Big London Session Ahead

November 14, 2017

What Happened on Tuesday > Top 3?

• Risk-Off themes dominate as markets see-saw
• Bitcoin bounces back by over $1,000, back to $6,600.
• Oil steady around $47, Gold Spikes lower sharply


• (USD) FX Dealers keenly awaiting the US Inflation Data
• (BTC) Bitcoin surges back after weekend plummet
• (EUR) Euro Traders attention shifts to ECB Draghi tonight

Data & Event Risk Today?

• (GBP) GBP Inflation – 8.30 am Sydney
• (EUR) German ZEW data – 9pm Sydney
• (ALL++) ECB, BOE, BOJ & Yellen speaks – 9pm Sydney
• (USD) US PPI Data – 12.30 am Sydney

USDX: 94.40

Dollar Index essentially unchanged around the 94.40.

USDX may trade in more restrained ranges this week ahead of the Retail Sales data & Headline Inflation for the USD this week.

We are very likely to a breakout either side, rather than narrow trading ranges.

USD JPY: 113.65

Dollar-Yen saw wild volatility yesterday, firstly selling down to 113.20 then coming straight back to 113.60 where it opened the day.

The risk-off theme dominated the early London session, causing the pull-down in USDJPY, which didn’t last.

The BOJ commentary this week may not move the Yen sentiment at all, but the US data, particularly if we get a solid headline inflation read on Thursday sure will.

USDJPY is trading midway at a familiar price back, but expect breakouts later this week or even this evening if Janet Yellen happens to comments about transitory Inflation in her speech.

EUR USD: 1.1670

Euro is still ominously quiet, but that could all be about to change this evening with ECB Draghi speaking at the big panel conference.

I can really see a snap higher and run up above 1.1730, but we do need a catalyst.

I am watching the Bund yields closely for the possible spark to fire up this EURUSD pair, but with the US 10-year treasuries trading back around 2.4%, the EURUSD is in a battle.

The Fed Funds Futures are still pricing the US Rate hike around 99% for December, so we are set for a volatile week with the headline tier 1 data on the USD side this week.

Look for breakouts, coming soon in my strong view.

GBP USD: 1.3115

Sterling came under pressure very sharply on the Monday morning open of trade after the weekend reports out of London regarding the PM May’s lack of support.

The dip down below 1.31 extended as low as 1.3060 before GBPUSD bounced back fast.

Expect pressure and a move lower in the London session today, but the bigger Volatility will be around the UK CPI data tonight (8.30pm Sydney) as well as the Bank Of England Speech (9 pm Sydney).

A move back under 1.31 looks very likely this evening.

AUD USD: 0.7630

The Aussie came down slightly caused in a pure risk-off move in London dealing overnight.

The China Industrial Production plus Retail Sales data were a very slight miss, but still solid, so AUDUSD has held up around 7630.

The Aussie did lift today as the AUDNZD flow dragged it higher.
Next moves for AUDUSD are possible back above 77, towards 7730.

NZD USD: 0.6875

The NZDUSD is under pressure, being offered quite firmly in the Asian session open today.

More likely in the coming month ahead is a stock market sell-off spiralling risk off and the Kiwi moving towards 6750.

That move looks like it has kicked off already, with NZDUSD very weak today, heading towards 6850.

USD CAD: 1.2740

Dollar-CAD has shown that it can lift sharply, as the Oil price dipped lower overnight.

Over the mid-term it still looks a great trade to consolidate higher from here, but the Oil price rally has been very supportive for CAD lately, but we are now close to the milestone 1.2750 – a level that may gain great support for an upward move.

I cannot see an end in sight for the Oil rally (towards $60) so expect USDCAD to be a little restrained in the 1.2650-1.2750 range, but also the Gold price this week will move CAD sentiment also.

USDCAD may have bottomed out around 1.2680 in the short-term.

Let’s see how its price action performs at 1.2750, a turn lower or acceleration higher. Both are possible!

VIX: 11.50

Vix is gaining ground, slowly but surely.

This could be the beginning of a serious & significant correction in US Equities, and we had a risk-off theme overnight lifting VIX.

The US Tax Reform in its current form, it very unlikely to provide a result for Team-Trump, so the potential for US Stocks to give back some of this year’s gains is very high.

Expect the VIX to trade higher looking towards 13 or even 15 over the next 6 weeks.

GOLD: $1,276

Gold lifted back towards $1,280 with the risk off flavour in full flight last night.

The USD will be looking for the Inflation data this week so we may see $1300 or $1250 but more likely no real breakouts in my view.

The extended timeline on the US Tax Reform will add a lot of buyers into Gold.

Watching that story very closely, as a $20 move higher is very possible.

Short-term a bounce back is very likely, as I favour the Gold price to come back based on the US rate hike being almost fully priced in already, hence $1300 back in play as my near-term target.

OIL (WTI): $56.60

Oil has seen a great deal of upward momentum shift strong Bids higher the past week or so.

Last night there was a tick down because the US Crude production numbers were projected to be sharply higher next year.

Price action suggests that higher highs will maintain, because the pullback was not so wild.

I still have a firm $60 target.

BITCOIN (BTC): $6,700

Bitcoin traded back up sharply after the capitulation over the weekend and to start this week.

Crypto investors shifted gears into the long Bitcoin Gold trade, and that traded vertically at the same time as Bitcoin itself slammed lower.

Bitcoin itself jumped straight back into action, as I knew it would because buyers in this space love a Bargain.

CME Futures & ETF for Bitcoin are both also coming soon so my call of $7,500 by year-end is very much in play, with (upward) momentum growing fast, again.

Macro Themes in Play

• Key Central Bankers panel tonight may give clues to forward guidance in FX
• Risk off tone was quickly reversed, as was the Bitcoin selloff
• US Equities interesting, VIX finally moves higher as we approach key USD Events

Russell Sandiford / Dealer

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