 Hello and welcome to CMC Markets and this non-farm payrolls webinar on Friday the 4th of November and this webinar will be hosted by myself Michael Hueson and my colleague in Canada Colin Sizinski before we get started, before we get started with just a few housekeeping rules we've got a risk warning which we have to display at the beginning of every one of these presentations because ultimately what Colin and I are discussing it's not just it's not about trading advice it's really about trying to interpret how the data might move various markets and what effect as well I think the US presidential election is likely to have and whether or not it will overshadow today's payrolls number and I think we can both agree Mr. Sizinski that ultimately it's not really about today's payrolls numbers it's about the US election because I think and please and please correct me if I'm wrong here ultimately unless we get a big miss on payrolls I don't think it's going to move the dial at all. I agree I think what we're looking at here is we're less than a week before the election both parties are going to try and take whatever number comes out and spin it to their advantage whichever way they can the number that came out last month the just above 150 Trump went around for a week saying it was terrible and awful and we need change big time and of course any good number the Democrats are going to go around saying well Obama's economic policies are working we're working and we want four more years of the same so it's really whatever happens is going to be spun more in relation to the election than to the Fed and my feeling is going into this that you to have a real surprise to move the market you'd I said below 50 or above 250 otherwise nobody will really notice and certainly not the the Fed the Fed still on course for a December rate hike and even that's more likely to be influenced by the election and market volatility than any economic data we get between now and then we're really into a much more political phase in the market so what I've said and in my non-firm guesses this morning is I put a 140 it's a little bit below street my feeling is that because you've got such a polarized difference between the two parties and such a potential for a radical shift in direction that a lot of companies have probably in October put off their their decision making a little bit and well we'll just hold off on hiring until after the election so that's my feeling is you'll probably get more likely all else being equal a slightly disappointing result or slightly a little bit down from last month you know I would don't tend to agree with that I mean if we look at the world interest rate probability assessment for December markets are pricing in a 76% probability of a hike next month now obviously we have today's payrolls data we also have the November numbers which would be due out I think on the 2nd of December so we've got two payrolls numbers between now and the December meeting which I think is 14th of December 14th and the 15th or the 13th of the 14th it's round about that sort of time anyway so I think in the context of what's going to move the markets today I think it's going to be a dollar move I think if there's a big miss on non-farms towards the downside and I think that's my bias I think a poor number could actually be dollar negative and could push cable through 125 it's a big big level cable 125 this is the gap it's the flash crash gap between 125 and 126 and ultimately that hasn't really been filled yet and I really want to see that field so in the context of what we're expecting today first and foremost we are finding a little bit of resistance around about this 125 area I think if we go 10 bid or something like that I think we could see a very quick 100 point move up to around about 126, 125, 50 even but more than that I'm thinking we've really we've come a long way this week on the pound and also ultimately we are now looking to start to run into I think a little bit of resistance at these sorts of levels but then you've got to flip that on its head and say well actually the market is so short of sterling that any move I think if if any currency is going to move today on the back of these numbers it's probably going to be sterling so what are we expecting yes I think that's reasonable the other one Michael is to watch for his dollar yen which is the other one that's had a really big move this week dropping from 105 to 103 against the US dollar that's the and that was on defensive flows related to the election election gold took off last week and the end took off this week yes so let's look at that well let's look at the key levels in dollar yen because let's first and foremost look at what we're expecting because I think this is really about the direction of travel and at the direct the direction of travel at the moment for the dollar is down I think we can pretty much say that with a certain degree of confidence and certainly rolled over here and certainly in the context for me I think this is really a case of selling the rally on any dollar strength rather than anything else for me because of the change that we've seen in sentiment over the past few days and it's not likely to change that much between now and Tuesday because ultimately I think presidential election dictates everything here unless we get a very big beat above 200,000 on the payrolls data on the upside or a big miss on the downside say for example 105 110 perhaps maybe even less than a hundred I'm more inclined to think that we're probably going to get a miss because of the weak ISM employment components on the non-manufacturing that we saw out earlier this week and on the manufacturing as well both of those components were weak now there isn't necessarily a correlation between the two and we've talked about correlations between payrolls and ADP for quite some time now this chart is probably not as elegant as your one Colin ignore the green line okay the green line is basically payrolls this time last year you've got the blue line here which is ADP and runs from right to left and you've got the red line which is non-farm payrolls and you can see they're matching each other quite nicely on this particular number and ADP here actually has ratcheted lower on from the previous month even though we did get a very big upward revision to last months to 202 so that would suggest to me that potentially we could get another downward leg in non-farm payrolls given the way that these have matched quite closely in the past six months now I know you were going to talk a little bit more about that Colin did you want to add anything else yeah I just wanted to know overall what what's important to look at here I found also is this channel between for the most part between about 150 and 250 and that's fairly consistent so if you get a result in that range it's going to be fairly in fairly neutral I mean people with people would kind of it wouldn't surprise too many people especially the more recently between say 140 and 200 isn't going to get anybody overly excited however I do want to note something that was that was quite intriguing that happened back in the spring just before the the Brexit vote in in June we got the May payrolls at the beginning of June and at the time the there had been some question of what with the Fed not raising the Fed was supposed to raise interest rates in June but the Brexit vote was coming and there were some some questions as to whether the Fed would try and hold off and blame it on Brexit and and at the time I had wrote in an entertaining article about that if the if the Fed blamed it on blamed a no move on Brexit they'd be throwing away 240 years of US independence and it got some pick up in the media and nice articles with pictures of George Washington and and we all had a good laugh about it in May and then that in the first week of June we got this incredibly disastrous non-farm payrolls number which coincidentally gave the Fed cover to to blame non-farm payrolls instead of Brexit for not raising rates in June and then miraculously the first week in July after the Brexit vote the US put up the most spectacular non-farm payrolls number we had seen in a long time it was absolutely hilarious so if we think there's any political inference at all going on here that the a low number favors Trump and favors the Republicans a high number favors Clinton and the Democrats but but who knows what's going to happen but I still think really all else being equal Michael and I are still on track for the somewhere in between 100 and 150 I think is what we're really looking at but if we get a out of left field number it would suggest there's some political wrangling going on as well so what you're basically saying Colin is that you think that it's going to be a big beat to the top side because Hillary Clinton sort of had a little whisper in the BLS's ear say can you give me a decent payrolls number it doesn't matter if you revise it away subsequently if we get a big beat that's what I'll be thinking I just wonder after what we saw back in the spring it was kind of that when I found shocking because that's like that one just blew me away when that happened so that happens but if we do there's our surprise and that's my out of left field conspiracy guess but my real guess is it's still the 140 yeah I mean the thing is the problem with that is that that low figure wasn't revised away whereas the ADP number for that month may was one six ended up being revised downward yeah it was 168 yeah and then got revised down to 24 so you know I mean you know I suppose it's it's it swings around about us but for the sake of this I mean I'm looking at this Ichimoku cloud chart here and we've now broken below the we've broken back into the cloud after being above it and break and not being able to take out this trend line now I would suggest here if we look at the resistance levels in this particular chart here the cloud resistance on the top side is about 103 30 so I think if we get a good number on non-farms slightly dollar positives and I think the upside is probably going to be limited to about 103 30 103 40 which suggests that reasonable which would then suggest that any pullback after that if it fails to get back through there then we're going to come back down here and touch the bottom of that cloud which is around 101 95 102 so now that we're back in the cloud and we've closed back in the cloud the way this has worked over the course of the past it worked fairly well as support or resistance I would suggest a slightly positive dollar number will push the dollar higher so we're talking anything in the region of 180 190 maybe 200 we'll get a bit of dollar buying I think that will be an opportunity to sell dollar strength the sell dollar rebound for a move back lower in the short to medium term and I think this is a similar sort of story for euro dollar as well if we look at euro dollar here we're running into a significant amount of resistance around about 111 30 111 40 so again you know strong dollar number here could potentially and knock euro dollar back down on on the subject of the S&P let's have a quick look at that before because we've got a two minute two and a half minute countdown we are right on the 200 day moving average right now so that would suggest to me that there's certainly a significant potential a little bit of buying interest between 2080 and 2085 so again I think we could see a little bit of a pullback to potentially 2100 that's really born out and that's also a beautiful go on rounded top and descending triangle that it's broken the Dow's the same thing there's the Dow I mean the Dow's on a very solid support there and also it's also not too far away from the moving average so again I think there's potential for a little bit of a stock market rebound whatever these numbers are they may try and push through the lows I would be surprised let's not say it won't happen but I would be surprised if we push significantly lower than we already have done this week on the back of these numbers looking again at the FTSE 100 very quickly again we're right on trend line support from those August lows where I've linked them through there we've gone slightly through it but again around about these 6,670 area does appear to be some element of support and then you've got this September lows through there so you know my bias at the moment is that the market does appear to be a little bit overextended on the downside and we can sort of see it born out an awful lot on an awful lot of these these these charts here as well around about 10,200 on the DAX now as for gold where are we on gold well we're above 1,300 one quick thing go on I was also just going to quickly note the we're starting to see some oversold readings show up on particularly on the FTSE so it is that you're ready we are kind of getting to a bit of a downside extreme we might get a bit of a trading bounce even if the primary trends continue yeah sorry go ahead and gold gold I was going to say that it does look a little bit toppy at these sorts of levels so again that really does support the idea of potentially a little bit of a little bit of a top a little bit of a sell-off maybe back to around 1290 I wouldn't be wouldn't be surprised to go back to 1280 but around about 1310 there is a significant amount of resistance so to sum this up as we head in this this is what we're expecting the forecasts here 175 non-farms 4.9 on the unemployment and average earnings if we have a decent average earnings number in excess of 2.6 percent again that will be dollar positive so keep an eye on that and we're ready to go right now okay there we go on 40 161 161 right down the middle 191 yeah a little bit below street upward revision yeah upward revision 4.9 on the unemployment rate which is as expected 2.8 on average earnings 2.8 on the hourly earnings that's huge so that's dollar policy inflation pressures are growing yeah so that's going to push that's going to push the dollar up and that's exactly what we're seeing dolly ends going up around 1310 cable back around 124 80 euro dollar but below 11 but it's it's fairly subdued but I think we'll see the dollar push higher a little bit as we as we head into the rest of the day on the back of these numbers slightly a dollar positive bias to them Canadian payrolls report you want to fill that in Colin huge huge 43.9 thousand increase the street was expecting a 15,000 decrease the full-time employment was a decline of 23,000 there was a reversal of last month we got but it's so it's a huge increase in part-time employment to the tune of 67,000 so normally we would like to see obviously the that that be reversed in the big increase in full-time over part-time but but beggars can't be choosers at this point in time Canada's been struggling and and so overall this is a pretty decent print for for Canada I mean to be quite honest they're pretty sure the loony yes they're pretty I mean that's the that's a five-minute chart of dollar CAD at the moment it's spiked lower but it's pretty much back where it was there's been virtually no reaction to it whatsoever in terms of where it was in the lead up to the numbers which surprises me a little bit you'd think that we'd we'd have a lot of get a bit of an improvement yeah you would I mean we did have the street usually discounts part-time a little bit they do focus a little bit more on the full-time full-time job creation but every little bit helps at least it's not going down I see now as we're less looking on the minute chart here it's gone down it's gone back up and it's kind of flat to slightly lower but the other thing you've got with dollar CAD is you've got that you always look at the Canadian data but then you've got what's happening with the oil price and what's happening with the US dollars so there's always a number of factors driving dollar CAD at any given time yeah but going back to the non-farm payrolls we got an outward revision to September from 156 to 191 and 161 instead of the 173 so it's all like a good news bad news it's basically a decent number it's not going to derail a Fed rate rise and more importantly the jump in average earnings to 2.8% from 2.7% revision to September from 2.6 supports the idea that we are going to get a US rate rise in December Mr. Trump notwithstanding and Mr. Trump remains the wild card here and will continue to be so and ultimately there is only one thing in my view that will derail a Fed rate rise and it's not economic data it's Mr. Trump being elected president of the United States because ultimately no one will really know much before his inauguration in January what sort of president he will be and that is the big unknown but to add to that Michael even if we do I think you what we'd be looking at is that you probably see market volatility on a Trump win because people as Michael mentioned people aren't going to know what he's going to do however the one thing that would be clear is that a rate hike would be delayed not not put off indefinitely because Mr. Trump has been going around for the last several months basically putting pressure on the Fed to raise rates and saying that they've been keeping interest rates artificially low to help the Democrats so odds are if you didn't see one in December you could still see one go in probably in March would be my guess if if you did get a delay because I think he'd be he'd be in there trying to talk the Fed into starting to get raise interest rates anyways but it's there'd be a lot of volatility at first just because people don't know what he's going to do well assuming of course possibly including himself assuming that Janet Yellen survives that's another thing and Lail Brainerd for that matter yeah well either way on Lail Brainerd because if she gets if Clinton gets elected Brainerd's been is on the it seems to be on the the media shortlist for Treasury Secretary yeah absolutely but only if Clinton gets an obviously only if Clinton gets in yeah if Trump gets in then her her influence diminishes dramatically well I think it but I think a diminish I think her influence diminishes completely exactly I don't think I don't think she'd be acceptable because there is a certain amount of political influence on on any fit new Fed members because ultimately they have to be ratified by the president do they not yes and ratified by Congress so that the they get nominated and then they have to go through an approval process for Congress just like members of cabinet do yeah okay so and assuming that Hillary Clinton becomes elected or gets elected then you still have uncertainty because of the FBI investigation into her her her emails that showed up on the Anthony Weiner's computer exactly so you know the problem you've then got the uncertainty that you could have a situation whereby you've got a president in waiting who's under investigation by the FBI and ultimately it's unlikely that that particular probe will be resolved anytime soon so you'll still have a huge amount of uncertainty now whether that will affect the economic outlook I don't think that it will certainly not if Clinton wins because I think in terms of Fed policy the status quo will be maintained but ultimately it won't be good go on yeah no it won't be good politically and it could impact the mood of the country although her room her vice presidential candidate Tim Kaine was also fairly well respected so it's not a it's not a complete wash out if she gets into trouble and I mean there were other people there's been a lot of other people hanging around in the background so and I think that's probably more important than anything else I think really the important thing to factor in with respect to the election is the makeup of the two houses the Senate and Congress if the status quo is maintained there then ultimately there's not an awful lot of damage mr. Trump can do because ultimately he can be reined in by the Republicans in the house where they have a majority but the damage to potential foreign policy could be quite significant and I think that's where the risks are I think it's in terms of not so much domestic policy it's more foreign policy just been asked about paralysis if Clinton gets in I don't think so because America is bigger than one person ultimately if Clinton finally finds she has to step down then I think Tim Kaine will probably have to step in and personally while I don't know an awful lot about him that may actually be a good thing Colin may have he was a governor of Virginia I believe it was her senator but he and I think at one point he was governor so he's somebody who does have a lot of political experiences very well known around around Washington as I so what I gather from what I can tell from past reading he's really he's pretty well respected all around so so it wouldn't be a huge issue now with the one thing you probably will run into is because Trump has ended up doing a lot better than than everybody thought even if Clinton wins the presidency you're looking at a gridlock Congress because they the Democrats might manage just one party or the other is going to just squeak out control of the Senate but it does look like the Republicans are going to pretty solidly control take control of the sorry maintain control of the House the the Democrats stop talking about trying to retake the House months ago they kind of gave up on that it just it's not going their way they were hoping for the Senate but you don't have this 20-point Clinton blowout that that would be enough to carry down the ticket and so so that's what you're probably looking at here as well so they go I mean regardless of whether she wins or not and regardless of the investigations or not if she wins you're going to have gridlock between the Democrats and the Republicans which is pretty much the same as you've had for the last two years with Obama so no change there yeah right so let's move on let's have a look at crude oil in the wake of that headline from that for over the wires from Saudi Arabia that in the event that they can't reach an agreement with Iran about a production freeze or what have you then they will turn the taps back on again ultimately I think it's unlikely that Iran will agree to be kept at four million barrels a day or less than four million barrels a day in back in March this year they said that their goal was to get production capacity back to the levels that they they they had prior to economic sanctions being implemented that was four million barrels per day and in excess of that so I can't see Iran rowing back from that which ultimately means that we could well see peak peak peak oil supply for quite some time longer than originally has been priced in and certainly being borne out by what's happening in this chart here on Brent we've broken the uptrend line from the lows that we saw in January this year God that seems a long time ago now but here we are we're almost it we're almost we're almost in at Christmas not too far away that's only about six or seven weeks away so we're looking at a very very key support on Brent around about the levels that we are now around about $44.80 if we look at a similar chart on WTI we have a similar sort of scenario playing out here with respect to that the 200-day moving average it's going to be fairly important in the context of the overall move and while we did actually briefly dip below it in July August this year we weren't able to sustain a move below it what I would want to see from both of these contracts is a confirmed move of both contracts lower to confirm a move back to towards $40 a barrel on WTI because ultimately I think that's potentially where we're going and I think dollar CAD is probably being driven more by the negative news from the Saudis and the employment report which my colleague Jasper has just tweeted and subsequently deleted nice one mate I'll retweet that one now when you when you send when you send it again you can I mention on yeah sure oh I was just going to add to add to that if you look on the WTI chart and end on the rent chart for that matter on the stochastics it's starting to get about as oversold as we were back in July so these to these 200-day tests are particularly significant you could see them hold here the other thing to note is we're in kind of a 40 to 50 channel for WTI it doesn't go much I mean except for the big bum we had back down in the winter but it hasn't really gone down below 40 and stayed below 40 since we retook it back in the spring and the reason for that is because between below once you get below 40 not very many people are making money anymore and the problem was once you get above 50 then that starts to bring the US shale production that's been shut in back on stream because that then becomes economics so you're sitting you're sitting also in around in and around 45 right in the middle of this range but this 40 to 50 range seems to be the sweet spot for for WTI and that's why we've seen it trending sideways since June all right we've got a Fed policymaker commenting on the wires at the moment Fed's Lockhart says Fed close to achieving its policy goals Fed's Lockhart says economy approaching full employment Lockhart inflation low and stable just a bit below Fed goal economy doesn't call for pre-programmed tightening so basically he's saying East the Fed's still on course for a December rate rise on the basis of that employment report I'm being asked on my views for the Japan 225 so going to go and talk about that essentially that's a proxy on what the dolly yen is doing at the moment and certainly in on the basis of this weekly chart I think there's potential for downside on dolly yen let's look at this we've got a potential bearish candle going on here on the weekly chart the likelihood is that we're probably going to see further declines on the Nikkei towards these series of lows in October let's quickly just draw a little bit do a little bit of analysis on this let's draw a trend line through there we're right on this trend line support from the June lows certainly on the basis of the daily on the weekly chart we're on the we're on the cusp of a potential bearish reversal so I certainly think in the context of what the dolly yen could potentially do this Nikkei reversal is potentially quite bearish and actually a strong yen is the last thing that the Nikkei needs and if this is a port if this is a an indicator of what the dolly yen could do then potentially we could head back towards 101 on dolly yen over the course of the next few days if this bearish reversal is confirmed I mean it's not by no means it's by no means you know a nailed on indicator but certainly on the basis of this particular chart here on the weekly chart there does appear to be a real difficulty in actually breaking out of this range breaking out of the highs that we've seen over the course of the past few few months and actually heading towards a test of support and maybe these mid-October lows that we saw a few weeks ago so ultimately I think the Nikkei 225 we've declined four days in a row we could see a bit of a pull back towards 17,100 and these sort of peaks here but ultimately momentum does appear to have shifted on the Nikkei and we could actually head back towards 16,700 16,600 yes and that's tracking the rally in the in the end as the end recovers we're seeing the the Japanese roll over and certainly we've been seeing the footsie roll over with the pound bouncing back and and I think that's something we want to consider as we head into the election result is that you may what we had with Brexit and when we had the Brexit surprise was that we had this big very short-term drop in the footsie but we also at the same time had the collapse in the pound and and then so the footsie went down for a very short period of time and then it started to go back up and when we go to the head to the election next week we also want to keep that variation between and and mirror action between the currency and the stock market in mind because it's the same sort of thing in the U.S. you'll probably see if Trump wins the dollar get hit pretty hard and that could end probably an initial decline in the in the U.S. indices and certainly we've seen them under distribution but if you get a big enough drop in the dollar then the indices may actually start to go up so you may have a two-stage reaction in the in the stock market it should should Mr. Trump win should Clinton win you're probably looking at the dollar stay up and stock markets and stock markets go back up because they've been coming down lately indeed and one thing I would say about the Brexit vote is we saw the pound actually going up in the lead up to the vote that's not been happening that's not been happening with respect to the dollar the dollar has been sinking ahead of the vote so there is a slightly different narrative going on here with respect to the dollar than there was relative to the pound and what's interesting is this is shifted in the last week or so because I up until about 10 days ago the dollar was going up and gold was going down and we had that reversal last week and I think what's happening this time is that because traders got caught so offside by Brexit and they were they were so wrong and so far out on the limb that I think this time you're seeing people take a bit more of a conservative approach and and that we have actually as Trump has gained momentum in the polls in the last week and a half we've seen the markets actually starting to reflect that a little bit not everybody's willing to to get caught surprised that again I said that fool me one shame on on you fool me twice shame on me and so I think a lot of people are our take have taken that and that's why we're seeing some of the action we're seeing in the US markets there is just a little bit of of pricing in going on for the the growing potential of either a very close race a contested election or or a Trump win and just to note to people when we had the contested election in 2000 the market went down 5% in November so keep an eye on that as well that was it it was in a bear market but the contested election was a people took to that as as blaming for the bear market that ensued okay so I think our half hour is up does anyone have any other questions that they'd like to direct at myself and Colin well I'll give you give you a few seconds to type a we have this one here for the next OPEC meeting yes I've just I've just November 30 sorry I just replied to that I've just replied to that did you see that 30 30 November's next OPEC meeting in Vienna do you have any more there Colin no that's all I can see on here okay all right well thank you very much ladies and gentlemen we'll be doing another one of these on the December the November payrolls numbers on the 2nd of December don't forget we do a regular Monday afternoon webinar at 12 15 which my colleague Jesper Lawler hosts and that's always very very informative and go to the education section to sign up for that otherwise Colin and myself would like to thank you for turning up today and hope you all have a wonderful weekend thank you all very much