 Good afternoon and welcome to CMC Markets and this Monday market update. Look at the week ahead on the 3rd of April. And it's been a fairly quiet start to the week. We saw European stocks close the quarter in a rather subdued fashion. But it doesn't change the fact that we've still seen a fairly positive start to the year. But before I start looking at the week ahead, let's first and foremost get a little bit of the housekeeping rules out of the way, a risk warning. Anything that I talk about today shouldn't be taken or shouldn't be construed as direct trading advice. What I'm going to be doing is highlighting key levels, potentially directional indicators in terms of what I think might happen. Certainly not what I think will happen because I'm probably as right as often as I'm wrong. Talk about managing risk and trying to mitigate any losses and try to maximise any profits using various trading rules that I generally tend to work fairly well over the course of the past. 20 to 25 years in my time trying to analyse the vagaries of financial market. So basically just getting these risk warnings out of the way. If you do have any questions, please feel free to direct them or reply to this message that I've just sent out over the chat facility. More than happy to answer any questions with respect to what I think an ASSEC class might do, not what I think that it will do, because there are no certainties when it comes to financial markets. But I think what I will be certainly looking at this week is the potential for a move higher or lower in the dollar, because it's going to be a big week for the dollar. And I think the direction of the dollar is likely to dictate where markets go to next. What I certainly have seen is despite the fact that we've seen very strong movements higher in stock markets, the German DAX is approaching a very key resistance level from the previous peaks in 2015. We can see that here on this daily chart. And there is also some evidence that US markets are starting to look, how shall I say it, a little bit tired. We've obviously seen some decent gains over the course of the past few weeks and months on the back of the Trump rally. But what I have noticed is that Mr. Trump isn't having it all his own way. And I think an awful lot of the rally that we've seen over the course of the past few weeks has been predicated on the fact that he probably would. That doesn't now appear to be the case. And I think the things that I'm looking at this week really I think is the Trump reflation trade starting to wear off, certainly in the context of bond markets it does appear to be some evidence that bond prices do appear to be bottoming out and yields appear to be starting to tail off. The inflation picture is looking a little bit mixed now. There is some evidence that the upward price pressure that we've been seeing in terms of prices on the CPI measure is starting to level off a little bit We certainly saw it in those CPI numbers out of the European Union on Friday when we saw a big decline on headline CPI from 2% in February to 1.5% in March. And that's taken a little bit of the sting, I think, out of the euro. It's taken a little bit of the wind out of the euro sales. And I think that has helped also push the DAX higher. But before we get to bullish on the DAX, we do have to look at where the DAX is in relation to where it was in 2015. It's all-time highs there. Also corresponds, these all-time highs in the DAX also corresponded with the lows that we saw in the euro at around about 103.50. So 103.50, 104 coincides with all-time highs on DAX. Now, the euro is looking a little bit weak, but the big question is how much more downside is there in the euro? We've run out. We're starting to run up against resistance around about that 12,390 level. So we do have to be a little bit careful about potentially taking on new long positions on the DAX when you're pushing up against significant all-time highs. So that could, in the short term, limit the downside in euro-dollar, limit the upside in the German DAX. So we do need to be very, very aware of that correlation between the two. If we look at the euro-dollar, we can see a similar sort of scenario playing out. Look at where the all-time, not quite the all-time lows, but the previous lows on the DAX in 2015 coincided with the all-time highs on the DAX. Now, we are slightly below that, and have been slightly below that, at the end of 2016, when we went as low as 103.50. But nonetheless, we've rebounded quite strongly off that. Now, on a weekly chart, we've seen a very strong bearish weekly reversal. But that doesn't necessarily mean that we're going to push strongly lower, because we saw a similar sort of bearish reversal here back at the end of January, and we only saw a modest move lower. So you also need to factor in the context of the move higher. We've seen a rebound off those lows at 103.50. We saw a modest weekly reversal, which took us lower for two or three weeks in a row before we rebounded again. We are at a very, what I would call, an indecisive moment in the context of the euro-dollar. And ultimately, we've only seen three, four positive weeks in a row. We've seen very one strong negative week. But ultimately, what we're seeing here is what I would argue is a potential sideways consolidation within a triangular formation. We do have a trend line coming in from the lows that we saw at the beginning of the year, and that comes in around about 105.80. So I think while we're below this 50-day moving average here and this resistance at around about 107.20, then I think the downside in euro-dollar is likely to be limited to around about 105.80 in the short to medium term. That's really as short or long term as you can make it. If we look at the four hour chart, again, we can see a very strong thrust lower. We are trading around about the lows that we've seen in the past few weeks. But again, we are looking oversold on the four hour chart. Downside is likely to be limited to around about 105.80. Dollar upside is also likely to be fairly limited by the way that the dollar index is trading as well. For me, the price is all important here. And the price is suggesting that there is euro weakness, but I don't think it's going to drop sharply. We can see that borne out by this dollar index chart here. So this is the dollar index. We've got solid support around about 99.00. These series of lows through here, we did have a brief thrust lower there, but we did get a fairly decently bullish turnaround at the beginning of last week. We pushed higher. We're starting to push against the highs of the week. We could potentially push a little bit higher, but we're then pushing against this trend line resistance from the peaks that we saw at the beginning of this year. And this sort of coincides with those lows that we saw in euro dollar. We have to bear in mind that in terms of the dollar index, euro dollar makes up around about 57, 58% of that. So if you're looking at the dollar index, you're also looking at almost a mirror-like comparison with respect to euro dollar. So keep an eye on that trend line resistance there. It sort of coincides with trend line support in euro dollar at around about 105, 80. So there's a decent correlation there. These charts aren't telling me that the euro is going to collapse anytime soon or the dollar is going to surge. So that therefore brings me into the context of what the UK 100 or the FTSE 100 is looking to do. And that gives us a slightly altogether different picture. But once again, it also tells us that ultimately, it's looking a little bit toppy above 7,400, but it's also looking well supported around about 72, 50. And that sort of then presupposes that ultimately we're likely to remain within a broad range for the pound against the dollar. Having said that, I still think there's potentially more upside in sterling dollar than there is in euro dollar. And the reasoning behind that is because the cable chart is looking slightly more impulsive in terms of a potential breakout up or down. Now, what do I mean by that? Well, if we look at the continuation pattern or cart back to the continuation pattern in euro dollar, it's not as conclusive as say, for example, the continuation pattern that we've got here in the cable chart. Now, let's just put to one side all of these other lines, moving averages and what have you here. Let's look at this top line here from the December highs and link those highs through here and also look at the lows from the beginning of the year. Now, this is potentially a triangular consolidation. Now, ultimately triangular consolidations tend to be trend supportive. That doesn't necessarily mean that they will break out in the direction of the prior trend. The prior trend at the moment is down. We can see that quite clearly from the move down from the June highs to the lows that we saw in July, August, back to the levels that we saw here. But ultimately what we're seeing here is there's a decision process going on here with respect to the pound against the dollar. The decision making process is likely to be dictated by the interest rate convergence or divergence that we're seeing with respect to the pound against the dollar. Now, for this, I'm talking my book a little bit. I think the pound is likely to break higher, not lower. Why? Why? Simply because I think the pound is very much predicated on a one-way bet. We're getting an awful lot of predictions that the pound's going to be around 110, 106 by the end of the year. It's very, very difficult to find anyone who thinks that it's going to go up. And that, for one, makes me very, very cautious about being overly short of it. If you're going to be short of it, obviously it's sensible to be short of it near the top end of the recent range. The top end of that recent range is between 126.5 and 127. So if you get a breakthrough 127, you stop loss really needs to be at 127.5 or 128. But look at the interest rate differentials for the pound against the dollar between US and UK rates. If we blow that out to maximum, the pound against the dollar has never been in terms of interest rate differentials this wide. It's never been this wide since date goes back to 1985, 1986. That, to me, suggests that it's very, very stretched. 1.27 basis points. And that sort of begs the question as to whether or not it can get any wider, which then feeds into the debate as to whether or not the Fed can afford to hike rates any further than it already has. We've already seen two rate hikes in the space of three months. Can we see a third? Can we see a fourth? Ultimately, it also then begs the question, what does that mean for Bank of England interest rate policy going forward? Now, at the moment, the market's pricing in the likelihood that, obviously, UK rates are at 0.25%. US rates are around about 1%. So you've got an interest rate differential. It's an upper band of 1%. The interest rate differential there is, therefore, 75 basis points. The market's pricing in 1.27%. So I would argue that the market is already pricing in at least another two Fed rate rises between now and the end of the year, certainly in the context of the 10-year yield. Is that viable? It really depends on whether or not you buy into the Fed or the Trump reflation trade. Now, let's focus on the fact that the Trump reflation trade is predicated on a significant tax reform, significant structural investment, structural reform, and also a health care reform, none of which have happened yet and all of which continue to appear problematic. So how much of the reflation trade needs to be priced back out and how much is already priced in? And that's always a very difficult line to try and... That's always a difficult accommodation to make. But certainly in the context of this chart here, we have got solid resistance at the 200-day moving average, which would appear to suggest that there's big resistance around about 1.2630, 1.2640. Good support around about 1.2380, 1.2390. Therefore, that is your range. Until such times as we break through 1.27, get above the 200-day moving average and break above or break out of this triangular consolidation. If we break out of this triangular consolidation, then your potential target is 1.28, 1.30 over the course of the next few trading sessions. But until such times as we break out of that triangular consolidation, then the range trade is the sensible trade to make. At the moment, the likelihood is we're going to trade 1.2390, 1.26 with a bias to continue that. Until such times we break and close above, close above the 200-day moving average. At the moment, the 50 and the 100-day are trading sideways or looking a little bit flat. So there's very little viability in that. For me, these are the two key levels here on the top side. If we break through them, we're going to have an explosive move towards 1.30 and potentially even higher. Why? Because everyone is positioned to be short of sterling. So that is the risky side of the trade at the moment. There's also another factor feeding into my slightly more positive sterling story, and that's euro sterling. We are still showing a significant reluctance to push higher on euro sterling. The ECB, the European Central Bank, is tapering its bond purchase programme from 80 billion euros a month to 60. So there's been an awful lot of speculation that we could get an increased taper as we head into year-end. Those recent soft inflation numbers that we saw at the end of last week, particularly from Germany and the EU, suggest that it's probably not likely, despite the fact that we saw very strong PMI numbers out this morning, and Germany in particular, 58.3, but we also saw some fairly strong numbers from Italy as well as France. Spain was slightly soft, but nonetheless, the weaker than expected inflation numbers mean that it's likely that the debate about an increased taper is likely to lose a little bit of impetus in the short to medium term. So at the moment for euro sterling, we're gaining a little bit of resistance at around about 85.30, 85.50. That's what I've put in my morning note. That's this resistance level here. You can see that in the chart forum right here. So I try and update these once a day. Euro sterling, sterling dollar, dollar yen, and euro dollar. So we've pushed below 85.50. We're looking for a retest of the lows around about 84, but before we get there, we've got this trend line support coming in at around about 84.50 here. But overall, looking at how euro sterling has behaved over the course of the past month or so, the bias remains towards the downside, resistance at 84.50, and then further resistance here at 86.05, 86.10. This is all about levels. This is all about highs and lows. It's no more sophisticated than that. And ultimately, we have found support around about 84.80. If we need to really get back above this 86 level to diminish the downside pressure that we've seen over the course of the past few trading sessions, and that's borne out by the charts that I've put in there. Also ties in with dollar yen. Slightly weaker dollar index, but we've also found that dollar yen continues to find the error a little bit thin above 112. And again, it's a similar sort of story here. It's about levels. At the moment, we're in a little bit of what I would call a congestion zone. Need to get back through 111.60 to retest this 112.40 area here. But overall, there remains solid support just above 110. So I still am of the opinion that we could retest 110, but for that to unfold, we need to stay below 112.40. So the bias for me on dollar yen still remains to sell into rallies and then chop them out if we go much above 112.50. That is the bias for me. I'm still of the opinion that dollar strength will continue to diminish over the course of the next few trading sessions. And a lot of that will depend obviously on this week's US data. Now, last week we saw US consumer confidence come out at the strongest level since 2017 year high. What is surprising about that is that it's not really been reflected in personal spending or retail sales. So you've got your consumer confidence telling us one thing and you've got US retail sales telling us another. And for me, retail sales are probably more important than consumer confidence. You can ask as many people as you like how confident they feel about the future with respect to their the outlook for their finances. But ultimately, it's whether or not they spend that money. And for me, hard data is better than confidence surveys or anything like that. To my mind, confidence surveys are like reading tea leaves. They're not that reliable. I prefer to look at the hard data and the hard data tells me that we've seen a little bit of a rebound here but ultimately for me we need to see a significant rebound through 112.5. Dollar strength, the data needs to support the confidence and at the moment they're diverging. The USISM manufacturing later today at 3pm, that should point to a continued resilience in the manufacturing sector. But in the Chicago PMI that we saw on Friday, we saw a very weak employment component. So I'll be particularly interested in the employment components of not only the USISM manufacturing number that's due out today but also the non-manufacturing number that's due out on Wednesday. Because that should give us a decent steer as to how strong Friday payroll numbers will be. And if we have a strong payrolls number that will obviously feed into a narrative of potentially a June Fed rate rise. Now, some of the heat has come out of that debate in the context of some comments made by William Dudley of the New York Fed on Friday. And there are a number of Fed policy makers who aren't comfortable with a very steep trajectory of US Fed rate rises on the basis of the fact that ultimately they don't want to see a significant divergence of monetary policy at a time when the strong dollar could act as a headwind for US growth. It's about managing expectations. And on Wednesday, we get the latest Fed minutes. And I think one of the surprises of the March Fed rate rise was the fact that it left its inflation forecasts and its growth forecasts unchanged. So they hiked rates but they remained fairly sanguine about the trajectory for US GDP growth and US inflation growth. And I think the Fed minutes will give us an indication as to whether or not there was consensus on that guidance with respect to the DOT plots and the inflation forecasts or whether or not the Fed is concerned that the inflation forecasts may be a little bit weaker than they are anticipating. And they thought they'd get the Fed rate rise out of the way and then hold a waiting brief until the autumn and potentially hike rates again in September. I think we'll get another Fed rate rise this year. I'm just not convinced that we'll get another two. So that will mean that for me I think means that this week's payroll numbers are going to be very key. I think they're going to come in weaker at around about 175, 176. We'll get a clue on that on Wednesday with the ADP payrolls numbers which come out at 115. But the big question is will wage growth continue to pick up? Because for me that still remains a little bit on the weaker side but if we get a weaker than expected payrolls number and a pickup in wage growth I think that will be more important than the actual payrolls number itself. So looking at the Fed minutes on Wednesday but also looking at the wage growth numbers on payrolls on Friday and see whether or not there's a significant pickup in wage growth over and above the general minimum wage increases that we tend to see at the beginning of the year which tend to skew the numbers. And I think that's the key here. At the beginning of the year you tend to get a pickup in wage growth because minimum wage increases tend to pick up. They tend to skew the numbers upwards but they need to be sustained. And at the moment I'm not convinced of that and you can certainly see that in the context of what US 10 year treasury prices are doing. If we look at the prices of this chart here we can see that these are the bottom for yields. Prices move inversely to yields higher prices lower yields we still remain below the lows for 2017 in terms of yields. So we remain in a little bit of a sweet spot where yields are concerned inflation expectations are probably softening a little bit which means that the prospect of higher prices in the short term is not going to be as dollar supportive as say for example it was in December and in March. And now this is when the Fed hiked rates here and here since the Fed hiked rates on both occasions yields softened. So the likelihood is it's going to continue to play out. So don't just naturally assume that because the market thinks the Fed is going to hiked rates that yields are going to soften. That's certainly not been the case or the yields are going to go up get my narrative the right way around. Every time the Fed hiked rates yields have come off. This is the peak in yields here and here on both occasions yields have softened. So I expect that to continue. Which means the dollar index is likely to continue to trade sideways and that could in turn push the euro or underpin the euro and help push this the pound higher against the dollar. So we've looked at Euro dollar. Euro dollar resistance is around about 107.20. That is really a key level for me going higher. We've already talked about the pound against the dollar. It's been up for three weeks in a row for three weekly closes in a row. That's its best run, incidentally for quite some time. If we look at how the pound has performed over the course of the past few trading sessions the last time it closed higher three weeks in a row was probably all the way back at the beginning of 2016 here and then in August and then it went for a run to the downside. So going to be keeping an eye on whether or not we can actually close higher for a fourth week in a row. The other thing that's making me cautious about the dollar is what gold prices are doing. Gold prices generally tend to come off quite significantly if there's any significant chance that the dollar is going to sell off and we are finding significant resistance at the moment on gold 200 day moving average 1260 but we're not coming crashing off and that suggests to me that ultimately the market is suspicious that the current rebound in the dollar doesn't appear to have any significant legs. Gold prices aren't coming crashing off. Having said that they're finding resistance around about 1250, 1260. The downside I think in any gold sell off is likely to come in at this level around here 1220. In the short term, let's look at this on a four hour chart to see whether or not we've got any clues through here. And we can see there's a little bit of support coming in around about 1240. Let's extend that back through there. So you've got 1240 support, 1239 on a short term basis we are finding that the lows are getting a little bit lower through there. So if gold drops below 123980 123975 then we could well get a little run to the downside to around about 1230. Just looking at that nice little consolidation through there. So overall on a long term basis I'm bullish on gold but that doesn't mean that we can't drift down through 1239 towards 1220 in the short term before then going back up again. So it's all about perspectives. Your long term perspective and your short term perspective. So short term potentially bearish for a move to 1240 and even 1220. But long term we take the long term chart through here we can see that the longer term uptrend for gold prices still remains intact in a fairly similar fashion as it does for say for example Eurodollar and the pound against the dollar. So we can see that we can come to two different conclusions depending on the time frame for a particular asset class. Let's have a quick look at the Aussie Dollar because that's come under quite considerable pressure over the course of the past few trading sessions. Last week I talked about this bearish and gulfing week. Since then we have come lower rebounded and are now looking to potentially come back to 75. I still think that the Aussie Dollar has got potential to come a little bit lower. Yes that does mean that that certainly does sort of fly in the face of some of the recent dates that we've seen but the Aussie does look a little bit on the soft side. We've had three successive down days. Let's look at the weekly chart here. But again we're in a range. Currencies at the moment are fairly benign but ultimately I expect the view of the Australian Dollar economy to show a little bit of a softening. That's borne out by slightly weaker commodity prices as well the copper prices that we talked about last week. They've continued to remain a little bit under pressure from last week. That's likely to weigh on the Australian economy and the fact that the data that we saw out of Australia overnight was slightly on the weaker side and that's likely to keep the RBA on a fairly dovish outlook going forward and that's likely to weigh on the Aussie as well. Looking on the support basis for the Aussie Dollar this low here around about 75.80 on a short term basis bring us back down to these March lows back here at around about 74.90 in the short to medium term. Going to finish up with crude oil have a quick look at that and I talked about this a little bit last week this area around about 53 but also the 50 day moving average could well cap any further advances. We did see a nice little rally last week on Tuesday Wednesday Thursday Friday at the moment we are below the peaks of last week but also this peak here so you're looking around about 53.50 now we've heard an awful lot from OPEC members about the potential for extending the output freeze beyond June they'll probably continue to talk that up but US rig counts continue to rise so for me I think we're still in a range the bottom of that range is around about $50 a barrel on Brent and the mid range is around about 54.55 and then above that 57 but if we look at WTI we can see that here we're running into resistance at around about 50.50 $51 a barrel so keep an eye out for the correlations between the two there is a little bit of probably further upward momentum there but keep an eye on the 50 day moving average because I think the 50 day moving average are not only Brent but WTI could act as a little bit of a break on any rebound higher before we drift back down again so that's crude oil looking a little bit toppy at current levels could go a little bit higher but ultimately I don't expect it to go much above $51 a barrel for WTI okay so also you've got to bear in mind with respect to the Trump trade that Donald Trump will be meeting the Chinese premier Xi Jinping later this week at his Mar-a-Lago resort in Florida and he's already indicated that those talks could be difficult in inverted commas so any prospect of that meeting may be more adversarial than it need be could well actually impact on risk assets and cause a little bit of a downward move in US indices and I'm going to finish up by looking at the S&P 500 looking at the daily chart here had a nice little rebound off the 50 day moving average had a little bit of a reversal on Friday but ultimately looking at $23.70 on the upside on the S&P keep an eye out on that level as a key resistance level there if we break through there then we'll be looking at potentially a move to $23.80 finding a bit of resistance there but ultimately I expect $23.50 $23.80 on the wide of the S&P in the short to medium term as we head in as we look towards non-farm payrolls on Friday now if you want to listen into non-farm payrolls on Friday please feel free to sign up right here it's a non-farm payrolls live coverage registration page you can find that on learn webinars and events and then click on non-farm payrolls there Colin and myself will be covering the data release live $1.15 on Friday look forward to all there otherwise thanks very much for listening I'll be posting this on YouTube later this afternoon so if you have any questions I'll speak to you all on Friday and hopefully you can join me and Colin on Friday for non-farm payrolls thanks very much for listening guys and speak to you all on Friday thanks a lot