Trader Talk Friday

What Happened on Thursday > Top 3?

• USD reversals the key theme to end Thursday
• Markets rethink the dovish Fed, or profit taking
• Oil gains for the 4^th straight day

Outlook

• US GDP data tonight
• Markets mixed, consolidation likely to close off this week
• USDCAD reversing extremely oversold positioning

Data & Event Risk Today?

• (CAD) Canadian GDP – 10.30pm Sydney.
• (USD) US GDP – 10.30pm Sydney.

USDX: 93.70

Dollar Index closed the gap after falling hard from 94 midweek.

USDX traded sharply higher in a USD reversal of form when markets digested the dovish Fed commentary. I can see the USD softness resuming and chalk yesterday’s trading patterns as profit taking.

USDJPY: 111.00

USDJPY saw a sharp reversal higher after the fierce selling on Thursday mornings FOMC release. The dollar-yen made it back to 111.70 before resuming the downtrend once again.

I feel that this swift reversal lower to kick off today’s Asian trading session is a sign of the market resuming the USD sell down. Look for 110.50.

EURUSD: 1.1685

Euro traded wildly yesterday as it firstly surged to fresh highs around 1.1775 before a very nasty reversal all the way back to 1.1650.

I can see the uptrend resuming from this level as the bull’s rush in for a fresh run into the 1.1700 handle.

The US GDP data is a key risk event on today’s calendar, so a miss on that number will see a weekly close above 1.1700.

GBPUSD: 1.3075

Sterling ended the day in the 1.3050 price area after a huge run up to 1.3155 as I called on Monday.

Much like with the Euro against the USD, I can see GBPUSD resuming the uptrend to finish this week strongly into the 1.3100 handle.

The GDP data for the US tonight may be the catalyst that the USD needs to resume its selloff, so am entering new LONG positions for GBPUSD here, targeting the same as previously, 1.3150.

AUDUSD: 0.7968

The Aussie dollar went wild yesterday in the Asian session, crashing up through the 80c barrier, Bid to 8070 before profit taking reversals.

We know that the RBA won’t move on interest rates on Tuesday so the pair should rally again once we clear the 0.8000 level again.

As per yesterday’s comments: “AUD will likely take a breather around 0.8000 for now, leading into RBA on Tuesday. “

NZDUSD: 0.7505

The NZD powered through the 7500 handle yesterday, climbing to fresh highs around 7555 before the USD strength fuelled a reversal.

It is very bullish technically whilst above that 7500 barrier and it looks comfortably in an uptrend on the longer term charts.

I wouldn’t be surprised if we see 7600 on the back of next week’s Kiwi jobs data (midweek).

USDCAD: 1.2545

USDCAD finally popped back up after many trading session finding lower lows.

The severe oversold positioning had to give back a little and yesterday did that, seeing USDCAD Bid from lows around 1.2415 to 1.2550 in a sharp reversal of form.

The oil recovery story will help the CAD, and we have Canadian GDP data on the US open tonight, so I favour staying on the sidelines for the moment on this pair.

VIX: 10.11

The VIX finally traded higher for the first time in a few sessions hovering around the 9/10 range.

Still ridiculously low and ripe for a sharp change as US Stocks earnings season is in full flight.

GOLD: $1,260

Gold sprung to 1,265 before a whipsaw back to 1254, squeezing the shorts sellers quite hard.

I like the LONG Gold trade particularly at entry levels around 1260 to end the week, and to power into next week (higher).

Oil (WTI): $49.06

Oil has had a solid trading week and turned very positive technically.

Can it break through $50, that is the question?

The headlines are helping Oil recover and I think that we will see $52 by next week.

Macro Themes in Play

• USD fight back on GDP data tonight?
• Treasury yields recovered dragging USD higher, evident across the major pairs.
• Commodity currencies ripping higher, particularly AUD & NZD.