Trader Talk

USDX: 93.40

Dollar Index is glued to this 93.40 level, which is a good reflection of the certainty around the USD currently.

The headline rate hike did little to lift the USDX because the forward guidance is unchanged regarding the rate hike path (3 hikes) in 2018, and the hike last week was so well priced in.

On Friday, we saw USDX bottom out again around 92.80 then get a sharp uptick towards 93.50 as the optimism surround the US tax reform boosted sentiment.

USD JPY: 112.70

USDJPY had another volatile end to last trading week, amid a swinging USD sentiment.

US 10-year treasury yields were a great reflection of the dynamic floating movement in the bullish/bearish bias in USD, firstly lower, then a reversal to close off a busy event & data risk week for US Dollar.

I think the USDJPY pair can find its way back above 113.00 this week after the Tax Reform progress looks skewed to the positive side clearly now.

EUR USD: 1.1765

Euro made its way as high as 1.1865 before a very sharp reversal to close off last week around 1.1740.

Last week marked another ECB meeting and their commentary plus the USD tone ensured very wild volatility, as traders try to decipher when the Eurozone can roll out of their QE.

I am maintaining my outlook towards 1.1750 range for EURUSD in the near-term.

That comment is based on the ECB Draghi quotes from last week in relation to “Stimulus needed for some time to come”.

GBP USD: 1.3335

Sterling was benefitting nicely from the Brexit process and BOE commentary last week.

Until Friday that is.

GBPUSD volatility changed dramatically on Friday, seeing a fast move from 1.3445 (down) to 1.3310 to close off the week.

I maintain my target of 1.3600 for GBPUSD particularly if we get agreement on the divorce from EU payment from the UK, however, despite this process moving to the next phase the Sterling took a firm hit.

Some analysts are suggesting that Brexit will not happen or will have to be changed from the existing proposals, but I don’t agree and think GBP looks cheap against the inflated USD.

AUD USD: 0.7650

Aussie Dollar spiked nicely on Thursday in Asian session dealing as extremely strong Employment data was released for Australia.

Notably, the AUD and cross pairs held onto most of the gains in what was seen as a Short Unwind for AUD after fairly heavy selling the past 6-8 weeks.

The Aussie Jobs data is done, so I now anticipate that the USD sentiment will take control, likely seeing another retreat towards 76c.

Copper also turned south after a bullish run-up last week.

NZD USD: 0.7000

The NZDUSD came alive last week, lifted as the news was confirmed of the new RBNZ Governor Orr.

The NZDUSD was my chart of the day midweek last week as the optimism saw strong Bids higher, taking out 70c level once again, after a long battle with upside resistance.

Maybe this pair can play out a run towards 7060 as my near-term target as some profit taking in USD longs can possible fuel this pair higher.

USD CAD: 1.2855

Dollar-CAD slammed lower midweek after CAD buying was in full swing.

Friday saw a reversal of that sentiment lifting UASDCAD back to the familiar 1.2850, amid a renewed optimism in USD from Tax Reform story.

The Bank OF Canada can jawbone the CAD but that rally was short-lived & overshadowed by the USD story.

We should see the 1.2850 level hold for now until; FOMC member Kashkari speaks midweek helping or hurting the USD sentiment.

VIX: 9.42

US Stocks holding up very well this year, and once again we are sub-10 on the VIX as SP500 Puts dip lower still.

The year-end volatility potential is always high, particularly as trades switch off for the year, but the US Tax Reform story still holds the cards on this move.

GOLD: $1,255

Gold rebounded beautifully last week after the USD was looking very bullish at one point seeing Gold as low as $1,236.

My year-end target of 1255-1260 looks very likely to be the end point of a volatile trading year for the yellow metal.

Gold has traded sideways since Thursday’s rate hike in a stalemate around 1255.

We may break out of this familiar range, but need a headline from US Tax Reform to be the main catalyst.

OIL (WTI): $57.50

Oil is trading back around $57.50 amid a nice bounce in sentiment to close out last week.

The US Crude Oil Inventories should have propelled a move above $58.50 last week, but volatility was wild and was tilted to the downside.

Price action suggests that we may consolidate around the $58 level this week as liquidity may thin out a little.

BITCOIN (BTC): $18,800

Bitcoin has now kicked off in the CME Futures trade as of today.
Over the weekend we saw a run up towards $19,500 in a very bullish move led by Friday’s price action.
The CME Futures have seen a soft open with price action moving back swiftly from 19250 to 17850 before another turn-around Higher.
For that reason, I can see no stopping this price action until $20,000, even with the current intraday pullbacks.
The buyers seem happy to step in each time there is a blip lower, with is a bullish pattern.
From 20K I can see a sharp reversal, as I have been saying for a few weeks.

Macro Themes in Play

• USD takes the positive tone from US Tax Reform again
• GBP volatile, back above around 1.3330 as GBP softens
• Euro resets back to 1.1750 & BTC seems like it wants to grab the $20,000 level.