 Hello and welcome to CMC Markets on Tuesday the 2nd of December and the weekly market update. And it looks as if it's going to be quite a busy week this week. We're coming off the back of some more weak inflation data out of Europe. We've got declining oil prices and we're going to look at them and the prospects for further declines on Brent. I'm going to have a look at the euro dollar in the context of this week's European Central Bank rate meeting where there is speculation in some parts that we may well see an announcement of full-blown quantitative easing from Mr Draghi on Thursday. I'll outline the reason was why I think that still remains unlikely and also going to be looking at dollar yen as well in the context of continued yen weakness and further US dollar strength. So once again we are trading near all-time highs on US markets. The German DAX has managed to get back above 10,000 again and make a brand new all-time high and all on the back of speculation about further monetary stimulus not only from the European Central Bank but also from the People's Bank of China. There was some chatter earlier today that the Central Bank of China, People's Bank of China, may be minded to further augment the stimulus measures that it's announced recently with a triple R cut to bank reserve requirements. Now whether or not that is true and whether or not that's imminent is neither here nor there. What it has done is it's given risky assets a further boost as has the expectation that we might see further action from the ECB at Thursday's rate meeting. Now I still maintain that full-blown QE remains problematic at this point in time. There still remains significant descent on the governing council as to the effectiveness of any such measures and that's despite the fact that we've posted some very weak economic data out of the euro area already this week. We've seen manufacturing PMIs for Italy, France and Germany slip back into contraction and more than that the decline in the oil prices is reinforcing concerns that the euro area is slipping slowly and surely into a deflationary spiral. But before we get too fixated on this I would argue that actually the decline in oil prices is a good thing for the euro area and it's something that the ECB really doesn't need to get too uptight about. If you look at core prices in the euro area they're at 0.7% so they're still well below 2% but there's certainly nowhere near the 0.3% that the headline CPI number came in at the end of last week. So let's make a start with the Brent crude chart. Now having a look at this monthly chart can give us an indication of how poorly Brent crude has performed on a month-by-month basis over the last six months. Five successive monthly declines. That's the worst performance since we saw the Dow move in 2008 from the highs around about $147 a barrel to the lows of around about $35-40 a barrel. Now there has been widespread speculation that we could see a revisiting of that $40 or even $50 a barrel a mark. While not ruling that out I would suggest for the time being that remains unlikely. At the moment the decline in crude prices has been driven by a price war between OPEC and the US shale producers and we haven't as yet broken that key support line on the 2010 lows around about $67.50 a barrel and that's the horizontal line that I've drawn on the monthly candle chart there. Furthermore if we now move forward to the daily candle chart we can see that there is potential for a significant reversal, a key reversal day on Brent crude. Now that would seem to suggest that maybe we've seen a short-term base. We've seen a similar key day reversal posted in the WTI contract as well. So as long as we hold above these lows that we've seen over the past couple of days then there's certainly significant potential for a short squeeze higher. What I would be hoping to see is for the crude price to hold above the recent lows that we saw around about $67.25 and for a pushback above that horizontal support line from the November lows around about $76 a barrel. So that really remains the key resistance line on the top side. In the meantime I would expect to see crude oil trade in a very very choppy range over the course of the next few trading sessions as traders try and weigh up the next move higher or lower but certainly that reversal that we saw on Monday does seem to suggest that maybe the market is probably a little bit on the short side. So let's move on to our old favorite Euro dollar. Now this is a four-hour candle chart and as you can see we are currently struggling to get above that trend line resistance from the October highs which currently comes in just above the 125 level. Now the key support remains around about $123.50 and the market does appear to be looking as if it wants to retest that level again but while we stay above that then the prospect of a short squeeze remains very much a distinct possibility. Really I think depends on first and foremost the services PMI data that we get out of Europe on Wednesday but also and I think this is probably more important how Mr. Draghi comes across at the ECB meeting on Thursday. It's unlikely that the ECB will announce further measures to stimulate the economy ahead of the December TLTRO that it's due to push out the door later this month. A number of ECB officials have gone on the record as saying that it's very unlikely that they will announce further measures before the first quarter of 2015 and I think markets need to really think about that before they start to put all their eggs in one quantitative easing basket. Now we finish off the week with the US non-farm payrolls on Friday and that's going to certainly be a key indicator in the context of where the US dollar is going to go to next. Now there's been an awful lot of speculation that US rates are likely to rise in the second quarter of 2015. Given the weak inflationary pressures that we've seen out of the US economy over the course of the last couple of days I still think that's unlikely given how weak the prices paid component of the manufacturing ISM number was yesterday. So that really does seem to suggest that maybe Dolly N could well find upside progress much more difficult to sustain the closer we get to the $120 against the Yen mark. What are we looking for on Friday? We're looking for a number of around about 224,000 new jobs to be added an unemployment rate of 5.8%. Also keep an eye out for the revision to the October number because there could be a significant revision higher to that number given the strong ISM numbers that we saw in October but overall is the dollar gains that we've seen in Dolly N overextended. If we look at a daily chart we can see that the price is a significant distance away from the 200 day moving average. Now the last time we were this far away from the 200 day moving average was in the middle of 2013 when we peaked at 103.73 and the 200 day moving average value was around about 87.60. We don't you know and that was around about 18.5% the distance between the price and the 200 day moving average. Now we're not quite there yet in terms of the 200 day moving average and the price at this moment in time but the nearer we get to 120 and 120 to 50 which is the trend line resistance from the 1990 highs at 160 then the more likely the greater the likelihood is I think we could get a sharp correction back from the highs. So keep an eye on Dolly N and be aware that we could get a sharp drop on the back of any disappointment in any US data over the course of the next few days. So that concludes this week's weekly market update. Once again thanks very much for listening just a quick reminder of Friday's non-farm payrolls webinar along the bottom. Please feel free to sign up otherwise that's it for me for this week. Thanks very much for listening. This is Michael Huston talking to you from CMC Markets.