Tuesday Hawk Squawk

Daily Trader Talk – Tuesday 27^th June.

What Happened on Monday > Top 3?

>FX Comes alive, USDJPY Bid higher.

>Gold moves sharply lower. Stocks Rally, Oil Rebounds.

>Brexit negotiations see some positive light but GBPUSD unchanged, ECB Draghi adds nothing new.

Outlook

+Risk themes generally saw a better tone, AUDUSD & NZDUSD first to move higher then retreat.

+ECB Draghi to speak again on the London open, from ECB Forum in Portugal.

+BREXIT negotiations make progress, BOE Carney speaks again tonight.

Data & Event Risk Today?:

• (ECB) ECB Draghi Speech – 6pm Sydney.
• (GBP) BOE Stability Report & Governor Carney Speech– 7.30/8pm Sydney.
• (USD) Consumer Confidence Report – 12am Sydney.
• (USD++) Fed Chair Yellen Speech – 3am Sydney.
• (USD) FOMC Member Kashkari Speaks – 7.30am Sydney (Tomorrow).

USDX: 97.13

The Dollar Index had a see-saw US session firstly dipping below 97 caused by softer Core Durables US Data, then rallying higher towards 97.20 as traders seem to be forward thinking to Janet Yellen’s speech.

USDJPY: 111.85

Dollar-Yen took a run higher in the US session despite the softer US data, seeing highs around 111.95 before settling at 111.85.

Price action flirted with 112 for the first time in 30 days and looks like retaking that 112 level unless Janet Yellen’s avoids adding hawkish commentary to her speech.

BOJ Governor Kuroda is set to speak at the ECB forum this week (on Wednesday evening) and may provide new clues on BOJ policy but more likely to see this pair driven by USD sentiment this week proven already true overnight.

EURUSD: 1.1180

The Euro saw a brief spike higher to the 1.1220 level on the back of soft US data.

ECB President Draghi talked of lower rates for longer for the EUR but EURUSD remained in a subdued trading range. This commentary from Draghi should have caused a selloff in EUR but the 1.1175 price held very firmly it what can only be taken as a wait & see approach to hearing from Janet Yellen before major price breakouts.

I feel that Janet Yellen will avoid saying too much and EURUSD may jump back above 1.1200, but technical analysis points to the 1.1260 (May 22 Highs) holding firmly on the upside.

GBPUSD: 1.2720

Sterling traded higher but in a narrow 25 pip trading range around 1.2740 as the DUP party made a deal with PM Theresa May to add some positive light on the week-old Brexit negotiations.

Look for the BOE Stability Report & BOE Governor Carney speech to move the GBPUSD lower in my view.

AUDUSD: 0.7585

The Aussie nudged higher to 0.7598 on renewed optimism with the Oil rebound, before reversing back under that key 7600 handle.

The Aussie is holding last week’s gains and is in a holding pattern here at 7580 leading into the key Yellen speech for market sentiment around the USD & the Feds next moves.

I still favour the downside for the AUD but as Oil rebounds and the risk on theme seems to be back in favour the 7650 area might come up before 7550.

NZDUSD: 0.7285

NZDUSD saw another day of choppy trade, trading lower in the Asian session around 7250, then higher to 7300 on the US softer data point, before settling back off those highs to end the US Session.

There certainly has been a lot of upside momentum in the moves towards 7300 / 7320 levels but has this run out of steam?

USDCAD: 1.3250

USDCAD was the BIG mover to end last week, caused by the all-important softer CPI data for Canada.

For the most part of Monday’s trading sessions drifted lower to 1.3200 before a renewed optimism in USD caused a bounce back to rest at 1.3250.

VIX: 9.90

Volatility Index traded down to sub-10 signalling a low market fear.

Essentially this Fear-Index is very low which may mean that a lot of traders are looking to this week flurry of central bank speakers from the ECB forum for clues to fire up trading ranges once again.

GOLD: $1,244.40

Gold is a very interesting Trade right now.

Out of nowhere yesterday, we saw the USD Bid up and Gold collapsed into our technical buy zones.

Gold collapsed from around 1256 down to 1236, very sharply before recovering a little to 1244.

If Janet Yellen doesn’t do a hawk squawk for the USD then Gold will find Buyers step In again back to 1250.

Oil (WTI) : $43.55

Oil price rebounded slowly & slightly back to $43.50 level.

Midweek we see Oil Inventories data again and I still favour the downside.

Macro Themes in Play

+Gold crunched on USD optimism, but not supported by Treasury yields.

+USDJPY reflecting the USD Bid, as it moves towards 112.

+Oil back to $43.50 helping risk sentiment.