Trader Talk

USDX: 91.90

Dollar Index bounced back to 92 on the back of solid ISM Manufacturing data overnight.

The US Dollar longs are really unwinding, which is clearly reflected in the USDX hitting a low near 91.40 – but it has bounced back.

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 (or higher, as I commented yesterday) because this much USD selling barely persists for too long.

USD JPY: 112.60

USDJPY lifted off the canvas in Wednesdays trading sessions, poking its head back ABOVE 112.50.

I think the USDJPY support can hold as we approach Interim Non-Farm Payrolls, but more importantly the NFP headline jobs data on Friday.

USDJPY can move in large runs if the USD sentiment turns, which I feel it will, so watch for 113.30 again.

EUR USD: 1.2010

Euro was Bid higher like a steam train as the rally accelerated through 1.2000 (to 1.2080) but more interesting to me is the price action holding above 1.2000 after last night’s pullback.

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 2018.

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.

Even if the NFP causes a short-term pull back, the EURUSD may still likely get on towards 1.2200 or higher after wards.

GBP USD: 1.3510

Sterling finally took profit taking pullback as the UK data missed yesterday.

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.

In the very short term, it will be looking to the UK data points and headlines around Brexit progress, as we have seen this fortnight already.

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, but ran into resistance around 7850 and has come to rest nicely at 7830.

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 is a large resistance price point.

Aussie Trade Balance data is on the Asian market open tomorrow, so watch for AUD volatility in the next 2 trading days with key USD data also!

NZD USD: 0.7090

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

The NZDUSD has pulled back from 7100 but not much – which is a sign of the strength in the market for NZD against USD.

Can the NZDUSD turn lower from here? We need a stronger USD catalyst, such as the interim or headline Jobs data being strong (for the US) 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.

I am seeking a target around 6980 to be in play.

USD CAD: 1.2545

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

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

When USDCAD moves, it can do long runs but it is now oversold, so it is likely to see a snap back as the USD may come back into fashion, but longer term USDCAD still looks very bearish.

Remember, GOLD has moved from 1235 to 1315 very quick time, so if the USD returns to fashion, USDCAD can snap back up (higher) as the USDCAD can then see profit taking.

VIX: 9.15

US Stocks have started this year quite strong, sending VIX even lower again overnight.

The SP500 remains robust, sending VIX back down to unprecedented levels, looking to the US data for more sentiment this week.

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: $1,312

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, but interesting GOLD is holding ABOVE 1300 – a very bullish sign.

Gold has reflected the re-pricing in USD, but this can snap back lower very quickly with a stellar US jobs number release this week.

Analysts (including me) are doubting the 3 rate hikes that we are expecting from the US Fed in 2018.

OIL (WTI): $61.90

Oil is very bullish, taking aim at my $64 target for early this year, as I have been saying for a month or so.

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.

Watch for Crude Oil Inventories later in the US session tonight for more potential strong volatility in Oil pricing for Crude & WTI.

BITCOIN (BTC): $14,800

Bitcoin had a volatile commencement of trade for 2018, but has recovered to sit at $15,000.

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.

Yesterday saw a rather quiet trading range, closely wiggling around $15k in tentative price action.

I still see some downside possibility before a rally onto $18,000 again.

Macro Themes in Play

• Commodity Currencies powering higher against the USD, and holding strong levels
• Sterling back 1 big figure as UK data missed the mark – Volatility continues
• Gold momentum is strong, but fading as the Key USD data is coming