Trader Talk

USDX: 92.20

USDX is under pressure trading to recent lows around 92.15 as the USD sentiment is dragged lower by US Treasury yields overnight.

The jump in USD on N Korean risk aversion will play out against the weaker currencies but this situation is dynamic as we go to print.

USD JPY: 108.80

USDJPY saw massive rush into Yen on the N Korean news that they fired a missile that travelled across the Northern Japanese island of Hokkaido.

This dangerous escalation in the Korean peninsula saw USDJPY sharply lower to 108.30 before bouncing back to 108.80.

I can see moves potentially to 106.50 if the US response is firm, however, what is likely here is that the reported Security council meeting for Japan, S Korean and the US will talk of a trade sanctions resolution for any nation connected to N Korea, aimed at inspiring more intervention and help from China.

Do we sell USDJPY from here or will it simmer down again? A move back to 109 is possible, but I still prefer to be short this pair with a mid-range target around 106.50 and be patient.

EUR USD: 1.1965

Euro has benefitted greatly even in the wake of recent N Korean escalation.

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 pull back 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 can see a run up above 1.2000 and continuation higher as the USD story is data dependent and the QE story for EUR becomes real.

GBP USD: 1.2935

The Sterling got a lift on Monday moving to its highest level in 13 days, extending moves above 1.2900 to aim towards 1.2950.

The BREXIT negotiations are overshadowing a lot of other fundamentals for Sterling at the moment but this move may stall under 1.3000 as USD likely to find Bidders with risk aversion regarding the N Korean story pulling risk off the table globally.

I am taking a wait & see approach to GBPUSD at the moment, but expect moves to 1.2950 then a turn lower as the USD likely Bid over NFP Friday, but remember to watch out for the Manufacturing PMI data for the UK to move the sentiment for Sterling too.

AUD USD: 0.7930

Can you believe that the Aussie is trading around 7930 in the face of Risk off sentiment out of the N Korean crisis?

AUDUSD traded as high as 7970 yesterday then slammed to 7900 as the news regarding North Korean missiles hit the newswires.

The UN Security Council meeting is a swift diplomatic response today but not an aggressive response.
Next Tuesday we have the RBA out with interest rate announcement but in the meantime, as the N Korean story unfolds we are likely to see AUD around the 7850/ 7900 range.

NZD USD: 0.7250

The Kiwi had another whippy trading day before settling around the 7250 key-level again.

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 and you would have to favor the downside.

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: 1.2500

USDCAD traded sharply higher as the Commodity currency was sold for the safe haven Greenback.

This was a good trade for Monday and may be a great way to play out the rush to USD particularly this week with risk sentiment being so by the hour plus the NFP US jobs data looming.

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.

Watch for CAD GDP on Thursday to potentially spur some USDCAD buying.

VIX: 11.32

The volatility index was marginally lower which is quite surprising to me.

The fear gauge may spill over into a Stocks correction over the coming month but we will need a war of words between tough US sanctions for China’s lack of firm intervention into this N Korean conflict. That can easily be the catalyst for a risk of move that will see VIX spike higher and Stocks dragged into Sell-Mode.

For now, that hasn’t played out but be nimble because the UN security council meeting today and likely US response may be swift.

GOLD: $1,317

Gold traded sharply higher from 1294 yesterday to 1325 before settling back a bit on the Asian market open today.

Look for a move towards the 1350/ 1357 levels if this North Korea conflict becomes even more out of hand in relation to Trump’s US response and diplomatic breakdown.

If a solid plan plays out towards diplomatic response then the Gold price can simmer down towards 1305 but I still favor buying on Dips for a move much higher.

OIL (WTI): $46.75

Hurricane Harvey has devastated the Houston area in the US sending Gasoline prices into frenzy.
Oil sharply lower yesterday from $48.15 to lows around $46 before a bounce.

Wild price action should continue so be nimble on Oil as the risk sentiment can drag price action also.
I like a move back towards 47.50.

Macro Themes in Play

• Major market risk aversion as North Korean tensions HIGH
• EURUSD continues higher on ECB Draghi speeches last week and ECB Outlook for Sept 7th
• Safe Havens bid Sharply as GOLD slams above 1300, USDJPY under pressure.