 Good morning and welcome to CMC Markets on Friday the 21st of September, and this quick look at the week ahead beginning the 24th of September, and European markets have by and large managed to shrug off the latest escalation in the trade spout between the US and China. China responded with 5 to 10% tariffs of its own on another $60 billion worth of US imports, bringing the total amount of goods subject to tariffs to $110 billion. Now that's pretty much all of the $130 billion that the US imported into China into 2017. So for all of President Trump's claims that trade wars are easy to win, it's proving not to be the case. This is turning into a little bit of a war of attrition between China, between China and the US, and there's little likelihood that we're going to see a resolution anytime soon. The only upside as far as markets are concerned is that the US only imposed 10% tariffs on $200 billion worth of Chinese goods and not the 25%, which is due to kick in at the beginning of next year. So we've seen a fairly decent week for European markets this week, on course for the second successive week of gains. We've also seen a similar turnaround in Asian markets as well as new record highs for the S&P 500 and the Dow Jones. So I think while there's little likelihood of an escalation between now and the US midterms, there's also little likelihood of a resolution. So as a result, despite President Trump's rather scattergun approach to tweet storms, he's now turning his sights on OPEC and the fact that oil prices are approaching $80 a barrel, that could be another factor that markets need to price in to their estimates of forward earnings on the back of the rebounds that we're seeing this week. So first and foremost, we're going to be looking at the DAX. DAX has rebounded off the slowest levels since March, pushing up towards the 50-day moving average, but we do have to be cognizant of the fact that it is now approaching trend line resistance from the June highs, which comes in just above $12,500. So this rebound that we're seeing could well be tempered by the fact that we are still seeing evidence of significant slowdown in some of the economic activity that we're getting out of the Euro area. French second quarter GDP was confirmed at 0.2% for the second successive quarter in a row, while the flash services and manufacturing PMIs from France and Germany were also slightly softer, even though the German services PMI did show a slight improvement. Nonetheless, I think there is an expectation that we were a little bit oversold from the highs we've seen in June. We have due a rebound. The big question is, can we sustain the rebound going forward? So looking at $12,500 on the DAX, on the FTSE 100, I'm paying particular attention to the 200-day moving average, just below $7,500 to see whether or not this current rebound, which is currently in its fourth day, is able to push up towards that $7,500 level and subsequently overcome it. At the moment the trend again, as with the DAX, still remains more towards the downside to the upside, but we are seeing a fair amount of resilience despite the fact that while the US economy is still showing significant signs of improvement, it does appear to be trading in isolation to the rest of the world where we are seeing a significant softening of economic data. With that in mind, with respect to the US economy, the keynote announcement for the coming week is likely to be the Federal Reserve rate decision. Now, not really expecting too many surprises from that. We will probably get a rate rise announced next week, 25 basis points rise in the Fed funds rate from 2% to 2.25% on the upper band. At the last Fed meeting, US policy makers upgraded their outlook for the US economy, but they did warn about downside risks to that assessment for the economy on the back of trade tensions thus far. We're not seeing much in the way of evidence of that weekly jobless claims at $201,000, US consumer confidence at an 18-year high and some of the manufacturing numbers are still showing a significant degree of resilience. Despite the rise in US yields, we are seeing a little bit of softening in the US dollar index, even though emerging markets are still significantly offered against the US dollar. The US dollar is still quite strong against emerging market currencies, not really the case on the overall dollar index. That is starting to look a little bit softer. We can see that here on this dollar index chart, very, very big support level in and around where we are at the moment. Now, we can argue the wise and wherefor as to whether or not this is a potential head and shoulders with this left shoulder here and a potential right shoulder here. I think if we see a significant push below 93, 1894 then we could well see further dollar weakness. Now, this is more or less borne out by the euro dollar. We've seen a move above 117.5. If we're able to sustain the move above 117.5, looking at support around about 117.20, 117.30, then there's certainly potential for us to move up towards the 200-day moving average above the 118.40 level that we saw at the beginning of June and trade back towards 119.5, potentially even towards 120. But for me, we really need to stay above 117.20 for this to play out. At the moment, we're not really seeing a confirmation of a breakdown in the dollar index and a break higher in the euro dollar. And really, both things need to happen for that dollar weakness that we suspect or I suspect might happen. Both need to happen for that to really come about as I hope that it will. So looking at the Fed decision next week, it's really not about whether or not they raise rates. It's really whether or not they row back on expectations for a December rate rise. So the statement will be important. It's going to be revolving around the narrative of further gradual increases in the target rate. Will they maintain that narrative? Will they maintain that monetary policy continues to remain accommodative? Or will they start to steer towards a slightly more neutral pace of monetary policy? If they start to go more neutral then expectations of future rate rises may become more tempered at the moment. Markets are pricing in two for this year and potentially one for next year even though Fed policy makers are pricing in more than one for next year. So the guidance is going to be very very important in the context of the dot-plot projections but also the estimates for GDP and inflation as well as wage growth given the fact that we saw a very decent number for wage growth at the last payrolls report. We've also got final Q2 GDP numbers for the US economy and the UK economy. The US economy is for the 27th of September. UK GDP is on the 28th of September. We've also got flash CPI out of the EU for September. We are seeing some evidence that wages are rising even though headline CPI for the EU is actually slipping back with core prices actually coming in below 2%. So certainly it's not seeing any evidence of headline CPI increasing unlike here in the UK where we did see a big jump in the August numbers earlier this week. We've also got Canadian GDP. So let's have a quick look at the Canadian dollar in that context. The problem with monthly GDP numbers for the Canadian dollar is they tend to be a little bit flaky so it's certainly not a really good arbiter as to future monetary policy but certainly in the context of a bank of Canada rate rise next month as long as we hold above this 200 day moving average here in these two key supports around about just just below 129 then the Canadian the dollar CAD could actually see a significant rebound of this key support here which currently comes in around about 12870, 12880 that's a big support level on the dollar CAD. If that level holds then we could see a significant rebound a weakening of the Canadian dollar and a strengthening of the US dollar as well. So that's it for this week once again thanks very much for listening Michael Houston talking to you from CMC Markets.