 Good afternoon ladies and gentlemen and welcome to CMC markets and me with me Michael Houston and this monthly webinar for the July US Non-farm payrolls report before I get started Just like to do a little bit of a Housekeeping disclaimers and what have you going to talk? We're going to talk in great length. I think today about the numbers key levels on various markets obviously the After-effects of last night's last night's treat tweets treats tweets by a president Trump and the likely impact that The escalation that we've seen in the last 12 to 24 hours is likely to have on Global markets in general and I think the key takeaway that we can deduce from Mr. Trump's intervention is that it's not a particularly positive one We can certainly see that in the way that these indices are currently pricing Looking at the FTSE 100 looking at the S&P 500 Looking at a significantly lower open for US markets on top of the declines That we've seen in the last couple of days. It's It's an extremely disappointing outcome if you're a if you're a stock market ball but To all intents and purposes markets are looking a little bit stretched as Can be seen from this daily chart that I'm looking at on the S&P 500 now I think in terms of the importance of this report. It's probably less important now than it was say for example two days ago when the Federal Reserve cut interest rates by 25 basis points and basically more or less said that It was a it was a mid-cycle adjustment So President Trump didn't get his wish for a bigger car and a weaker dollar and based on the economic data That we've seen thus far out of the US economy. I think it was just it was difficult to justify Anything more than a 25 basis point rate cut. So I think from that point of view While one could criticize the Fed's Communication because the press conference was a bit of a shambles I don't think anyone could really criticize the Fed in terms of the extent of the cut even though we had two dissents from Esther George of the Kansas City Fed and Eric Rosengren of the Boston Fed, but I always felt they would dissent in any case. So The big question now is has recent events made a September rate hike rate hike September rate cut That much more likely. Well, if we look at my one of my favorite screens, which is Wip on Bloomberg, we can see that markets are now assigning a 100% probability That we will get a cut in September on the 18th of September September the 18th 100% probability of a rate cut now if we go over to the right hand column here We can say that markets are assigning a 90% probability that it will be 25 basis points Which I suppose given recent events It's not unreasonable. They're also assigning a 10% probability That we will see a 50 basis point Rate cut now at the moment. I don't think That is likely even though Markets are already pricing in the prospect of a 50 point 50 basis point rate cut Now, why do I say that? Well, it's very simple if I look at the US two-year yield That is currently trading Pretty much and I apologize for the slow response for my Bloomberg It's trading at 1.7 percent. So that's over 50 points below The upper bound of the Fed funds rate the Fed funds rate is between 2 and 2.25 percent. So 1.7 percent it's 50 points 55 points pretty much below the upper bound for the US Fed funds rate so We've pretty much got to priced in already based on the moves that we've seen over the past few days And if we look at the way that chart has behaved In the past two days, we've fallen quite precipitously We haven't been able to really break out of this range that we've been in over the course of the past few weeks But what what does appear to be the case is we do appear to have dropped or Looking at around this support level around about 1.7 percent So that's for me is a very very key level going forward Also, if we look at the 10-year the 10-year we've seen a significant move lower as well 1.86 percent So that's also a significant move lower in the 10-year US Treasury yield and that has broken the lows that we've seen at the beginning of July so markets certainly pricing in a significant Rate cut Between now well in September Obviously that will be dependent and contingent on The economic data that we've seen or expect to see coming out of the US economy over the next few weeks one thing I would say though is that in The context of the data if we get a poor number today, then obviously the odds of a 50 basis Rate cut will increase So what are we looking for? Well in terms of the headline payrolls numbers anything in line with the ADP number that we saw earlier this week 155 165 is pretty much in line with expectations Certainly in terms of wages Any significant softening in wages is likely to be bad news Certainly in terms of a more modest rate cut that will that will reinforce Expectations of a much larger cut going forward one of the things I would say though is we did have two dissents in The most recent meeting so the big question is what's in the context of a September rate cut What will prompt the two dissenters in July to change their minds in September and there's two narratives at play here There's trade and there's the domestic US economy now the domestic US economy continues to look fairly decent Yes, we had a fairly weak Chicago PMI earlier this week came in at 44 The ISM manufacturing was a little bit soft and prices paid was very soft. So I think a Continuation of weak data It could be a question in terms of the continuation of weak data. It's really a question of degree Do we get 25 do we get 50? Particularly if Trump follows through on his threat to implement tariffs, let's not forget These tariffs come in on the 1st of September now these tariffs are likely to hit Trump's base the hardest because they include Products that have hitherto recently been excluded from the tariffs Coverage so we're talking clothes apparel shoes. We're talking toys. We're talking electrical goods so we're talking a 10% tariff on the sorts of Consumer goods that generally trumps base tends to probably have a significantly more exposure to And that's key because US consumer confidence in July was very very strong So if we find that in the aftermath of these tariffs consumer confidence drops off quite significantly and is a decent chance It might then that will really reinforce the prospect of a much bigger rate cut when it happens or if it happens in September so I'm being asked in general terms if we get a poor figure today Will markets go up in anticipation of that rate cut bad news is good news. Well Under normal circumstances, I would probably say Yes That that is a possibility, but there is also the fact that with a good number Last night's escalation by the president has muddied the waters with respect to the normal reaction function of the market So you could argue no news is good news, but you could also argue that bad news is bad news Because it means the global economic outlook is getting that much darker central banks are more likely to ease But they're pushing on a string Because if you actually look at what? What's happening in Europe? There is now more negative yielding debt than there ever has been 14 trillion dollars worth and Irrespective of whether or not we get worse data profit margins on particularly in US stocks are likely to come in and at some point you're going to reach a tipping point between valuations and Where where stocks really should be now at the moment We aren't seeing any evidence of a significant meltdown in sentiment If we look at the way markets have been behaving We're still very much in an uptrend So in terms of mentality very much still in by the dip mode for stock markets Finding support on the 50-day moving average for the S&P 500 We're also looking on the FTSE 100 at a similar sort of outlook If we look at the FTSE 100 over the course of the last few months We're still very much in an uptrend, but What we've seen on the weekly charts looking to play out at the moment is Potential for some significant reversals here We've got here very long up a shadow on this candle if we close all the way down here There is a decent chance. We're going to come back and test the lower bounds of these trend lines That I've been talking about Right here right now. So 50-day moving average at the moment. We're right on the cusp of it here The next key support on the FTSE is going to be around about 7360 I do think at the moment We are a little bit oversold heading into the weekend But that's not to say that this week's events couldn't have a significant Dampening effect on sentiment going forward. I'm just going to pull these over here So that they're out of the way because these are the key numbers that I'm going to be paying particular attention to also keep an eye out for any revisions to the June number and if we look at the the DAX that's been particularly hard hit over the course of the last few days and one thing that Is notable is that we've broken the downtrend line From the lows that we've seen in December, which we haven't done on the FTSE 100 So there is evidence of a potential breakdown In terms of risk appetite with below the 50-day moving average On the germany 30 the DAX We are looking a little bit oversold But that doesn't necessarily mean that we can't go quite a bit lower over the course of the next few days Let's not also forget the next week. We have services PMIs services ISM services PMIs and thus far Those numbers have been generally much more positive than manufacturing. So I think at the moment There is there is an expectation putting all of this trade stuff aside for one moment That while the global economy is slowing down It hasn't trickled down Into the service sector services sector if it does Then obviously the prospect of a 50 basis point rate cut in september starts to increase So let's look at the key levels here because the big question for me is where the dollar goes to next And at the moment we've seen a break lower on euro dollar below 111 But what's a what's a little bit striking here? Ladies and gentlemen is the fact that if we look at the way the dollar index has performed here on a weekly chart We can see that we've got a very long upper shadow on the weekly chart It's struggling to maintain these moves higher Which suggests to me it could be vulnerable to a snapback And the snapback by I mean by that is maybe euro dollar going back through 111 20 Back towards 111 80. We have made new two-year lows on euro dollar We can see that here But this long lower shadow on the daily charts makes me a little bit suspicious If we break through 111 20 That we could trigger a whole host of stops All the way back up to around about 111 70 111 80 The dollar is vulnerable to a rebound and that obviously also applies to cable cable's been under pressure like no one else This week. It's above a very very key support level at around about 1985 1985 is the lows that we saw in 2016 and 2017 We can see it here. It's a huge huge level. Do not underestimate it If we don't break that low there We could experience a very significant rebound and cable doesn't take any prisoners when it rebounds I can testify to that having Having previously been trading it a few years ago cable is a very unforgiving market at the moment It is looking a little bit soft, but it's very much vulnerable to a snapback Looking at dolly yen. It's a similar sort of story. We are at the range lows for dolly yen over the course of the past few days, so We could see if we do get a poor number if we get a wages number that comes in around about three percent A weakens to three percent. We could get a little bit of a rebound Sorry, if we get a if we get a wages number that's better than expected We could get a little bit of a dollar rebound in dolly yen You know, we could go we could go either way as someone just said to me it looks like A case of managing the chaos and that's really I think where we are at the moment We are managing the chaos We're trying to see the wood for the trees. It's very very difficult to do because of the prospect of a complete tweet out of the blue That sends the markets sharply into reverse and I think that's the real key at the moment We can look as many chart points as we like What we're going to have to do is degree is deal with probabilities And probabilities are at the moment. We're above support In dolly yen around about 106 70 75 so we could get a rebound there We're also above Some very key support levels in cable, but we've broken below a key support level in euro dollar So trading these markets is probably an awful lot more difficult now than it ever has been And it certainly feels that way at the moment. We're getting a little bit of a dollar yen weakness As these numbers come up. So I'm going to now be quiet And see where we go from here as these payrolls numbers break Okay, and here we go Our return early earnings are coming at 3.2 So slightly better than expected 3.7 164 in line The revision to the previous month payrolls Slightly weaker down from 224 to 193. So I think really what's happened here ladies and gentlemen is that this is a pretty Pretty nothing report. There's nothing here really To suggest that we are going to See a change of direction and it's really back now to Focusing on the trade picture 3.2 wage growth is okay It's not blowing the doors off But the revision lower in the June payrolls report is a slight negative. So we are seeing some evidence Of jobs growth slowing, but certainly not enough to worry anybody and it's really now a question of Whether or not next week's services ism starts to show any evidence Of weakness in the us consumer because certainly in the context of the wages numbers Wages are picking up Headline number is a little bit softer on The average But overall there's nothing in these numbers to suggest that We won't get a potential rate cut in september and the the dollar weakness that we're seeing at the moment Is I think a little bit of a reflection that certainly in the case of dollar yen In the case of euro dollar. We're getting a little bit of a squeeze higher looking at 111 20 again on the top side. We talked about that earlier I think if we do get a short squeeze through here, then we're likely to get a bit of a run up to 5070 But but overall I think it's a bit of a nothing number In terms of any questions fire them over because obviously I've looked at Euro dollar. I've looked at cable. I've looked at dollar yen um I've looked at the s and p I can look at the nasdaq for those of you Who have an interest. Let me just close those boxes there so that uh we can Display the insights box If we look at the nasdaq here, also what we've got is a bearish engulfing week. So again here There is potential for probably A little bit of a little bit more weakness over the course of the next few days and weeks If this weekly reversal is confirmed Those of you who are regular listeners To my webinars will know that I look at Japanese candlesticks charts An awful lot. I think for me, they're very very instructive In terms of what they show you in terms of the supply and demand dynamics the buying and selling pressure On any given day Take this candle here for example We more or less wiped out The previous days losses at one point yesterday And yet we close lower. That's a very negative It's a very negative look In terms of a market reaction near all-time highs It suggests to me that investors are very very nervous about being long And if we get a break below This support level here, which was the lows that we saw on the 9th of july on the nasdaq We could we'll see further losses back towards the 50 day moving average I don't try and over complicate My technical analysis. I try and keep it as simple as I can. Why because I think keeping it simple Works better than trying to over complicate it So the level I'm looking at really on the nasdaq is around about 7700. This is the nasdaq 100 I'm going to keep a close eye On that support level Simply because it happened to be a fairly decent support there when we broke above this this area of resistance here So keep an eye on that Also keep an eye on If we look at the s and p 500 Because i'm looking for confirmation here Of these numbers And look at the 50 day moving average But also look at Similar sort of low point that we saw Around about a month ago Two months ago in fact These series of lows through here Which also happens to coincide with those peaks There I can just zoom that in You'll see what i'm driving at There's a little bit of congestion Through here and through here If you see the way the market reacted around 2960 There was a peak there. There was a peak there Then there was a trough there. There was a trough there There's a trough there. We rebounded through there went up. We're now below it. So 2960 On the s and p is likely to be a very key support level which would potentially bring us back To these peaks here And those lows there. So we're looking at 2910 As the next key support level On the s and p 500 Now that we've now that we've staircase lower Through this pivot zone around about 2960 So for any potential short positions on the s and p I think really what you're doing here is you're looking to stop out any short position above 2960 because of the importance Of that that high there that high there that low there and that low there yesterday So keeping an eye on that being asked about Canada yen And ozzy yen So let's have a quick look at ozzy yen first Bring that up Right when you're looking at ozzy yen, you really do need to be aware that next week We have The reserve bank of australia and they are due to make a decision On australian Interest rates now i've done a little bit of a preview on that you you'll be able to find it in the news and analysis of the News and analysis section of the website Around about 4 p.m. Today. I haven't published it yet, but The ozzy has been under pressure quite a bit as you can see from that daily chart that i've got in front of you there You got a flash crash low from earlier this year currently below 72 But You have to be cognizant of the fact that everyone is expecting the rba Potentially to cut rates next week The rba rate meeting is on the 6th of august. It's tuesday so tuesday morning and last week's recovery and quarterly inflation measures might temper The rba in terms of whether or not they cut rates next week because let's not forget The rba has already come off the back of two rate cuts one in june one in july Are they really going to cut rates again? in august when it's not immediately apparent That the effects of a rise in inflation are Yet to filter through into the currency and let's not forget a falling currency is slightly inflationary Anyway, we've also got the fact that rba governor philip low When they eased monetary policy for the very first time In june said that further easing was likely to have little effect Particularly if other central banks act in a similar fashion This would suggest to my mind that given the declines in the ozzy The rba might spring a surprise and stay on hold So you need to be careful about that. There is a risk the rba Might hold off on raising rates. That doesn't mean that they won't sorry raising rates cutting rates I keep saying raising rates. Why do I say that? cutting rates They might spring a surprise and stay on hold and that doesn't mean that they won't cut rates later But they might wait to see the effects of the two previous rate cuts and the decline in the australian dollar And obviously there is an awful lot of ozzy weakness there as a result of the us china trade dynamic as well so You don't really want to sort of press down too hard on the monetary accelerator at a time When the trade tensions are doing a little bit of your job for you So be very very careful with respect to ozzy and ozzy crosses over the course of the next week or so because the rba Could have in its locker a little bit of a surprise And we are very very oversold and that doesn't necessarily mean that we can't continue to go lower But if you are short of ozzy or ozzy crosses, lower your stop losses down So that if you do get a sharp rebound, you don't give it all back I mean we're looking looking at the run here. We've got one two three four five six seven eight nine ten Ozzy's fallen for 11 days in a row So by the law are probabilities with your rebound. So you need to start pairing back your short positions In preparation for a little bit of a snapback Canada yen What am I looking at the lowest point on the ozzy dollar? Well Just I'll come to Canada yen in a minute. Sorry. Just answering another question here Um Very much in a downtrend as you can see. Let's go back slightly further we did have the flash crash lows of Earlier this year And that or the end of last year and that was around about 67 30 67 34 If we go back any further than that you're sort of really looking Pretty much You're looking at a long long way back 2009 you're looking at potentially 10 year lows. So um, let's not say the ozzy can't go an awful lot lower but I liken this to potentially to A possible elastic band Effect you can stretch it and stretch it and stretch it but at some point it's going to snap and it's going to hurt you So be very very aware of a snapback on ozzy dollar. It could come Um, because the market is looking significantly overstretched. So A little bit below where we are now around about 67 30 is probably a a decent Area of support in the short to medium term Canada yen Again, we're looking at a very key support level around about the lows that we saw Around about the end of may around about 79 90 80 nice round number I like round numbers. They tend to act as fairly decent support on resistance levels And also we have the canadian jobs report next week as well And you also have to basically take into account the fact that canada a canadian dollar is a proxy for crude oil So those declines that you've seen in the canadian dollar over the course of the past couple of days Have been very much largely driven by the big decline that we've seen in crude prices So the big question is I think for me is not just about what the canadian economy is going to do because the canadian economy is actually doing okay um unemployment Unemployment fell to A multi-year low at 5.4 in may and wages have started to push higher So I think even if the fed does cut in september That doesn't mean the bank of canada will follow it In which case you could see the canadian dollar come to a little bit of a bounce So you've got a combination of weakness in the oil price, which is weighing on canada As well as a little bit of yen strength in terms of safe haven buying as well. So Key support level around about 80 on canadian Could make it vulnerable to a bit of a rebound And to highlight the fact that we are near a very key support level on brent crude If we look at my brent crude chart here, this is one I drew earlier I've drawn a line through 60 dollars a barrel Which is the lows pretty much Since early february If we look at the lows in june Here and the lows yesterday We got a fairly decent rebound From that key level there So keep an eye on brent crude prices If we get a bit of a move lower on that That could unwind in terms of canada weakness Also have a quick look at wti As well And for me here we've got a little bit of a consolidation in and around 54 dollars a barrel A little bit of a double bottom there Which saw us move higher Now the key level for me is in and around this 54 dollars a barrel level here If we can consolidate and move through here Then we could see another move lower at the moment We're getting a little bit of a tweezer bottom and a little bit of a rebound From around about 53 dollars 50 so Keep a particular eye on that If we get a break lower in both brent and wti We could get a follow through effect there So Ozzy Kiwi Okay Ozzy Kiwi we can look at Ozzy Kiwi We've also got an RBNZ rate meeting next week as well So be a little bit careful with Ozzy Kiwi We've got the RBA and the RBNZ Reporting their latest monetary policy decisions Next week But the direction of travel here is quite clear for Ozzy Kiwi Ozzy Kiwi is falling We're in a downtrend We would be looking to sell any rallies back to this trend line here So you could draw a line through these peaks Through here the 200-day moving average It looks like we're potentially heading lower on Ozzy Kiwi Always remember the direction of the trend The direction of the trend The trend is your friend I know it's a cliche But it is so true Basically to trade in the direction of the trend To trade in the direction of the market Let's quickly do gold Gold is very much by the dips Ever since we broke above 1380 I've said this I think on a previous two webinars That will trade sideways for a bit before breaking higher I still stand by that If you've got bond yields heading lower and lower and lower Then the prospect, the likely prospect is You are going to see gold eventually move higher As a potential store of value Now people can say what they like about gold In terms of that it doesn't yield anything Well it yields more than 14 trillion dollars of global bonds So I would suggest people who criticize gold Take a look at that and stick that in their pipe and smoke it Because basically 14 trillion dollars of global debt Is yielding negative rates That makes gold a much better store of value Than all of those other bonds So again if we get a little bit of a drift back Anywhere near to 1400 or 1380 Wire above this key support level here Then the direction of travel points to a potential move higher Towards around about 1500 dollars an ounce One more thing before I sign off We've also got earnings coming out next week for Lyft and Uber So they should give us a little bit of a volatility Second quarter earnings And they are due out On the 7th and the 8th of August respectively So unless anyone else has any other questions I'm hoping I haven't forgotten anybody or anything Does anyone else have any other questions about Oh Dollar Canada and Sterling Yen Just seeing that sorry guys Let me just do that for you Dollar CAD because we do have payrolls reports The Canada Payrolls Report next Friday Right so with respect to Dollar CAD There is a distinct chance that we could be approaching A little bit of a resistance level in Dollar CAD In and around the 200 day moving average But also coinciding with these lows here If you assume that the Canadian economy Is going to be slightly stronger than the US economy Then really you need to be long of CAD short of the US Now at the moment we're getting a strong move higher in Dollar CAD Maybe on the basis of the fact that those wage numbers Were slightly better than expected And oil prices are a little bit on the soft side So that could be why the Canada is slightly weaker today Then it has been over the course of the past two or three days And why we're seeing a little bit of a retest Of the 200 day moving average But overall if we look at the direction of travel here We're in the middle of the range And at the moment there is a distinct possibility We could run out of steam around about the 200 day moving average What else Stirling Yen Stirling Yen is looking a little bit soft We can see that from this Stirling Yen chart here I was looking at it the other day And it would be very interesting to see how these lows here match up With the lows that we saw in 2016-2017 Keep going over here We can see we've still got quite a bit to go From the flash crash lows of October 2016 But we have broken below the lows of earlier this year So if you buy into the narrative that the Japanese Yen remains a little bit of a safe haven And Stirling is likely to continue to look soft Because of fears of the hard Brexit Then probably selling rallies in Stirling Yen is the right way to go But would I be sure of these sorts of levels? Probably not, I'd wait for a rebound And it goes back to what I was saying earlier Stirling cable in particular is looking very vulnerable to a short squeeze It wouldn't take much to snap it back higher Would I sell at these sorts of levels? Probably not But I would certainly look for a move back to around about 122.80, 123 Which coincides with this support level here This 123.80 level held for quite a long time before it gave way So the potential for a short squeeze is there At the moment we're too far away from the support around about 119.82, 120 So at the moment I'm leaving well alone I've always got a motto When it comes to trading a particular market I wait for it to come to me And a level that I'm comfortable buying or selling at If it's nowhere near a level I'm comfortable buying or selling at I'll leave it well alone Okay, so that's I think it Euro Swiss Yeah, dollar Swiss Don't touch it I mean the Swiss is one of those currencies It's very, very difficult to make money off I know that I used to play around with it 20, 30 years ago, dollar Swiss It's very, very tricky It doesn't move and conform to the same sorts of behavior That like say, for example, Euro dollars or dollars Or cable or any of the other currencies do It's also very expensive Certainly looking at the way that it's trading at the moment It's obviously getting a safe haven bid On the back of the fact that in the same way that the yen is And as a result, it's likely to mimic the yen To a greater or lesser extent Which means you're likely to get a move back to around about 98 Now what does that mean for Euro Swiss? Well, it probably means Euro Swiss is going to go an awful lot lower But it's obviously then going to elicit a significant response from the Swiss National Bank They've already got negative rates of 75 basis points The whole Swiss yield curve is negative So the big question for me is whether or not Swiss banks and the Swiss National Bank will make it that much more difficult For whether they'll loosen financial conditions even more And the likelihood is that Euro Swiss here, we have it 109 certainly has the potential to go an awful lot lower So let's look at the weekly chart We've broken the 200-week moving average The next key level for Euro Swiss is 108 And I can't see anything in this chart to suggest that we won't see A move down towards that level Particularly if you think that the ECB is going to do more When it comes to monetary easing And certainly the German bond markets are already pricing in Another 20 to 30 basis points of rate cuts from the ECB If you look at the German two-year yield The ECB deposit rate is minus 0.4 So let's look at the German two-year yield It's minus 0.78 So there's another 38 basis points of cuts that the market is pricing in for the ECB So at some point the ECB is going to move in line with the market The ECB will follow So there we have it I can't see bond yields going higher Any time soon Now that in essence should prompt investors to buy into stocks But at the moment because of all this uncertainty over trade People are unloading a little bit They're going into the safe havens They're going into US treasuries They're going into yen They're going into Swiss franc They're going into gold And until we get some form of clarity Against a president who has a scattergun approach to policy It's going to be very very difficult and very very choppy So with that passing thought I'd like to thank you all for tuning in Wish you good luck trading Enjoy your weekend And speak to you all or see you all next week Thanks very much for listening ladies and gentlemen