 Good afternoon and welcome to CMC Markets and this month's non-farm payrolls webinar on Friday the 6th of October My name is Michael Houston, and I will be taking you through the numbers and And obviously the disclaimers as well. I was scheduled to be joined by my colleague in Toronto Collins is in scan fortunately He's a he's no longer available To to attend and help me out with respect to This webinar, so you'll just have the pleasure of my company Please feel free at any time to ask me questions over the chat facility just Just reply to the message that I've that I've just just sent over Be more than happy to answer any questions that you Might have and hopefully hopefully I will be able to answer them and hopefully this Months payrolls number will be less eventful than the number last month where CNBC Broadcast a number which was complete nonsense and Ultimately prompted a little bit of a counter move in the US dollar After the number the actual official numbers came out So what are we expecting today? Well, ultimately we're expecting a number that's going to be very much storm affected by hurricanes Irma and Harvey then that means essentially that the headline payrolls number is probably not as important as it would be in Months previously, and we've already seen Earlier this week with the ADP payrolls report that the employment numbers were affected by the By the by the by the tropical storms and hurricanes came in Significantly below expectations at around about one three seven But there hasn't really been that much of what I would call a correlation between non farms and ADP numbers in recent months We've seen a significant divergence between the numbers So I think even if we get a disappointing number for non farms today, and we are expecting a disappointing one of Well below one hundred thousand and certainly the lowest number for the year So the consensus view is for job gains of around about 80 or 90,000 But even if we come in well below that We can generally put that down to the fact that the the transatlantic storms have skewed The number to the downside in a similar way that we saw With the ADP numbers what we have seen this week is Some very positive ISM data manufacturing and services and what's particularly Confidence boosting about those particular numbers is that the internals were also very very positive And as a result of that we've seen a significant move higher in the dollar index and we can see that on This chart here. This is a dollar index and We've been in a downtrend pretty much since the first Fed rate rise in December At the end of last year Every single rate rise we've seen a lower dollar now We are seeing a little bit of a rebound at the moment and as you can see from the horizontal line That I've drawn on on this particular chart I Really don't see that we're going to see a significant move Higher in the dollar because an awful lot of what I would say is a positive dollar move He's already priced in and what we've got here is what I would call an inverse head and shoulders And it's it's matched pretty much buyer I'm pretty you know, it's matched pretty much in a mirror image by euro dollar where there's a significant area of support around about 116 70 now this is this is the left shoulder here We've got a head here and we've got a fairly weak Right shoulder here. So I think shorter the move above 94 20 on the dollar index I think unless this is a really gangbusters positive dollar number I think by and large a decent a decent number is already priced in and it and a bad number It's probably going to have a little bit of a little bit of a case of dollar weakness Certainly if we look at the weekly chart, we can see that over the past four weeks We've seen four successive weeks of dollar gains. So I think for me You're going to have to have a very very positive wages number To really suggest that we can get we have the potential for further dollar upside So I think for what I'm looking for this week It's less about the headline payrolls number and it's more about the wages number But ultimately I think with respect to the dollar move that we've seen this week I think we've probably seen it And I'm being asked if you can view the dollar index on the platform you can it's down here But unfortunately, we don't have an awful lot of historical data Which is essentially why I've used the Bloomberg chart because it gives me a much longer frame of reference When it comes to actually looking at the dollar index as a whole on an historical basis Well, we can we can only see the the actual futures contract You can't actually see the cash contract and that's why I generally tend to look at the dollar index On the Bloomberg chart because it gives me a much better long-term history Where the actual numbers are we've also got the Canadian payrolls report as well And certainly the Canadian economy has been going very very well over the course of the past few months GDP growth of annualized around about 3% a year We've seen two rate hikes from the Bank of Canada and there is speculation We might actually see another one over the course of the next few months So I think in terms of the US and North American economic data. It's been a fairly positive outlook So we've got the numbers up here expecting an unchanged unemployment rate of around about 4.4 percent For the US economy average earnings on a month-on-month basis of 0.3 an increase of 0.1 on The Canadian employment report. We're expecting job gains of around about 14 and a half thousand Down from the previous of 22.2 and obviously we have non-farm payrolls If we just get rid of that manufacturing payrolls number stick the unemployment rate in there with them We can display the high-impact announcements along the right-hand side So we've looked at the dollar index. So there is really a neckline resistance around about 94 20 So even if we get a spike through that given the gains that we've already seen this week I would be very surprised if we see significant move Further higher in the US dollar as we head towards the weekend one of the reasons for that I think is there's still an awful lot of what I would call uncertainty going around with respect to geopolitics Donald Trump made some comments at a dinner with those military top brass last night that There could be an unexpected announcement over the weekend calm before the storm Maybe he's going to pull out of the Iran not a nuclear deal Or maybe he could be planning something with respect to North Korea Hard to say But at the moment what we're seeing for me, this is pretty much a dollar story for this week and You know with respect with respect to what I'm what I'm looking out at the moment I'm suggesting that if we do get a move higher in the dollar today particularly against euro dollar. I think It could well be limited It could be fairly limited certainly we're looking at the euro dollar here and the key support here Which is similar to the resistance on the on the dollar index is around about 11670 we haven't quite got to there yet, but certainly this triple top that I outlined here Suggests that we still have further upside to run in the US dollar But I just don't think we're going to see it today We could well see it over the course of The next few right now I'm being asked at the moment if I'm still using the old platform now I'm still using the new next generation existing platform Same platform that I've been using for the past two to three years so So hopefully that answers your question so with respect to this particular number good support round about 11670 I think we will see euro dollar lower over the course of the next few days and weeks I just don't think we'll see a Significant lower low today That's probably going to come back and buy me, but certainly I think if we're looking at euro dollar We need to see a break below 11670 to argue for a move down to walls one 1575 Which I think we will see just just not this just not this week And certainly I don't think in light of the these particular payrolls numbers With respect to dollar yen Looking at dollar yen in particular. That's going to be a key barometer of where we are in the moment There's a nice little little bit of a flag formation Forming here or a little pennant or a little triangle top of that pennants around about 11320 so if we get a breakthrough 11320 then we're looking to retest the highs that we saw in July Looking a little bit overbought at the moment So certainly I think if we do see further upside I think we could struggle around about 130 20 1 13 30 Probably see a drift back down to around about 1212 70 12 30 I Certainly think a US December rate rise in answer to a question is pretty much priced in I think markets are thinking by and large that is what we're going to get And I think it will be a significant surprise if we didn't if we look at yields on the US 2 year We can see US 2 year yields are the highest levels For five years if we look at this chart here, we can see that So you can pretty much see that they're at 1.5 percent So I would argue that on the basis of this particular chart here. We're pretty much back at levels that we saw back in 2012 if we also look at the weight the rate rise probabilities world interest rate Expectations at the moment. We're looking at 77% nearly 77% Possibility market is pricing in a 77% probability is near as near as rounding it up That will see a December rate rise So I think the key question now is not whether or not we'll get a December rate rise is how many we get in 2018 and that's not immediately clear because ultimately Stanley Fisher will be leaving the Fed this month Janet Yellen may not even be in charge of the Fed come January and Donald Trump needs to fill five Positions on the Fed board So we don't really know what the nature of the what the make up with the Fed will be and ultimately we still have the unresolved issue of the debt Ceiling which has as yet not been resolved and won't be resolved until that December or just prior to that December meeting So that could be a Little factor that could derail any potential Fed rate rise. Let's look at cable We've seen a significant move lower over the back of the cook over the back of the cast past few weeks We're on a significant decline looking towards very key trend line support at the moment around about the 100 day moving average There's certainly I think a risk premium in terms of sterling weakness because of the political uncertainty and the absolute shambles of the Conservative Party conference Earlier this week, but I can't help thinking that we've probably seen they're the worst of the sterling move in the short term That's not to say that we can't fall a little bit lie There's certainly scope for us to fall back to around about 129 51 29 70 But if we look at the weekly performance on The pound we can see that much more markedly here We're still in an uptrend and we've been in the uptrend for most of this year So we certainly got potential for further weakness and the fact that we've fallen Towards 130 60 is a little bit of a worry But that is that is quite a key support area in the overall move since the March lows of earlier this year And again, we are looking a little bit oversold going into the weekend and ultimately I'm not convinced that Theresa May Will be ousted before the end of the year ultimately This is a little bit of what I would call Self-indulgence on the part of conservative MPs Really, I don't think they you know There is no upside in getting rid of the Prime Minister at the moment none whatsoever. Who are you going to put in her place? Boris Johnson really Philip Hammond not really. I don't think so. There is no credible candidate that You know can step in to her shoes at the moment Ultimately if the Brexit talks go bad, they still need a scapegoat So I think she will stay in place and an awful lot of what we're hearing at the moment Is an awful lot of hot air from dissatisfied back benches Which means that ahead of a potential rate hike by the end of this year and I still think we're on course for one Will probably see the pound rebound But that's not to say that it won't be a rocky ride in the short to medium term. So I think for me This this this number is probably not going to tell us any more than we already know the December rate hike is already priced in The dollar has had a very very good week And ultimately I think that further dollar upside is probably from here going to be fairly limited in the short to medium term Certainly with respect to stock markets. We're near the top of the range. I think with respect to the footsie 100 Can we go a little bit higher? Yes, we can we probably can come back to around about 75 40 75 50 But again, I think if the pound rebounds that will weigh down on the footsie 100 with respect to the s&p I think whether or not it's a good or a bad number makes no odds It's still I think very much by the dip But certainly I think in terms of where we are at the moment. I think it's probably going to be a little bit A little bit toppy I think the dollar is probably going to be a little bit toppy and Certainly if you know if you had to push me one way or the other I'd probably be looking to pare down any dollar long positions ahead of this payroll's number So we're counting down to the number now as I say a disappointing number would not be unexpected. So here we go Wow, that's a really negative number But the the revision has been a revision of 169 k And the unemployment rate drops to 4.2 percent 0.5 average earnings So poor headline number, but a very good average earnings number So I think markets are probably going to react to the average earnings numbers as I suspect yet they probably will and We're probably going to see a little bit of a push higher in the short to medium term on the US dollar On the back of that now mechanic candidate adds 10 000 jobs Slightly below expectations. Let's have a quicker look at the dollar CAD for our canadian for our canadian clients My mistake. I should have looked at that before I did anything else. We are starting to approach I'm significantly overbought territory on that. Certainly if we look at this particular chart here Um, if we look at this downtrend line here, we've been in a significant move higher on dollar CAD But you have to argue that we're probably nearing a short term top in that particular number And we we could potentially start to drift back as we approach As we as we approach the highs that we saw at the at the end of august Looking at the initial reaction with respect to the footsie 100 pretty much muted Not really not really affecting an awful lot until we get some clearer indication of where the dollar is going to go The market's going to want to push the dollar higher. I think that's pretty much a done deal But I think really despite the fact those wages numbers are good I think they're going to I think they're going to struggle to push it much higher Certainly, I would be looking to pare down any dollar long positions that I've got at this point in time Looking at the gold price at the moment Again a little bit of a drift lower that's still looking soft There's certainly potential for us to go a little bit lower and towards this trend line support from the lows that we've seen Again, you know nice little uptrend in place here But the potential for a little bit of weakness probably back towards these lows that we saw at the beginning of august but overall I think There's probably there's probably less upside Towards around about 1290 and a drift back down to around about 1260 1255 over the course of over the course of the next few days Moving on to Aussie dollar Let's have a quick look at that some of the key levels there Again very big support coming in around about This series of highs through here So we can draw that in there So around about 77 40 Why is that why is that significant because ultimately it was it was a significant resistance level on the way up So it's going to take something really significant to push it below which again sort of buys into The story that maybe the dollar is a little bit overbought and probably do a little bit of profit taking Being asked to have a quick look at the DAX That's certainly looking to test the 13 000 level But but again, I think that really depends on what euro dollar does over the course of of the next Over the course of the next few Next few hours again. We've seen a very very positive week for the german DAX But once again, what I want to see here is A close above 12 940 I think we could well see that there's certainly there's certainly potential for further gains in the DAX And it certainly ties in with my view of a lower euro over the course of the next few weeks And my target for euro dollar or 115 50 But certainly I think with respect to euro dollar, I'd be looking to sell rallies at this point in time I certainly wouldn't be looking to sell it at these particular levels simply because of where it where it currently is You know at the lows of the last Over the lows of the last few weeks I'm very much very much a trend trader when it comes to Euro dollar and I like prefer to sell into a downtrend And not sell at the bottom of a wave but sell into a pullback And at the moment, I think we are very very susceptible to a little bit of a pullback on euro dollar back above 117 20 117 30 over the course of the next few hours Looking at the Kiwi Let's move on to that Kiwi dollar broken below the 200 day moving average our technical basis That's likely to probably go a little bit further, but again, I think I would be looking to trade the pullback on that To around about 71 and a half 72 for a for a continued move lower there I think there'll be a little bit of round number support as we approach the 70 level So that brings us on to Crude oil now crude oil is quite interesting because we've seen a significant decline in Crude oil prices over the course of the past few days And I think the prospect is we're probably going the likelihood is we're probably going to see some more Why do I say that because it's seen a very interesting pattern Play out on the weekly chart and we can see it here now this in Technical analysis parlance is what we call the gravestone doji. Why is it called that because ultimately it's it's It's the gravestone of the bull market. We can see a technical definition of it here And as I say, it's quite useful as a warning sign that maybe we've seen a short-term top So gravestone doji is it calling market tops it marks the graves of the bulls that have lost today particularly good And we can see we can see it here, you know, basically, this is a good example The bulls have lost control and the bears are starting to reassert themselves. So let me just pull that out of the way We can see that here. We've tried to push significantly higher. We haven't been able to do it And now depending on where we close today If we close below 56 dollars a barrel Then I think the probability is we'll see a move lower In crude oil prices and I think this is the big conundrum at the moment with respect to the inflationary picture For the u.s economy if you look at the ism numbers that we saw earlier this week The inflation picture for prices paid is at five year high Yeah, if you look at the fed's preferred inflation measure, which is pce, it's at two yellow You know 1.1.3 1.4 percent So something is not quite right in terms of the trickle down effect of where prices are going Ultimately doesn't change the picture that we're potentially going to get a fair rate rise in december The big question is where do we go after that? Just been asked to look at canada yen. So i'm going to look at that for you And give you an indication as to where I think that is going Certainly in the context of this particular move here We are starting to trade a little bit sideways from the highs that we saw in september. Let's drill that down even further and we can Start to do a little bit of analysis on it. So here we go. Let's draw this one there Nice little bit of resistance all the way through here Certainly think the canada has probably got potential to probably move Back towards 90 47 But overall, I think we've potentially seen the top canada yen Look to sell a rally back to or was about 94 97 91. We're starting to go higher on the slow stochastic So it's probably being long with a stop loss below these series of lows through here Is probably the what the right way to go around about 89 60 so Looked to really buy the dips on that. I think canada yen Right cable being asked to look at cable I think this 100 day moving average is probably going to be quite important. Certainly, I think 130 30 130 40 I think is a decent area of support. We saw it was a decent area of resistance Through may and june here. Let me make the chart a little bit bigger for you So looking at this this area here between 130 30 and 130 40 We saw a peak there. We saw a peak there We saw a series of peaks through there. So I think If we drop below 130 20 then we'll probably go ahead back towards this train line support here But if we can find support around about 130 20 130 30 Then I think we can see a move back to the walls around about 131 on 30 120 130 30 So certainly in terms of the pound I think there's potential for a rebound from around about the 130 20 130 30 area If I if I was looking if I was looking at the cable chart So hopefully that answers your overall question with respect to the pound against the dollar. Let's just get rid of these numbers here Does anyone else have any questions? Dollar index in the longer term well That's you know, it's a fairly that's a fairly decent question. Ultimately for me the dollar index Is directly predicated on that resistance area 94 20 So that was the inverse head and shoulders that I was talking about earlier. I did post the chart on twitter earlier today And for me in the longer term, I think the dollar index has got potential to go higher But for today, I think we're probably really seeing the highs in the dollar. We'll probably come back retest Retest retest the lows on the dollar index. So if we look at the chart that I was looking at earlier On this chart here, we're probably going to come back down from the highs that we saw. So 94 20 is there We've seen 94 10 the high So we we can potentially come back down to around about 93 18 really depends on what euro dollar does We weren't able to break that 116 70 area. We may have another go at that But ultimately I think as long as the the euro dollar is able to hold above 116 70 1665 The dollar index should drift back But over the longer term, I would expect the dollar index to push higher complete that inverse head and shoulders And head and head higher. So Hopefully That answers your question longer term. I think it goes higher Just not today the thing about pre-empting inverse head and shoulders breakouts is they have a habit coming back and biting you and that's why I was That's why I articulated my concern about selling euro dollar on a break below 116 70 1665 Because this you could argue Here's a head and shoulders reversal here. We saw the triple top here. This is the left shoulder here This is the head here It's an irregular head and we've got a very lazy right shoulder here Which I don't think has really been given an opportunity to complete. So I think if we get a rebound Of 116 70 then we can get a pullback to 118 30 and then we can potentially head lower from there But at the moment, I think the range trade for euro dollar. It's 118 30 116 70 And look to sell the rallies on that and by definition That should cap the dollar index but in the short term but in the longer term I think the dollar index can can go higher just not today Hopefully that answers your question and I don't have to re-answer it Later today if the dollar index does break higher, but ultimately, you know, no one's right all the time That's why we have stop losses. That's why we implement risk management And ultimately if the dollar index does break higher, then you're looking to put a stop loss at around about 94 30 94 40 if dollar if euro dollar breaks lower then your stop loss needs to be around about 116 40 116 50 If you're looking for a little bit of a rebound on euro dollar Um germany 30 Quite happy to look at the germany 30 Again, as I said, I mean that I think is going to be a direct correlation with euro dollar If euro dollar breaks lower then the germany 30 will continue to head higher If we get a rebound in euro dollar and it heads back towards 118 Then that I think that will put downward pressure on on the dachs and at the moment I struggle to see it above 13 000 today. I really don't I don't think the momentum is there I don't think you really want to see Um, I don't think you I don't think you're going to see Um investors wanting to stay long over a weekend North Korea still remains a clear and present danger We don't know what's going to happen over the weekend With president trump and pulling out of the iran nuclear deal So I think if you're looking to I would be very very cautious about being overly long equity markets going into the weekend It's a natural caution born of the fact that you will have no control over where they open up on monday morning So I think it does pay to be very cautious in that regard So the euro affects the germany 30 absolutely it does if you actually look at what the dachs has done since The euro topped out at 120 Um, we if we look at a daily chart here ladies and gentlemen We can see it when the euro Was at 120. Let me just pull that there. There's there's the dachs. Okay, if we look at euro 120 It's not an exact correlation. Okay, so you need to be careful about extrapolating a direct correlation but if you look at If you look at where euro dollar topped out around about august september and where the dachs bottomed out on august and september When euro started to drift lower that started to go up so And the reason for that is that a stronger euro Means that german exporters are much less profitable because ultimately a weaker currency boosts your export capability when you convert it back into local currency So exporters want a weak currency. That's why everyone was So not too bothered about a weaker pound because ultimately it boosts your export capability Same applies to german exporters a weaker euro good for german exporters increased profits So you look at euro you look at euro dollar and you look at the german dachs And there is a little bit of a correlation with respect to The way that they correlate with each other. It's not a direct correlation, but certainly in the short term It does work quite well With respect to the dow Jones We have Again new record highs every day and we can probably continue to carry on doing that I think we'll probably struggle to make a new high in the short term But certainly I think there's no reason to suppose we won't continue to do them next week In the medium term, I think probably what we'll see today is a little bit of a sideways consolidation In the same way that we saw Head on on wednesday Simply because again caution ahead of the weekend a little bit of profit taking taking some money off the table It's a new week next week. We've got the latest fed minutes. We've got uscpi. We've got us retail sales CPI generally has been a little bit on the weaker side What I will be looking for next week though ladies and gentlemen is some evidence that the Strong prices paid numbers that we've been seeing out of the ism numbers start to manifest themselves in the CPI the headline CPI numbers. We've certainly seen it In respect of wages today What we want to see it now is in terms of headline inflation at the moment We're not seeing that but certainly I think that wages numbers that we saw that wage number that we saw 15 or 20 minutes ago does appear to suggest that wages are now starting to exert upward pressure On inflation and that is a good thing. That's a good thing for the US economy It's more spending power for the US consumer and ultimately it will mean that the Fed has more flexibility to raise interest rates over and above the quarter of a cent that's being priced in already for the end of this year Okay, so that's it for This week got one other thing to say We do have a Monday webinar with my colleague David Madden. You can sign up for that on the Website It starts at 12 15 and he'll give a preview of the week ahead other things to watch out for next week It's the start of bank earnings season US banks Third quarter earnings now We've heard an awful lot of concern that maybe trading revenues might be a little bit weaker So watch out for that because I think if you look at US banks, I think they are priced Quite nicely. So if they come in and disappoint we could see a little bit of a drift lower having said that Banks like higher rates and certainly higher bond yields Are certainly going to improve their profitability So, you know talk talk of tax reform talk of higher rates You know all generally positive for us banks But ultimately we do need to be prepared for the fact that they might be a little bit disappointing on the revenue side When they report next week, we've also got China trade data Given us an indication of how well the Chinese economy is doing ahead of The plenum the the congress which starts on the 18th of october So we may see some indications as to how the Chinese economy is doing whether or not the exports Are starting to slow down as a result of a stronger Chinese economy There is some evidence that Chinese exports were slowing at the same time As internal consumption was actually starting to pick up. So keep it keep an eye out for that as well And obviously, Catalonia Catalonia going to be could be a potential clear and present danger For european equity markets and by definition for the euro as well So I think that could be another factor that could well limited the upside in euro dollar Again, look to tell rallies on that back towards the 118 level if we see them So that's it for today and this month ladies and gentlemen Thank you very much for your questions. Thank you very much for your feedback until the november payrolls or the october payrolls in november I'd like to thank you very much for listening and wish you all a very good weekend