Wednesday Trader Talk

What Happened on Tuesday > Top 3?

• US Retail Sales data beats expectations, USD Bid higher
• GBP, AUD & NZD lower against the USD
• GOLD eases down to 1270, USDJPY Rallies to 110.80

Outlook

• Volatility still holding 12.04
• North Korean issue simmers down and helps USDJPY & Gold price reversal
• FOMC Meeting Minutes coming

Data & Event Risk Today?

• (GBP) Average Hourly Earnings data & Unemployment UK – 6.30pm Sydney
• (USD/OIL) US Building data & Crude Oil Numbers – 10.30pm/12.30am Sydney
• (USD) FOMC Meeting minutes– 4am Sydney
• (NZD) PPI Data – 8.45am Sydney

USDX: 93.75

The USD gained ground across the board against all majors as Fed speakers plus Stronger US Retail sales spurred USD Buying.

The USD (LONG) story seems here to stay as the data points culminate overnight with FOMC meeting minutes and we get closer to the Feds balance sheet changes, likely Dollar positive.

USDJPY: 110.65

USDJPY drove 1 big figure higher yesterday with sustained Bids across all three trading sessions.

We had NO new negative North Korean headlines, Stronger Retail Sales data for the US as well as Fed speakers again talking positives for the Greenback.

We need to see that 110.80 break to the upside before I start talking 111.50.

EURUSD: 1.1740

Euro had a quiet Asian trading session yesterday, then a brief dip lower on the US data release which dragged EURUSD to 1.1675, before very quickly recovering back to where it started.

The Weekly chart shows a bullish bias and moves to the upside seem like they can drive EURUSD towards 1.2000 over the coming months and remember the Euro has already moved from 1.0600 since March this year, slamming to highs around 1.1900 recently.

Strong uptrend remains the Macro theme for this pair.

GBPUSD: 1.2870

Sterling nailed Lower yesterday by a miss on the CPI data released after the London open.

On Monday, we had a soft market open around 1.3000 and drifted down to 1.2965 most of Tuesday until the inflation data miss, plus the US data strength, and pow, GBPUSD reset back down to 1.2850.

That is a key level for Sterling (1.2850) so expect that level to hold on the downside, meaning that losses should be restrained to this floor.

AUDUSD: 0.7830

The Aussie dollar took a tumble yesterday in a USD driven move lower to 0.7805, missing my target by 5 pips.

I still feel that we are set to get to 7730 or 7750 very soon for AUDUSD. Patience is the key as the Aussie resets lower on renewed USD optimism.

We have Key jobs data for Australia out tomorrow morning on the Asian market open, so LOOKOUT!

NZDUSD: 0.7230

NZDUSD was Offered yesterday, down to fresh 7220 recent lows.

7250 looks like a key level that will win out the day this week depending on the risk appetite of traders in FX.

I maintain short positioning on this pair looking for a move lower on the back of Stronger USD data or risk off headlines coming back on the newswires.

USDCAD: 1.2755

I love this trade (LONG) USDCAD recovery story. This pair can easily run back up to 1.3000 in the coming weeks as the USD strength kicks into full speed again.

The end of this coming week sees CPI data for Canada, but a lot can happen before that hits the news wires.

Don’t underestimate the ability for USDCAD to recover back towards 1.2800.

VIX: 12.04

The Fear index was off again yesterday, moving back towards 12.

I expect the Volatility index to fire up again and head north back towards 15 in the week ahead.

GOLD: $1,273.65

Gold pulled back with profit taking on Monday coupled with the USD fight back.

Then came Tuesday and the headlines were dominated by North Korea taking a wait and see approach towards the US aggression, plus strong retail sales data & Fed speaker helping USD spells lower lows for Gold.

I am not convinced totally on this USD recovery, so I re-entered LONG Gold today 1272 for a long-term play above 1300.

Oil (WTI): $47.80

Oil battled with the $50 handle quite hard, so I like to favour a continued pullback.

Last week the OPEC compliance (Complying with planned production cuts) dropped down to 75% so that meant that Oil had a pullback to 48, and now we see 47.50 back.

The $46/$48 range should maintain for now.

Macro Themes in Play

• USD recovers sharply as Retail Sales beat estimates
• Markets still cautious about North Korea’s next move, but far less concerned.
• FOMC Meeting minutes will be crucial overnight.