 Welcome, everyone, to this week's Monday Market Webinar with me, Michael Houston, in the absence of Jesper Lawler, who's on the lead today. Just a quick risk warning for all of you guys out there to digest before we get started and have a quick look at the main events, I think, that I'll be looking at this week which I expect to drive, not only currency markets, but financial markets in general. So let's get started first and foremost with the non-farm payrolls numbers that came out on Friday. Those of you who attended the webinar on Friday will obviously already know the main takeaways that I took away from that particular report. On the margins, I think it was the fact that it was one of those Goldilocks reports, if you like, that it was not too bad, but it also wasn't one of those reports that made it more likely that the Federal Reserve would be inclined to raise interest rates more than, say, certainly one or two times later this year. And I think that has had an effect on the US dollar. It is slightly weaker on the margins on the back of that report. The pound is certainly rebounded from the lows that we saw on Friday. The euro is struggling to really break much above 114, but overall I think the direction travel there for euro-dollar is probably more towards 115 than it is to 112. Inequity markets are now starting to find a little bit of a foothold here in Europe after what I would call is a fairly lackluster start. US markets are trading near multi-week highs, certainly pushing against a very key resistance level, which I talked about on Friday. If I draw a line through the highs, the all-time highs that we saw in July last year, we can see that we are approaching a very key resistance level, certainly on the basis of this move that we currently have here. We had a potential double bottom here on the S&P, and the bottom of that was around about 1810. The top of it was around about 1946. What I did to project a price target for this was to basically take this move here and project it from the breakout point, which takes us up to around about 2082 as an initial target for the move higher, but also we've got trend line resistance coming in just above that around about 2090. Now, obviously, US markets have outperformed European markets, number of reasons for that, but the main reason is undoubtedly the comments that we saw last week from Fed Chair Janet Yellen. The playing down of interest rate rise expectations in the wake of the March meeting, the late March meeting that we saw where the Fed dialed back its expectation of potentially four interest rate rises this year to two, and the fact that Janet Yellen dumped very heavily on the hawks or the hawkish comments from a number of non-voting policymakers in the intervening weeks between that meeting on the 16th of March and Friday's payrolls report does appear to suggest that really Fed policy makers aren't in any rush to raise interest rates any time soon, and in the beginning of the year there was an expectation that monetary policy certainly with respect to US monetary policy and European monetary policy was on a divergent course. They were moving apart, they were moving away from each other. That no longer appears to be the case or certainly not to the same extent as it was at the beginning of the year. So while there's no likelihood or very little likelihood of a rate rise in April, the risks of an interest rate rise in June have also slid back as well, and I can illustrate that quite nicely with this Bloomberg table that we currently have in front of me. Now this is a chart that I look at or a table that I look at on a fairly regular basis because essentially what it does is it outlines the probability of what bond markets perceive will be the risk of a rate rise at the respective Fed policy meeting. So the 27th of April here, the market surprising is a 0% probability of a hike and a 0% probability of a cut. They're only assigning a 24% probability of a hike in the June meeting. Now obviously that will or could well change in the intervening weeks and months as we get newer economic reports on the state of the US economy. And certainly I think some of the political rhetoric that's coming out of the US will no doubt play a part in how well the US economy does over the course of the next few months when you get people like Donald Trump predicting an even worse recession than the one in 2008 while it's easy to dismiss that face value and to a certain extent I do because I certainly don't think any of the US economies in any way near the sort of state that Mr Trump seems to think that it is. That's not to say that the tone of the debate won't have an effect on consumer confidence and it won't have effect on spending patterns within the US as a whole. Certainly if you look at personal spending on the part of consumers it still remains very, very weak relative to the rise in incomes that we've been seeing on a month from month basis. Also if you look at the rise of average earnings, average hourly earnings that's trending at around about 2.3% per annum that's still well below the peaks that we saw in the middle of last year around about 2.6% and we only got one rate rise last year even though average earnings growth was trending at around about 2.6 but since that peak in the middle of last year average earnings growth has been trending lower and I think one of the reasons behind that weak earnings growth has been as a result of what's been happening in the oil patch, what's been happening in the mining patch. If you look at the number of jobs that have been lost in the US economy over the course of the past 12 months a good proportion of those jobs will be in the mining sector and the manufacturing sector and generally the hourly wage of workers in that sector is in the region of between $25 and $30 an hour. Now these jobs generally are much higher paid than the new jobs that are being created. Looking at the jobs report, the US jobs report on Friday, a good proportion of the new jobs that were added were in arts, entertainment, recreation and retail and the average salary of those particular jobs the average hourly salary is between $17 and $20 an hour. So when you get that sort of job replacement take place, consumer spending as a net will obviously suffer a slight hit because the average earnings, the overall average earnings picture is actually showing a decline and that's I think why you're seeing weak average earnings growth because more expensive manufacturing and mining jobs are being replaced by much lower paid retail, hotel and leisure type roles and that really does feed into the narrative as to why we're not likely to see a rate rise and certainly in April, dependent on the data that we see that number of 24% could go up. What I really want to see is it go above 50% to give any indication that there's a possibility that we might get a rise in June. At the moment that doesn't seem very likely and I think if US rates do remain fairly low then that is going to have an upward effect on US stock market prices and I think that's why you've seen the US market outperform its broader European peers. While European markets are still in negative territory for 2016, you can see from this chart that US markets are not. They are now in positive territory for 2016 and that's largely been as a result of the fact that we're seeing an improved economy in the US or certainly not a significant slowdown and we're seeing the Fed dial back its hawkish rhetoric that it was initially talking about at the beginning of this year when Stanley Fisher suggested that four rate hikes were a distinct possibility. That's no longer on the table and as a result dollar longs have been paired back and that's helped to support broader US markets. Similar sort of story on the Dow Jones. We have broken the downtrend line from the highs that we saw last year but what we haven't done is we haven't taken out the peaks that we saw in early November and that's the 18,000 level. So that's certainly what the level that I'm looking for next in response to the potential upside for US markets. Even though we've broken out on the Dow, we still haven't broken out on the small cap and we haven't also broken out on the S&P. So there does seem to be a little bit of divergence there on the back of the move higher in the Dow Jones relative to the S&P and the US small caps and I would argue that the US S&P is probably a better barometer overall sentiment within the US than the Dow Jones 30 which can be influenced rather heavily by one or two very big cap stocks. So what does that mean for the dollar index overall? Well I certainly think that the dollar index remains on a downward path. We talked about this a little bit on Friday's webinar and I see no reason to alter that perception. I think there is still potential for further dollar losses certainly against the Yen, certainly against the Euro, probably a little bit more neutral on the pound given all the concerns that investors are expressing about the forthcoming upcoming Brexit vote. Though I do have to say that I think an awful lot of the pessimism and the concern about taking out sterling insurance is a little bit overdone. The fact that it's at levels last seen or it's actually at worse levels of last seen in the financial crisis in 2008 speaks to I think a heightened sense of hyperbole about the risks to sterling in the event of a Brexit vote. If you cast your mind back to 2008 everyone thinking the sky was going to fall in I certainly don't think anyone thinks that if the UK decides to vote for an exit from the EU in the June referendum vote we've seen a massive decline in the pound over the course of the past few months. It remains to be seen as to whether or not we're going to see any further losses given the problems currently being experienced by not only the economy in Europe as a whole but also concerns about what's going on in China and monetary policy there. I think that's why I think this week could be a very big week for European markets particularly given that we get a number of services PMI announcements tomorrow. Now cast your mind back a few months ago and the Paris attacks and there was a bit of a decline in services PMI's in the wake of those Paris attacks. The most recent PMI data that we've seen from the French economy would appear to suggest that we've seen a bit of a recovery in the services sector since the beginning of the year. We've got a reading of around about 51.4 for the services PMI. That was a big jump from the February number. Of course since that reading came out we've had the Brussels attacks and I think it's quite reasonable to think that in the wake of those Brussels attacks you could actually see a significant hit to the services PMI numbers that we're expecting to come out tomorrow. Let's look at what we're expecting tomorrow because I think it's going to be quite important in that context. We've got a whole host of numbers out between 8.15 and 9 o'clock and obviously we also have the UK services PMI as well. Now the one that I'm particularly interested in is the French PMI. Now the previous number, the February number was 49.2. Now the flash number that we got out a couple of weeks ago before the Brussels attacks came in at 51.4. I think it's a little bit on the conservative side to think that we'll get a slide back to 51.2. We may certainly get a bit of a weakening there. I think it's unlikely that we're going to get an increase given the fallout from that and I will be paying particular attention to not only the French services PMI but I think also the more broader European ones as well. Certainly in that context I think it's inevitable that we will see a slight softening in services sector activity in the wake of those attacks whether it will be sustained is another question and I think that's really a question for maybe later in the year but concerns about terrorist attacks are fairly new to European consumers and while we may be more used to it here in the UK I still think that it took about three months for the Paris consumer to recover from the Paris attacks. I think there will be a short term effect to that over the course of the last couple of weeks. Does that have consequences for European central bank rate policy? Probably not. Certainly in the context of the move that we've seen in the Euro over the course of the past few days I think the direction of travel there does remain contingent on central bank policy and the change of tone from the ECB does appear to suggest along with the change of tone from the Fed that the upside is likely to see a return to around about 115. In the interim though I think there's certainly potential for us to move back to around about 111.80. I've certainly indicated that in my chart forum update earlier this morning which I update every day when I can and while we have slipped back a little bit I think there is a decent area of support around 113.20 and 111.40 so I'll certainly be keeping an eye on those particular areas but overall I don't see any change to the overall trend that we've been in over the course of the last few weeks and so far this year. More broadly I think my dollar weakness scenario is borne out by what Dolly N has been doing over the course of the past few weeks. If we look at this is a long term chart that I've talked about fairly great length over the course of the past few weeks and those of you who have seen my weekly videos will know my reasons for behind or know my reasons behind my view that we will probably see a move to 106 in Dolly N by the end of the year. What we've seen here this is a weekly chart and what I've done is I've taken the move from 75.66 which was the lows in 2011 and the peaks in 2015 of 125.85.90 and we can see straight away that we haven't really had a pullback at all with respect to this particular move higher. Furthermore we've finally broken below this series of lows that we saw throughout 2015 and the first part of 2016 around about 115.85.116. I think this is potentially an inverse, non-inverse, I think this is potentially a head and shoulders reversal with a left shoulder here, a complex head here with a right shoulder here. Basically if you work on that premise that this is a head and shoulders reversal breakout, then the minimum price objective before this breakout would be you measure the distance between the head or the peak in 2015 and the neckline and the neckline I've drawn through the lows here. It's a horizontal neckline which is unusual. Necklines usually tend to slope upwards in an up trend and when it breaks down. If we project that down then that brings me out with a target of at least 106 and that would equate to the 38.2% retracement of the entire up move from the 2011 lows. So if you work on that basis of a weaker dollar then you also have to work on the premise that that's likely to manifest itself into other currency pairs as well. Now the dollar index is comprised of six currencies of which the Euro is the biggest one makes up around about 57%. The rest of those currencies are comprised of sterling, yen, Swiss rank, Australian dollar and Canadian dollar. Much smaller proportion but overall I think a significant move lower in dollar yen is only going to happen for one of two reasons. It's either going to happen because the Fed is going to remain on the dovish side and it's probably going to raise rates much less than people think that it will and the fact of the matter is the Bank of Japan has pretty much ran out of road when it comes to cutting interest rates that much further. I think the surprise decision to cut rates into negative territory which has prompted a move higher in the yen not lower has pretty much been the straw that broke the camel's back with respect to the Bank of Japan's attempts to weaken the currency and that in itself has consequences. If I take this to a daily chart what we're currently doing with the dollar yen is we're trading in a broad downward channel. Now we're approaching the bottom end of that channel but nonetheless the direction of travel does appear to suggest that we're probably going to see a lower dollar. If we're going to see a lower dollar against the yen then I think there's a good chance that we could see a lower dollar against the euro and potentially against the pound maybe not so much against the pound because of obviously the political risks and the risks surrounding the uncertainty surrounding a Brexit vote. But ultimately I think there's a good chance potentially that maybe we've seen the bottom in cable and I know that's a bit of a big call but I've certainly seen the potential that the market is becoming to one way in terms of its outlook for sterling and it reminds me of the narrative that we got from a whole host of investment banks about the decline in the oil price. When you've got a whole host of people queuing up to basically talk oil prices lower or talk the pound lower, that's usually the time when mainly they're talking their book and mainly the trade starts to become a little bit crowded. $10 a barrel on crude standard charted, $15 a barrel, $20 a barrel on Morgan Stanley and various other investment banks does appear to suggest that potentially they've probably got the wrong side of this particular trade and while I don't expect oil prices to go raising higher, I think there's a good chance we could have seen the bottom in oil prices and I think there's potential that we could have seen a short-term base in the pound against the dollar. There's one of the reasons why I potentially think that with respect to the pound against the dollar and that's when we look at the monthly chart. Now I mean this could equally go very, very wrong but ultimately trading markets is all about making decisions and having an opinion and if I look at the monthly chart here on the pound against the dollar, this particular pattern here does seem rather compelling in terms of a potential reversal pattern. This is what I would call a bullish engulfing day or a bullish engulfing month and the fact that we declined one, two, three, four months in a row, pulled back quite significantly, closed on the highs of the month, albeit not at the very, very highs of the month. We have seen a little bit of a pullback in the interim. That's not to suggest that we can't drop any lower. We could certainly come back to the lows that we saw at the end of January but I think if you actually look at my other chart for sterling dollar, I think there is an argument for potentially saying that we could be seeing the beginnings of an inverse head and shoulders here. I draw my neckline from the peaks in February through the peaks in March and we topped out last week just below 144.60, 144.70 which is basically where this line comes in. What I've also done is I've got my left shoulder here around about 140.80 and my right shoulder which is slightly more irregular is also around about 140.60 and 140.80. What would cause me to reverse my view that the pound has bottomed out? Well, quite simple. If we break below 140.80, then I would get a little bit concerned about the prospect of a strong rebound in the pound. There is certainly a number of barriers in place to the potential for a breakout but what I would say is given the way the client's sentiment is working at the moment, our clients, our top clients do tend to be split rather 50-50 in terms of the cash positions but overall majority of clients are long as opposed to being short which is quite a brave trade given the way bearish sentiment is at the moment but sometimes it does pay to be the wrong side of a trade or the wrong side of consensus I should say. You don't want to be the wrong side of a trade but you can be the wrong side of consensus. It takes a brave man to do it and certainly you need an awful lot of confidence in your own analytical skills and your interpretation of the charts but as long as you time your entry and exit points into the trade, it can work out. So I mean in terms of what the pound is doing at the moment, it's halfway between this trend line resistance here and this very, very strong support here. So at current levels it's very, very difficult to have a strong view one way or the other. We could fall all the way back here before rebounding but ultimately any stop loss on any long positions really needs to be below the lows that we saw here and here which is around about 140-60, 140-50. So any long position you'd have to have a stop loss below 140 and a half for a move through 144-10 and 145. So not 144-60 and 145. If we move through 145 then the target for this particular move would be 151 and a half. So that gives you potential for a minimum price objective for an inverse head and shoulders breakout. To see how well this worked in another asset class we can look at euro sterling as a case in point. This is a weekly chart and this is something that my colleague Jasper looked at initially a few weeks ago. We've got this potential rounded bottom or double bottom here, series of peaks through 75, 74-50 and a lows around about 69-20 area. We broke higher and it's taken a while but given the fact that this pattern here unfolded over the course of the most of 2015, it's not a surprise to see that it takes quite a few months to unfold on the weekly chart but certainly in the context of the move that we've seen thus far. Since we broke above the series of highs here we've slowly and surely ratcheted gradually higher. The next target for euro sterling for me is around about 80-75, 81. Also coincides with this trend line resistance from the peaks that we saw in 2008 when it got within a whisker of parity around about 98-20. So we've been in a long-term downtrend on euro sterling. We're still in it. We've just broken above the 200-week moving average finally after a number of attempts to break above it and certainly that 74-30-40 area will now act as a decent area of support on any move lower. But overall while we remain above 74-30, 79-30, the bias I think now has shifted somewhat slightly towards a test of 81 and this minimum price objective of this move higher that we saw when we broke out at the beginning of this year. So certainly looking at a slightly stronger euro, certainly against the pound in the short term, and potentially could we'll see a fairly stronger euro and are in an uptrend against the yen as well. So if you're looking at the crosses in isolation, you have to really take a view on euro-dollar as well. Now we have seen a little bit of a bearish reversal here on this euro-yen chart which suggests we're probably going to see a little bit of a drift lower. So the big question then arises what's going to take up the slack in a move lower in euro-yen? Is it going to be the dolly yen or is it going to be the euro dollar? And I think it's more likely to be the dolly yen. We could get a little bit of weakness in euro-dollar as a result but ultimately given what we've seen in euro sterling, given what we've seen in euro-yen and the fact that we are in an uptrend for euro-yen since March, the only way that I would revise my expectations for a move lower in euro-yen would be if we broke below this trendline support here and the kumo cloud support that we've currently broken into and we've acted as resistance at the moment here. So we should trade between these bands. Once we break out of these bands we should go strongly in one direction or the other. Look how this band has acted as resistance over the course of the past few months on euro-yen on the daily chart. We've now finally broken into it. That means it should now act as support and as we go forward in time if we break through this resistance level here we should start to ratchet higher over the course of the next few trading sessions. This is why I think it's important that we look at technical analysis as well as fundamental analysis when we look at how we trade these markets. Certainly in the short term there is scope for us to trade back down towards these support levels here before pulling back and potentially trading higher. Okay so let's move on to Brent crew prices because certainly the rebound that we've seen in Brent crew prices over the course of the past few weeks I think has helped support equity markets over the course of the last few weeks. Certainly the rebound from the lows that we saw on Brent didn't quite coincide with the rebound from the lows that we saw in equity markets in February where we rebounded in around about February the 11th but what we have seen is a slow move higher in crude oil prices and while we have broken below this key support level here around about 38 dollars around about 38 dollars 20 a barrel in Brent the direction of travel does appear quite clear but we're still in the uptrend that we've been in since the lows that we put on in January for Brent prices and the moving average the 50 day moving average is starting to turn higher so ultimately a weaker dollar should help on the margins underpin the crude oil price. If we now change that to a monthly chart that can also give us a decent indication of longer term sentiment at the moment very long shadows on those monthly candles suggest that there is pent up demand down there people are worried about being short despite all the talk about potential production cuts I don't think they will come to that much but ultimately I think the downside should be limited for the moment to around about 35 dollars a barrel on Brent slightly higher I think probably on slightly lower rather on WTI. Let's look at WTI very very quickly again we've bounced off a quite a key support level those lows in mid-march around about 35 dollars a barrel as I indicated there so even though we've broken this uptrend line we found support at those march those mid-march lows there so we need to break below that to retarget the move from this double bottom breakout here which we pretty much hit just about on the money fell short with 200 day moving average and I've cut and could potentially come back to this support level here if anyone has any questions please feel free to direct them my way if there's anything that I haven't covered that you'd like me to keep them like me to run the run the rule over for you I'll quickly finish off with the German DAX those of you who've been regular viewers of my videos will know that 10120 is my key resistance level on the DAX we're finding support just above the 50 day moving average and these these lows here we're pretty much in a range I think on European markets for the time being if the euro continues to push higher then it's going to I think it's going to act as a bit of a drag on the DAX it's going to make it much more difficult for the DAX to rally or any European or broader European market to rally for that matter so keeping an eye on that and again the UK 100 or the FTSE 100 we can see straight away where the big big resistance level is there as signified by this chart that I'm showing you right now it's the daily chart it's 6,220 just above that we've also got the 200 200 day moving average certainly worth keeping an eye on that and finishing off with gold prices because that's a nice old favorite the other thing to keep an eye out for later this week is obviously the Fed minutes they will give a good indication as to how split the FOMC committee is over policy certainly the divisions do appear to be on the non-voting member side if the vote count is any indication of the nine there was an eight one split on the voting patterns with I think a Loretta Mester voting for a rate rise all the others who voted to keep rates unchanged but certainly in the context of the gold price there is a good area of support just below where we are now two week lows around about 1205 1210 through there if we break below 1200 then we could see a broader correction lower but we can certainly see that there is a bit of a downtrend line taking down trends taking place after we peak in early March if we do break below this 1200 level then we could potentially see further losses but at the moment I think there's probably more risk of a move higher in gold prices than a move lower so with respect to gold prices certainly think there's a there's probably potentially limited downside there on the margins I do I think someone is asking me a question if you could direct it could direct the question here I'm just sending a message to you sir and then I will hopefully answer that question for you if there's anything that you want to cover offline I can be reached at on Twitter mcuthan underscore CMC also we will be having an event in Liverpool later this week so if any of you are local to Liverpool please feel free to drop by otherwise I will conclude this week's Monday market webinar in the absence of any further questions um bring asked about euro commodity pairs do you mean euro Aussie euro CAD I'm hoping that you mean euro Aussie and euro CAD okay and euro Kiwi okay so let's have a look at euro Aussie I think with respect to euro Aussie you do have to be aware of the fact the RBA is meeting later this week in fact I think it's meeting on Tuesday morning now it's unlikely that the RBA will ease monetary policy in the short term but I can tell you this much they're going to be very unhappy about the fact that the Aussie has moved higher against the US dollar over the course of the past few weeks it's up 8% since the beginning of the year and I think in the context of that move higher they're probably going to be a little bit uncomfortable with that but ultimately at the moment there's good resistance on euro Aussie around about 150 good support around about 147 certainly I'd be be a bit reluctant to be long of euros and short of Aussie at these sorts of levels but being short of Aussie is probably the the better option given where it is against the dollar at the moment certainly looking at it in the context of this long term weekly chart here we're probably at the top end of expectations with respect to where we are now and certainly in the context of this there is an argument potentially for saying that we could be starting to form some form of short term peak in terms of the dollar I think this could support around about 7590 and a break below 7590 could bring us back towards these lows that we saw at the beginning if we look at this particular line that I've drawn in here now with the respect of the Canadian dollar you've got to take a view on the strength of the oil price and the oil price is very the strength of the oil price really does affect how the Canadian dollar moves certainly in the context of this chart this isn't really that particularly that helpful but certainly 150 again how often of these levels pretty common but 150 on Euro CAD probably looks like the top but I think in terms of clues to dollar CAD I would probably be looking for this chart here and we're approaching a very very key support level on dollar CAD over the course of the past few past few months and years we're approaching key resistance line from the lows that we saw back in 2014 quite near that now this potentially could be a hammer on the dollar CAD chart we did post just about we eat out a very positive day on Friday but that does appear to suggest that there is a good deal of selling pressure anywhere near 132 but overall I think if you think that oil prices are potential to maybe move back higher again then you need to take a positive view on dollar CAD sorry on Canadian dollar not dollar CAD if you need to take a slightly negative view on dollar CAD so slightly more tricky one with respect to the dollar CAD but certainly we are approaching a very very key support level on the dollar resistance level on the Canadian dollar over the course of the next few days and weeks finally Euro Kiwi I can just dig that out I don't think it's there so I'll need to look that up so just go to the library add euro and zd there we are open the chart or some lines on it the resistance line there straight away actually let's just snap those to the highs and the lows and that looks to me as if it's consolidating so at the moment I wouldn't be doing looking to do anything with that but if it breaks to either the top side or the downside I'd be looking to trade the breakout one way or the other there's certainly a good deal of resistance through this series of peaks through here which also happens to coincide with the 200 day moving average as well so certainly Euro Kiwi looks at this is starting to build up momentum for a move towards the top side that's probably as a result Kiwi weakness more than euro strength but it certainly gives a slightly mixed picture with respect to what's going on with the euro crosses against the commodity currencies hopefully that hopefully that answers your questions sir oh absolutely I will just um I'm just about to send you my twitter handle it's right there and otherwise I'd like to thank you all for your tuning in I will be posting this on youtube later at youtube.com forward slash cmc markets plc either that or you'd follow me on twitter at what I just uh what I've just sent right now otherwise thanks very much ladies and gents and um speak to you same time next week