Trader Talk

USDX: 92.65

Dollar Index traded down to 92.50 as the US 10-year rates slipped to 2.41% overnight.

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 between 92.50-92.80 this week amid much lighter trade volume than normal.

USD JPY: 113.25

USDJPY traded in a tiny 10 pip range across all three sessions yesterday.

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.

We see some tier two Japanese data in the Asian session today, but price action on USDJPY is still likely to hover around 113.30.

EUR USD: 1.1900

Euro was Bid higher to the 1.1900 handle which was no surprise in thin liquidity amid soft USD themes.

This move in Euro is a good reflection of the USD softness as the US Tax Reform story seems priced in, so EURUSD can make a run for 1.2000 without too much effort.

I am maintaining my outlook towards 1.2000 target price range for EURUSD in the near-term, as we are seeing more and more revised forecasts lower for the USD outlook into 2018.

GBP USD: 1.3400

Sterling traded steadily to re-open after the Christmas break, lifting back to the 1.3400 handle, helped by USD selling pressure.

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: 0.7775

Aussie Dollar traded solidly higher, grinding through key resistance at 7750 to find a high yesterday at 7780.

Notably, the AUD USD has held above 7730 easily, amid softer than expected USD and Commodities being solid, across the board, notably Copper rallying consistently still.

I think that this run up in the Aussie Dollar can fizzle and fad back towards 7730-7750 reasonably quickly.

NZD USD: 0.7070

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 7060 area, which is where we sit right now.

Can the US 10-year rates come back and therefore spur a reversal in fortune for NZDUSD off these highs?

USD CAD: 1.2650

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, as we saw lows last night of around 1.2635.

VIX: 10.47

US Stocks have pushed up to dangerously high levels, dragging the VIX to all-time Lows, just above 10 again, but are we about to finally see some cracks appear in this rally?

The year-end volatility potential is always high, and the SP500 does look ‘Toppy’, so I still maintain my view that VIX will pop higher and breakout in a big run.

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

GOLD: $1,288

Gold is trading solidly higher (another $6 rally overnight) this past few trading days as market liquidity thins out remarkedly.

My year-end target is now revised to be 1295 as the softer USD has fuelled a move from 1268 to 1288 very quickly 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): $59.60

Oil is solidly again, dangerously close to my $60 target for WTI, but drifted back ever so slightly in the US Session on Wednesday.

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): $15,400

Bitcoin slammed down sharply on Friday, as I called the $12k target, before a suitably sharp reversal played out over the weekend trade, and it has held its ground above $15k since.

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 $15,500 in a more tentative price action on Wednesday.

The BTC price seems destined to grind its way back towards $18,000 to close off this year, in my view, even if the rally is slower than earlier in December.

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 very solid in thin FX dealing
• Sterling back to 1.3400 & Euro back to 1.1900 as USD Softness is clear
• Gold moving towards $1,290 as the US 10-year rates slid back overnight