What Happened on Wednesday > Top 3?
• Bank of Canada holds Interest Rates with Cautions tone USDCAD Lifts to 1.2800
• US Data supports a Firm USD, Asian & European Equities lower
• Bitcoin screaming higher, reaching $14,000
• (USD) Interim Payroll data solid, looking towards Headline numbers Friday
• (GBP) Brexit Negotiations still mixed
• (AUD) Aussie Trade Balance drags on AUD, now approaching 75c
Data & Event Risk Today?
• (USD) US Unemployment – 12.30 am Sydney
• (EUR) ECB Draghi speaks – 3 am Sydney
Dollar Index lifted higher amid solid interim USD data on Wednesday.
The headline US Payrolls data (on Friday) is likely to be an excuse for the Dollar buyers to step, so expect a possible move above 94.
The US Tax Reform has passed the first huge hurdle in the US Senate, with a vote in favour 51 to 49, giving a huge lift to the USD bulls, so expect a strong finish to this year on USDX and USD across the board.
USD JPY: 112.45
USDJPY was quiet most of yesterday but has consolidated around 112.50.
No real catalyst, as the Bond markets were mild, in fact, Treasuries drifted lower.
I think the US Tax Reform story can outweigh the political issues dragging on the USD.
I expect the 113 level to reappear very soon, but need a catalyst such as the Jobless numbers this evening or the NFP US payroll data on Friday, particularly if the US unemployment rate dips down to 4.0% as it is predicted (in Friday’s headline US Jobs Data).
I maintain my near-term target of 113.80.
EUR USD: 1.1800
Euro price action has looked soft to kick off this week, dribbling lower yesterday under 1.18 as the USD was firm.
Euro may get an uplift if the end of the week provides a clearer divorce path for the UK from the EU, but the issue over free movement for UK Citizens over to Ireland seems like it will hold up that optimism for EUR.
I am maintaining my outlook towards 1.1680-1.1700 range for EURUSD in the near-term seeing the potential for Offers down towards 1.1700 to end this week as we have no guarantees of the Brexit pathway clarity plus the likelihood of solid Jobs data for the US will support a move lower in EURUSD.
GBP USD: 1.3385
Sterling did see some whipsawing price (again) action yesterday which is to be expected as the Brexit negotiations drag along.
My research points towards the Brexit deal being 90% done, which means higher highs are expected in the sterling and the sterling cross FX pairs, but the potential for small blips lower in the very near-term.
I maintain my target of 1.3600 for GBPUSD particularly if we get agreement on the divorce from EU payment from the UK.
Watch for the GBP cross pairs to show huge ranges this coming fortnight which we already got a hint of last week in GBPJPY and GBPAUD, still looking at huge upside potential.
AUD USD: 0.7550
The Aussie has moved lower again, taking on the 7550 price level after the Trade Balance data missed expectations today.
The downslide has firmly begun and the momentum shifted lower for AUD this week.
I favour the downside on AUDUSD to end this year around 75c (or even lower) as the US move on rates this month helping the Aussie lower as the Divergence plays out.
Also, don’t underestimate the negative SWAP spread on the 2-year treasuries to drag AUDUSD towards 7450 if we see a stellar NFP number for the US on Friday, more likely though is 75c.
I think 0.7450 looks very likely in the coming month as the divergence is in full swing.
NZD USD: 0.6860
The NZDUSD came back off 69c very quickly amid Dairy price data and RBNZ commentary yesterday.
The NZDUSD back around the familiar 0.6850 and seems like the USD is back in the driver’s seat for direction from here to close off this year.
The slide in Kiwi-Dollar towards 6800 should resume before support is found, particularly on the back of the USD sentiment more than the NZD, and expect that the US Payrolls data this week may be an excuse to buy Dollars as we get nearer to the US rate hike also.
USD CAD: 1.2800
Dollar-CAD lifted off the canvas this week, as I mentioned from that key 1.2660 level.
The Bank OF Canada held interest rates but noted some Cautions tone, hurting the CAD sentiment, as did the slide in Oil overnight – hence USDCAD shot up to 1.2800.
The 1.2750 level is a large support price area, and it will be interesting from here if we can form a base at 1.2800 for a run higher towards 1.3000 again?
The door is open for more Buying to step in later this week on USDCAD from my experience with this pair.
US Stocks still firm, basically holding recent gains ahead of the US headline Payroll data this week.
The year-end volatility potential is always high, so a break above 12.50 is becoming very possible.
For too long this year, Stocks has seen unbelievable sustained upward momentum, so it can flip back quickly too.
Gold totally collapsed and has not bounced back much after the US data overnight.
The USD is still looking strong, now that the US Tax Reform has cleared the first BIG hurdle in the Senate, so I will not be shocked if the downside resumes for GOLD with my renewed targets around the $1,255 marker.
The revised trading range that I have in mind for Gold is 1255-1270.
This can go either way, so be nimble, but I prefer the upside on a possible USD disappointment out of the political jitters for Team-Trump, PLUS the US rate hike is almost completely priced in.
OIL (WTI): $56.20
Oil holding steady but did blip lower in overnight trade even though the US Crude Oil Inventories data were supportive to higher prices.
I am more neutral on Oil for the finish to this year after the sharp profit taking that we saw overnight.
Price action suggests that we may consolidate around the $58 level but it can be an unpredictable beast.
BITCOIN (BTC): $13,900
Bitcoin is trading very bullish, slamming through $13,000 yesterday, and continuing on to $14k today!
The CME Futures coming on a likely start date of 18th of December (and CBOE starting next Monday 10th) is the big catalyst here, as this development allows for the Institutional money to get into standardised Futures BTC trading.
For that reason, I can see a nudge towards $15,000 then a sharp pullback is very likely.
This weekend trading is likely to be very volatile, so be prepared for wild price action before Futures products commence trading next week.
Crypto investors are likely to keep the buying pressure, possibly to $15k psychological level, before a possible sharp reversal.
Macro Themes in Play
• US payroll data in focus to close out this week
• GBP volatile but seems in a wait & see mode, CAD sold down aggressively
• Gold drifting lower and Oil turning lower, as Bitcoin Powers ahead.
Russell Sandiford / Dealer
Australia (toll free) T 1800 176 935