Trader Talk Wednesday

What Happened on Tuesday > Top 3?

• USD fights back as the US Healthcare vote sneaks through
• US Treasury yields make a higher high for the first time in 8 days
• Oil surges back to $48.50

Outlook

• Aussie Inflation data critical for AUD
• RBA Gov Lowe Speaks
• US GDP data & FOMC

Data & Event Risk Today?

• (AUD) Aussie CPI data – 11.30am Sydney.
• (AUD) RBA Gov. Lowe speaks – 1pm Sydney.
• (OIL) Crude Oil Inventories data – 12.30am Sydney.
• (USD+) FOMC Statement – 4am Sydney.

USDX: 94.00

Dollar Index fought back yesterday as US yields made higher highs and the US Healthcare vote sneaks through.

Dollar Index has come alive and may make a run for 95 if the FOMC statement delivers bullish bias. We are still pricing a 41% chance of a December rate hike but those odds will plummet if the language from the fed has a cautious tone regarding recent inflation data.

USDJPY: 112.05

USDJPY jumped with the positive US headlines yesterday and moved 1 big figure higher resetting above the 112 handle.

Buyers stepped in on USDJPY from lows around 110.60 finding solid Bids non-stop through the London & US trading sessions.

We are in a familiar range for dollar-yen so the FOMC as always will be crucial for a move back towards 110 in my view.

EURUSD: 1.1640

Euro took a run higher and made it to 1.1710 yesterday before a sharp reversal as the USD strength kicked in.

Technically the Euro looks very solid and looks like another breakout above 1.1700 is likely but the FOMC statement might cause a selloff in the short term.

I still maintain strong bullish bias looking for moves above the June highs of 1.1718.

GBPUSD: 1.3025

Sterling ended the day unchanged after a strong run up to 1.3075 before falling victim to the USD strength in the US session, as per the above for EURUSD.

The GBPUSD still seems very indecisive but upside potential still looks large in my view, with a near-term target of 1.3150.

AUDUSD: 0.7935

The Aussie dollar is set for a huge day today, as we see the CPI data hit the news wires at 11.30am today.

If the inflation number comes in as expected at 0.4% the case for a rate hike is much better and the likelihood of a spike above 0.8000 is extremely high.

Just to spice things up, 90 minutes after the inflation data RBA Gov Lowe speaks and is very likely to want to talk the Aussie Dollar down, as his deputies did last week. When they talked last Friday about Australia not needing to follow its global peers in raising rates the AUD was Offered down sharply. That is again likely, but we are watching to see if the end of day finishes under 7900 as this is the last chance in this series of speakers for the RBA to talk down the Aussie.

NZDUSD: 0.7420

The NZD, had a quiet day yesterday except for a brief spike lower in the Asian session when a story about dairy disease was reported.

Once that story faded, the NZDUSD resumed its strength, trading in a narrow trading range around the 7425 level.

USDCAD: 1.2505

USDCAD looked very heavy yesterday as the Oil price recovery story was in full swing.

The USD strength was the only saviour for the USDCAD slide lower and the pair seems to be finding a solid base at the 1.2500 level I still favour a bounce back for USDCAD towards 1.2650.

VIX: 9.19

The VIX traded to a 23 year low yesterday, down 0.24 points to 9.19, after earlier falling to 9.04.

We haven’t seen these levels since December 1993 boosted by strong earnings season making SP500 Bid to new highs.

GOLD: $1,247.40

Gold slammed lower on the positive USD news Offered from 1255 to 1247 sharply in the US Session.

Buyers will step in fiercely on the FOMC statement if any overly cautious commentary referring to inflation concerns makes it way into the Fed language.

Oil (WTI): $48.40

The big news for Oil is the planned production limits that OPEC are seeking to get agreement from Libya & Nigeria. Those headlines helped Oil recover from 45.40 back to 48.50.

Oil seems to battle to break the $50 price so let’s see where we are later tonight after the US Oil Inventories data lands.

Macro Themes in Play

• Aussie Dollar aims at 80c leading into RBA speaker and crucial Inflation reading today
• USD shows signs of strength but traders await the FOMC for dominant theme around rate hike path