Trader Talk

USDX: 92.40

USDX tumbled hard on as a direct result of the Janet Yellen commentary out of the Economic symposium.

It was very evident that she avoided speaking about monetary policy and economic outlook and instead focused on how regulation post the financial crisis has made the financial system safer without “impeding growth”.

The markets took this as Dollar negative and sold down USD across the board, reflected clearly in USDX dipping to 92.25 before a small bounce to kick off this week.

USD JPY: 109.10

USDJPY was Offered back from 109.80 to 109.10 fuelled by the absence of Fed talking up the prospects of normalization in the US rate hike but also because the US treasuries are dragging.

US 10-year bonds dipped to 2.172% as Yellen showed zero signs of becoming more hawkish. I don’t think that we can call this a big move in USDJPY though, so I think that the 109 handle should hold for now leading into data midweek around the USD consumer confidence.

EUR USD: 1.1925

Euro took off on Friday as we called in the Weekly outlook last week, as the ECB Draghi commentary from Jackson hole plus the softer stance from Janet Yellen fuelled massive EURUSD buying.

I can see the markets running into very firm resistance at 1.2000 but the reality is that we are likely to get through 1.2000 and continue higher.

The September 7th ECB meeting is likely to be the opportunity to announce two things: QE Unwinding, which means in English, the ECB buys less of its own Bonds to scale back the money printing, which will lift the EUR.

Secondly, they are likely to expand on the list of assets that the ECB will buy, to create different ways to stimulate the economy, which will lift the EUR too.

How would you consider playing this out? Look for pullback to enter at a better price for potential moves higher over the month ahead. The danger is always that the markets already have this move from the ECB priced in, but in this case I feel the pullback will only get to 1.1900 before Bidding resumes.

GBP USD: 1.2890

The Sterling saw a lift of one big figure on Friday as the USD softness played out across all major FX pairs.

We saw GBPUSD move from 1.2800 to 1.2900 before opening marginally softly this morning in Asian session open.

Bank holiday today for GBP so consolidation is likely. Keep an eye out for Manufacturing PMI data on the London open on Friday, that will set the tone for the bigger directional momentum for GBPUSD leading into the US Jobs data release afterward on the same evening.

AUD USD: 0.7940

AUD short traders did need to run for cover like I mentioned on Friday because the Copper rally last week (getting to a 3-year high) is supportive for AUD in a big way.

The upside was capped around 7950 on Friday nights trade, like we mentioned last week, and remember next week is RBA rate announcement, so more volatility ahead.

Do we sell AUD from here back to 7850 or look for another run above 80c?
Non-farm payrolls will be the answer to that question and I favour the downside from this level on AUDUSD. Watch for CAPEX data this week on Thursday for some knee-jerks moves on the Aussie.

NZD USD: 0.7215

The Kiwi had another whippy trading week last week seeing 7300 and 7180 before settling around the 7250 key-level.

I am not surprised at all that we see a stall around 7250 and would expect the next moves on the Kiwi to be led by USD sentiment this week.

NZD ANZ business confidence levels are released on Thursday which may create some price action but normally subdued in the US Jobs data week. I think NZDJPY might provide better opportunities.

USD CAD: 1.2475

USDCAD traded lower again on Friday on the back of a not-so-Hawkish Janet Yellen.

The 1.2500 level may find technical support for an attempt at a bounce but that will need fuel such as Non-Farm payroll New Jobs added numbers to be strong, or Average hourly earnings data to be solid.

The US Debt ceiling issue may raise its head again and spiral USD lower, but we seem to be pricing in that as a non-event.
Watch for CAD GDP on Thursday to potentially spur some USDCAD buying.

VIX: 11.28

The volatility index was marginally lower to end the week.
As I expected on Friday, Janet Yellen didn’t really effect a mild move higher again in Stocks.

The VIX under 12 is still very low but perhaps we are about to see a big year end move higher (VIX higher and Stocks correction) as the Stocks run up looks far too good to be fundamentally true.

GOLD: $1,294

Gold is very volatile currently as the USD falls into favour and out again very sharply.
That comment from Friday could not have been more correct!

Gold slammed down to around 1274 before just as quickly finding bidders again to end the week around the recent highs, and just shy of the benchmark 1300 level.

US Jobs data on Friday might spur a move to 1310 or 1275.

OIL (WTI): $47.75

Oil traded higher briefly on Friday but then returned to where it held for most of last week around 47.70.
The price swings have been a little less wild lately for Oil as it seems like $48 is a magnet for price action.

We need a breakout above 48.90 to see $50 resume but I am not sure if this week will be the week.

Macro Themes in Play

• USD sold across the board as Janet Yellen didn’t offer much for USD Bulls
• EURUSD sharply higher on ECB Draghi speeches and ECB Outlook for Sept 7
• USD back on the sidelines to the EURO – which is the biggest market theme playing out.