Wild Wednesday – Trader Talk

Daily Trader Talk – Wednesday 28^th June.

What Happened on Tuesday > Top 3?

>ECB Draghi hawkish, EUR skyrockets.

>Janet Yellen didn’t do much to support Stocks & USD by highlighting Inflation “Caution”.

>Huge moves in EURJPY (12-Month high), EURUSD (10-Month high) as Yields drive the markets.

Outlook

+ USD Index dragged to 96 on Yellen’s comments & Treasury yields.

+ ECB Draghi big notes on EURO outlook.

+ AUD & NZD lagging in the Yield battle.

Data & Event Risk Today?:

• (ALL FX) ECB Panel – 11.30pm Sydney – BOC, BOE, BOJ and ECB Speakers.

USDX: 96.17

The Dollar Index was crunched down to 96 over the US session.

I was a Fed doubter and expected nothing new from Janet Yellen, but comments surrounding the inflation concern from her were enough of a clue to sell off USD across the board.

USDJPY: 112.14

Dollar-Yen traded soft in Asia but then got a lift from a rise in US Treasury yields and jumped to it’s highest in more than a month around 112.45 and has since settled back in early Asian dealing.

I was correct in doubting the Fed yesterday, but Treasury yields price moves are driving the USD.

The Nikkei opened lower this morning so the USDJPY may struggle to hold these gains seen in the US session overnight.

BOJ Governor Kuroda is set to speak at the ECB forum this evening and may surprise with comments to move the Yen, so be nimble.

EURUSD: 1.1340

The Euro got a huge rocket higher, mainly seen in the difference in projected yields between EURO & Yen (EURJPY to a 12-month high).

In laymen’s terms, the comments from ECB Draghi now causes the markets to reprice the EUR much higher.

We may see this run continue in EURUSD & EURJPY over the coming weeks.

GBPUSD: 1.2810

Sterling traded higher and showed us signs of more breakouts to come potentially, after the BOE stability report plus a fairly mild commentary from BOE Governor Carney.

The Cable got up to 1.2860 before racing back to the 1.2800 level.

Still, cautious trade seems evident for the GBPUSD in the wake of ongoing Brexit negotiations.

Key point;

Draghi’s hawkish steer lift EUR, GBP rises in sympathy

AUDUSD: 0.7600

The Aussie is in the same boat as the Kiwi, making early gains in Asia and giving them back in the US Session because the flood of carry traders move to Euro from AUD & NZD.

The Euro becomes the key funding currency, even more so than the USD overnight, making AUDUSD slide lower (from 7625 back to 7580) because all of a sudden, the outlook has changed for Euro.

We sit right at the 7600 handle now and further commentary tonight out of the ECB forum is likely to see Aussie drift lower but restrained to the 7550/7580 price area.

NZDUSD: 0.7270

NZDUSD bolted higher to 7350 until a complete reversal to 7260 occurred on the back of ECB talking up the Euro outlook.

Same as for Aussie, the Euro gains from funding currency status which weighs on the lagging central bank’s currencies such as RBNZ/Kiwi.

I expect 7250 to be more familiar price level in the near term.

USDCAD: 1.3160

USDCAD is definitely in play today after the Janet Yellen comments and tonight’s upcoming Bank Of Canada Speaker.

With oil back to $44 and the potential for commentary from BOC to be hawkish (maybe) we are likely to see lower price action driving towards the 1.3100 level tonight for USDCAD as the divergence plays out in US Stalling on hikes and Canada signalling optimism but be cautious because Canad’s inflation was soft on Friday just past.

VIX: 11.06

Volatility Index naturally jumped higher by 12% yesterday as Janet Yellen’s comments were felt in the Stock markets & Fear Index.

More to come I feel, much more.

GOLD: $1,249.30

Gold is a very interesting Trade right now. I think a stock correction can Jolt GOLD much higher in the last half of this year, but overnight it benefited from the USD commentary led by Janet Yellen’s comments.

Gold moved towards filling the gap from huge spikes lower ion Tuesday, back towards 12509 as I said it would yesterday.

Oil (WTI) : $44

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

+USD, EUR up against JPY, boosted by yield differentials

+Cable rides EUR coattails, UK CBI numbers better than expected

+EUR the biggest story now benefitting greatly from the Carry trade & funding currency status

+Dollar Index struggles & Gold Bid back to 1250 on real Yields & Inflation comments for USD.

+AUD & NZD to feel more pain as EUR & US are the remaining central bank Hawks