Tuesday Market Action

USDX: 93.75

USDX traded quietly on Monday, wiggling around the 9370 level as US yields rose then receded.

The speculation of the next Fed chair also helped to lift the USD last week but that may be trimmed with Powell the firm favourite, as his attitude is similar to that of Janet Yellen.

The probability is now around 99% for a December rate hike, so USDX moving towards 95 is quite possible, as it really hasn’t fully moved on that as yet.

USD JPY: 113.35

USDJPY gapped higher to start the week, amid news of the big win for PM Abe in the Japanese elections.

Now with PM Abe winning the weekend election, the Yen should remain softer for longer with the continuation of Abenomics.

Dollar-Yen was Offred back for most of the London & US dealing sessions, hitting a low around 113.25 before settling down.

I still favour a play towards 114.50.

EUR USD: 1.1755

Euro traded softly to start this week, hitting lows of 1.1720 before bouncing back.

This week will be crucial for the Euro as to be expected with the ECB out this Thursday.

The range for EURUSD may be confined to 1.1750 – 1.1850 as it may ping-pong with intraday sentiment and treasury spreads until the ECB is clear on the exact QE unwind game plan.

Expect extreme volatility on Thursday and a breakout of this range potentially making lower lows.

The risk is certainly skewed to the downside, but needs a break down below 1.17 to really unwind Long positions sharply.

GBP USD: 1.3200

Sterling was very quiet yesterday, essentially holding a 25-pip daily range around the 1.32 handle.

The downside pressure is growing in the GBPUSD but all this pair needs is some positive headlines surrounding Brexit and it will lift sharply. That doesn’t seem close though.

I think in the short-term you have to stay with the downtrend betting on the US Dollar winning this battle, particularly as PM May was on the newswires overnight with comments like: “No deal is better than a bad deal” regarding the Brexit process.

AUD USD: 0.7810

The Aussie traded very quietly, leaking slowly lower across all three sessions on Monday.

The big news this week for AUD is tomorrows CPI data on the Asian open.

The key level of 7750 is very likely this week but the AUD data is tipped to be a resounding 0.8%.

If that is the actual number (tomorrow) the Aussie will lift back above 7900 against the USD.

NZD USD: 0.6980

The NZDUSD is on a knife-edge this week after NZ Election result puts Labour into power and puts NZDUSD dangerously close to breaking down below 69c.

Yesterday did see a reasonable bounce higher though, lifting NZDUSD from lows of 6925 to head straight back around 69c.

The NZDUSD may settle down a little now, but will likely turn lower again as we get more certainty around the US Tax Reform progress (boosting the USD generally) plus the new Fed Chair likely announcement in the coming trading days.

USD CAD: 1.2635

Dollar-CAD was a big mover on Friday after the Canadian CPI missed expectations.

I don’t think that the Bank OF Canada can move on rates this week, so I expect the USDCAD to lift higher.

USDCAD may continue higher as the pressure is on now for the BOC to move interest rates higher again.

The USD Strength is really shining through in this pair and the 1.2650 resistance has stepped up, but may not hold as a ruin towards 1.2750 still very much on the cards.

VIX: 11.07

The Stocks dipped lower late in the US session, driving VIX up a whole point.

VIX finally came alive overnight and this may fuel more lifts.

I am still wagering that we see a spike to 13 or 14 (or even higher) led by a serious stock market selloff before this year ends.

GOLD: $1,283

Gold lifted as the mild sell down in risk aversion and slight reversal in the USD came in late in the US session overnight.

Gold was Bid back above $1280 comfortably and likely will grind towards the 1285 level.

If the hawkish incoming Fed chairperson is appointed, namely Taylor, we may see Gold back at 1260-1250, but with Powell the favourite, Gold should hold around 1285.

At this stage, it is almost certain that Powell will win that seat, and President Trump said he is very, very close to announcing this result, so expect a small lift in Gold to carry on.

OIL (WTI): $52

Oil is holding firmly at $52.

Price action late last week saw a dip to 50.95 but Oil was supported yesterday with the risk aversion moves late in the US session.

The range for Oil has tightened up and it is a little passive now as the Iraq story has blown over.

In fact, I am prepared to say that we will get stuck in a $50-$52 range for a month or more.

BITCOIN (BTC): $5,780

Bitcoin pummelled down about $500 yesterday after another run above the $6000 level.

Negative comments yesterday dragged it back sharply, and expect some potential extreme volatility today around 2pm Sydney with the possible Bitcoin Gold fork.

I anticipate a big move lower possibly today, but be careful though, pullbacks can ruin your Trading Day very quickly, so best to under trade your account.

Macro Themes in Play

• Gold is grinding higher as speculation that Powell will be next Fed Chair
• EURO cautious ahead of the ECB this week
• Aussie CPI & Bank Of Canada in focus tomorrow.