 Good afternoon and welcome to CMC markets on Monday the 6th of February and This week's weekly market update a look at some of the key events this week first and foremost start with the risk warning Any analysis and any analysis and Charting that you hear from Here is not to should not be construed as trading advice ultimately It's my views on where I think the markets could well go and Just make sure that the various risk warnings are Digested for the various regions right pretty much ready to go Key themes that I'm looking at this week. There's a number of them Obviously, we're still looking at the aftermath of Friday's payrolls number, which if you tuned in to The non-farm payrolls webinar on Friday You will have you will have noted that both Colin and myself thought that we would get a decent number On the basis of the payrolls numbers that we saw or the ADP payrolls numbers that we saw on the Wednesday Over the last 12 months We've pretty much seen a fairly close correlation between ADP and payrolls Non-farm payrolls within about 20 to 30 thousand jobs on a month-by-month basis There hasn't really been a significant Deviation from the numbers on a month-to-month basis So it stood to reason that we were probably going to get a decent non-farm payrolls number that being said The response that we got in terms of the dollar wasn't what we expected and I think a large part of that was down to the fact that We got a fairly weak Wages numbers of the wages numbers that we were expecting was in the region around about 2.8 2.9 percent on an annualized basis And what we got was a drop back to 2.5 percent, which obviously suggests that We are likely to find or likely to see the Fed probably remain a little bit Cautious about the prospect of raising rates in the short to medium term. I will be covering Dolly Yan Euro dollar Aussie dollar Nasdaq and the cat Caron In response to a question that I've just received. I will be getting on to that, but ultimately I think what's going to drive markets this week is Perceptions about what the Fed is going to do with interest rates, which also rubs up against what The Trump administration wants with respect to a stronger or weaker dollar last week We heard Peter Navarro who is one of Donald Trump's chief trade advisers basically have a pop at Germany for Artificially keeping the euro lower. Well, most of us most of us listening to this webinar I know that's nonsense because ultimately Germany has no control Over monetary policy with respect to the European Central Bank That being said it has prompted a little bit of a counter response from German finance minister Wolfgang Schäuble over the weekend He's pushed back at the European Central Bank for its easy monetary policy and it's no secret that Germany has been one of the key Has been key in its criticism of President Draghi's low rate policy because ultimately what it does is it pushes the euro Lower without actually dealing with the core problems within the euro area That being said looking at the dollar index over the course of the past few weeks We've seen a significant weakness from the peaks that we saw In the early parts and the late early part of this year and the late part of last year and that's no better born out Then by this particular chart that we've got here I'm going to show you all my Bloomberg chart because I think it's quite it's quite instructive certainly when you look at it in the context of This chart here Since we peaked at around about on the 3rd of January Which was at 14 year highs the dollar index has slipped lower and I think this is important It's important in the context of where we go to next with respect to euro dollar It's also important in the context of where we go to next in in the context of dolly in because even though Those payrolls numbers that we saw on Friday were very very good I don't think it's going to make the Fed likely to pull the trigger on another rate rise Anytime soon. There's a number of factors at play and one of those factors is The amount of slack that a Fed policymakers think they are think there is in the US labor market We saw the unemployment rate rise on Friday from 4.7 4.8 percent, but more importantly we saw the Patient rate also rise by two Two basis points as well from sixty two point seven percent sixty two point nine percent Which suggests that there's more people coming back into the labor market to look for work Which suggests again that ultimately the underemployed aren't Are still a significant part of the US labor market and aren't exerting outward pressure on wages We saw wages decline. We put saw payrolls increase If you have a tight labor market, you would expect the unemployment rate to stay stay the same You wouldn't expect it to increase and you wouldn't expect the underemployment or the participation rate to increase either So Janet Yellen and a number of Fed policymakers have indicated quite strongly That they want to see further evidence that the US labor market is tightening Falling wages or declining A declining increase in wages suggests that there is no inflationary pressure on wages Despite the fact that prices input prices are rising at the fastest rates in several months We saw that in the isms last week So for me that suggests that the dollar is likely to find upward momentum Significantly restrained. We are in a downtrend on this dollar index chart So as such while we remain in this downtrend, I think dollar strength is going to be fairly subdued That also ties into what I was talking about last week in respect to dollar swiss dollar swiss at the moment Is looking to be in a nice little downtrend So we look at the dollar swiss chart. We look at the dollar index chart the downtrend is I think it's fairly significant and it's almost uncanny in terms Of how the downtrend is moving now. We are finding support on the dollar swiss At around about the 200 day moving average. So we do need to keep an eye on that But ultimately have a look at have a look at parity in the dollar swiss because that would suggest that the downtrend It's been in place since the end end of december beginning in january Is going to potentially run out of steam and turn around But it also could give clues as to the overall direction of the dollar on the longer term Given the fact that euro dollar makes up 57 77 of the dollar index We also have a fairly nice uptrend in place in the context of the euro And this is also quite instructive in terms of why we've seen the move higher in the euro against the dollar And for me, this is all about yields If we look at the distance this this this green line here basically signifies the gap Between us and german borrowing costs. So when they were at their peak Euro dollar was at its lows Since then the german bund yield which is This line here the the yellow line The yields have jumped up from 0.25 to 0.44 percent So essentially german bund yields have doubled in the space of around about Four weeks Moving in favor of the euro, which is why why we've seen the euro rise and the dollar fall If that trend continues you can expect to find the dollar will come under further pressure Against the euro. So we're in this uptrend good support Currently round about 107 106 80 if we break below those lows that we saw At the end of last week around about 107 05 then Obviously the uptrend in the euro that we've seen over the course of the past few days Is going to bring about a broader correction lower at the moment. This is a four hour chart I haven't seen any evidence that is going to take place. You work on the basis of the trend as your friend at the moment The dollar downtrend remains intact the euro uptrend In in euro dollar remains intact and as such we're seeing a similar sort of pattern also play out on dollar yen We're round about the lows of the past month or so This 112 area is going to be very very important in the overall scheme of things these twin lows here Let me just remove those lines for you just to hide them and you can see what I mean These two loads here again, this is a daily chart Good support around about 1205 So really if you're going to be long of dollars against the dollar yen your stop loss is going to be below 112 So 112 on the dollar yen. I think is a key level 107 on euro dollar Obviously look at parity on dollar swiss We're at some very very key levels With respect to where the dollar is going to go at the moment people are talking about a stronger dollar We've seen a bit of a rebound today But ultimately the trend since the beginning of the year has been for a slightly weaker dollar and I think there's a bit of concern Given some of the narrative coming out of the new trump administration given the fact that Markets were pricing in potentially three to four rate hikes this year They may not get that and that's going to take the edge of the dollar And we're seeing some we're seeing the effects of that Starting to unfold in some of the positioning. What's more important in the context of that Is the fact that gold has started to wedge up as well We look at gold It's a similar sort of story We've broken above the peaks that we saw in january And we look as if we could be gaining a bit of traction to go higher now some of that Maybe down to the fact that people are taking They're hedging themselves against what I would call trump risk He's proved to be a little bit of a loose cannon We still haven't heard any details of what sort of fiscal stimulus that the new US president may embark upon and while he's been signing executive orders like confetti At the moment we've seen a little bit of a pause in the recent uptrend for stock markets Yes, we are back above 20,000 level on the Dow and we're just shy of the 2,300 level on the s and p 500 But an awful lot of that rally that we saw on friday was predicated on reform of dod frank and There is no guarantee that that will happen at the moment what mr. Trump is looking to do on that is review it We're not talking about rolling all of it back And if he does talk about rolling all of it back, he's still got to get it through congress and he's got to get it through the senate And that's not a given mr. Trump is not the most universally Liked person in the republican party simply because he's a complete maverick so Gold I think is likely to find momentum in its favor Just been asked about gold and certainly on the basis of this chart here We can see quite clearly we're in a nice little uptrend. This is the four hour chart We've broken above the 1220 area Which would appear to suggest that we could have the potential to go a little bit higher any pullbacks on gold I likely to find support round about these sorts of lows here that we saw in the middle of last week around about 1195 But overall momentum does look to be starting to build it towards a slightly higher gold price But we still do need to be aware The Fed officials could still want to keep the option Of a march rate rise on the table even though I think the prospect of it is highly unlikely I don't think we're going to see that simply because the data doesn't really support it So looking at that gold chart here on a four hour chart We've broken through those series of highs from the 16th to the 23rd of January at 1220 We're probably going to incrementally move higher over the course of the next few trading sessions towards The 200 day moving average, but the 200 day moving average is going to be a tough nut to crack And any pullbacks we're probably going to find support around about the 1200 level as well So my view on gold is we're probably going to edge a little bit higher But we will be vulnerable we will be vulnerable to downward ticks downward corrections On any narrative that we get out of the out of out of the federal reserve and particularly Concerns about currency wars because I think that is one of the reasons that's driven the Gold trade over the course of the past week or so. It's this narrative from US officials about currency manipulation And certainly I think that's something that I will be looking at towards the back end of this week when China releases its latest trade numbers I think If they if they post a significant surplus, which I expect them to do so We're going to we're probably going to get more narrative from US officials about About Chinese manipulation of the currency despite the fact that ultimately the federal reserve is probably the biggest currency manipulator out there and Since the beginning of this year the dollar has weakened quite significantly against the warm so The the trump officials cannot really argue that the chinese are Manipulating their currency lower since the beginning of the month We've actually the the one has actually strengthened quite considerably And is actually knocking on this real key support area Around about 678 675 I think what's significant about this as well Is the fact that we've Every time we've rebounded off this key support level The rebounds have been significantly lower. So there is again potential here to suggest That we could get a little bit of a weakening of the dollar in the short to medium term Brings me neatly on to the pound because the pound has taken a significant caning over the past few days On the back of a fairly dovish Bank of england quarterly inflation report Now I was quite surprised by how dovish the bank of england were and I think that's really sort of led me to believe That ultimately and they they they really want to keep the pound pretty much where it is Below 128 and back towards the lower 120s now For me, there are risks in that. I think there's there's risks In the fact that the bank of england in being so dovish really I think is reinforcing The narrative of its august rate cut I think there's a number of reasons why I thought that was a mistake And I continued to feel it was a mistake and ultimately despite the fact that the chief economist andrew Haldane has admitted that maybe they got it wrong. Mr. Carney doesn't want to do so, but That being said We have seen a very strong rebound off the lows at 120 And this is something that I talked about last week when I talked about this bullish engulfing week here Now the thing that does worry me a little bit is We did see a key reversal day on the dailies Which would appear to suggest that we do have the potential to contest This 50 day moving average here around about 124 30 And I think this is going to be a really key level for the pound over the course of the next few days If you look at this 50 day moving average and the way that it's performed over the last six months It's acted as a key support and resistance level on a number of occasions over the last six months More recently it's acted as a significant resistance level At the beginning of january here around about 124 30 and here again And now it's acting as a little bit of support area over the course of the past week or so So I think how the pound reacts over the course of the next week or so Will be very important in the context of where it goes to next. I'm still marginally bullish on sterling We do have The latest the last commons vote on article 50 due to take place on wednesday And I think that's going to be key in the context of where we go to next I think it's unlikely that any of the amendments that a number of mp's are looking to push through on article 50 Will um get voted through we may see With a couple of minor ones, but ultimately I expected that legislation to get kicked up to the house of lords On wednesday it's going through the committee stage now Over the next course of the next couple of days. I would expect that that vote to go through on wednesday And then it goes up to the house of lords And hopefully it will be passed through the house of lords The beginning of march march the 7th In time for the budget the uk budget on march the 8th and in time for tereza may to go to The european commission on march the 9th and potentially trigger article 50 on on march the 9th any slowdown I think in the course of pushing the legislation up to the house of lords Could actually be sterling negative because I think one thing that I did find quite instructive Was despite the fact that mrs. May was talking about triggering article 50 We didn't actually see the pound Break it's low. It's a since then it's gone higher and I think that's because of the higher level of certainty So on a technical basis while we're above 124 30 I think the potential for a rebound back towards the the highs remains quite high. There's an also There's an also bigger Factor at play as well in the context of euro sterling Big resistance on euro sterling at the 100 day moving average. We can see it on the daily chart here Let me remove those Lines and you can see what i'm talking about Where the 100 day moving average is active as resistance and support in equal measure through here through here And also through here. So big resistance at 86 50 I've talked about it on the chart forums on my chart forum update Which you can access from the chart forum page here. I try and update these every day or every other day If I haven't got any changes to make for it on a day-to-day basis I won't update it, but if I'm going to make a marginal change I will generally update it and post it to the chart forum There just put those lines back in So nice little uptrend in euro sterling, but it's running into resistance here Bigger picture is this a right shoulder of an invert of a regular head and shoulders reversal chart from what we've seen From this move that we saw from the lows in 2015 at the moment It's slightly irregular We haven't actually taken out the 86 50 level But i'm looking potentially For euro sterling to roll over and come back to these lows Through here a move through 86 50 will obviously delay that but it won't negate it completely So looking to sell euro sterling on rallies looking to Basically sell the us dollar on rallies as well Right gonna look at the look at the major indices now. I've been asked about the us 30 So let's have a look at the us 30 back above the 20 000 level The big level for me. I think still remains this series of highs just above 20 100 i'm not sure That we're really going to get um Another move back up here in the short to medium term certainly not on the four hour chart We've had the pop higher. We filled this gap the big the big level for me still remains 2300 On the s and p the dow The dow for me. I think is is of limited value When we look at it in the context of where us markets are going to go I think it's quite instructive that the reason we went back above this 20 000 level Was as a result of a rebound in banking shares and you can see that From the rebound that we saw in say for example goldman sacks on friday We look at that there. We're still above. We're still below The highs that we saw earlier this month. So i'm going to be keeping a particular close look On that also going to be keeping an eye on jp morgan's share price as well again We're still below the highs that we saw in the middle of january. So keep an eye on that for further momentum building there but ultimately While we've heard mr. trump talk about an executive order We're talking about reforming the dod frank not repealing it entirely because i don't think he'll be able to push that through congress. So Yeah, we did see a bit of a rebound on friday But i think we could see a little bit of realism start to kick in on the back of that as well also quite a big level on the footsie 100 currently at 7200 we're really struggling to get back above those peaks that we saw A few weeks ago around about around about here 7206 7 210 Also, it's quite important to look at what we saw A couple of weeks ago We saw a very big bullish weekly reversal So when we talk about the footsie 100 rebounding What we really need to see Is a rebound back above the highs that we saw over the last two to three weeks and to to date thus far We haven't seen that Because we would need to also see a really little significant reversal of this key bullish this key bullish reversal On the footsie 100 and i think that's another reason why i can't be overly bearish on sterling Because ultimately if you're bearish on sterling then you think you have to be a little bit bullish on the footsie 100 given the correlation Between the two that we've seen over the course of the past few weeks or so Given the significance of this reversal on the weekly chart Then you would have to suggest You sort would have to think along the lines of what's going to drive the footsie higher if not a weaker pound So looking at the 72 10 level For a significant Breakout back to around about 72 50 Were a bit while we're below 72 10 Then i think we're probably going to continue to range trade on the footsie 100 Um over the course of the next few sessions I would obviously revise that if we traded at 72 20 because then i would suggest that we could well test another 30 or 40 points Higher on that basis, but we are running into a bit of resistance at 72 7200 7205 at the moment With respect to the DAX that's been a bit of a bit of a Head scratcher for me. I've been looking at that over the course of the past few Trading sessions and i've been struck by the fact that it's really really struggled To move back above the highs that we saw in mid january and and i suppose in some ways That's not too surprising and the reason for that is a slightly stronger euro Given that german companies Export capability is largely dictated by a fairly strong euro So 11 700 is really the key level that i'm looking for On the DAX if we can get back above the 11 700 then i think we could potentially retest The highs that we saw at the end of january, but while the euro again remains fairly strong And it remains in its uptrend. I'm struggling to make a case for a slightly stronger DAX So again, it's the currency play playing into the equities play which in turn plays in to the commodities play so There are linkages there And ultimately i think that's what's playing out in terms of what equity markets are going to do next Right, um, what have i missed at the moment? I've got to do the ozzy dollar and the nasdaq So just doing the ozzy dollar for you ladies and gents and again, I think that's that's a commodities play We are on the verge of a potential breakout on the ozzy dollar. We can see the price action here It's not immediately obvious as to which way we're going to go and until such times as we do The safest thing to do is to play the range. So ultimately until we break above This resistance level here around about 77 then really you've got to sell the ozzy and buy the us dollar There was some talk that the rba Could be looking to ease monetary policy Maybe That talk or that chatter will come back onto the table What's driven the ozzy rebound over the course of the past few days Has been much better than expected australian economic data the trade surplus that we saw last week On the back of the rebound and commodity prices That's pushed the australian dollar back up towards the top end of its recent range But we can see straight away and anytime it gets above 77 or near to 77 It finds it very difficult to maintain the momentum Back above there. So smart trade is to sell ozzy on rallies Until such times as we get a clearer idea of where we've been going in the short to medium term But we are at the top end of its range Therefore that suggests to me the bias remains towards selling rallies cac caron Again same question from the same person What we've got here again is a similar sort of story playing out as in the dax up towards the upper end of its recent range Again, this feeds into a slightly stronger euro, but not so much. We've also got Upcoming political uncertainty with respect to the the french presidential elections Lightly to weigh on the upside with respect to french equities So that is going to be a headwind going forward probably less so Probably more so rather than the currency risk of a higher euro So look with respect to the cat caron Similar sort of story playing out look to sell any strength back towards 4900 for a for a drift towards the lower end of The recent range Been asked about Cocoa u.s. Cocoa. Well, that's a new one Let me see if I can find I've got UK Cocoa. Let's have a look at u.s. Cocoa. Let's try and find that So I'll go to the library Type in Cocoa And here we go u.s. Cocoa Well, that looks pretty soft No price for guessing that that's in a downtrend I mean for me really if you if you're if you're trading with the trend on that Then you've got to trade any pullbacks towards the 2121 area Um does appear to be at a long time low But again as with any market you really got to trade with the trend If you're looking to try and find the base on it that can be a very dangerous game It's akin to trying to catch a falling knife You may be lucky, but then again you may actually cut yourself quite nastily So at the moment I would be hesitant about trying to call the bottom on this particular market Yes, we are all-time lows But I would be looking for evidence of a of a potential bottom in this particular market And at the moment we haven't seen one So until such times I've seen evidence that we're going to get a rebound I would be very reluctant to look at trying to buy into such a market Um At this particular at this particular level if we look at the end of december beginning of january We did see a big rebound in the weekly chart But then the following week we then drifted lower again So at the moment we've seen a couple of false positives in terms of a potential rebound Which have come to nothing So if you're looking for the bottom on that I'd wait a while Um crude oil Crude oil again The the iranian the iranian story probably could give us a little bit of mileage in upside but again Looking at looking at and the iranian sanctions that were announced Haven't taken oil prices back above the levels that we saw At the beginning of this year and the december peaks and I think that for me is quite significant Oil tends to be a fairly technically driven market We also saw rig counts rise again In on friday from 712 rigs to 729 So, um, I think it's unlikely that we'll see iranian sanctions new iranian sanctions hit their oil output significantly And as such I think any upside is going to be mitigated towards the upper end of the range around about 57 58 dollars a barrel So still I still think we're in a range on crude um And as such I'll be very very cautious about being overly long of it at these sorts of levels It's a similar sort of story on the wti The air is a little bit thin at the moment with respect to oil prices There may be a little bit more upside in it, but I'm not overly convinced that we've got an awful lot of more upside in it Okay, so that's Pretty much it for This week. I'm just looking to see if there are any other questions that you ladies and gents want to Want me to answer I'm guessing not otherwise I'm just going to quickly recap to Just recap as to what I'm looking at for this week So key themes for this week final vote in article 50 on wednesday any developments on dodd frank any further us data that would can Support a potential rate rise. I don't think we're going to see that um, and any other comments with respect to China Europe us Currency wars and what have you because at the moment we're pretty much light on the data front So I think most of the risk is come probably going to be geopolitics and macro risk as opposed to actual data driven risk Otherwise I'm going to Sign this particular webinar often wish you the best of luck In your week's trading. Thanks very much for listening and speak to you all same time same place Next week