Trader Talk Monday

USDX: 93.40

Instabilities in the Trump presidential team had an interesting effect on the USD late last week, pushing Dollar Index to a very soft weekly close around 93.30, but that’s where it started the week.

The markets are still pricing in the chance of a December rate hike at around 38% which should be reflected in USDX moving around the 94 handle later this week when Janet Yellen offers directional clues regarding the Fed unwind of their Balance Sheet.

USD JPY: 109.30

USDJPY slammed lower to take out targets at 108.60 on Friday before a nasty reversal back up to 109.60.

A wildly volatile pair of late, as we have been saying, and this pair continues to be a great way to play out the market sentiment towards risk and towards USD appetite.

If the North Korean situation flares up again this week, we will see 108 on USDJPY, but if a simmer down in the war of words occurs, then a drift higher towards 110 is likely as we have no Yen risk events on the calendar.

EUR USD: 1.1755

Euro traded lower last week as the ECB Monetary Policy Meeting Accounts were released, but then recovered sharply as a USD driven move on Friday led gains for this pair.

The EURUSD seems happy to drift 30 pips either side of 1.1750 currently but that can change very quickly on Wednesday with the Eurozone data plus ECB Draghi no doubt offering a spike in Volatility.

The chances of a bullish breakout are still possible, but the EURUSD has also the risk of a USD rally led by Janet Yellen to close off this week, making 1.1700 a magnet to price action.

GBP USD: 1.2870

Sterling is in a very tight trading range and essentially it did the same as EURUSD last week – being a brief dip lower then sideways price action.

Risk on sentiment shouldn’t hurt the Sterling too much, but as always, this pair is lacking a little direction as Brexit negotiations progress gradually.

The other factor out of recent data is the softer CPI data, that is helping to hold GBPUSD around 1.2850 / 1.2880.

AUD USD: 0.7930

The Aussie dollar had another wild trading week last week and it must be noted that Iron Ore is trading at a 4-month high, helping AUD above 7900 once again.

The AUD held onto gain after recapturing the 79 handle and looks like it will likely dribble up to 7950 before looking for direction again.

With the current potential for a risk-off move driven by North Korean tensions, I would say that traders need to stay safe on the risk currencies and let’s see if we get a move back down towards 7850.

NZD USD: 0.7315

NZDUSD benefitted greatly this week as the twin forces of the FOMC meeting minutes’ release plus the North Korean situation simmering down helped risk sentiment.

The scope for 7300 to resume last week was quite low, but as the North Korean war of words simmered down, the Kiwi found Bids higher.

I am taking a balanced wait & see approach for the Kiwi-Dollar, looking for resistance at 7350 to possibly act as a ceiling in this light data week.

USD CAD: 1.2585

USDCAD turned south again on Friday, following USDJPY in the dollar selloff to close off the week.

The Canadian CPI data was middle of the road, but that didn’t stop the USDCAD being sold down under 1.2600 once again.

The Gold price rally on Friday helps the CAD but Gold did also reverse, so the downside trend is in-tact for USDCAD again. Will it bounce higher from 1.2585 fuelled by USD side buying?

VIX: 14.26

The VIX slid back slightly on Friday after the huge 33% jump last week fuelled by Geopolitical headlines and concerns.

If the North Korean tensions flare up this week expect SP500 to have a tough week and the VIX to spike up again. Very possible as North Korea have been vocal over the weekend about the US / South Korean military drills.

GOLD: $1,287.50

Gold found strong Bids on Friday, rallying up to highs of 1300, before a savage reversal back to 1280.

Wild trading volatility seen in GOLD is set to continue as markets are nervous about the Korean peninsula tensions!

I like a move higher this week to play out from here at 1285 to potentially run up to 1300 or above, but be careful, if tensions are not in the headlines then Gold may very well get down under 1280 key support.

OIL (WTI): $48.75

Oil traded strongly higher on Friday, making a high around 48.90 before running into firm resistance.

The $46/$48 range should maintain for now, until we get any OPEC related headlines to give a clearer direction.

Macro Themes in Play

Risk remain on a cautious knife-edge as Geopolitics in the headlines again.
Washington instability is still hurting the USD with Trump headlines almost daily
Some FX Pairs quiet, but USDJPY very volatile as markets still pricing a 38% chance of December rate hike.