Pre NFP squaring

Much of the price action revolved around pre-NFP position squaring. The one exception was sterling that tanked after the latest BOE inflation forecasts.

All eyes are on the greenback today. In the wake of this weeks’ robust ADP print, expectations are running high for an equally robust NFP print, but are the remaining dollar bulls setting themselves up for disappointment? Needless to say, a combination of higher earnings and lower employment rates will see the dollar bounce. However, I'm convinced that we have not seen the last of the current US "corrections", even more so that in the absence of any concrete news on the fiscal front. The USD is finding itself perched in a precarious position, all but waiting for someone to push if off the ledge. The ardent dollar bull in me says, the Buck and Duck, but I hate putting so much emphasis on one economic print. Rest assured that a strong NFP will shift the Fed’s March rate hike expectations hard but remember, there’s a lot of data between now and March 15, so tread lightly.

Australian Dollar

Tempering one's expectations in the wake of "home run" trade numbers is tough, but it's imperative to take note of the increasingly complex landscape ahead of us. Needless to say, volatility has ratcheted higher ahead of tonight NFP and the US trade negotiations are just warming up.

The stars are aligning with a record positive AUD trade balance and a less hawkish Fed, but the Feds may still pull the trigger on a March hike or begin the long awaited balance sheet taper. I still take the view that whatever side of the coin you're on in this perilous trading environment, the best course of action is a nimble one.

President Trump and Australian PM Malcolm Turnbull had a very candid discussion overnight that primarily centred on the refugee resettlement deal. Trump later tweeted that he would "study this dumb deal" that was struck with the Obama administration. There's definitely a new sheriff in town.

Japanese Yen

Not lots of action overnight, but one thing that is certain is, the spot Yen play versus your typical correlation remains broken-down, Don't be fooled by the sense of calm in the market as pockets of interest are sitting with trigger fingers ready to hammer the dollar. While tonight's NFP is a critical inflexion point on the macro side, the larger stage is still President Trump’s.

Chinese Yuan

China will be back after the long holiday and given recent market moves, I would expect the USDCNH short to cover ahead of tonight's NFP. I still believe the CNH is ostensibly overvalued at current levels but while the PBoC continues to bully the market, investor interest continues to wane. In the meantime, look for the CNH current high G-10 correlation to hold intact.