 Ladies and gentlemen, welcome to April's non-farm, Friday 1st of April's non-farm payrolls webinar, fourth one of 2016 and the first one of the new quarter. Not really too sure how much influence this will have on the direction of the dollar, given some of the comments out of Janet Yellen earlier this week. But before I get started, I have to flag up the obligatory risk warning for all the regions. So we have the UK risk warning coming up right now. So videos for general information, not intended to provide trading or investment advice or any personal recommendations, so on and so forth. So then we have the other one for the other regions. And finally, the one for Canada, my colleague in Canada, Colin Szynski, who will be co-hosting this webinar with me. Good morning, everyone. And good morning. And hopefully we will be able to shed some light on the overall direction of the dollar, which to all intents and purposes, I think Colin, is, I think markets are still longer dollars. I think that's the overall impression that I get, certainly looking at the client sentiment indicators on our major currencies. Euro dollar is predominantly short euros. We can sort of see that despite the fact that the market has broken higher. But I think first and foremost, before we start digging into the currencies, I think we need to start talking about expectations for the payroll's numbers in just under 15 minutes time. Sounds great. And let's start with the actual headline number. Because I think to all intents and purposes, the headline number is probably not as important as the wages number. Agreed. And the street is expecting 200,000. And what we're really looking at now, and we've seen for a good part of this year, and what we're getting from the Fed speakers is that they've all come back to around two interest rate increases this year. And that's because of the party line we've seen. Dove, I said to her, Yellen, spoke to that earlier in the week. She's knocked down those members last week who were calling for three. And at the same time, we've seen some of the Doves at the Fed also moving towards two rate hikes for this year. So we saw that from Evans of the Chicago Fed and Dudley of the New York Fed. They're of the more Doveish members. They've kind of, they're all kind of starting to gravitate around two rate hikes. With that being said, then, while we look for non-firm payrolls, is there anything to move it off of that? And really, it looks like we'll probably hit somewhere in the sweet spot again of, they're looking around 200,000. So enough that people don't freak out and start worrying about a U.S. recession, but not so strong that people start worrying that the Fed might have to start raising rates faster. So the streets in about 200, if we give a range of about 100 around that, you'd really have to be below 100,000 or above 300,000 to really make any kind of an impact on Fed expectations. I was calling for... Sorry? I'm laser here. The Fed expectations in front of you. Or the market expectations, I should say. Great. So we had 242K last month. The streets looking for 205,000 this month. For myself, I went a little bit more bullish because I thought that the ADP was a little bit above expectations. So I called for 220. I also think that 242 will get revised downward about 10K or so. And you're a little bit lower than me, Michael. I am. I'm looking around about 160K on non-firm payrolls. And my reasoning behind that is, I think, because of the milder weather in February, a lot of new hives in February got brought forward from March. And I think that could well be reflected, not only the downward revision, but also the fact that March generally tends to disappoint to the downside in any case. So the markets... This is a screen which I find quite useful. It's called WIRP, WORP, World Interest Rate Probability. And markets are assigning a 2% probability that we'll get a hike in April, a 21% probability that we'll get a hike in June. So really the markets are assigning around about a 50% likelihood that we'll get one rate hike this year. So that suggests to me that really it's not the non-farm payrolls numbers that we're going to be focusing on. It's these numbers here. It's the wages numbers. And last month in February, after a very decent January number of 0.5, we got a decline of minus 0.1. And that was a real surprise to me. Well, it wasn't so much of a surprise to me. I thought that February would be weaker. I was just surprised at how much weaker it actually was. Because in 2015, in January, we got a very decent month-on-month number for U.S. average hourly earnings of 0.6. And that was as a result of minimum wage increases in the number of U.S. states. The same thing happened in January this year. We got a bump of 0.5. And again, in February, we got a significant slowdown as a result of that, as the average earnings or the minimum wage bump rolled off. And I think this is the concern. I think the wage growth that we're seeing is coming in at the lower end of the scale and those high-end manufacturing jobs that we found that we've lost over the course of the past year or so are being replaced by slightly lower-skilled, lower salary-type services jobs. And that's why I think wage growth is actually as weak as it is. And I see no evidence whatsoever that that's likely to turn around anytime soon. Now, I know... Especially with the oil patch, with the big crash in oil, I mean, those were a lot of really high-paying jobs that were lost in the oil patch and they're getting replaced at a much lower rate. And the other reason why this is important is because one of the questions we've had now that the oil price has started to come back is, and we've seen some of the other inflation measures creep higher, like the core PCE rate, is the Fed's folding behind the curve on inflation. Yellen thinks no. I think it's iffy, but if oil keeps going up, then maybe they do. But these wage pressures will be very important in signaling that are we seeing wage pressures rise? If they are, that suggests more pressure on the Fed to raise rates sooner. If we just see the subdued, then there's not as much pressure on the Fed to raise rates anytime soon, which will keep them on track for a hike maybe in June and December. And I think that's really the timing. I think markets are looking at the rest of this year and they're ignoring the fact that there's a presidential election taking place. And I think after June the Fed will find it very, very difficult to even contemplate a rise in rates in the heat of a presidential campaign. The last thing the Fed will want to be accused of is being partisan. And if they don't go in June, then I think it's unlikely they'll go at all. They may go at the end of the year, just before Christmas. As they did last year. As they did last year, but I think that's very much an outlier. And I think it also depends on who's on the presidential ticket. The likelihood is you're going to get Donald Trump on the Republican side, potentially Hillary Clinton on the Democrat side, but there's still that concern that Mrs. Clinton could get indicted as a result of these emails and we could end up with a Trump-Sanders runoff. And either one of those options is not a particularly great one for the US economy. And I think if that happens, either way, it's going to be very, very difficult to buy dollars against that sort of political backdrop. Simply because of the positioning as well. I think a lot of people are positioned for US rate rises and at the moment we're seeing that trade getting squeezed, particularly against the Euro and particularly against the Dolly Yen. But before we start on that, let's have a quick look at the S&P 500 because I think what we need to establish here is what's the potential upside because we are getting a significant amount of divergence between US markets and European markets. European markets are moving lower. US markets are pretty much near the highs of the year. And the reason for that I think is a weaker dollar and a stronger Euro. The stronger Euro is pushing down on European markets and it's pushing up US markets. So I think with respect to this double bottom breakout here, we still have potentially a little bit more upside in US markets around 2080 and potentially to this trend line here from the highs last year. Yes. And because one of the things we're seeing as the US dollar starts to weaken is one of the biggest complaints we've had from US corporations is sitting to watch as we move into earnings season, although this quarter will probably be too early, is the forex impact on US earnings, which has been negative for the last year and a lot of companies have come out and stayed. It's had a huge negative impact on their earnings. As this pressure starts to come off of US corporate earnings, some of the earnings expectations may start to rebound in the coming months, although I think this quarterly round is going to be too soon. I think that we'll see that more of that in the next round of reports in July. I think another factor playing into my reasoning here with respect to why I think certainly equity markets are slightly biased to the downside is not only the fact that we did get a breakout in the US 30 above a very long-term resistance line. We haven't seen a similar breakout in the S&P or the Russell 2000, which makes me suspicious of this up move. I mean, yeah, we have moved quite considerably higher over the course of the last few weeks since those February highs, and we've got a very nice bullish reversal here in the middle of February, which did suggest that we were going to get a bit of a rebound. But certainly all the other indicators that we were looking at, certainly with respect to the markets in Europe, suggest that we have broken to the downside with respect to the German DAX. There's a nice little break there, and we've broken that today. The 10,120 level has been a significant cap on the DAX, so we could get a pullback through there, but overall the direction of travel does appear to suggest that we're going to probably head back to this support level here, particularly I think if the euro continues to gain. And certainly that does appear to be the case because we've seen a breakout not only in the euro against the dollar, but also the euro against the pound. Let's look at this chart here very, very quickly. We've got four minutes to go, but we've broken above the 200-week moving average in euro sterling for the first time since the end of 2013. More importantly, I think we're still on course to meet this target from this breakout pattern here, potential double bottom breakout, which we saw at the beginning of the year, and we could well head towards around about 80, 74, 80, 75. So that's potentially very positive for euro sterling. We could certainly go a lot higher there. Not only that, we're doing the same sort of thing in euro yen as well, pushing higher on an uptrend from the lows that we saw at the end of February, beginning of March. If you buy into the narrative that dollar yen is weak, then ultimately there's only really one way that euro yen can sustain this particular up move, and that's for euro dollar to go higher. Not going to be good news for Mario Draghi. Not going to be good news for the fact they've started their corporate bond buying program today. The fact of the matter is the market doesn't really believe that the European Central Bank can do much more. They think that it's pushing on a string. There is a little bit of resistance here around about current levels, which could pull us back towards these lows around about here, but overall the direction of travel here does appear to suggest they're in the process of potentially pushing the boundaries of euro dollar higher. More importantly, cable I think is bottomed out, and that for me I think is really a key. What I'm looking for now for the next catalyst is a break of this inverse head and shoulders neckline. We've got the left shoulder here. Colin posted this chart earlier this week, and I talked about it on Tuesday with my weekly video. We've got the right shoulder here. We've got neckline resistance at 144.70, so we could pull all the way back to around about here, but if we break this neckline here, ladies and gentlemen, then you're basically taking the target for this move here all the way up to 150.150 over the course of the next few weeks. So how does that feed into the Brexit narrative? Now that's not to say that we're going to break out today. I'm not suggesting that for one moment. We can certainly pull all the way back down here, but as long as we stay above 140.80 and then break higher, then there's a good chance that we could go higher. Furthermore, if we look at the monthly chart on sterling dollar, it's probably certainly a lot more compelling, and I've been a completely different chart to illustrate that. That's this chart here. This chart here, we posted a bullish engulfing month on the monthly, and that suggests to me that potentially the base is in. We could certainly come all the way back here, but ultimately as long as we hold above 140.80, then I think there's a good chance we could go back to 150 in sterling dollar, and that again feeds into my weaker dollar narrative over the long term. So certainly in terms of the dollar trade, I am bearish dollar, irrespective of what the client sentiment indicators are telling me. At the moment cash is 59% short cable, longer dollars. It's the same sort of story on Euro dollar as well. 85% short euros, long dollars. That's pretty much one way, and if we look at dollar yen, I think I've just about got enough time to do that. This range that we've been in since the middle of February, we can see it here. Good solid support, 112. If we get a poor number on the average earnings numbers, then the likelihood is we're probably going to test back to these loads around about 110. So what's going to be a poor number? Well ultimately anything between 150 and 250 is going to be broadly neutral. Unemployment rate around about 4.9% may take up to 5%. It's this number here, the average earnings number, that we really need to pay attention to. Anything above 0.2%, I think will probably be mildly dollar positive without I think altering the overall direction of the dollar. I think it will push it higher, but I don't think it will push it out of the direction that it's in at the moment. A negative number, we could see a test of the highs that we've seen over the course of the last few days. So let's quickly bring it out now. Numbers are now out. So that's mildly dollar positive, and 5% of the unemployment rate's ticked up. So I would suggest that that's mildly dollar positive in the short term, but I don't think it moves the dial much one way or the other with respect to the long-term direction. What it will do is give dollar longs an opportunity to get out. Colin? Yes, I think we'll probably see a short-term pop in the dollar here after this, but we'll get intraday fluctuations as we move through today. But what I think is most important here with the dollar is that we had a wide discrepancy, and Michael showed it earlier with the work and the bonds, is that we've had the bond market forecasting a low number of interest rate hikes. We had the currency market forecasting a high number of interest rate hikes. Like when it was up at a dollar index, it was up at 100, you were looking at 4%. We're still seeing that reversal back. So we're going to get some short-term trading swings here, and we're getting a little bit of a pop. But this isn't enough to convince the Fed, I don't think, to move up off of two rate hikes this year. So we'll get a trading pop, but I think it'll be fairly short-lived. I think that the longer-term trend for the dollar remains downward, and a certain number of people will probably use this as an opportunity to get out. Yes, I think so too. And bear in mind we are at the end of this particular week, and the dollar has been trending down for most of this week. So I think this opportunity here, this will be an ideal opportunity if your long of dollars is to get out. And I think, you know, this all ties into my narrative. I covered this in my video this week, the dollar index. If we look at this dollar index for our chart, what's notable about this chart? And I think it's borne out certainly here between the 29th of February and the 21st of March is that whenever we've gone up, whenever we see up candles, the up candles are very small and they're fairly incremental. Certainly if you look at the week beginning, the 14th of March, halfway through it, here we've got slowly we're moving higher, moving higher, moving higher. But when we move lower, look at when we move lower. The moves are very, very sharp and they're very... The big pulses. And the big pulses, exactly. Here and here and here and here and here and here and here. And here as well, this week. But when we move higher, we move higher incrementally. But when we move down, we move down aggressively. That suggests to me that the market is longer dollars, but it's nervous of being longer dollars. And when we get a sudden down move, the market's bail. Traders start to bail very, very quickly and the move becomes self-perpetuating. And we've certainly seen that, I think, in the context of these moves here and here and here and once again here. And actually, if we look at this four-hour chart here, it's probably not immediately apparent on the four-hour chart, but if we take it to the five-minute chart, you can see here that we've seen a significant up move. But overall, I think we are slap bang in the middle of this range and when we look at these peaks here, the peaks are getting lower, the lows are getting lower. And that suggests to me that the trend for the dollar is down. People are still trying to buy into the narrative that the Fed is probably going to be raising rates maybe two or three times this year. I know you and I disagree on this, Colin, and I think that's a good thing because it invites some very healthy debates. Absolutely. But I think that it's going to keep people speculating that we're going to get a June rate rise, and I keep that on the table. And as a result, I think it will keep people trying to buy the dip in the dollar, but ultimately the direction of travel, I think, for the dollar at the moment is towards a slightly weaker one. And I think that's really borne out by the fact that this particular dolly-en move that we were talking about, and the dolly-en is very susceptible to dollar strength and dollar weakness. It's not really that impressed. It hasn't been able to get back above the highs of today, and you would expect it. No, it's still going out there around 94.70. Yeah. Oh, sorry. I'm in the dollar index. You go ahead. Yeah, yeah. 112.40 on dolly-en. It hasn't really been able to get back above the peaks that we saw first thing this morning. It's run in to a wall of sellers. So ultimately, that doesn't bode well for dollar strength in the short to medium term. Obviously, you don't want to read too much into one set of numbers, but I think the market's looked at it and gone, whatever. So where does that leave us with respect to other currencies? Because I'm sure a whole host of you people want to talk about not only not just the main currencies, but also crude oil and gold. Gold's reaction has been fairly muted. So let's have a quick look at that. That's been in a downtrend. This is a four-hour chart that we're looking at at the moment. That's been in a downtrend for most of March, in fact, pretty much all of March. But I think it's interesting to note that actually when we sort of zoom it all the way out, we look at where it's come from since the beginning of the year. It's one of the best-performing assets. And I think that's as a direct result of the fact that the Fed has gone an awful lot more dovish. And I don't think it's a coincidence that happened. That's happened since the G20 meeting earlier last quarter. And it does strike me, and you may have a view on this, Colin, that central banks are becoming slightly more coordinated in a very subtle fashion. I think they're starting to come back together. And I think in particular we're seeing it from the Fed that I think every once in a while you'll hear a Fed member talk about negative interest rates, and then they'll quickly downplay it. And I think one of the big things the Fed's been trying to do is to they had become a real outlier. And the dollar had gotten to the point where it actually really was starting to fight into corporate earnings. And I think I have the feeling from the Fed that they don't want to have everybody else devaluing their currencies and boosting their economies at the American's expense. And I think that they've been trying to come back a little bit from really hawkish, at least back towards something a little bit more neutral. Whereas, and at the same time they're sending these warnings to the other central banks to not go too crazy on currency devaluations or negative interest rates either. So yes, I think we're reaching the limits of where the dovish central banks can go with negative rates. And then even with QE to a certain extent, I think we're actually getting close to the end of that cycle. And that the U.S. is leading the way back the other way. And that's common. And the Fed considers themselves the premier central bank and they expect everyone else to fall into line behind them. And they're starting, but I think they can't go quite as fast as they originally wanted to because they were paying for it in the dollar. But I still think they're trying to kind of push that way. And I think you're right, Michael. We're coming back into the middle on the central banks and we're also slowly coming back into the middle on that divergence we had between the bonds and the currency and the way that's being resolved is by the currency giving way and coming back down. Indeed, mate. So let's look at dollar CAD because I know that's one of your favorites. So we'll have a quick look at that because I think you're agreeing that there's a potential for that to maybe bottomed out. So this is a chart that I drew earlier. Let's look at the lows from 2014. Look at this line that I've drawn in here, but also look at the horizontal line that I've drawn in from these previous peaks all the way over here through the lows in October last year and the lows that we saw earlier this week. And that looks suspiciously like a hammer to me, Colin. Yes. And it was also a bit of a perversal as well. So I think what we're seeing is that the Canadian dollar is looking a little bit exhausted right now in terms of the move it's had. And we're probably looking for a bit of an upward correction here in the near term, perhaps back up to those recent highs with moving average. Not huge, but I do think that it's probably getting due for a bit of a rest here. And a lot of that's becoming because we're seeing also that crude oil had quite a strong rebound and now it's looking tired and starting to roll over as well. I want to use surprise and interesting, even when we do see the crude rolling over, CAD is not falling down as much as others. It's not falling as much as Norway. It's not falling as much as Russia. And even the Canadian economy, because it's a little bit more sensitive to the U.S. and does get a bit of a cushion from the fact that the U.S. is doing well, has been helping the Canada in that. But I do think in the short term you might get a bit of a trading bounce here in it just because it's gotten kind of washed out here. And also I think because oil is topped out. I think that's really borne out by this Brent shot here that I showed you, that I have on previous occasions shown people. If we look at the trend line from the May highs last year, look where Brent topped out. Also look at where it topped out relative to the August lows and the lows that we saw at the beginning of December. We've also got this breakout, this triangle breakout from the base in earlier this year. We haven't quite hit our target of $44.32, but we've hit this trend line smack on the money. We're coming back down. Crude oil needs to get back below $38 a barrel on the Brent contract. This is the cash contract for the CMC markets contract. If we break below this $38 a barrel, then I think potentially you could argue there's a short term peak is in and that we could probably come all the way back down to this trend line here and potentially to this series of lows just below $33 around about $32.50. So I'm keeping a very close eye on this particular level here around about $38 a barrel. Yes, one other thing, Michael, if you look on the bottom, we've got the stochastics has rolled well under $50 and one of the things this morning on the WTI with the RSI rolled under $50 as well. So you are getting this downward momentum starting to build in both crude oil contracts. And if we look at WTI, again, I think you probably see it's a similar sort of story. Not quite, actually this one's worked slightly better because we have broken out of this uptrend, but we also, and this is a double bottom breakout, we more or less hit our price target of just over $41 a barrel, but we weren't able to get back above the 200-day moving average, which also acted as a little bit of a cap and has acted as a cap since it was touched in June and then again in October. So that's a significant resistance level. We have broken lower. I think the likelihood here is in WTI. The support level is in a slightly different area. It's around about $35 a barrel, but again it's a similar sort of story when you actually look at it relative to Brent. Okay. I thought there was something that you wanted to add there, Colin, but I'm guessing that you didn't. No, we're good. We're good. Okay. So I think let's also have a quick look at the Aussie Dollar as a bit of a commodities trade. The Aussie Dollar has broken to the top side. Largely, I think, is a result of dollar weakness. What does that mean going forward? Again, we've got a very significant downtrend line coming in from the 2013 peaks. I think the RBA is going to be very uncomfortable with the prospect of the Aussie Dollar heading back towards us. It's always 80. And that does appear to be the direction of travel for the Aussie Dollar at this point in time. And again, that ties into our position of a slightly weaker dollar. They've got a meeting next week. RBA has a meeting next week, so the way this has been acting, don't be surprised if they start taking pod shots and try and talk the dollar down again. The Aussie Dollar, yeah, absolutely. And I think that obviously that could also have significant effects on Aussie yen. But I think overall, Colin, I think the general consensus that we've taken away from this particular payroll's report is a little bit meh. There's not really that much there. Yeah, so you said the issue goes kind of number, right down the middle of the... Yeah. Right down the middle. But it's slightly... It's not hawkish. It's not dovish. The unemployment rate's ticked up, but so is the participation rate. So you could argue that there is a correlation between those two. But overall, I think we're pretty much done in terms of price movements for today. Yes, we have ISM manufacturing out later this afternoon. And that may cause a little bit of a reaction, certainly in terms of what we're expecting from the market. And we'll have a quick... We'll do a brief summary of that. We've not only got the US ISM manufacturing PMIs, we've also got Canadian PMIs. I would expect the Canadian PMIs to improve back above 50, given the GDP number we saw yesterday. Was it yesterday? Or was it the day before? I can't remember now. It was this week. And then we've got the ISM. And that was 49.5 in... And is you expecting that to tick back above 52? Yeah, I think it might go 51 or 52. I think, again, that'll be slightly more dollar-positive in the short term. And I think that could potentially push euro a little bit lower. Oh, and one more? Yeah. You keep an eye on construction spending as well, because that had a big pop in February. And that was the weather effect, because the winter wasn't so bad this year. So again, that's another one of... was some of the construction spending pulled forward because February wasn't so bad. And yet, Street is looking for a bit of a retrenchment in merch. So let's see what happens with that. Okay. All right. So I think we're pretty much done for this month. Hopefully, you've got something from this webinar. If you have any questions, please fire them my way now. Otherwise, we will post this on YouTube. And we'll post it on YouTube. And hopefully, it'll be available by the end of the day. And you can listen to it back. Otherwise, thanks very much for listening, ladies and gentlemen. And Colin and I will talk to you probably at the same time next month for the main on-farm payrolls. And we may well actually do a preview of the FOMC meeting sometime towards the end of April. But we'll let you know about that nearer the time. We've got one question, Michael. Why is a weak dollar good? Is it because it increases spending? So I'll speak to that. The weaker dollar helps the American companies in two ways. First of all, it helps their exports, makes their exports into the broad. And it's one of the things that's hurt them. But at the same time, the other thing it does for them is when their corporate earnings come back, particularly from overseas, and of course the U.S.'s headquarters to a lot of global multinationals. But when they're read their overseas earnings come back and the dollars higher, they come back at a lower level. So a lot of companies have been talking over the last year, in particular, of the negative foreign exchange impact on their earnings. Because the U.S. dollar soared in between mid-2014 and mid-2015. It went from 80 to 100. It was a huge, huge rally in the U.S. dollar. And it did have a seriously negative impact on U.S. corporate earnings and U.S. corporate exports. So as it starts to come back down in this case, it's what I call taking some of the pressure off of them. Some of the negative headwinds to corporate earnings that we've seen are starting to go away as the weaker dollar comes off. I mean, certainly other countries have been out there driving down their currencies to help to rebalance and boost their economy. So a falling dollar does help the U.S. In fact, we can say that often a rising currency in general is the same thing as interest rate increases. It does provide the same kind of effect. A falling currency has the same positive effect as interest rate cuts. Cool. Great. Okay. Well, unless there's anything else. Thank you, Colin. No problem. Thank you, Michael. And thank you everybody else. Thanks, everybody. We'll talk to you again either later this month or first thing in May. Thanks a lot. Yes. Thanks everybody and a nice weekend.