

Dollar-CAD was bid higher solidly on Friday, getting towards 1.2600 as the USD buying kicked into gear across the board, particularly hitting the Commodity currencies lower.

The Oversold nature of this pair is enormous, so the USD buyers are getting positioned in this pair, but the rally last week was quite strong so upward momentum is now in full swing.

If we see a miss in CPI data on this coming Friday that will help support a move towards 1.2450, but markets are poised for the opposite – a solid Inflation number for the USD.

I prefer to play on the long side of USD this week, so look for 1.2650 particularly as the FOMC speakers talked up the USD late last week and we get the FOMC meeting minutes (midweek) also.

VIX: 9.65

The volatility index traded slightly higher on Friday after a solid 3 day rally in Stocks, seeing new All-Time highs.

Janet Yellen has highlighted this week that the Fed are on track to lift rates again for the US in December, and markets are still rushing into the high yield trade buying more of SP500 and the Dow, seeing VIX dip lower.

The long stocks trade is a crowded position but structurally it must turn back and lift VIX back towards 12 or 14 in my view.

GOLD: $1,277

Gold traded as low as 1259 on Friday as traders took the US headline Jobs data as dollar-positive.

After some very strong North Korean headlines over the weekend, Gold found support very quickly, but in fact, that recovery happened in Friday’s late trading session after the US data was digested.

The US Jobs data will need to be poor for USD to give Gold a lift, but I am not confident that is how tonight’s data will play out.

I can see Gold moving back towards 1255 as the USD Bids higher still, particularly as the US Inflation data is now more critical than ever, and like to be a Solid number (on Friday).

OIL (WTI): $49.50

Oil saw a big turnaround from the key resistance at $52 last week as headlines dominates the sentiment in traders positioning.

The midweek Crude Oil inventories data for the US may be supportive and may hold price around the $50 mark, but Oil seems much more headline-driven in relation to the next OPEC production cuts.

I am confident that we will get back above the $50 level this week, but not sure it can maintain.
We may see some indecisive price action from Oil until the next key OPEC headlines are released.

Look for WTI to ping-pong between $49-$52 this week.

BITCOIN (BTC): $4,600

Bitcoin has traded strongly towards the $4,600 in a strong move on the back of North Korean sentiment and BTC growth.

Quite a bullish signal back in this market as traders shrug off the recent negative headlines about Bitcoin exchange bans in China & South Korea.

We would have to favour another un to $5,000 again, or even higher as buyers seem to have firmly started the buying again.

Technically I can see a run up to more like $5,150.

Bitcoin is trading LIVE now on the easyMarkets proprietary Web platform, so your live charts will display all of the usual goodies for technical analysis.

We have a huge Bitcoin event this month on Wednesday night, at Sydney Hilton 25th October.
Reach out to me for more info please.

Macro Themes in Play

• USD traders see the Jobs Data as Dollar-Positive
• Inflation Data for US this week will be a big player in market momentum
• Sterling very soft (Lower) and EUR turns north again