Trader Talk

USDX: 93.20

Dollar Index reflected the clear USD bullish move yesterday after the US Tax Reform moved to a floor vote in the Senate.

This can still fall over at the next stage, but in overnight trade for USD index, we saw a lift from 92.50 levels to 93.20 as markets took this move forward as Dollar positive.

I favour a possible fade-the USD scenario over the next 2 trading weeks with this event risk before the inevitable US Interest Rate hike in December, but in the short time it is likely to craw towards 93.50.

USD JPY: 111.55

USDJPY was wild on Tuesday, trading lower for almost all of the Asian session before a complete reversal in the US dealing session.

North Korea launched another ICBM missile which landed in the Sea of Japan, but traders shrugged that off and Bid up the USD on the optimistic headlines surrounding the US Tax reform.

The focus was also on the comments from new Fed Chair4 Jerome Powell, who spoke in relation to the US inflation target, a lot.

For that reason, expect a consolidative move around the 111.50 price range today, until Janet Yellen speaks later in the US session, but I maintain my Bearish outlook for the week ahead.

EUR USD: 1.1850

Euro slid back to the 1.1850 price point as the USD was Bid in the US & London trading sessions.

There is the possibility of the US Tax Reform progress next week spurring a huge spike in EURUSD either way, meaning 1.17 or 1.20+, but last night we saw a glimpse of what to expect if the Tax Reform passes, USD UP, EURUSD down.

I expect a breakout later this week or next, however, in the meantime, a likely holding pattern around 1.1850 seems obvious, before a move back under 1.1750.

GBP USD: 1.3365

Sterling decided to have a furious whipsaw last night in the London session, which I have been suggesting would happen over the Brexit progress headlines.

Essentially the UK have agreed to the huge Euro based divorce settlement figure, which stopped the huge sell down in GBPUSD (trading from 1.3320 to 1.3220), reversing back higher above the 1.3330 level to close off.

GBPUSD for mine, is still the strong trade of this week ahead of tonight’s BOE Carney speech plus MPC (Monetary Policy Committee) member speech, looking for 1.3350+ levels.

The GBPUSD is crawling higher but still needs a big positive Brexit headline to jolt above 1.34 and on towards 1.35, which is how I can see this coming fortnight playing out.

AUD USD: 0.7605

The Aussie ended yesterday unchanged around the 76c handle due to no key AUD or CHINA data.

The AUDUSD stall at 76c seems like it wants to punch lower but support has formed, and the slide has stopped for the time being.

We did see some North Korean headlines again pop their head up, which hurt the risk appetite in the market, so AUD pulled back, but mildly, not wildly.

The Aussie 2-year SWAP spread has turned negative so expect the selling to resume for AUDUSD, so expect the Aussie to trade back to 7530-7550 without too much effort – this is not to be underestimated.

NZD USD: 0.6900

The NZDUSD was a big surprise mover (higher)on Monday, as it retook the 69c handle and has held those gains ahead of the RBNZ speech today.

The grind higher was supported by the Financial Stability Report earlier this morning, but the Kiwi-Dollar is settled now around the 69c level.

The Kiwi range should maintain 67.50 – 69c to close off this year even with the US Tax Reform story looming large over the US Dollar sentiment.

USD CAD: 1.2815

Dollar-CAD strongly Bid higher, in a USD bull move as the positivity hit the headlines surrounding Tax Reform moving to the US Senate.

There are huge risks this week instore for CAD as the Friday data is firstly met with big moves likely in the OIL price, but the bid through the 1.2800 handle at a fast pace is a warning shot for those Buying CAD.

OPEC on Thursday can sway the OIL momentum wildly, which drags around the CAD sentiment too.

We need a break down below 1.2750 to see the momentum shift lower, and on the upside, 1.2850 should be a firm ceiling of resistance.

VIX: 10.03

US Stocks were lifted by Financials overnight, after Jerome Powell (New US FED CHAIR) remarked that the financial rules are already “tough enough”.

The US Tax Reform in its current form, it very unlikely to provide a result for Team-Trump, but the US market loves a USD rally on any optimism, so stocks were strong, VIX holding around 10.

Expect the VIX to trade higher as it always spikes (sharply) when the levels are too low for too long.
I still anticipate a lift to 14 or higher this year.

GOLD: $1,294

Gold started this week to look very bullish, lifting to a whisker shy of $1,300, but is still undecided on string momentum, either way.

The trading range for Gold has tightened up around the $1,295 level as it awaits the USD sentiment from this week’s risk events.

This can go either way, so be nimble, but I prefer the upside on a possible USD disappointment out of the US Tax Reform story, which I just cannot see passing in its current form.

The extended timeline on the US Tax Reform will add a lot of buyers into Gold – I certainly favour long positioning in GOLD (with the risks of the US Debt Ceiling also looming) looking for $1,320, over the next 2 to 3 weeks, as per the above.

OIL (WTI): $57.80

Oil is holding just under $58 ahead of the OPEC meetings all day (tonight).

I maintain bullish bias for WTI looking for a breakout above $59.

Price action suggests that we may consolidate around the $58 level for now, still looking to spike higher to end this year towards $60 or even higher with Crude Oil Inventories this week as well as OPEC.

BITCOIN (BTC): $9,900

Bitcoin has crashed higher lately, and holding just below the benchmark $10,000 price barrier.

The CME Futures coming hopefully next month will see the money flowing into Bitcoin shift from Retail speculation to the institutional side.

Crypto investors have raced into the bargain levels around $8,250 late last week, so I expect buyers to push this to $11,500, but the question is, will we get a pullback first? Doesn’t seem that way.

The tentative price action ahead of $10k is not to be trusted, as I still feel a slide straight through $10,000 is imminent.

Macro Themes in Play

• Jerome Powell remarks on Inflation and US Tax Reform Story moves to Senate floor
• USD Traders ignore the latest missile test from North Korea, seeing USDJPY higher
• Oil & Gold steady, Sterling a huge mover with Brexit talks getting clearer