 Hello and welcome to CMC Markets on Thursday the 31st of August this quick look at the week ahead beginning The 4th of September and I think the main focus this week is likely to be on Central banks and in particular the Bank of Canada Reserve Bank of Australia and the European Central Bank now I think the most important of those Central Bank meetings is going to be the European Central Bank meeting Simply because of the gains that we've seen in the euro Not only against the dollar up 14% since the beginning of the year But also against the Chinese one the Japanese yen and the pound sterling where we've seen similar gains of between 6 to 8% And given the extent of the gains that we've seen thus far I think there is some concern on the European governing council European Central Bank governing council That the rapid rise in the euro on the back of improving economic data as well as much lower political risk It's starting to have a disinflation effect on The headline CPI numbers and the ECB's and the ECB's ability to hit its inflation target Now at the moment there doesn't appear to be any evidence that the rise in the euro is starting to press down on inflation earlier At the end of August we saw the term EU inflation for August came in at 1.5% Up from 1.3% in July, but generally these sorts of moves tend to operate with a little bit of a lag And ultimately well We're not seeing much in the way of Disinflation repression in the most recent CPI numbers that doesn't necessarily mean that we won't see it further down the line And I think that will be front and center of what is likely to be concerning Mario Draghi when he conducts his press conference on Thursday later this week on the 7th of September, so I Think if if if markets are looking for further details as to what the ECB's policy will be At the beginning of next year with respect to a tapering program I think the likelihood is it could be very light on detail and ultimately what markets expect and what the ECB is able to deliver There could be a significant amount of divergence on that there is also I think another element to this particular story with respect to the rise of the euro and We've we've seen it in the recovery in some of the most recent US economic data Now I've looked at this euro dollar chart and I did a little piece an article on it On the 30th of August which you can find on the news and analysis of section of the website And as I record this video, obviously, I still don't have signs of US non-farm payrolls data Which is due out on Friday at 1 30 that being said we have seen an improvement in US second quarter GDP from 2.7 percent to 3 percent and a large part of that was driven by personal consumption 2.8 to 3.3 We also seen a significant improvement in the private payrolls the ADP payrolls report for August Which posted job gains of 237,000 Most of which were added by the services sector 204 so I think if we get a similarly strong non-farm payrolls report on the Friday and Expectations of that number to come in and around about the 200 to 210 mark then I think we could well be In line for a little bit of a dollar rebound And we've certainly seen some evidence of that in the price action in euro dollar over the course of the past few days Now let me just hide these drawings for a minute So you can get any indication as as to my thinking looking at this pattern here with respect to the daily candles That does appear to be the beginnings of a significant reversal pattern. We pushed above 120 We were unable to sustain those gains up to 120 In the wake of Jackson Hole and obviously there was concerns about North Korea And they will always be bubbling around under the surface So we can't discount them entirely given the way that they actually affect risk appetite But certainly I think looking at this chart that does appear to be some evidence that we could Be in the process of seeing a short-term top in euro dollar But I need to confirm that by looking at the dollar index So I'm quickly going to have a look at the dollar index and we've got a similar sort of hammer Played out around here on this daily chart here. So What I need to see here really is a confirmation of This little trend line break from these peaks here that we saw in the middle of August and a retest of these peaks and The 50 day moving average what I don't want to see is a fall below The lows that we saw on the 2nd of August around about 92 54 so to take that to it's extreme to take it but take that to its logical point What I don't want to see here on euro dollar is a move back through one 19 20 19 30 Because that would suggest to me that we're going to go for a retest of 120 levels so we've broken below 1910 19 20 well we stayed below 1910 19 20 we could get a squeeze up to 50 But as long as we as long as we stay well away from 120 then I think the bias remains For euro dollar to slide back down Towards this trend line support that I've drawn in from the April lows But also the 50 day moving average which roughly comes in around about the one 16 20 area So given what we've seen on euro dollar what we've seen on the dollar index and more importantly also we've seen a similar reversal pattern Unfold on the euro sterling as well We can see that here very strong downward thrust on the candle here if we break below 91 80 on the downside for euro sterling then I think there's a decent chance we could see a move back down From the 92 and a half level that we saw We're where this line here comes in back towards the 91 level of the 90 80 level over the course of the next few days So other factors to keep an eye out for we beginning the 4th of September Obviously the ECB rate decision is the key decision Bank of Canada and RBA not expecting any rate changes there Even though the Bank of Canada raised rates at its last meeting and markets are looking to price in an October hike I think that for the moment that is unlikely. So I don't expect to see any change there We've also got China trade balance numbers for August this coming week and On the previous numbers we did see a little bit of slowdown and import and export data So I would hope for that slowdown not to get any worse We've also got the US beige book which will give us an overview of the US economy Which on the face of the GDP numbers and the ADP numbers probably looks in slightly better shape Then was probably previously thought two weeks ago That's why the dollars rebounded That's why the markets are potentially starting to price in a potential December rate rise from the Federal Reserve I don't think we'll get one in September But certainly think markets are now starting to price in the possibility We could see one in December particularly if non-farm payrolls come out in a fairly positive fashion If they don't then obviously it's back to the drawing board What I will say is that I think even if the non-farm payrolls number is a little bit disappointing Momentum has slightly turned in the dollar's favor as long as we remain Below those key levels on euro dollar that I outlined earlier So as I say, that's it for this coming week. Thanks very much for listening to Michael Houston talking to you from CMC markets