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Currency Trading Summary Friday 15-Dec-2017

Written by Russell Sandiford / Dealer

What Happened on Wednesday > Top 3?

• US Hikes Rates, USD Retreats anyway as CPI missed expectations
• Gold back to $1,255, Bitcoin Steady around $16,300
• Sterling jumps above 1.3400 again amid USD unwind and ongoing Brexit


• (EUR) ECB Tonight
• (GBP) BOE likely to stand pat this meeting
• (BTC) Bitcoin Futures remain solid, no real breakouts, mild profit-taking

Data & Event Risk Today?

• (AUD) China Industrial Production Data - 1pm Sydney
• (CHF) Swiss Nation Bank Libor Rates – 7.30pm Sydney
• (GBP) Bank OF England – 11pm Sydney
• (EUR) ECB Interest Rates & Press Conf – 11.45pm / 12.30am Sydney
• (USD) US Retail Sales – 12.30am Sydney
• (CAD) B of Canada Poloz Speaks – 4.25am Sydney

USDX: 93.40

Dollar Index made its way to 94.20 before collapsing lower amid US CPI data missing expectations.

The headline rate hike did little to lift the USDX because the forward guidance is unchanged regarding the rate hike path (3 hikes) in 2018.

US Retail Sales data tonight gives the USD a chance to fight back, if that data is supportive, but in the meantime a likely slide to support at 93 is very likely.

USD JPY: 112.80

USDJPY was wild overnight as the CPI data missed dragged on USD sentiment fiercely.

US 10-year treasury yields came back and USDJPY bottomed around 112.30 before a mild bounce back on the Asian open today.

I think the USDJPY pair can find its way back above 113.00 this week on tonight’s all-important retail sales data, as the oversold nature of this pair seems obvious.

I have a revised target around 113.30 to close off this week.

EUR USD: 1.1835

Euro traded sharply higher as the USD Long positioning was unwound on the back of softer than expected CPI data.

This week marks another ECB meeting and likely no change expected until midway into 2018 so expect EURUSD to pull back under 1.1800.

Euro may see a turnaround towards 1.1780 if the ECB commentary is where we anticipate, pushing out their timeline to unwind Eurozone QE.

I am maintaining my outlook towards 1.1750 range for EURUSD in the near-term.

GBP USD: 1.3425

Sterling finally came alive, helped by softer USD across the board.

Watch for the GBPUSD volatility this week ahead particularly around the inflation data release, which was supportive yesterday.

I maintain my target of 1.3600 for GBPUSD particularly if we get agreement on the divorce from EU payment from the UK, but that lingering negotiation did hurt the Sterling late last week, as markets were expecting more.

AUD USD: 0.7670

Aussie spiked sharply higher this morning on the back of ridiculously good Aussie Jobs data plus the October figures were also revised higher.

AUDNZD becomes an interesting cross FX pair to look at today, after that AUD jobs data supported a spike back above 1.0930.

I favour a profit-taking U-turn tonight in US Session dealing as the Aussie jobs data is often wrong and revised very different.

The Aussie Jobs data is done, but US Retail sales can be the next catalyst for a reversal towards 7650 or lower.

NZD USD: 0.7010

The NZDUSD came alive after a quiet Monday, as the news was confirmed new RBNZ Governor Orr.

The NZDUSD was my trade of the day yesterday as the optimism was very sharply seeing strong Bids higher, taking out 70c once again.

Maybe this pair can play out a run towards 7060, but that momentum is likely to be capped unless the US data is a miss this evening.
I prefer to play with AUDNZD for the Kiwi-Dollar uncertainty.

USD CAD: 1.2805

Dollar-CAD trading sideways around 1.2850 until the USD selloff, seeing a move back to 1.2800.

The supportive Oil price recovery faded, and so did the USDCAD, but also watch for Bank OF Canada Poloz is speaking late in the US session tonight.

The Bank OF Canada can jawbone the CAD but the USD seems more in control in the short term anyway.

We may find a base here around 1.2800 for a move towards 1.2800 to close off this week, on the back of USD strength, resuming after this knee-jerk.

VIX: 10.18

US Stocks holding up very well this year, and in overnight US session trade they remained strong, lifting VIX back above 10.

The year-end volatility potential is always high, as last Friday saw a 4% drop in VIX/ Volatility as the fear index slides under 10 again.

It is happy to hold firm, but the US Tax Reform Optimism is holding Stocks high and VIX low in my view.

GOLD: $1,254

Gold rebounded beautifully back to 1255 amid USD softness in overnight dealing.

My year-end target of 1255-1260 looks very likely to be the end point of a volatile trading year for the yellow metal.

Copper on the other hand, looks bullish again, but Gold is restrained, grinding slowly back towards $1,260.

The USD is still looking strong overall, so don’t be surprised if the uptick in Gold is short-lived, particularly with 3 more rate hikes projected for 2018 for the USD.

OIL (WTI): $56.85

Oil is trading back under $57 amid stockpile data overnight.

The US Crude Oil Inventories should have seen a move around 57.50 but Oil blipped lower anyway.

The US data surrounding Oil Production is weighing on the rally that looked like $60, in what seems like year-end profit taking potentially.

Price action suggests that we may consolidate around the $58 level over the coming week..

BITCOIN (BTC): $16,300

Bitcoin had a HUGE run up last week, and has been very resilient, essentially holding onto most gains.

In a quiet day, it did spike lower late in NY session trade, seeing 15.400 before a recovery higher once again above $16k easily.

The CME Futures start next Monday, and will see increased volume in the near-month contract, which is currently pricing about $1000 premium on spot pricing for BTC.

For that reason, I can see no stopping this price action until $20,000, even with the intraday pullbacks.

Crypto investors are likely to keep the buying pressure, likely to drive to $20,000 before seeing a profit-taking reset lower, sharply.

Macro Themes in Play

• US Rate Hike done, CPI softens up the USD amid an unwind in Long Positioning
• GBP volatile, back above 1.34, with ongoing Brexit talks
• ECB Tonight are likely to add to the Macro moves in Euro back around 1.1800.

Russell Sandiford / Dealer
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