Trader Talk

USDX: 91.55

Dollar Index traded down through big support areas under 92 to start this trading year.

The US Dollar longs are really unwinding, which is clearly reflected in the USDX hitting a low near 91.40 in US session trade.

The US Dollar has had the door open for a pullback in this lighter trading volume period, but remember we have headline payrolls on Friday, which may provide a much-needed USD comeback.

Expect a possible bounce back to 92 as this much USD selling barley persists.

USD JPY: 112.25

USDJPY fell off a cliff yesterday as the Dollar selling kicked in and the slide moved USDJPY quickly towards 112.

I think the USDJPY support can hold as we approach the ISM manufacturing data, FOMC meeting minutes, but more importantly the NFP headline jobs data on Friday.

USDJPY reflects the poor demand to be long US Dollars in the current market, but the real question is can this trend reverse?

ISM Manufacturing is often a good price mover, so tonight is the first chance for a USD fightback, which I am tipping that we will see, lifting back to 112.50/112.80.

EUR USD: 1.2055

Euro was Bid higher like a steam train as the rally accelerated through 1.2000 to see a high in UIS session dealing at 1.2080.

This move in Euro is a good reflection of the USD softness as the US Tax Reform story seems priced in, and the market sentiment (regarding USD) shifts to the Rate Hike forward guidance for 20178.

EURUSD has certainly shown how quickly it can run away, as per my calls from 1.1765 to the near-term target of 1.2000.

EURUSD can make a run for 1.2200 without too much effort in the weeks ahead, unless a stellar NFP data release this Friday reverses the USD fortunes.

GBP USD: 1.3600

Sterling finally took out the 1.3600 target after the news hit overnight that Britain will look to be added to the Trans Pacific Partnership after Brexit.

That was the positive headline catalyst that accelerated GBPUSD from 1.3520 to where we rest now on the 1.36 handle.

GBPUSD volatility has now shown that as we get more into 2018, we get more potential for Brexit to be clearer, and thus Higher-Highs in Sterling.

I have a new target of 1.3750 for January on Sterling versus the Greenback, but be nimble because the USD won’t be weak forever, as is the current flavour.

AUD USD: 0.7830

Aussie Dollar traded solidly higher, after the China data beat estimates yesterday to kick off the important data points for 2018.

Notably, the AUD USD has benefitted like all of the Commodity currencies have against the USD, lifted by Gold & Copper steamrolling higher, but also the ever so soft USD.

I think that this run up in the Aussie Dollar can fizzle and fade back towards 7750 as the 7830 level & the 7850 level are large resistance points.

NZD USD: 0.7100

Kiwi-Dollar another currency/FX pair benefiting greatly from the commodity block rally, essentially getting to 71c against the Greenback.

The NZDUSD would have broken some hearts recently if you were selling these rallies, as the momentum and upward bias has remained intact.

Can the NZDUSD turn lower from here? We need a stronger USD catalyst, such as FOMC meeting minutes, ISM US Manufacturing or Jobs data being strong to save the USD firstly.

The likelihood of a reversal is very high in my experience, so look for a shift backwards off these levels.

USD CAD: 1.2510

Dollar-CAD was one of the biggest market movers over the past few trading weeks, as I have been calling for the chart of the day to all of my Aussie & Singapore clients, fueled by the Oil price rallying, Gold rallying and a softer USD generally.

Those three things combined are a strong anchor weighing the USDCAD downwards.

The Bank OF Canada comments from last month also talking of a ‘50 bps rate hike’ have not been forgotten, so the USDCAD reflects the CAD buying driving USDCAD to lower lows.

When USDCAD moves, it can do long runs but it is now oversold, so I feel a dip under 1.2460 is possible, but a snap back on USD reversal is also in play.

Remember, GOLD has moved from 1235 to 1320 so if the USD returns to fashion, USDCAD can snap back up as the CAD will see profit taking…

VIX: 9.77

US Stocks have started this year quite strong, in an unprecedented rally through 2017.

The year-end volatility potential is always high, but the SP500 remains robust, sending VIX back down under 10 once again.

VIX is a measure of the Puts in SP500 in the market, and a great Fear Index, but it is still very, very historically low.

I remain stubborn in the fact that this won’t last and we are soon to see a jolt higher in VIX, led by a corrective selloff in US Stock markets.

GOLD: $1,321

Gold is trading like a runaway steam train currently, after a bumper 2-week rally through the 1300 level.

The USD selloff is sharp and sustained as Traders begin to doubt if the US Fed will raise rates 3x this coming year ahead.

Gold has reflected the re-pricing in USD, as analysts scramble to estimate how many rate hikes are likely from the US for 2018, but watch for extreme volatility to end this week as we have headline US jobs data to fuel the fire.

Analysts are doubting the 3 rate hikes that we are expecting from the US Fed next year, it seems.

OIL (WTI): $60.40

Oil is very resilient above $60, but came off highs slightly in overnight trade.

Price action suggests that we may see a bullish 2018 for Oil – getting bidders from the $60 level and then look to move towards $64 early in 2018, leading into the Saudi Aramco listing.

Hedge Funds seem ok to gamble that OPEC will tighten the Oil market too much, as per a story on my Reuters terminal this morning.

Interesting Oil-year ahead I feel.

BITCOIN (BTC): $14,800

Bitcoin had a wobbly trading day yesterday, getting down to 13,000 and looking very soft until the US session saw a story regarding Peter Thiel investing into Bitcoin hard, lifting BTC up $3,000.

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

I wouldn’t be surprised if we get a sell off to $10,000 FIRSTLY, before we see $18,000 so I am actually flipping to bearish on Bitcoin and can see a sell down coming.

Yesterday saw some acceleration in the short positions, which is a Bearish signal in my view.

Macro Themes in Play

• Commodity Currencies powering higher against the USD, notably USDCAD slammed down through resistance
• Sterling is the biggest mover back to 1.3600 on positive Brexit headlines
• Gold momentum is enormous, now $1320, but can the USD fightback?