 Right good afternoon ladies and gents and welcome to non-farm payrolls Friday on April the 7th with me Michael Huston and my colleague Colin Ciesinski in sunny Toronto, Canada Hopefully it's as warm there as it is here with about 20 degrees here and sunny mate, but I would imagine you're probably freezing The last 24 hours have been just dark and dreary and it's a Vancouver kind of day I wish I could say I feel sorry for you, but I don't Anyway, let's let's let's get the risk warnings out of the way. So just just just got to do all of them making sure that everyone's Works their way through through through all of them so that our compliance team We're all happy and happy clapping and what have you and then we can then we can get started So Colin non-farm payrolls. What's it going to tell us about the US economy that we don't already know? I would suggest not much I agree particularly in the week of the ADP payroll numbers that came out on Wednesday I think the biggest thing that was what the payroll number is going to tell us is that more or less US job growth is Continuing that the the positive momentum we've seen in the US job market this year is Continuing because what's happened was this time around it's more about expectations when we look to ADP the street Was expecting the the payrolls to drop from 298,000 last month to 190 This month and instead we got 263 I went with 250 and and I and was was pretty cool pretty close the I'm going again with 250 for non-farm payrolls as well this time around the streets had a bit of an opportunity To react to this but not really I mean like we've got last month was 235 for non-farm payrolls The streets expecting it to fall to 180. I don't agree. So and I don't agree. I think it's going to go up I think it's going to be strong. I think the only thing that could hold payrolls back a little bit is the hiring freeze in government But but in terms of the private sector, I'm thinking that things are looking pretty good here Well, when you look at the actual ADP figures and the breakdown on Wednesday Manufacturing was a very strong gainer and even though we saw a decline in the services ISM component I think the manufacturing all offset that and let's look at the correlation between ADP which is the yellow column here That was 263 if we look at non-farms and the correlation between the two over the past few months There's never been much more than to say a 45 or 50,000 difference between the two Obviously there has been the odd occasion But in recent months the correlation has been quite good So I would suggest Given the fact that the participation rate has also been rising over the course of the past four months that we could get 230 So I'm coming in slightly below you But ultimately I think I still think we'll get a number in excess of 200,000 and what I'm looking for here This is about slack in the labor market. There's been an awful lot of chat about slack in the labor market or the lack thereof I think the fact that we're posting Consistently above 200,000 Means that there is a significant amount of slack in the labor market because wages aren't doing anything And if there was if the labor market was tight wages would be going up and that's not happening So we're seeing an increase in the participation rate We've seen an increase in the participation rate every month since November from 62.6 in November to 63 now So I think for me what we need to see is an increase in wage growth And that's we're expecting 2.8 and 0.2 for that So I think which is steady which is which is steady now if we get more than 2.8 Then that could be dollar positive But ultimately I don't expect these numbers and I'm pretty much sure you think the same thing to drive the dollar out of its recent ranges Certainly in the context of where the good support on euro dollar is we can see that on this chart here I think if we get a decent number, we'll find support around about 105.80 I can't really see as much below that That's the trend line support from the lows that we saw at the beginning of the year And but we've also got resistance on the 200 day moving average around about here So I think we can expect pretty much more of the same I think the big question is what is what happens to dolly in and I don't know whether you want to chip in here Colin But there's massive massive support at 110 Yeah, I'd just like to mention a couple more things about the non-farm payroll number Before we move on to the yen and that is one thing I think we're seeing the increased correlation between adp and non-farm because this the private sector is starting to kick in The private sector is taking the lead on employment now rather than the government sector And I think that's why we're starting to see this correlation really tighten up second thing Manufacturing payrolls the streets expecting 17,000 down from 28 But as you noted it was stronger in the adp number room for a positive surprise there That's particularly important today with Trump and z having a summit today talking trade talking manufacturing talking u.s Jobs being shipped overseas if that manufacturing number is really important because Trump's probably going to focus on that And I could set his mood before going into today's meetings Going on to dollar yen We're we're definitely seeing the yen in a really nice established downtrend here Trading between 110 and about 111 25 to me. It looks like we just we've had a down swing We're consolidating at a lower level, but basically we're seeing yen strengthening and overall and we're seeing certainly we're seeing gold has has totally taken off overnight with the Increasing political risk. Yeah, and I think the end strength obviously feeds into the slightly risk off That we're seeing at the moment So if I actually draw a line through these peaks here We've got a nice little resistance coming in on the ishimoku cloud around about 111 20 111 50 So the moment I think while 110 holds Then I think we can get a rebound back to 111 50 if 110 gives way and I fully expect that to happen Just not today I fully expect 110 to give way because ultimately I think there's too much priced in with respect to positives in terms of the trump trade I think it's unlikely now that the Fed is starting to talk about the potential for running down its balance sheet I think it's unlikely they're going to do both They're not going to raise rates and cut down on the balance sheet. They'll do one or the other So they may call a pause on rate rises and actually look at getting the The rate the the the the balance sheet tapering underway Before or in place before Yellen calls time on her tenure as president of the Fed, which comes up in january So she's only so that On that so that means we're likely to get a rate hike in june. I think we will as well Yeah, and I think that'll be it. I guess well And that'll probably be it your rate especially because september Is when you may have the real budget showdown and the potential for a government shutdown So I've already was thinking the Fed will probably pass on september I think your rate at a certain point the Fed's going to hold on raising interest rates and shift to cutting back their balance sheet I agree Um, so yeah, I think they've got one to two more hikes and I think you're thinking one Yes, yeah, we're pretty much inconsistent on that. Yeah, we are now. Let's look at the key support on the yield chart for tenure yields We're at a key key level here Um, a good number. I think we'll see a rebound or a number in line I think is probably going to keep that that yield chart intact But certainly I think there is some evidence that maybe us yields may be about to come lower and if they do this is a potential double top Um, so double top formations generally when they wind down They tend to go the distance between the height and the base So if we project down from 2.6 to 2.3 You're talking at 2% which pretty much brings us back to where we were a year ago Um, uh, in the middle of the towards the towards the end of april now What could cause us that what could cause that to happen? Again, I think it's the fact that we might start to price out three or four rate hikes and start to price in just two But again, I'll be surprised if it happens today But it could happen if people start to buy into us treasuries on safe haven buying Which obviously is also helping to boost gold. So the key level on gold. We've got six minutes to go. We're counting down We've broken above that 200 day moving average that I was talking about earlier this week in my weekly webinar Um, it had been capping it for quite some time. We are starting to break out. But beware We are approaching trend line resistance from the peaks that we saw in july last year So I think ahead of the weekend We could see a little bit more gold strength But I think we could bump into a little bit of selling around 1270 And I've drawn it through those that peak there for the simple reason Is that was the trump win peak? Um, which saw gold spike and risk assets briefly sell off Before actually coming back quite strongly. So I'm not reading too much into that spike there simply because I think if you go back to it It was an intraday rather than a close. So it wouldn't be Well, this is this is a daily signal anyway. This is a daily chart. So I mean, it's closed well down here Yeah, so you can see shooting star. Yeah But so for me, I think we we just got a few Position clear outs there before we went back down again But now we're in a steady uptrend. The likelihood is we're going to test the top of that line And drift back. So I think for me even if we get a decent number I think dollar downside is likely to be limited Um, and even if we get a bad number dollar dollar Sorry, if we get a good number dollar upside will be limited And if we get a bad number dollar downside will be limited ahead of the weekend simply because there's too much geopolitical Um shenanigans going on for anyone. I think to really have any confidence in holding a position over the weekend let's talk about let's talk about The um tomahawk cruise missile strikes and the effect that they've had on crude oil Because we've certainly seen a significant rebound there Um, but it's quite significant. Look, we haven't been able to hold on to the gains And for me this change is nothing with respect to the overall supply and demand picture for for for crude oil We're still in the range. We're still below the February highs and ultimately I think this for me For trump, I think was his way of sending a message to north korea in china I'm not president obama. I do have red lines and if you push me too far I'll um, I will act upon my rhetoric and I think that's a message that You know, it's quite likely to be heard whether or not it'll make any differences another matter But I think certainly in the context of messaging. I think he's already set himself apart from obama He's not he's not afraid to have red lines and then he's not afraid to act upon them Now what that means for risk appetite Is anyone's guess but what I will say is that the gains that we've seen in crude oil are starting to dissipate and um equity markets are starting to bounce back and actually if you look At what the dowels looking to do it's likely to open Pretty much where it closed last night. So as is the s&p and let's look at some of the key levels on the s&p Because I think they're important as well three minutes to go Look at the resistance level that I've drawn in through here We held this resistance level earlier this week We still find that this decent support around about 2340. I think for me. That's the key level 2340 Um, so if we do get any dips that I think they're likely to be well brought into I'm not convinced that we're going to see a significant Market reaction. And if anything it's the wages data. I'm going to be keeping an eye on Um, could I just mention one thing with a couple minutes to go? So go I just wanted to mention the canada jobs are also out today at 8 30 The street is looking for a retrenchment back to 5000 from 15 000 last month The street has finally come up a little bit and and gotten back into the positives for for canada jobs after being overly pessimistic for the last Three months the now what was interesting was the full-time part-time split last month was 105 000 increase in full-time and the 90 000 decrease in part-time So there was a huge shift in canada from part-time to full-time employment. That was a positive What we're looking for today really is that split again? Are we continuing to see the shift of part-time jobs becoming full-time or are we going to see a retrenchment? That's that's quite significant and the really the big underlying thing we'll be watching for With the canada jobs today dollar cad has just been kind of going nowhere lately Interestingly, it's not it hasn't been confirming the rally and the crude oil price the big rally Gains we've seen in crude this week Things like cad and norwegian crowner really haven't been confirming So that adds to your feeling michael that that perhaps this rally is kind of getting close to done and in crude and that it could level off Especially when you're seeing the the shooting star and you're seeing overbond on stochastics and things like that Yeah, absolutely. So let's do a quick recap Just going to look at the dachs very quickly because I know some of you like to look at the dachs and again We're right on a very key support level on the dachs as well I get the impression here that they we're sort of building some form of topping Formations and a lot of these markets in the footsie 100 In the dachs for me. I think the key question is what's been it? What's the catalyst going to be to drive us higher at the moment? I can't see one maybe a diminution of political risk. I don't know But ultimately I don't think trump is going to be able to deliver everything that he's promised And for me markets are pricing that and as a result I think if the markets are pricing that then ultimately it's going to be very difficult for them to move higher You would expect them to move higher if he over delivers and at the moment. I don't think that's likely so Just something that's going to crack sooner or later. So let's look at let's look at the key levels I'm going to look at dolly end for the dollar reaction because I think that's generally a good barometer I'm going to be keeping an eye on the participation rate to see if that increases from 63 I'm going to be looking at wages and obviously looking at the wake up and also Don't forget about revisions to the february number for non-farm payroll. So we've got 10 seconds to go Dollar positive dolly end up dollar negative dolly end down going to be keeping an eye on the wages numbers and let's go Here we go now Wow, that's really low. That's a low number. That's a shocker That is an absolute shocker And the participation rate is exactly the same 63 That is an awful number. I am really really surprised 98,000. That is shocking What's um, oh look at um, let's see. Listen, but look at but look at but look at the unemployment rate The unemployment rate has dropped to four and a half percent That's bizarre That is really bizarre. So does that suggest that mean we're going to get a tight labor market? Because certainly wage growth is 2.7 percent. So the unemployment rate's dropped. It's a poor payroll's number I don't think the dollar's going to drop off a cliff as a result of that because of the drop in the unemployment rate I think the markets are going to focus On the unemployment rate. Let's see how the dollar reacts around 110 But certainly I think in the context if it's able to hold above 110 The knee-jerk reaction is to sell it on the headline number Wages are pretty much as you would expect But the drop on the unemployment rate would appear to suggest that the market is starting to get a little bit tight Because the participation rate hasn't moved. So potentially you could argue That that makes a fed rate rise more likely and not less Yeah, you got to wonder if that means that you're you're actually starting to get close to full employment Exactly because it's such a low number. It's actually quite good You know in a perverse sort of way because I'll Does that does that make sense? I'm I'm I'm I'm sort of I'm spitballing a little bit You're going to run out of people you're going to run out of people basically and then what's going to happen is that wages are going to start to wedge up as you try and You know you try you try and fill those positions Manufacturing payrolls was disappointing again. I'm surprised at that given the strong adp number, but you know It certainly looks as if the knee-jerk reaction was to sell it And I think now markets are looking at the unemployment rate. I'm thinking potentially well actually this could well be A little bit dollar positive. I'm looking at us treasury yields They've dipped slightly. Let's quickly look at that Dipped down to around about 2.2 point 2.2 8 2.2 6 9 4 was the low on that But it does appear to be coming back a little bit. So I think The markets are sort of coming to the same sort of conclusion The market's going to think going to try and push the dollar lower I think the big question is it will they be able to and I'm not sure that on that number Once you once you dig around The It just it justifies a significant amount of dollar weakness because it's this this number here that I think People will look at and think well actually Maybe We're starting to get close to full employment But we'll see we'll see let's see what gold prices are doing Shall we let's get rid of that So gold prices Have shot up Which you would expect on a weak number But again, I'm not convinced. We'll see a break this trend line here Coming in from the highs You know, it's a it's a bad headline number. But again, you know, I hate to bang on about this, but There is another way you could spin that number and that that for me. I think is is the key thing So what are equity markets doing? What's the s&p doing? Not much. Let's have a look at see what the 10 minute charts showing us Yeah, again markets are reacting negatively to it. Um I don't think it's as bad as people think but we'll see But overall what what is this? I think what It's not really going to change the overall picture for me with respect to what equity markets are doing It may change the dynamics with the dollar euro dollar is probably going to have another go at um around the 107 level on the back of this number Perhaps but ultimately it's still in a range and I really don't see This number is going to drive it out of that range. So we'll get a retest of 107 perhaps Before we we drift back down again over the course of the next few trading sessions Let's have a look at what the dollar is doing overall on the back of that and not surprisingly it's um It's uh Only up against the pound and the australian dollar it's down against everybody else Yens up canada's up Norwegian's up That's um, you can yeah, because good. It's a good number Canada jobs were a really good number. They came in at 19.4 Thousands so 600 jobs off from my expectation But what's importantly when I talked about the full-time part-time split this time around they're both up We've got a full-time jobs increase of 18,400 and 1,000 increase in part-time employment When we look at this split, we really look at the full-time jobs Growth in full-time jobs is a good thing. It's good for the economy And and so that's a very positive Assign for canada and we're seeing that player with the loony Rallying today Sometimes we also hear and in canada the media reports the cad us dollar and and so sometimes round numbers on that can be important too Right now it's sitting just below 75 cents on cad us and it's sitting dollar cad is at 133 60 so so kind of in its trading range But but definitely picking up nicely on this news Yeah, so let's have a look at the dollar canada chart see where the next where the next key levels are and yeah, I mean Nice little nice little push lower on the u.s. Dollar nice little rise higher on the canadian dollar so Yeah, as you would expect fairly decent report, but again, I don't think we're probably going to see much in the way of Downside or upside for the canada On on the back of that ahead of the weekend Um unemployment rate at a 10 year low so You know make of that what you will but ultimately um Fairly unexciting report. Yes, the headline numbers were certainly noteworthy, but I certainly don't expect That number to drive us out of the ranges that we've been over the course of the past few days and it's certainly I do think that Put my teeth in I do think the dollar is going to weaken. I just don't think it's going to be today Let's look at the dollar index. Yeah, dollar index is only down a little bit overall I mean it went from 150 to 170 overnight now. It's back to 150 So really the knock on effect on the dollar is fairly limited overall And I think we saw that with you know cables kind of holding steady having sold off earlier in the morning and And the euro just kind of drifting. So this is this is my dollar index chart This is what I don't expect the dollar to go too much higher. I certainly don't expect it to break out of that trend line And I am still of the opinion That cable risk is to the upside not the downside one thing that I have noted Over the course of the past few trading sessions is the way that 123 50 123 80 area has held I still expect that to be the case and for us to retest 125 over the course of the next Week or so. Obviously if we do break below 123 80 It's going to It's going to you know, it's going to it's going to be tricky But I just think there's so much bad news priced into the pound at the moment That really I think it's going to take something substantial to drive it significantly lower And I think that's why next week if we look if we look ahead to next week That could be significant because we've got inflation numbers out out of the uk. We've got wages data on We've got inflation numbers out on tuesday. It's a four-day week next week Inflation numbers out on tuesday. We've got unemployment and wages data out on wednesday And we've also got chinese inflation data as well. So I think if we get a strong number there that actually could be fairly supportive so I would suggest that the weekend starts here and ultimately I don't expect Too much in the way of significant currency moves now between now and when the market markets close this afternoon Obviously barring a geopolitical shock, which I don't expect to happen because I think despite the fact that we got All of this nonsense overnight I really don't think it's going to have a long-term effect on What happens in syria or um anywhere else for that matter. I think trunk trumps made his point And ultimately I think you'll get a little bit of diplomatic shadow boxing Going on between the various parties But I don't think iran is going to be too unhappy about the fact that oil prices are higher on the back of it So I think their response is likely to be the usual thing that you would expect from iran Criticizing the fact that the u.s. Is an attack to an ally, but ultimately I don't think it's going to go any further than that It does look like it's going to face and the summit meeting between that Trump and and see today is uh is also significant But the reports out of last night seem to be that they were you know, kind of at least Civil or cordial to each other and it wasn't too too frosty as I think people were really worried that they that they'd get off to a the kind of frosty Report that we saw between trump and and merkel a couple of weeks ago And and so keeping an eye on that It does look as though at least they're at least on the on the surface trying to get along somewhat But certainly they have some Pretty big issues between the u.s. And china that need to be sorted out Over trade over north korea I probably you know a lot of you know signaling and in posturing and things like that So we'll keep an eye on that through the day, but I don't think we'll see anything really specific coming out of it It's more of a how does it set the tone for their relationship going forward? and and as you noted michael with the That uh the last night's missile strikes certainly could be a signal trying to build You know parameters around stuff. Yeah, exactly And particularly north korea because of their incessant sort of saber rattling missile strikes and what have you He's basically saying to them. Look, you know, you may want to test your missiles, but ultimately Um at some point you're going to push it too far Yeah, and I think that's the message. He's probably kind of be trying to send Um before we wrap this up because I don't think I think we've pretty much covered everything that we need to cover Does anyone have any questions on anything? That collin and I haven't already covered Any questions? I've just been sent the message here, which I can't um, which I can't repeat So what's wrong with my accent? Someone's just commented on my accent Okay, let's look at sterling kiwi we've just opened. I've just been asked about sterling kiwi. So let's open Have I got that up there? Is it there? No, I don't think it is actually. I can't see it. So let's let's search for it Let's search for sterling kiwi There we go It's a strange combination Oh, that's an interesting breakout It's above the 200 day moving average. That's really interesting. Okay. Let's drill down into it a little bit Now let's 170 680 looks like a fairly decent support level Right through there. Sorry 177 80 even through there Potential top perhaps Or maybe it's worth buying the dip with a stop loss below 177 80 perhaps Certainly looking as if it's starting to run out of steam a little bit, but There's no question that this is a decent uptrend that we've got going on here And maybe That's the way to play it play the trend because at the moment. I can't really see any evidence that we're getting a significant Reversal that looks even better actually there. You're starting to approach the December highs as well. Yeah That's the 180 round number. So as long as you're support holding that support Um that michael's drawn in you're in a rising channel so far so good But you are approaching a level where you've seen the past resistance. Could you put up a An oscillator on that michael? Yeah, I can Yeah, yeah sure. Yeah, I'll go study take a look. Let's look at let's look at an rsi So use a 10 day rsi Well, let's also use a slow stochastic because that's what I prefer because it's less it's less it's less noisy Um this particular slow stochastic that I use and then we'll make it a little bit Bigger, okay, a little bit of divergence on that perhaps A touch enough to call that that's a negative divergence That's probably enough to tell you your your upper momentum is slowing as you're approaching that 180 round number in the december high So you could you could end up leveling off in this 177 Once sorry 178 to to 180 kind of range But as long as you're holding the the higher lows you're still in an uptrend But if you start breaking it, then you've got to then you could see a more significant pullback Yeah, you could get a pullback, but as I say while it's above 177 80 then it's likely to go for a little bit of a rebound But if it does go below there, you probably get that be triggering a few stop losses Okay, so let's do the uk 100 have been asked about that The 72 50 level on the footsie is the big one for me. Um, you can certainly see that born out here Look at these long shadows on these candles The neckline of a head and shoulders top. Yeah, potentially so you could either draw it in there It depends where you draw the neckline though. I mean, do you draw the neckline through there? You've got it using 72 60. Yeah, I've got 72 50 just in case it drops below it But certainly I think if you draw that in there Then I think any any rally back to rules around about 73 and a half 73 40 50 I'm even above the highs of the last two days. There does appear to be some significant resistance there so Through here, so 73 20 73 30 Is probably a decent resistance level in the shorter medium term the oscillator is turning higher This on the other hand on the four hour chart long shadows suggests that momentum is starting to stall We could get a move back to 73 10 But I would be surprised if we don't finish the day around about 72 90 There or thereabouts There's a question here On any comment on the fed comment about equities being fairly high the other day I actually find that read that and I was quite shocked and I actually found it laughable in some ways because The fed a lot of the market gains Of the last several years have been boosted by the fact that the fed put plowed all this Quantitative easing asset purchasing easy money into the system and it all followed the the path of least resistance Into the stock market and the and the fed was perfectly fine with that for years and years and years So I find it I found it actually funny that the fed would then suddenly turn around And complain about high stock prices when they're the ones who jack the market higher for years So it's a it's quite interesting that they even mentioned it though But I think it does tell us so that it has actually gotten their attention that They're maybe starting to think that gee, maybe they've overdone it or they'll blame other other factors and themselves But but the reality is the market has had a huge run on this trump trade And as michael alluded to earlier It's hard to see how he's going to actually be able to deliver not only everything he promised But in the time frame that the street is expecting somehow After the election the the market has completely forgotten how difficult it is to get anything done in congress Even when you do control it and and and things are going to be bumpier and things are going to take longer And that means that it's going to take longer for it to to get through get approved Get funded get delivered and get into corporate earnings and people are thinking so if you're running if you're running models based on Based on earnings growth then you know on off of trump then you're going to find that That's going to get delayed and the risk is a lot higher than Then people have been thinking and at some point the streets going to run out of patience and so far I think what you've seen in the markets is that The first thing is was you had a huge amount of capital stored on the sidelines and no matter what happened after the election Capital was going to get in and get put to work And then it kind of took a life on its own where the bandwagon really started going And you had all these lagging portfolio managers going I can't be hitting the end of the year with all this cash on my books I got to get on this bandwagon too and then you get into uh into february with the um the retirement Savings deadlines and the tax deadlines for uh for retirement plans and those all hit around the end of february It's not a coincidence that the peak of the market was march the first Because of that that's perfect seasonal timing on on that and even through march and april We're still in a seasonally strong time of the year, but what happens when you start hitting? May and june and the traders start running out of patience and what if you all this talk about tax reform being Done by the when congress recesses in august and they get to august and they're not done And or you know you start getting into September when they when they again could have this blowout over the Over the debt limit and and so there's enough political risk out there Internally to the united states let alone Let alone all external events and things like relations with syrian and north korean stuff like that So at some point it looks like this could break and I think the fed is is starting to warn a bit on that Yeah, and I think you know the fed complaining about high stock market valuations It's up there with the bank of england complaining about Um, you know high levels of consumer credit Given the fact that they were the reason that that's happened because they cut rates in august I mean hello You know, why do you think consumer credits elevated because you slashed interest rates in august unnecessarily in my view And added qe and the economy the economy was in no way Um as bad as um, you thought that it was and I must admit I thought that was a mistake So, you know central banks sometimes you sort of do wonder You do wonder Yeah, I mean some things end up I think are you know end up being more politically driven than the central banks would like to admit Indeed Indeed Well, I've just been told that someone's from north london petal. Well, I'm from south london. So there you go south london sarf so anyway On that controversial note On that controversial note unless anyone else has any more questions Um, we'll wind this up. Um, I won't be doing a webinar next week. I've got next week off and uh I will um See you all after easter. Um When I will return on the Cool, what is it the 24th of april? I think 24th of april, so Not in next week. I've got a week off. Um, obviously easter monday is the following week and uh So back for the monday market webinar on the 24th of april So I'll take this opportunity to wish you all a great easter And um, I will talk to you all afterwards and um, I hope you all have a very successful trading two weeks Have a great day trading everybody. Cheers guys. Thanks a lot. Thanks. Bye rune