Trader Talk

USDX: 93.45

USDX traded sideways in an expectantly quiet Monday trading day amid US Bond markets and Bank holiday.

The headline US jobs data (from Friday) helped to boost the potential for US rate hike in December, now priced probability around 87%.

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 between 9280-9450.

USD JPY: 112.50

USDJPY has traded quietly, drifting back off Fridays high of 113.45 back to 112.50 ahead of today’s Asian trading session.

Today also marks the anniversary in North Korea’s independence/ National day so I will not be surprised to see Rocket Man spark more aggression towards testing missiles in the Korean Peninsula, which will drag ion USDJPY and make Haven assets Bid higher (such as Yen, GOLD, CHF).

USDJPY is trading right at the key 112.50 level, looking towards another move above 113 in my view assuming we don’t see any serious provocations from North Korea, as we have the FOMC meeting minutes midweek.

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.

I expect this week to kick off with dealing around 30 pips either side of the 113 handle, with a move higher restrained until the CPI data on Friday, which analysts are expecting to be solid.

EUR USD: 1.1750

Euro traded very quietly on Monday to kick off this week where we have EcoFin meetings all day today.

There was a prepared speech from ECB member that commented on the possibility of reducing Bond purchases as early as next year, but EURUSD was restrained in a tight trading range around the 11750 level.

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: 1.3140

The Sterling was in a dangerous slide last 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 lifted off the canvas to rise back to 1.3150 in yesterday’s trading sessions as traders saw signs that the Brexit negotiations will become much more muddled if Theresa May is not at the helm.

I am not convinced that the Sterling has broken out of the Downtrend so I am looking for a renewed move lower from 1.3150 towards 1.3000 fuelled by the USD data side of this pair.

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: 0.7755

Last week saw a sustained slide lower for the AUD, signalling a market shift to bearish bias helped along by RBA comments.

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 positing 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.

The AUD was lifted slightly yesterday as the Iron Ore price was Bid higher by +0.9% for the day, in a very quiet Monday.

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: 0.7065

The NZDUSD traded virtually unchanged in Monday as to be expected in a US Bond market & Bank Holiday.

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.

The Kiwi has stalled at 7050 very firmly but that may be about to change as the FOMC minutes provide more USD sentiment.

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: 1.2545

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.

USDCAD is rife with speculation that after Fridays Canadian data that the BOC may delay their next rate hike until 2018.

There is however, still a chance of a remaining rate hike for the CDA, which will drive USDCAD sharply lower for this year, but I doubt it.

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: 10.37

The volatility index came alive a little yesterday as jumped back above 10 as the markets are nervous about the possibility of North Korean provocations which potentially can drag risk & stocks lower.

Janet Yellen has highlighted this week that the Fed is 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 hold on to the sub 10 levels.

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: $1,284

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 continued on Monday, lifting Gold from around 1277 to see highs of 1285.

Gold is a tough one this week as I can see potential North Korean risk off driving Gold back to 1300 but also, I can see that without those negative headlines in the markets Gold back under 1260 amid strong US CPI data to end the week.

Be nimble and follow the trend, that’s the only way.

OIL (WTI): $49.50

Oil saw a big turnaround from the key resistance at $52 last week but was virtually unchanged on Monday around 49.50.

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.
Yesterday had more speculation about Russia’s opinions for planned OPEC Oil production cuts through 2018, but Oil didn’t over react as US traders were away.

Will the Oil traders play catch up today?
Look for WTI to ping-pong between $49-$52 this week.

BITCOIN (BTC): $4,800

Bitcoin has traded strongly towards the $4,850 this morning as I awoke very early today to watch the latter part of a strong rally.

The Bitcoin rally may be attributed to the softer appetite for market risk, seeing BTC trade like a safe have strangely enough (considering that it is highly risky/speculative).

Quite a bullish signal that the 4850 level was trading in late New York trade, as traders shrug off the recent negative headlines about Bitcoin exchange bans in China & South Korea.

Where to next? This week looks likely that the $5,000 market will be broken through.
Technically I can see a run up to more like $5,150.

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

• Inflation Data for US this week will be a big player in market momentum
• Sterling Bounces back to 1.3150 but looking for Stability
• Risk tone is cautious amid North Korean potential flare-up