Where will the action be for FX?

July 14, 2017

Daily Trader Talk – Friday 14^th July.

What Happened on Thursday > Top 3?

> Janet Yellen points to the strengths in the labour market

> Markets still pricing a December rate hike at just under 50% probability

> AUD, NZD & CAD biggest performers higher against the USD

Outlook

+ US Retail Sales & Core CPI data on the US Session open

+ Euro cautious at 1.1400 and USDJPY cautious at 113.30.

Data & Event Risk Today?

(USD++) US Inflation (CPI) & Retail Sales Data – 10.30pm Sydney

USDX: 95.60

The Dollar Index traded slightly higher as to be expected as Jante Yellen’s testimony was far more hawkish on day 2, talking up the U.S. Labour Market overall indications of strength.

USDJPY: 113.30

Dollar-Yen took the cue from Janet Yellen’s first day of testimony and pulled down on Wednesday, due to her Dovish commentary, only to see a mild bounce in overnight trade on a less dovish day 2 of her Testimony.

The range will tighten up measurable today leading into tonight’s Inflation & Retail Sales data but a move below 113 is likely from what I can see on the Inflation projections.

I prefer to fade the USD.

EURUSD: 1.1400

The Euro had its big run up higher on W3ednesay to just shy of 1.1500 so it flew back down propelled by Yellen reaffirming that the Fed outlook is to tighten their Interest rates plus we heard comments from ECB signalling caution around the Eurozone health in general.

I am not buying into that, I feel ECB’s Draghi is keen to commence Tapering the ECBs Bond Buying and may hint at that in the coming weeks, so I can see huge moves to the upside in the near term towards 11615 or 11700 if Tapering becomes a headline.

In the meantime, EURUSD is battling with the resistance at 1.1500 and trading 1 big figure below that level so watch out if the US CPI data disappoints the USD bulls tonight.

GBPUSD: 1.2940

The Sterling found bidders again but was a slow grind higher from just sub 1.2900 handle to 1.2940.

The Asian session will see consolidation across most of the major pairs & FX Cross pairs today because the Inflation data for the US is pivotal for the direction of so many.

The cable remains capped below 1.3000 for now so I expect the 1.2950 – 1.2850 range to remain in play.

AUDUSD: 0.7730

The Aussie continued the grind higher to 7730 last night.

The AUD is ripe for a pullback but where can it get to first before turning south?

That depends on the CPI data (and Retail sales data) for the US, but perhaps 0.7730 will hold during the Asian session today leading onto that key release.

I am still SHORT AUDUSD with breathing space in that trade having a Stop Loss just above the key resistance at 7750.

NZDUSD: 0.7320

NZDUSD traded strongly again, spiking to new recent highs of 7365 before a sharp retracement to 7320 to start today’s Asian session.

With markets pricing Fed rate hike for September at just 13% and about 45% for December, the sharp moves higher in the Kiwi against the Greenback reflect the USD caution and doubts that the Fed may move a third time this calendar year.

The Kiwi is ripe for a pullback, but again, we need to see stronger downward momentum firstly before entering Short Orders on this pair.

USDCAD: 1.2730

USDCAD is under pressure again on the Downside as the Oil price rebound gathered steam on Thursday.

The only thing to save this slide lower will be a stellar CPI & Retail sales data release tonight.

I have taken profit and happy to sit on the sidelines for USDCAD for now because it has been totally crunched from 1.3700 to 1.2700, over a decent period that is still a massive move.

VIX: 9.90

Volatility Index slid below 10 to finish off the US session under an hour ago as Stocks in the US await earning reports the Fear Index is seasonally very low.

Last time we saw the Volatility index this low was just before a big market breakout and spike higher in VIX, which I can see repeating itself.

GOLD: $1,217.50

Gold was Offered on Thursday’s US session trade because Janet Yellen’s used her day 2 of Testimony to remind that markets that the US Labour Market is still tight and the Fed is still locking to raise rates.

Naturally, this had an immediate effect sending Treasury yields higher & Gold lower.

The key $1,200 base is holding firmly leading into tonight’s all-important US CPI data.

If that data disappoints for the USD, Gold will make a run towards $1,230 again.

Oil (WTI): $46.14

Oil recovers back above the $46 price level showing great signs of a bounce back to end this week.

We still have one day of trade ahead but Oil recovered as global demand story versus OPEC planned production cuts still the main battle driving price slides & rebounds.