 Hello and welcome to CMC Markets and this quick Monday update and a quick look at the week ahead on the 15th of May 2017. My name is Michael Pearson and I'd like to welcome you all to another week and hopefully another week of trading opportunities before I get started. Let's get going with the risk warning which I'd like you all to digest and take in and once we get the risk warnings out of the way we can we can then get on with the seminar itself or the webinar itself. So say once once that's done we can get started. Now we've certainly got a positive start to the week thus far and driven higher by a number of factors. What I was particularly struck by last week I think was the fact that US markets were a little bit how should we say heavy and certainly struggling to go to new all-time highs whereas what we've got is European markets particularly the the FTSE 100 and the DAX hitting new record highs. So a little bit of divergence there and this is despite the fact that I would argue that we've got slightly stronger euro and a slightly stronger pound which is rather counter or has been counterintuitive in the context of recent gains that we've seen in the DAX and the FTSE they've usually been in conjunction with a weaker pound and a weaker euro. So when do we go to from here well ultimately what we've seen with respect to the FTSE 100 is we are currently struggling to get much above 7450 we did break above that very briefly earlier this morning but if we look at the peaks that we saw in March the current move higher is a little bit is a little looking a little bit overextended now that doesn't necessarily mean that we can't certainly go an awful lot higher from here on in but what I am cautious about and I'm cautious about this simply because US markets are also showing some signs of topping out and generally despite what a lot of people would have you believe that European stocks are cheap certainly we're looking at the DAX and that's trading at record highs you look at the cat Caron that's trading at the highest levels that we've seen since 2008 2007 2008 so you you've got a situation here whereby you have equity markets in the US which is starting to look a little bit toppy you've got the FTSE 100 which is really struggling to gain a significant amount of traction much above 7450 and you've got a DAX that continues to go from strength to strength but it does it in a very incremental way and that does make me a little bit cautious about being overly aggressively long of equity markets particularly indices at these sorts of levels what I would be looking for is essentially a breaking of new highs for the US a breaking of new highs for the FTSE and a breaking new highs for the DAX now obviously we've seen the DAX and the FTSE 100 do that but we they're doing it in a way that makes me a little bit suspicious as to whether or not there's a significant amount of extra momentum in this particular move so that makes me a little bit cautious also I think one of the drivers of this particular rally is a rebound in metals prices as a result of that story over the weekend about China's new silk road investment projects $900 billion I think what you have to do though is you have to put that particular project in the context of being a long-term project as opposed to a short-term one we've coming off the back of a significant decline in commodity prices and that is prompting a little bit of a technical rebound in commodity prices and you're seeing that played out certainly in the context of copper prices today we've seen them bounce off significantly low levels in the middle of last week and since then we've gone quite a bit higher iron ore prices which have also come off fairly low levels after declining about 33% since March so I think you've got to look into that you've got to look at it in the context of a little bit of a technical rebound with respect to iron ore prices and commodity prices in general if we look at this particular chart here for iron ore despite the fact that we've seen this positive news out of China at the weekend iron ore prices are largely unmoved as a result of that a big infrastructure project you would think like a $900 billion silk road a long-term investment project you would have thought you'd have seen a significant bigger reaction in iron ore prices than the one you've just got the other news obviously is that news from Saudi Arabian and Russian oil ministers that they're looking to extend the output cap or the output freeze into March 2018 and that's had the desired effect in squeezing those crude oil short positions but ultimately we're still pretty much in the range that we've been in for the past six to nine months so for me while we've seen a significant rebound of the lows that we saw at the beginning of last week we're still pretty much in the broad range that we've been in and are still quite a way off those highs that we saw earlier this year and about $57 a barrel for Brent crude and ultimately I think when you get Russian oil ministers and Saudi Arabian oil ministers saying they'll do whatever it takes to stabilise the oil market I don't hear I don't think it's going to have the same effect that Mr. Mario Draghi's comments that he'd do whatever it takes to preserve the euro in quite the same light because ultimately for me I think it's going to be very problematic for Saudi Arabia or Russia to cut production to such an extent that US shale producers won't fill the gap that's left by those production freezes rig counts once again increased on Friday now up at 885 gas and oil rigs and that's seen that's another weekly rise and that's been a pretty much part of the course over the course of the past three to four months where it counts have been rising on a weekly basis and I think they're likely to continue to do so so with respect to crude oil it's once again I think a range trade play ultimately what I'm looking for here we've got the 200 day and the 50 day moving average here but above that we've also got these significant support level that we saw it in January and and in the first part of April which is likely to act as a little bit of resistance on the move higher so I think while we may see a little bit more upside in oil prices ultimately I don't think it's sustainable what I think we're getting is a little bit of rally ahead of the OPEC meeting which comes well which I think takes place on the 25th of May so that's in 10 days time also looking at US prices US crude prices and we've got a similar sort of story here as well we've got running into the 50 and the 200 day moving average it's quite significant here that the 50 day moving average is rolled over quite a bit which was just to me that once again the resistance level around about just above $50 a barrel on WTI is likely to be the key level there so we've seen some very strong gains here I think driven by a large amount of short covering which took place on a break below these March lows the market's been caught short between below this level here and now it's starting to stop itself out so while I think we could get a little bit of a further rebound back towards around about $50 and 40 or $53 on Brent crude I think ultimately we could start to drift back lower unless these OPEC and non-OPEC producers really do coalesce around some sort of agreement that will actually stick and I'm not sure that it will so looking looking at the oil picture for me I think there's a little bit of thought there's a little bit more upside in it but ultimately I expect that upside to run out of steam over the course of the next couple of days and start to drift back down towards the lower end of the range as for US markets if we look at the S&P 500 what I was struck by on this particular chart is the fact that we weren't able to sustain a move back above 2400 and that for me I think is significant I think if we're going to make further gains on the S&P then we really need to gain traction above 2400 thus far we haven't been able to do that and until such times as we do I'm a little bit reluctant to be aggressively long this particular market and ultimately while we're below 2400 I would certainly look to I would be very cautious about being overly long at these sorts of levels ultimately I think the play here really is 2380-2400 until such times as we get a break out significant break out of that range it's a similar sort of story on the US 30 the Dow it's more significant here with respect to the 21100 level there appears to be a decent barrier in and around that level but there's also a decent area of support around about the 20,775-20,780 level on the daily chart on the on the downside again I think this is pretty much tight range stuff it's not going to be significant I think in terms of overall moves higher or lower I think at the moment the markets a little bit unsure as to where it's where it wants to go to next and I think some of the data that we've seen out of the US has been the wrong side of pretty abysmal certainly I think if you look at US retailers and their sales numbers and those retail sales numbers that we saw on Friday which were I think singularly disappointing we're expecting a rebound of around about 0.6% for April retail sales we only we got barely less than half that and at a time when February and March were also weak there is a significant divergence between the confidence data that we're seeing out of the US and the actual hard data and that does make me a little bit suspicious despite the fact that US payrolls continue to be trending at a fairly decent level of 200,000 the unemployment rate is at multi-year lows the under-employment rate also fell and yet wage growth and inflation repressures still remain a little bit on the weak side so you've got all of these factors you've got a weak retail sector and let's not forget the US economy is largely driven by consumption so I think there you've got a little bit of a weak point and ultimately what I'm looking to see is any evidence that we could be starting to roll over a little bit markets are currently pricing in the fact that the US will raise rates in June I think the pricing in in pretty much as a done deal I still think that we could see another rate rise this year but I'm a little bit cautious as to call for a definite move on rates in June while I would suggest that it's very it's going to be very difficult for the Federal Reserve to dial back from that expectation and we can certainly see evidence of that in this in this probability of a hike that the market is pricing in for a hike at the June meeting when I look at the data I'm finding it very very difficult to make the case for a move in June which then presents us with a little bit of a problem because ultimately if you look at what the markets are pricing in and what the bond markets are pricing in you look at that Fed fund thing there 97.5 percent probability that we're going to get a rate rise in June okay so let's spin that round and let's look at what US yields are telling us now this chart here is quite interesting if you think that the Fed is going to raise rates several times this year then you'd have to argue that you need to be longer the dollar because ultimately interest rate differentials are going to favor the dollar more and more the more the Federal Reserve hikes rates and we've seen two rate rises already in the last five months one in December one in March and potentially we could get third one in June let's see it looks like what happened when the Fed raised rates in December yields peak and then yields came down the Fed raised rates here in March yields peak and the yields came down now the markets are pricing in a move in June but actually yields are starting to tail off and I can't square that that doesn't make sense to me if the market thinks the Fed is going to raise rates in June why aren't yields going up and it's this divergence in terms of what the bond markets are telling me and what the Fed funds probability of a Fed rate hike is telling me that's making me a little bit suspicious about being long of dollars and that suggests to me that ultimately we could actually see the dollar start to come off certainly if we look at the dollar index here we can see there's a clearly defined trend in place this is the Fed rate rise in December this is the Fed rate rise in March the dollar continues to decline we can draw a line this is the dollar index we can draw a line right through the highs so if you think the potential for the dollar to weaken is probably higher than it is to strengthen then ultimately you really need to be short the dollar against the currencies which would then argue that dollar yen needs to come lower euro dollar needs to go up and cable needs to go up because ultimately I think when you actually look at the interest rate policy for those particular central banks that's not going to change so it's really about expectations of what the Federal Reserve is going to do over the course of the next nine months and that could be why I think yields are starting to roll over well I think the market thinks there will be one rate rise this year they don't think there's going to be another one and really then it's just a question of timing so let's look at dollar yen and see whether or not we've got any further upside after the gains that we saw last week now this chart may look a little bit busy don't worry too much about it what we're particularly interested in is this bit of price action around here now we've seen a big rebound off the lows that we saw in April around about 108 we haven't I'm weren't able to get back above that 115 or 114 40 area 114 80 area that I talked about last week we had three successive peaks in or around 114 40 and then what we had here is what I would call a bearish engulfing day or a potential key reversal day made a slightly higher high this candle here engulfs the body of the previous day's candle and then we've broken lower now while in the short term I would expect to the 113 level to hold here let's drill this down because we're rolling over on the four on the daily stochastic let's drill down on this a little bit around about 113 through these series of peaks here we're probably going to have a little bit of support and we could edge back to around about the 114 area but I think while we're below 114 40 and this probably could come back up because it's oversold at the moment on the 4-hour chart we could edge back up to around about 114 114 20 I would be I would be surprised if we break back above 114 40 and as such I think there's the potential now for us to edge lower what we've seen here is these low these highs are getting lower what's more important is this series of support through here is broken and we've made a new low there so while we're below 114 I would expect for this particular downtrend to continue and for us to edge back towards 113 and then back to 112 40 over the course of the next week or so I think the dolly end has the potential to probably drift back down to around about 112 40 while we're below 114 40 so a slightly weaker dollar over the course of the next few days I think it's going to be a similar sort of story with respect to sterling dollar I'll come to platinum in a minute guys I've just been asked about platinum I'll cover that in a minute your brave trading platinum all I can say that tends to swing about quite a lot with cable again you know this there's not really much to say here apart from the fact I still remain fairly bullish on the pound longer term against the dollar as long as we hold above 128 I would still expect despite the fact that we got that week data last week and the Bank of England was fairly dovish we've got a host of data out later this week starting tomorrow with CPI UK CPI UK retail prices as well as well as unemployment data wages data and retail sales data so we've got a pretty data heavy week for UK inflation expecting that to come in around about 2.3% though there is a chance it might come in a little little bit weaker than expected simply because I think Eurozone inflation was a little bit weaker than expected last week and generally what happens is the same drivers that drive that generally tend to drive global inflation so and the fact that we've got slightly weaker we've had slightly weaker commodity prices over the last month or so as well so lower oil prices are likely to feed into that if we do get an upside surprise and there is a good chance that we might get an upside upside surprise because of the weakness of the pound then that could well support sterling and push it up towards the highs that we saw at the end of last week and if we do get a foothold through and above 130 then the triggering of stop losses should trigger a significant move back up towards 131 now the consensus for the pound for UK inflation tomorrow is anything between 2.1 and 2.6% so anything below 2.3 is likely to be slightly sterling bearish anything above 2.3 slightly sterling positive more importantly core CPI if that goes above 2% then it's going to really increase the pressure on the Bank of England start thinking about pushing interest rates up not that it will happen but that will that will be the direction of travel when it comes to arguing for a slightly tighter monetary policy before the end of the year also we've got unemployment for for the UK and again that is that is expected to remain at 4.7% and we've also got average earnings which is expected to come in or increase to 2.4% so I think the key driver this week for the pound will be the inflation data and obviously we have retail sales on Thursday which brings me neatly on to euro sterling don't worry I haven't forgotten about the platinum euro sterling is training in a very nice triangular consolidation at the moment with the top of it around about 84 90 so this is actually quite a nice potential potential opportunity for a short position maybe with the stop loss above 85 10 85 20 with a move back towards here if we do break out above this then the likelihood is we'll probably test these April highs that we saw here around about 85 30 but at the moment I still can't get overly enthusiastic about being long of euros unless it's against the dollar when we get a dip back to around about 109 or 109 or 108 108 80 109 with euro dollar again if we can maintain a foothold above 110 then we could get a significant break out towards the top side at and the highs that we saw in November but certainly we're still in a little bit of a range top of that range is around about 110 bottom of the range is 200 day moving average we've seen some really nice rebounds in the past couple of days but ultimately what I really want to see here is a breakthrough 110 on your dollar and a breakthrough 130 on the pound so that's that's your that's your weak dollar story okay so let's have a quick look at platinum for for you and that's an interesting one let's have a look at the server resistance levels here yeah well looking at this chart I would suggest that we're running into a little bit of a resistance zone around about 934 on this particular chart and let's add a let's add an RSI or a slow stochastic study studies and we've also got moving averages as well weekly chart see if that's giving us any clues really so the picture for platinum is that running into a little bit of a resistance zone likely to be a little bit of selling pressure coming in around about one nine thirty four nine thirty five also got a trim line coming in here so your platinum is running into a little bit resistance around one nine thirty five if that holds then we could well drift back down towards around about nine ten in the short to medium term while I'm on platinum have a quick look at gold getting a little bit of a bid on the back of a technical rebound and a little bit of dollar weakness we did break below this trend line support earlier this month so I'm going to remove that see if I can redraft it through there the thing with trend lines is sometimes you do have to redraw them you'll get a little bit of a technical break and then we'll come back here but what we certainly can see with respect to this is a little bit of dollar weakness a little bit of uncertainty and I think the cyber attacks over the weekend have prompted a little bit of uncertainty though when you actually look at the number of countries it's affected a hundred and fifty countries and two hundred thousand computers two hundred thousand computers really I don't think is that many when you consider how many computers there are in the world and they do appear to be only it does appear only to be affecting unpatched Windows XP computers well I still I stopped using Windows XP about five or six years ago so as probably have a lot of people so while it's likely to cause a little bit of disruption I don't expect it to cause a significant amount of disruption and would expect gold prices to come back and retest this 1240 area in the short to medium term before and while it's holding above this particular trend line here would expect to remain I think fairly well supported I certainly don't think it's going to fall off a cliff in the short to medium term so certainly would be looking to buy dips on gold as a preferred strategy rather than trying to go short of it okay so what else have we got this what else have we got this week obviously we also have preliminary GDP numbers from Japan on Thursday so that could be significant in the context of expectations around monetary policy that that could well certainly guide indications as to whether or not the bank the Bank of Japan is likely to remain fairly dovish in its overall outlook we also have flash GDP from the euro area that's on Tuesday at around about the same time or just after the UK CPI numbers also got Italian GDP I think the likelihood there is that we're probably going to find that Eurozone CPI and Eurozone GDP could well actually disappoint expectations I think there's a large expectation that some of the recovery that we've seen within the euro area could be the beginning of a significant rebound there is a concern and I have a concern and I did express it last week in that China's data has been singularly singularly easy for me to say singularly disappointing and I was confirmed this morning with that very weak industrial production data for April came in well below expectations and while retail sales were pretty much more or less as expected I think there is a concern that the tightening of credit policy that was instituted by the people's Bank of China over the past few months is starting to have an effect so the question is that I'm asking is whether or not the slowdown that we saw in the April industrial production is systematic or or an early warning sign of a slowdown in Chinese GDP in the second quarter of this year because it certainly doesn't appear to be being borne out in the European data but in the US data there is there is a little bit of a mixed picture so that's something that I'm particularly going to be keeping an eye on over the course of the next few days so I think really the key the key things that I'm looking out for this week is potential potential short-term top in oil prices slightly weaker US dollar if US yields continue to roll over at the moment US 10 years around about 232 and keeping an eye on the dollar index in particular and this series of lows that we saw last week because looking at this particular candle chart here it does suggest to me that we could be we could be in line for a little bit of a retest of the lows that we saw last week on the dollar index and if that does turn out to be the case that's likely to be that's slightly to underpin the euro it's like to underpin the pound and it's likely to act as a little bit of a wait on the dollar yen potential slowdown just been asked a question if there is a potential slowdown why is the Aussie dollar crude copper Australia 200 gone up well because they're rebounding from significantly low levels if I look at the Aussie dollar look at where we've come from on the Aussie dollar over the course of the past few weeks we've come down from peaks of 77 and then 75 we've hit a trend line support or just come in above a trend line support for the Australian dollar around about 73 and a half 74 now we're running into a little bit of a resistance area at the moment and we have rebounded two or three days in row but ultimately if you look at what commodity prices have done over the past week or so and in particular the commodities these the CRB index that's rebounded as well so they've rebounded from significantly oversold areas so there has been a slope that does appear to be a slowdown iron ore prices are off 30% in the past few months what we're seeing I think is a technical rebound in Aussie crude prices copper prices and the Australia 200 so hopefully that does make some degree of sense to you certainly that's the way I'm reading it in the context of why we've seen the technical rebounds or the rebounds that we've seen over the past couple of days if you look at the Australian index here this is a daily chart we've rebounded off support of 5,800 so again it's a technical rebound if we look at copper prices it's a similar sort of story a little bit of a technical rebound from very very low levels in the in the context of the last few weeks and the last few months so hopefully that explains why we've seen a bit of a rebound there does anyone have any other questions on anything that I've talked about yes no okay so in the absence of any further questions about any of the other markets I'd like to thank you all for your attendance today and I'll see you all same time same place next week thanks thanks very much for listening and I'll talk to you all again and good luck trading this week