 Hello and welcome to CMC Markets on Friday the 9th of February and this quick look at the week beginning the 12th of February. And it's certainly been an interesting week but those of you who tuned into non-farm payrolls around about this time last week will have probably taken note of the fact that I warned about the S&P 500 weekly chart and the potential for a significant break lower on the back of those very positive wages numbers that we saw out of the US. Well in light of that we certainly did post a bearish weekly reversal but what's come after that has been a little bit surprising even if I do say so myself. I did expect to move to the downside but what I didn't expect was the extent of the move that we've currently seen over the course of the past few days. I did certainly say that if we broke below 2800 we could we'll see a move to the downside and we've certainly seen that. The big question now I think dominating I think discussion is whether or not we've seen the lows thus far and the 200 day moving average has provided a little bit of support in the short term for the S&P 500 as it has for the Dow. So I think the big question is given that we've seen the DAX and the Cat Caron and the FTSE 100 all close below their 200 day moving averages is I think whether or not this particular dip that we've seen or correction whatever you want to call it is the extent of the move lower or whether or not the increase in volatility that we've seen over the course of the past week or so is the precursor to further declines. At the moment I'm a little bit reluctant to suggest that we are going to decline further certainly because the RSI or the slow stochastic in the case of the S&P is starting to look a little bit oversold. Also we haven't closed below the 200 day moving average and that for me would suggest that we could be due a little bit of a rebound or even a little bit of a consolidation below 2700 because at the moment what we've seen thus far is while we have broken lower we have broken below the 50 day moving average we are currently struggling to move back above that. So for the interim I think volatility is likely to increase we're going to probably gyrate round or oscillate around an awful lot before we get a clear idea of where we go to next. But ultimately I think what is spooking investors and what is likely to make investors a little bit nervous is the fact that bond yields are continuing to push higher. Not only in the US but we've also seen a little bit of a spike in UK yields as well and I think that's largely as a result of slightly more hawkish rhetoric that's not only coming out of the Federal Reserve and expectations about future interest rate rises but also the Bank of England. Mark Carney, Governor of the Bank of England was unexpectedly hawkish at the latest inflation report and I think in the context of what we're going to expect for the coming week I think the focus will be on UK CPI, UK retail sales as well as obviously US CPI and US retail sales because I think all those numbers I think could be decent arbiters of potentially where the dollar and the pound could go to next. So let's make a start by looking at the pound and I've talked about this on a number of occasions and the potential for a little bit of a rebound in the dollar and the fact that the pound was looking a little bit overbought. We talked about the trend line resistance coming through the highs that we saw at the end of January that has thus far managed to hold along with the 200 week moving average. We've broken below 139.70, we're looking to test around about 138.30. We could well test all the way back to 136.60 why because that was the previous peaks around here in September but overall unless we significantly break below 136.60 overall I still remain a fairly constructive on the pound against the dollar. I think the numbers that I'm going to find particularly interesting for this coming week is UK CPI because I think one of the things that I took away from the press conference this week was the fact that the Bank of England was limiting its tolerance for higher inflation and that suggested me they are a little bit concerned about input costs, rising input costs, keeping inflation above that 3% level. Now expectations are for CPI to decline ever so slightly to two point nine percent I still think that's optimistic I think that we will struggle to get much below three percent and retail prices to stay around about four point one percent. Retail sales later in the week we saw a big decline in retail sales in December around about one point five percent looking for a modest rebound in January to naught point six percent offsetting some of the damage that we saw in the December numbers and in the US we're also looking for CPI to decline a little bit from two point one percent to one point nine again not overly optimistic that will turn out to be the case and also retail sales in the US for January expecting a slightly slower rate than the big number that we saw in December of one point four looking for a rise around about naught point two. Now one thing I have talked about at great length is the strength of the dollar and the fact that the dollar has continued to remain weak albeit we have had a decent bounce since those payrolls numbers on the second of February and one of the reasons why I thought that we could see a little bit of a decent bounce was the fact that we were we did appear to be finding a little bit of a base just above the 88 level and also finding a little bit of a top on Euridora around about 125. There has been a significant amount of jaw-boning if you like from US officials with respect to the strong dollar. Steve Mnuchin the US Treasury Secretary has gone out of his way to say that he would prefer a stronger dollar that I think that has helped support the greenback over the course of the past week as have the slightly higher yields but one thing that I have noticed and this is in particular case to Euridora is the potential for a reversal pattern. This is a quite nice little pattern has been played out here we've broken support at 1.2320 now we're currently below that at the moment and we're trading in this corridor of price action between 1.2160 which is this level here that I drew through the early 2018 in January and 1.2320 here more importantly if we change this to a weekly chart this actually looks like for those followers of candlestick charts an evening star reversal pattern on the weekly charts which would suggest to me that if we do break below 1.2160 or we break above that 91 level on the dollar index we could see about a significant dollar strength. So what is an evening star? Well I think it's best explained if we look at it through this piece of this is this word document here the market has to be trending first and foremost so we have an uptrend in place this this this little doji star here if we blend these two candles it actually comes out as a bearish reversal okay so this third session here is a down session that's an up session that's an up session there this can be either color it can be a positive candle or it can be a negative candle or it can be a very slim doji but ultimately I think where this weekly candle closes is going to be very significant in the context of whether or not we get a reversal now it's important in the context of evening stars that they have to be confirmed so to confirm this what we really need to see is for this weekly close to stay down here and then we break below 1.2160 so you always candlestick pans always require confirmation and this is a three day or a three week reversal pattern so ultimately for any significant reversal and euro dollar to take place we need to see a break of 1.2160 on a weekly close to suggest that we're going to see a further correction back towards 1.18 so that is very important keep an eye on the price movement on a weekly basis around this level because we could be at a turning point in the context of euro dollar everyone's talking euro dollar 1.25 130 if 1.2160 gives way we could see a significant move to the downside so what else am I looking at this week well I'm also looking at a number of earnings announcements from T.Y.Travel first quarter sales numbers Kraft Heinz is Q4 update in the wake of its a Unilever take or attempted takeover a year ago and Cisco systems Q2 and also be keeping an eye out for European Union and German fourth quarter GDP which is likely to come in again at a significantly high level around about 2.7 percent for European Union fourth quarter annualized GDP so that's it for this week once again thanks very much for listening it's Michael Houston talking to you from CMC markets