 Good afternoon and welcome to this non-farm payrolls webinar on Friday 1st of August with myself Michael Houston and Colin Cizinski from the Toronto office. Now we're doing this webinar on a joint basis simply because I think two heads are better than one. So first and foremost, we'll get the risk warning out of the way, have to do this for compliance purposes just to basically make it completely clear that we're not here to make trading recommendations just to try and essentially try and make sense of what to expect and also try and pick a direction. So without further ado, let's get cracking. So basically, non-farm payrolls, expecting a slightly weaker number than last month. So you may recall that both the ADP payrolls numbers and the non-farm payrolls numbers came in at plus 288, the unemployment rate dipped to 6.1%. We're not expecting anything explosive this month or July. We're expecting a weaker number simply because July generally tends to be a fairly weak month for payrolls. If we look at the graph that I've got here, what we've got is this is the ADP numbers for the past 12 months and as we can see and on the green line here basically highlights the non-farm payrolls numbers for the 12 months previous. So you can see in July, there's always generally a dip from June simply because of the 4th of July holiday and I think we're going to get a similar dip on this occasion. We've got a dip on ADP, this is the non-farm payrolls graph here, we've got 288 in June. The key question I think is how much do we dip by? I would be surprised if we got a move above 300,000. So I think to all intents and purposes, unless you disagree with me Colin, I think we're going to get a dip back. I think we're going to get a dip to around 216, similar to what we saw on ADP, you on the other hand Colin may have a different take on that. Yes, I think we've got a bit of a drop here as well. I think the 288 is 80 plus is kind of at this point is still kind of unsustainable on a month to month basis but it was a great win. We're into July now, we're into the start of summer vacation, we're also into if we do get a downside surprise, one thing we may get it blamed on was retooling in the auto sector, they're getting gearing up for production of the new model years apparently there's been a little more than that than usual. You saw that in Tesla's earnings report last night where they talked about it, they're retooling and slowing down their production guidance. So if we do see a negative surprise that probably come from there, I've gone on Twitter and said I'm guessing about 240 which is a little bit above the street estimate but certainly I think anything in the 220 to 240 range is probably where we may shake out and anything above 200 is still good. Indeed and I think that's what we really need to take away. I think the farm payrolls number today is probably not going to be the market mover unless we get a number below 200,000 because that would suggest that maybe all this expectation about interest rates going up in the first half of 2015 is maybe overhyped. What we don't want to see is a weak number because it actually could prompt a little bit of a rebound. I think we're probably going to get a little bit of a rebound anyway simply because we've come so far in such a short space of time. I think the market is geared up for a good number and if they don't get a particularly good number they may take a little bit of money back, take a bit of profit from the declines that we've seen so far bearing in mind that we're starting to approach the 200 day moving average on the Dow. The Dow is the only US market that's in negative territory for this year. The S&P is up 4%, the NASDAQ is up 8%, all other European markets are down. The DAX in particular, I've been concerned about the DAX for quite some time. Any of you who've been watching my weekly videos, that has been diverging for quite some time. I don't know whether you want to talk a little bit about the Dow, Colin. I know you wanted me to bring the chart up so here it is. You can see the breakout that we saw earlier this week and it's been fairly aggressive. Absolutely and that was a big bearish wedge that it closed as well as a fairly solid trend line that it broke. We're starting to get confirmation from other indices as well. For example, yesterday we had the S&P broke down through its 50-day average so we are starting to see some catch up. I do note here on, if we look down at the stochastics, we're getting close to oversold as we're getting close to the 200-day moving average so it is possible we could see a bit of a trading bounce at some point in the near term, whether you test the 200 and then bounce or whether you have it off of the news items that come out today. 16354 is the value of the 200-day moving average. Go on, Colin. So whether you test the 200-day and then have a little bit of a trading bounce or whether you have it here off of the news terrains to be seen, but it does look like you'll see some choppiness. And you can't get choppiness right through the day. Well, we recall that not only are we getting non-farm payrolls here in 10 minutes, but we're also getting in an hour and a half or three o'clock p.m. London time, we're getting the manufacturing PMI as well. And that has had some impact on the markets overnight. As well we saw in the Far East, China came in around 51, which depending on the reading was a little better or a little worse. Australia was pretty good, France and Germany have come in. France was a little better, Germany and the UK came in a little bit below expectations. Yeah, I think that's the key thing. I think for all the noise about bad data and good data and what have you, it's really about the levels, guys. And we can see from the S&P here, we've had a very, very aggressive sell-off, but we seem to be finding support around about the 1915 area. So I think even if we break below 1915, once again, we've got a good, I think we're going to get good support around about 1900 in the event of a very good number. So I think, again, a very good number could actually send the market spiking lower. More importantly than that, we're talking about wage growth. We may have heard a lot of chatter about the employment cost index and the fact that it rose in the second quarter 0.7%, which really is raising concerns that if wage growth or the Fed is underestimating wage growth, now if the Fed is underestimating wage growth, then I think there's a good chance that could actually be reflected in this payrolls data and the ISM data this afternoon. So I'm just going to bring my Bloomberg thing over onto the screen in front of you. First and foremost, obviously the change in the non-farm payrolls is this top data item here. But if you go a little bit further down, there's the unemployment rate there. It's this average hourly earnings data. Now the Fed has a target in around 2% for inflation and at the moment, CPI is above that. It's at 2.1 on the year-on-year basis. The PCE, which is its core indicator for targeting inflation, is a little bit below that. But wage growth, which the Fed has been concerned about and that has been articulated by Janet Yellen on more than one occasion, average hourly earnings, if they start to tick higher by more than say 2.2%, again, that could actually feed in to the higher rate strategy, which I think has really partially driven this sell-off. And it's been particularly notable at the front end of the yield curve on the US Treasury curve. We can see that with the two-year yield on the US Treasury, it's a three-year high. Now, if you remember just over a year ago, when Mr. Bernanke first talked about tapering asset purchases in May 2013, we got a spike in Treasury yields. What we've seen here is we've actually seen today's, or this week's, spike in Treasury yields take out the spike that we saw in May last year. And if I just highlight that for you, that's going back two years. So you can see there's the initial spike higher. Then we come back and then we go even higher in July, September. And that was, I think, prior to concerns about the debt ceiling and what have you. We've come all the way back down. We're now higher than we were for the entire course of last year. So I think what you've got here at the moment is the market is certainly concerned, but instead of getting a rate hike at the end of 2015, we could actually get it in the first two courses, or at least the first two courses of 2015, unless you have a different view on that, Colin. Yes, I've been thinking that the first rate hike would probably come mid-year in 2015, and now that's starting to get moved up a little bit, I think rather than the end of June, if we continue to see these strong numbers, that could start getting pulled forward, I think, at this point. Okay, so let's look at some levels. I know you wanted to look at gold, Colin, so let's look at gold. I think that's also of interest to quite an awful lot of clients who are on here at the moment. This is my gold chart, and we can see straight away here that the gold price is looking very oversold. We're at the bottom end of the recent range. We do have support around about 1275, 1280. Obviously, if we get a good number, that's going to push gold lower. So if you look at the horizontal line along there, I don't know whether you want to jump in, Colin. Yes, I just wanted to mention with gold that you had a descending triangle that had formed above 1285, and that was broken yesterday with a pretty large candle. So we are seeing some distribution in gold, and that's being driven primarily. In the past, we talked about how gold has been driven over the longer term by the increases and decreases in the ECB balance sheet. But short term, right now, gold is going back to acting primarily against the U.S. dollar. Gold has been getting pushed down while the U.S. dollar has been rallying, because if we look at the political situation and the financial situation and all the other things that have kind of driven gold in the past, it would be lining up for higher gold. But at this point in time, it's reacting against the U.S. dollar, because as Michael said, we're seeing a big shift in sentiment here towards the U.S. dollar. And it's starting to strengthen as people think, okay, well, the Fed maybe really is going to have to start to raise interest rates now. So we're seeing U.S. dollar strength, and that is impacting gold. And even here in the last minute or so, we've actually, I'm looking at a one minute chart and seeing gold has started to drop again. It has fallen back under 1283 to 1281. So there is some pressure coming in against gold as we head into this announcement. And it's basically pushing against that lower line that I've drawn in there. Also in terms of dollar strength, it's always worth looking at Dolly N, ladies and gentlemen, because if we get a good number, there's some whispers coming out on Twitter at the moment that we may be getting 260 for non-farms, which obviously is weaker than last month. But it's not as weak as the market consensus at the moment. So let's look at Dolly N. We've broken above this trend line from the highs, 105.50 at the beginning of the year. We've also broken above what I would call my cloud cover. And there is a good chance that in the event of a good number, we could actually take out 103.10 and head back towards the highs that we saw in April around about 103.10. So with respect to Dolly N, it is looking a little bit overbought, but that doesn't necessarily mean that we can't continue to go at least another 100 points, certainly 70 points. But I would be suggesting that if we do get a strong rally in the dollar, it might be worth selling into for a pullback. And if we get a dip in the dollar, then again, it's one of those things. It's going to be a range trade, I believe, and any weakness in the dollar will really look at getting in on dips, because this story is more than about one data item. So even if we get a disappointing payrolls number, and we get a little bit of a dollar sell-off, all it's going to do is it's going to shift the attention to the ISM at three o'clock. So certainly don't suddenly dive in to sell the dollar if we get a poor number. It's all about trading the levels and trading the ranges. And the ranges are basically what keep you in tax. Looking at the euro dollar, again, it's looking very oversold, but that doesn't mean that it can't go lower. But again, if you see a significant rally in the euro dollar to around about $134.50, then again, I would probably be looking to maybe take a small short position there in the event that we do get a rally in that. Was there something else you wanted me to cover, Colin? No, I think we've covered it all, had pretty much heading into the news. One thing I did want to mention about the Fed, the Fed FMC member, Charles Plosser from Philadelphia, who's the one that dissented at the meeting a couple of days ago, he's out again pounding the table on the hawkish case and is obviously trying to drum up support. So this is the first meeting where we've had the hawks really start to go public about pushing for earlier interest rate increases. So that's important to note as well as we head into the number here. Interesting, also on the NASDAQ, again, approaching a support level, but on a weekly chart, we could be getting a bearish reversal on that depending on where we finish the week. So certainly worth keeping an eye on in terms of the longer-term direction as to how that candle finishes up. We are looking oversold. We've been talking an awful long time about a correction and it's certainly worth keeping an eye on in terms of the long-term direction. Quickly look at cable, because I think that's significantly important. Again, in the event of dollar weakness, certainly be looking to around about 169, 169.20 for a bit of a rebound. The 100-day moving average has actually the support we're currently below that, but we haven't closed below it. So be very aware of the fact that we are below that. But again, a negative number could actually drag the cable back up into a bit of a short squeeze. It seems to me that gold is continuing to look a little bit soft. Colin? It is here. It's trying to stabilize just above about 12.81, but it's still trading at lower than it was prior to this downdraft here. It hasn't closed at all back yet. That's the other interesting thing on that one, as you were mentioning. Not only are we getting a big reversal, but we had a big failure at a big round number, which was 4,000. It got to 39.99 and smacked into a wall of resistance and just could not get any farther. Now we're starting to see it come back off. And it's coming back off even though we've continued to see positive reports out of the technology sector. So people are just starting to take profits against news. People are fine running this, Colin. They're fine running a good number. Dolly, how are we going up? So we have got, I believe, we've got 25 seconds. So keep in on the numbers. The number here, this is the number we're keeping eye out. Look at average earnings. Keep an eye out for that. Labor force participation rate. Not overly concerned about that, but it's all about the headline number and the average earnings number. And now both myself and Colin will keep quiet and wait to see market reaction to the data. 209. 209. So it's a bit low, but not that low. Last month revised up to 298. So that's positive too. The hourly earnings 2.0 in line with last month down slightly. Yeah, so basically in terms of the rates expectations, it's actually a little bit weaker, but and again, it's a little bit of a yours mine, I think if you like. The upward revision in June is sort of being offset by a slightly weaker reading in July. All right, let's call this out of the way and let's see what the dollar's doing. Yeah, we've got a weak number. So they're re-explaining. Dow is spaking dollar yen down. So as we suspected, a slightly weaker number has been taken as slightly more positive for stocks and negative for the dollar. And that's been a pattern actually, Colin, hasn't it? Going into non-farm payrolls, the dollar goes bid. And then in the event the number comes out slightly, slightly worse than expected, we suddenly get a significant sell-off. But again, it's one of those things. You know, these one, these single figures don't change the overall narrative of expectations of higher US rates, do they? No, you're still talking about this is July, which is as I said, is a slow month. You've got retooling, it's summer vacations, and you still put up a 200k plus print. I mean, that's pretty, that's still really good. And in the 298 for June is an upward revision. Unbelievable. Yeah, but I think what that does do is I think it puts a cap on the dollar for today. Would you say that? Well, yeah, I think that's reasonable. You'll probably see a go-more range band because you had the dollar run up into the numbers. So now you'll probably see some people starting to take some short-term trading profits against that. And what we're seeing here in the action looking at that gold chart there had a nice pop-up to 1287 coming back. So now we'll probably see some choppiness for the, I suspect for the next little while. I mean, it's true to the ISM number unless you get a big surprise there. Yeah, I think it sort of also ties in with the range that we've been seeing in Dolly N. It's been toppy around 10310 for quite some time. And again, that's really proven to be the case. We can actually look at it through here, through the prism of this high there in May. That was a non-farm payroll spike there in May. And we've got another one here which tried to get through the highs in July and it's failed, highs in May. There's, I think there's significant interest to sell Dolly N at those sorts of levels. Let's see what it's done to US two-year yields. And I think that could be fairly instructive. I think you'll find the yields are lower and they are, they've fallen back quite considerably. So I think for today, guys, it's a slight dollar weakness story. So I certainly think if you get a bit of a dollar strength, if the Dolly N moves back to around 10290, then I think it will struggle to get through 103. And I think it'll be a similar sort of story on the cable and the euro dollar. I think you could find that the cable may start to squeeze back a little bit now. And I think the euro dollar may start to squeeze back a little bit now. Given the fact that- Could that happen through a sec, Michael? Sure. So I just wanted to note going back to this minute gold chart here. The, in the very short term, this is a very example of a flag pattern. You had an initial spike, a little bit of a consolidation around 1286. Now you're rallying again. You're up at 1288. And based on your measured from 1281 to 86, you probably got resistance coming in around 1291-92. But it's a short-term example, but that is an example of a flag pattern. And if we look at the euro dollar, we actually have had similar a spike and now we're getting a bit of a symmetrical triangle. So almost more of a pendant. We could still see another possible. We could yet get another leg up for euro dollar as well. Is that a one-minute chart you're looking at? I'm looking at the one-minute chart. Yeah, okay. So basically what we've got here at the moment. So certainly we'd expect to see maybe a squeeze back to 134.75. Yes, that's what I'm thinking. Okay. Going in and around there. In and around there. And you're back in the- Yes, and you're back. You've held this 134, 133.90 supports. You are getting a bit of a technical bounce here. So let's look at, let's have a quick look at cable. And we're going to do one-minute chart again on that. That's actually starting to look a little bit soft. But I think that may be the result of this week, of this week this morning's rather weaker than expected PMI. I agree. The euro dollar's healing as well. So. Yeah. And what I would say though, is that cable has basically declined 12 of the last 13 days. So you've got to think that at some point we're going to get a bounce. So certainly looking at that 168.45 level, which I pointed out earlier, with respect to the 100 day moving average. I think if we're going to see 167, and I think we could well see 167, it may take some time. It may take a couple of weeks. But I think if we do get to see 167, we may get a squeeze back to around 169.30 before we see 167. Because certainly looking on the daily charts, we can see what I'm talking about with respect to the declines here. If we look since the middle of July, we've declined every single day bar one. And that was around about. That's relentless. Which is pretty relentless. And it's the worst. I struggled to go back to try and find a worse run in terms of cable in the last three or four years. And I can't find it. So, you know, as I say at some point, 168.45, the New York close on cable. If we close below that, then I think that those numbers I think should provoke a little bit of a short squeezing cable. Should provoke a bit of a short squeeze in Eurodollar. They should limit the downside, I think, for today and for this week. Do you have any questions for us, rather, ladies and gents, with respect to any currency pairs that we haven't covered? Because I certainly think with respect to the wage growth data, I think the dollar strength that we've seen this week could well be limited in the short to medium term. I'm going to have a quick look at dollar CAD, actually. Because I think that's quite an interesting chart. And we're approaching a very key resistance level on that. I've been covering that in my weekly videos for the last three or four weeks. We've had a very nice move in dollar Canada, certainly from the trend line that we saw from 2012, the bullish engulfing week that we saw two or three weeks ago. We've broken the downtrend line. I think we can test back to 1096 a bit. I'm thinking that maybe with your pullback on that, to maybe back the 200-day moving average before a move higher again. Yeah, and I mean, at this point, you can see up on the statistics, we're getting over by it. It's confirming the uptrend but the short-term pullback would not be a surprise at this point. I think that the moving average there or the Fibonacci level, either one could be tested. But at this point in time, you're seeing that the US is accelerating ahead of Canada. And so you could see some weakness, the 10960, or I suspect you may even see the 110. At some point, that might take a little longer. Well, you've got the Canadian jobs report next Friday, right? So we'll probably see some action around that. Because it was a weak number the last time. So I think there's a good chance we may see another weak number. You know, it's difficult to say, I suppose, given that they're so closely correlated to the Canadian and US economies. Yeah, the Canadian, although what's interesting is the last few months, like Canada had led the US for a number of years, the US has now been catching up and passing the last few months when the US has been putting up big increases. Canada, when you net it all out, is pretty much flat. So the US is starting to outpace Canada. And I think that's what we're starting to see that recognition show up again in dollar CAD. Okay, so that's the dollar CAD. Let's have a quick look at the Aussie dollar, because certainly the Aussie dollar and yield differentials do tend to be driving that. And we did get a little bit of a breakout on that. But it looks to me, for me, the key level on the Aussie dollar, I think if we get a rally back to around 9320, then again, there should be resistance around there. We've got a daily chart there. We broke below that key level yesterday, which had been actually supporting the Aussie dollar for quite some time. It does seem to me to suggest that maybe we're starting to lose a little bit of momentum in the favor of the dollar. And again, the US dollar, I think as long as we stay below 9320, we could start to drift down to around about 92 over the course of the next few trading sessions. I think this is really about a dollar story, isn't it Colin? Yes, it is. It's really a US dollar story at this point. But this trading here, this last candle, is I think is very significant. You had the breakdown through 9320 yesterday. Now you've got the retest, and the retest is as a new resistance level has been successful so far, and you're starting to turn back under 93 again. So you could see some weakness here. And on top of that, of course, not only are we seeing the Aussie breakdown, but that's starting to follow the Kiwi dollar lower. If you could put that one up, Michael, that's the only other one that's been as relentless as the pound lately in terms of selling pressure. Now that obviously got started by the... Last week, the Reserve Bank of New Zealand paused on its interest rate hike program. They said they're not going to raise any more rates for a while, and then they warned about the dollar and said it was overvalued and started talking it down, and the thing's just totally been crushed. So it's been selling off, but that could still pull the Aussie dollar down with it as well. So maybe there's a trade in Aussie Kiwi on that perhaps. Certainly looking at the Kiwi at the moment, I think there's a good chance we may find a little bit of a base here. Look at the oscillator. It's very oversold. We're above the 200-day moving average. That sort of had a rather mixed attempt of trying to support it, but it certainly does seem to suggest over the past few months that in and around the 200-day moving average, it does appear to find some amount of buying interest, and we are very oversold. So maybe there's an Aussie Kiwi trade in that perhaps. Let's have a look at the Aussie Kiwi because I think it's certainly worth looking at that particular chart if I can find it. Let's just do that and go Aussie Kiwi. Oh, it's still near the bottom, Michael. A little further down. Underneath the round. Yeah. I couldn't see it for looking, Colin. Thank you for spotting it for me. I need you. I'm not wearing my glasses. That's what we get to say to Vice. Exactly. I'm not wearing my glasses. Let me just change the color of that moving average so that we can actually see it better. There we go. So again, here, actually, this looks interesting. Aussie Kiwi, a bearish engulfing day on Wednesday. I had a very strong down day on Thursday. We've got a little bit of a pause for a breath, but overall, ladies and gentlemen, I actually think looking at that, there's probably more downside in the Aussie than there is in the Kiwi. I agree with that. Particularly if you look at that resistance line there. So I think maybe move back towards 110, short position above and maybe a stop loss around about 111, perhaps. Certainly, you've also got resistance coming in from there. So it looks to me as if Kiwi could well outperform Aussie on this particular chart over the course of the next few weeks. Yeah, it's definitely looking that way because the Kiwi led the way down, and it looks like it's stabilizing where Aussie's probably got some room to pull back because it had previously been holding up. Just looking at the weekly chart, it doesn't really add too much to the overall narrative in terms of the actual analysis, but certainly that bearish engulfing day does seem to suggest that maybe there's probably more downside than upside in that. Let's have a quick look at crude oil because that's always, although having said that of late, it's been a bit dull because it's been in a range for the last few days, but it's looking a little bit self to me, maybe, Colin. It's still looking a bit softer. Crude has been pulling back. The WTI crude busted $100 yesterday, and we can see here Brent's starting to break an uptrend line. So we have been seeing some weakness in crude. I think a lot of this is another, again, the function of US dollar strength in the last week or so because you're continuing to see more turmoil in the Middle East and elsewhere. I mean, people haven't even been talking about Libya where a number of countries have been closing their embassies and pulling their staff out of the country, and Gaza may not produce oil, but Libya certainly does. Yeah. I mean, nobody's even talked about that. Well, exactly. Let's quickly look at these loads here. I mean, while the oil's going down. And these loads here. There's probably going to be a little bit of support around about $97.20, perhaps. I've got a lot of lines on here, ladies and gentlemen. I'm sorry about that. I do like it. I do look a lot. I do like a line or two, $97.42 through the March lows. So maybe WTI may find a little bit of support through there. But of course, that also feeds into a slightly weaker inflation outlook. If we look at what oil prices have done in the US, you've got wage growth, which actually has come in slightly softer than expected, but also oil prices, which at the beginning of this year, were around about $92 a barrel, been up to $107, and are now starting to fall back again. So maybe the inflation that we're seeing in US energy prices that we saw at the beginning in H1, we could actually see it drop off in H2. Yeah, that's definitely possible. Now that we're 15 minutes past the, I think, do we want to take a look again at the Dow and the gold and the Euro, Michael? Yeah, we can certainly do that. Now that things have had a few minutes to settle out, if we start with the, let's start with the Dow or the S&P, that's fine. So we had the initial pop, and now we're seeing it basically consolidate at a bit of a higher level. It's still well down from where it was trading a few days ago. Last night. We're still at 19. Sorry? Where did it close last night? It closed yesterday at 19.30. So we're back to, we're basically back to where we finished the day yesterday. 1950 was the breakdown point a couple of days ago for the S&P, we're still short of that. So we are getting a trading reaction, but it's not huge, but we are seeing this. It's consolidating a higher level. The street's probably now looking ahead to the PMI number, which is coming out in an hour and a quarter. And we're seeing that the other one I've been looking at is Euro dollar, which is looking similar to Euro pound. That pen information failed. It's come back. It's actually dropped below where it had started, amazingly enough, interestingly enough. So it's not acting as well at all. Gold, however, is holding up about 1286, 1288. So it's from where it was trading, say, at 8 o'clock, it's up a couple of dollars. So we take a bit of a balance, a bit of a reaction in terms of a bit of weakness in the dollar, a bit of strength in stocks, but not huge, I think is the takeaway from this. So the number you've probably seen is mildly disappointing, but not a huge disappointment. And it's still 200 key plus. And we're still slightly higher, or off the lows, because I'm looking at the footsie, and we're about 1.3 percent down. We're now just under 1 percent down. So we're getting a little bit of a pullback as we go into the US Open, which obviously opens in 45 minutes. Worth keeping on the price is paid component of the ISM as well, just for any signs of inflation. Okay, well, unless we've got any further questions, ladies and gentlemen, I'm going to wrap this up. If you want to listen to any of it back, it will be posted on YouTube over the weekend so that you can listen back to it. Otherwise, I'd like to thank you all for attending, and hopefully you can join us at the same time next month, where we will also be holding another non-farm payrolls webinar. Thank you very much for coming along.