 Good morning. Welcome to CMC markets on Friday the 2nd of November and this quick look at the week beginning the 5th of November and before we look ahead to the coming week and the Fed meeting the US midterms UK third quarter GDP and the latest China trade numbers I think it's important to look back at the events of the past few weeks and we've seen a very disappointing October performance for equity markets And that's obviously raising the questions as to whether or not we can see further declines or whether or not we'll get a little bit of a rebound Certainly in the context of the S&P 500 We are starting to see the beginnings of a rebound off the trend line from the 2016 lows certainly if we look at a monthly chart the long-term Outlook does look a little bit concerning given the declines that we've seen for the month of October. We've seen The market take out the lows of not only September August In July, but also June as well So we've wiped out four months of gains and even though we have now started to rebound modestly Off the trend line from those 2016 lows We still have to get back above the 200 day moving average Which is currently where we're pushing up against as I record this video and that's around about the 27 65 2770 area, so I'll be keeping a close eye on that Ahead of today's non-farm payrolls numbers and these are likely to be very important in the overall context of where we go to next because certainly What we've seen over the course of the past few months has been Past few months past few weeks even has been concerned about the strength of the dollar and rising US yields That does appear however to be some evidence that maybe The dollar has topped out in the short to medium term if we look at the dollar index chart here We can see that this week. We've posted a very bearish Daily candle on the dollar index which would appear to suggest that maybe those dollar longs are Slightly overextended and actually we could well see a bit of a rebound across the board not only in the euro But in the pound as well and a slide back in dollar yen However, if we look at US yields, certainly that does not appear to be the case They still seem to be showing that they are at fairly elevated levels But I think what is important is they're still below that 325 area That I've identified as a key tipping point in terms of further Further interest rate press upward pressure on interest rates So I think in that context this afternoon's payrolls numbers will be very important in the overall scheme of things when it comes to the direction of the dollar So let's talk about that a little bit because obviously as I talk to you Now I don't have sight of the non-farm payrolls numbers So I think particular attention will be not only on the fact that we could get a significant revision to the October numbers after the disappointing 134 September number, which I think to a certain extent was affected by the US hurricane season, but I think more importantly It's going to be the wages numbers and the wages numbers are expected to tick up above 3% Which essentially I think would be the highest levels this decade So a move higher in wages could put further upward pressure on yields and potentially upward pressure on the dollar Given the direction of that dollar index chart Whether or not we get a higher wages number or not I think momentum has slightly shifted towards the downside in the US dollar over the course of the next few weeks, so I think it's important to bear that in mind in terms of overall Reversals is that there does appear to be a little bit of a reversal in the offering when it comes to the US dollar We can see that with respect to euro dollar here We're pushing up against this one 1480 115 area And I think if we if we move above that in euro dollar We could actually see further euro gains and further dollar losses And you know what what could cause potentially further dollar losses Well, it could be the outcome of the midterms which are due on the 6th of November now previous to the midterms President Trump has promised Further tax cuts for the US middle class now. I think if Republicans do Win a majority in both houses or maintain their majorities in both houses That becomes ever more likely and as such That could well put further upward pressure on US rates and put further upward pressure on the US dollar because if If the US president Embarks on a program of further tax cuts, that's going to be a fiscal stimulus The Federal Reserve is going to be concerned about that and it's going to put further upward pressure on rates at the moment Next week's Fed meeting I don't think is likely to really shed any new light in terms of the timing Of any further rate rises. We still expect to see a rate rise In december the jury remains out as to whether or not we see three or four rate rises In 2019 and I think that is really where The play is in terms of interest rate expectations and the US dollar If we start to see some evidence of weaker US data and certainly in terms of the october isms There was a little bit of disappointment in terms of those numbers Then I think there is a distinct possibility that q4 could actually be slightly Slightly less expansive than q3 which came in around about 3.5 3.6 So we are starting to see some weakness slip into the US economy In the latest october isms manufacturing report if that's borne out and the services numbers Next week and it's quite a big week for services data out of europe and the global economy Then we could well see some of the expectations with respect to us rate rises dialed back a touch We've also got the latest chinese trade numbers in the wake of the rebounding stock markets That we've seen in the past two to three days And they're likely to be very important in the context of the tariff story october will be the first full month that we've seen The effect of the additional 200 billion dollars the 10 tariff on 200 billion dollars of additional chinese goods Which was which were levied it came into effect at the end of september Now judging by recent us data in the other direction the imposition of these tariffs doesn't appear to have made that much difference However, these will be the first four month numbers from china That will give an indication as to whether or not china's export machine has slowed down So certainly be keeping a very close eye On those china trade numbers in terms of the key levels on the german dachs Having seen the rebound over the course of the past few days The next level for me is really this level through these lows and these highs here So it's around about 11,800 11,900 around about 200 300 points away from that at this point in time But that is likely to be a key resistance level on the top side with respect to the footsie 100 Again, it's going to be the 200 day moving average or this series of lows through here pushing up against around about 7,200 220 770 220 that's likely to be key a key resistance level any rebound higher But certainly given what we've seen in october It's going to be very very difficult to reverse the losses that we saw in october In the remaining two months of this year. So we could get a modest rebound But there is a good chance we could see A retest of the lows that we saw back in october other things to keep an eye out for In the coming week our third quarter gdp the first print of uk third quarter gdp The pound at the moment has managed to rebound quite strongly off the lows of around about 126 So that could potentially be a little bit of a double bottom there And we could well We could we'll see a retest of the range highs around about 132 I still think we're in a range when it comes to the pound against the dollar I'm not expecting to see any significant moves one way or the other Decent support around about 127 decent resistance about 132 and a half But certainly euro sterling is starting to look a little on the soft side But again, you've got these previous lows here and around about 87 20 87 30 Which are likely to be a decent area of support. There are other Items out next week. You've got the rba rate decision Last month the rba left rates unchanged at one and a half percent for the 26 Month in a row that's on the 6th of november It's unlikely that they're going to move on rates At this particular meeting Given the concerns about a slowdown in china So that's um, that's unlikely to really move the markets that much. We've also got a host of earnings announcements due out We've got dropbox third quarter earnings And we've also got earnings from sainsbury's and marks and spences Which should give us another insight into the uk retail sector So that's it for this week. Thank you very much for listening. It's Michael Houston talking to you from cmc markets