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Daily Outlook - Trader Talk

Currency Trading Summary Friday 23-Feb-2018

Written by Russell Sandiford / Dealer

What Happened on Thursday > Top 3?

• Dollar index retreats, concerned by inflationary pressure and rising borrowing cost

• Non-yielding commodities and metals are edging higher

• Bitcoin pulls back to sub 10,000 support level, but up-trend remains intact for now


• (USD) Dollar reverse before met its 90.20 resistance, leading the rhythm to the majors

• (BTC) 5.37% slump, bitcoin inches lower for three consecutive loss and $8,500~$9,000 is key level to watch from here.

Data & Event Risk Today?

• (EUR) German Final GDP q/q – 06:00 pm Sydney Time

• (GBP) MPC Member Ramsden Speaks – 11:00 pm Sydney Time

USDX: 89.65

The bears are back and have pushed down the greenback lower against all of the major currencies, despite jobless claim fell to a 5-week low, which it should have helped the dollar. The downward in regards in favour of risk currencies was backed up by the equities showing a reversal. The dollar’s decline is also pushing up the price of the commodities. Strong resistance level remains at 90.50, which crossing that level would put the strong bulls back in the game.

USD JPY: 106.65

The pair failed to hold most of the previous days’ gains following the Japanese yen benefited from broad weakening dollar due to a sharp recovery in the equities and pullback in US treasury yields, breaking the immediate support level at 106.60. Investors speculate that the US Fed may have to accelerate its pace of rate hikes. The only data will be released today is the Japan national yearly inflation early today. Breaking through the 106.00 would confirming the existing bearish outlook in the near term.

EUR USD: 1.2330

The pair recovered its ground back to above 1.2300 level and remained around that figure after bottoming for the day at 1.2255 during Asian trading hours, as the rally backed by the greenback turned lower against most of its rivals. Macroeconomic data was ignored as disappointing EU data while the US is encouraging. The next resistance level is at 1.2360 level.

GBP USD: 1.3915

The pound broke down below the key support level at 1.3800, however, bounced back up to reach up to the 1.4000 level, however, it lacks significant upward momentum to suggest further gains ahead. GBP suffered from missed UK data but later taking advantage of USD broad weakness. No relevant releases in this Friday but PM May organised a meeting regarding the Brexit term which investors look forward into.

AUD USD: 1.2715

The Aussie regained some strength following to the dollar sell-off and holding steady around the 0.7800 level, the rally was backed up by the surging in commodities prices as well. No relevant data from the AUD side for the rest of the week, while the outlook for Australia economy still seemingly muddied with mixed data and key figures. To support the Aussie recover, breaching the level 0.7940 is needed.

NZD USD: 0.7320

0.7310 is a heavy support for Kiwi dollar, a further test has yet been attempted. However, the overarching tone is the market right now is yields and risk. And especially following pretty hawkish FOMC minutes yesterday. At the moment, NZDUSD is seesawing to a narrower price section, and by definitive, such trend is destined to break and the market is searching for a catalyst.

USD CAD: 1.2715

The loonie failed to participate in the rally as disappointing retail sales of negative figures from positive 1.7%, however backed by the rally in commodities which eased the upward in the pair in spite of reaching early year high. Upcoming CPI data from the CAD side, which investors are watching closely look at for fresh drivers.

VIX: 18.72

Yesterday’s losses in DJIA has been trimmed, and the same goes to S&P 500, albeit the recent discouragement remarks by FEB, the market took it very lightly. Short-term volatility is still on its way up back to 25. Investors are also considering a regularly bouncy market fails to fit in the definition of volatility. If the market exhibits a certain pattern, a more cautious and risk-averse sentiment will emerge.

GOLD: $1,330

Gold edging up on the upside rejection that greenback encountered yesterday. A traditional safe-haven registered to be more than significant as a wide-array of alternation asset classes introduce themselves to the investors in 2018. A larger amount of capital being invested and the demand for a risk-less asset when the market is risk-off is more sufficient. And what it means to the gold is that gold price is much more susceptible and exhibit a higher correlation to the U.S. dollar.

OIL (WTI): $62.60

Higher price action in USDCAD has been the catalyst for the recent decline in the oil price, notwithstanding, the repositioning market share for American oil. Being one of the greatest beneficiaries of recent events, oil price even tested $63.0 level and it is reasonable to assume $63.00~64.00 would be the next region when the demand is higher and supply is not yet in surplus.

BITCOIN (BTC): $9,740

When the traditional finance sector falls short in any aspect, we would find increasing interest emerge in buying bitcoin and alt-coins. Recent aggressive selling in Dow Jones 30 is a perfect example, and the aftermath of 2008, bitcoin price is pleased to find the turmoil is never rested. A retrace to $9,500 or even $8,500 can also be explained by the normalization of the traditional asset class such as Gold, Stock, Commodity. Substantial buying is expected to flow in when the first higher low makes its debut.

Macro Themes in Play

• Dollar trimmed its recent gains at 90.20 and inched lower. 89.50 region to watch

• USDJPY is one of the beneficiaries of dollar weakness, 107.5 is next immediate resistance

Russell Sandiford / Dealer
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