Trader Talk

USDX: 92.80

Dollar Index traded very quiet, as expected in thin holiday vols.

The US Dollar is quite soft as the US tax Reform is passed, but most of the benefits are front-loaded and already priced in.

The US Dollar looks a little tentative and may likely trade in a narrow range from here with some traders doubting the impact of the new Tax Reform plans for the US, and how that may play out in real GDP growth.

Expect a slim range around 92.80 this week ahead before year-end.

USD JPY: 113.30

USDJPY traded in a tiny 15 pip range over the close of last week and during Boxing Day.

The Bank Of Japan didn’t offer surprises at all, but the Tokyo CPI data was above estimates (0.4 versus 0.2) which dragged USDJPY back to 113.30 as the Yen caught a few small Bidders.

I think the USDJPY pair can hold up towards 113.50 this week as market liquidity thins towards the quieter last week of this calendar year, but don’t expect much more.

EUR USD: 1.1865

Euro is essentially unchanged around 1.1865 as the Catalan vote again raises some interesting talking points for the Euro.

This move in Euro can certainly be seen as a reflection of the USD softness as the US Tax Reform story seems priced in, so EURUSD drifts towards 1.1900 at almost every opportunity.

Likely to see a quieter trading range to close out this week around that 1.1850 price point, give or take 20 pips.

I am maintaining my outlook towards 1.1850 target price range for EURUSD for year-end, as we are seeing more Breaking News regarding the Catalan independence issue (ongoing) move the Euro around.

GBP USD: 1.3375

Sterling traded steadily to re-open after the Christmas break, trading sideways around 1.3380.

GBPUSD volatility has slowed down a little, with the Brexit issue still very high on the GBP agenda.

I maintain my target of 1.3600 for GBPUSD particularly if we get agreement on the divorce from EU payment from the UK, early next year.

In the meantime, expect the GBPUSD to close out this year around the 1.34 price point.

AUD USD: 0.7745

Aussie Dollar traded solidly higher, grinding to a high just after the Asian lunchtime around 7740.

Notably, the AUD USD has held above 7700 easily, amid softer than expected USD and Commodities being solid, across the board, notably Copper rallying consistently.

Look for a settled end to this week in the region of the key 7730 level for AUD against the Greenback.

NZD USD: 0.7040

Kiwi-Dollar another currency/FX pair benefitting greatly from the commodity block rally.

The NZDUSD may see some follow-through buying towards a ceiling of 7760 as I have been calling this past 3 weeks, but I would suggest that this will fizzle out at the 7050/7060 area, which is fast approaching.

The Kiwi is a great reflection of the overbuying in the USD being reversed, but don’t be shocked if NZDUSD turns back lower after hitting head-on into key resistance shortly.

USD CAD: 1.2690

Dollar-CAD was one of the biggest market movers over the past few trading days, fuelled by the Oil price rallying, Gold rallying and a softer USD generally.

The Bank OF Canada comments from last week talking of a ‘50 bps rate hike’ have not been forgotten, so the USDCAD is a reflection of CAD buying driving USDCAD lower towards my target 1.2650.

Nothing else to say. Watch for lower lows in my view as Gold squeezes higher.

VIX: 10.25

US Stocks have pushed up to dangerously high levels, dragging the VIX to all-time Lows, just above 10 again.

The year-end volatility potential is always high, but we have been expecting stocks to pull down since March, and it has NOT happened.

US Equities are at ridiculous levels, and maintaining.

VIX is slightly above 10, but basically unchanged and looking to breakout higher, only question is when?

GOLD: $1,282

Gold is trading solidly higher this past few trading days as market liquidity thins out remarkedly.

My year-end target is now revised to be 1280 as the softer USD has fuelled a move from 1268 to 1283 very nicely for Gold.

Gold has reflected the re-pricing in USD, as analysts scramble to estimate how many rate hikes are likely from the US for 2018.

OIL (WTI): $59.75

Oil is solidly again, dangerously close to my $60 target for WTI.

Price action suggests that we may see a bullish 2018 for Oil – getting bidders from the $59.50 level and then look to move towards $62 or $64 early in 2018, leading into the Saudi Aramco listing.

I have higher price targets but we won’t see that play out this year as trader’s wind down for the holiday season, this $59 level seems like a price magnet for a settled year-end close.

BITCOIN (BTC): $15,750

Bitcoin slammed down sharply on Friday, as I called the $12k target, before a suitably sharp reversal played out over the weekend trade.

The lows were around $11,100 on Friday as panic selling was triggering Stops under $14,000, but that has been long-forgotten now as we are essentially back to $16,000.

The BTC price seems destined to grind its way back towards $17,500/$18,000 to close off this year.

The CME & CBOE Futures have seen an increase in Contracts traded as the huge 40% price swing would have had a lot of bargain hunters running to their Buy button.

The buyers seem happy to step in each time there is a blip lower, so I do anticipate a grind higher slowly towards $18,000 from here.

Macro Themes in Play

• CAD & other Commodity currencies all solid in thin FX dealing
• Bitcoin recovery gathers pace, towards $16,000
• EURO becomes more interesting with the Catalan vote creating another Volatility talking-point in EURUSD.