 Hello and welcome to CMC Markets on Tuesday the 11th of November and the weekly market update and once again we're talking about new record highs for the Dow Jones and the S&P 500. We've seen a fairly positive start to the week for European markets but once again we're talking about the divergence between US markets and the continued fairly positive data that we're seeing out of the US last week's non-farm payrolls data was fairly positive coming in at 214,000 the previous month's number was revised up to 256. I think what was surprising about Friday's number was it was actually a little bit weaker than most people had been expecting given how strong the ISM employment components had been for the services sector and the non-manufacturing sector but given the fact that we saw a significant upgrade to the August numbers I think it's quite likely that over the coming months the numbers for October the 214 number that we saw for October could well get upgraded higher over the course of the next couple of months. As it happens we've seen the S&P break above its previous highs at 2024 looks like it's now heading towards 2050 but European markets continue to underperform and once again I'm going to have a look at the DAX following on from looking at it last week and also I'm going to look at the performance of the dollar because the dollar continues to outperform once again we've hit dolly end new highs there gone through 115 55 up to 116 the Nikkei has once again made new seven-year highs nevertheless I think there is a possibility that we could be hitting some form of dollar exhaustion I think the trade at the moment is so one way that we are looking for a pullback and I'm going to look at the pound against the dollar in that context through the prism of the inflation report which is coming out tomorrow the unemployment data as well I'm also going to look at the Aussie dollar and the dollar Swiss because maybe we could be seeing some early signs of a potential reversal there as well okay so let's make a start with the Germany 30 the German DAX now last week I talked about the 50 day moving average if we look at this chart we can see that we've now broken above that but we now are getting close to the 200 day moving average more importantly than that on this particular daily chart we've got a potential bearish candlestick reversal a couple of days ago so I think there is an element of divergence here on European markets the key data to watch out for later this week of the GDP numbers on Friday from France Germany and Italy the DAX is certainly finding it difficult to break above these levels that I highlighted last week yes we are above the 50 day moving average now but what we need to do is get above the 200 day moving average on the DAX but not only the DAX also on the euro stocks 50 and the cat caron we are below the 200 day moving average and on all three of those indices and as with Dow theory I'm a great believer in Dow theory what we really need to see for European markets to kick on is for all three of those core markets to actually push above that 200 day moving average until we do so then it's then I think it's quite likely that we could struggle to go higher now let's have a quick look at the dollar and the dollar continues to go from strength to strength this continues to stifle any rally in the euro or the pound or in all for that matter in the Australian dollar and the Swiss Frank now let's start by looking at the pound we've got the Bank of England inflation report tomorrow we've got the unemployment data we've got average earnings the likelihood is we're going to see growth downgrades from the Bank of England as well as inflation downgrades now that's strictly speaking should weigh on the pound and while I could potentially see a move to 157.20 that won't take us below the wedge that we're currently trading within the descending wedge that we're trading in currently on the daily charts we can see from the red line that I've drawn on the charts where the bottom of that wedge is we can also see the 157.20 level that's a 61.8 Fibonacci retracement level of the entire up move from the 148 lows to the 172 highs that we saw earlier this year what we need to see is for that lower line to hold either on the wedge or on the retracement and a rally back above the blue line back through 159.50 back through 160.20 to stabilise in the short to medium term one of the striking things about this US dollar rally has actually been the resilience of the Australian dollar despite the peaks that we saw at the beginning of last year around about 110 it's really struggled to push much below the 85 cents level and I think there is some evidence on this daily chart here that once again we could be building up for a bit of a rebound on the Aussie now we haven't got any Australian data this week so really it's a question of what could cause the Australian dollar to rally and I think we need to look at this week's Chinese data we've got industrial production data coming out we've got retail sales data coming out as well as the fact that I think the positioning in terms of US dollar longs could actually be now starting to move too far into the long side and maybe that could actually feed in to a bit of a bounce on the Australian dollar if we look at this daily chart we've got a key reversal day and we had that at the end of last week it's also a bullish engulfing candle so I think as long as we hold above the lows that we saw last week just above the 85 cents level then we could well see a bit of a rebound back to the 88 the 88 cents level and also we are starting to look as if we're particularly oversold on the daily oscillators so what I would be looking for is a test back towards the October lows the October lows that we saw at the beginning of October so a bit of a rebound back towards 87 88 as long as we hold above the lows that we saw last week another chart that is actually showing some evidence that we may have seen a short-term top is the dollar Swiss chart and that can be shown by this daily candle chart here we've got a tweezer top through the November highs we've also got what I would call dark cloud cover so it's not quite a bearish engulfing day the body of the negative candle has pushed more than 50% into the body of the previous days candle and that is potentially negative but we need confirmation of that so what we don't want to see is a move back above the November highs as long as we stay below the November highs then there is certainly potential to move back towards that trend line support that I've drawn in from the August lows and that currently comes in around about the 95 cents area so that's pretty much it for this week so just a reminder the key events to watch out for later this week are US retail sales on Friday European GDP French GDP Italian GDP and German GDP also on Friday and the Bank of England inflation report on Wednesday that's it for this week once again thank you very much for listening this is Michael Houston talking to you from CMC markets