 Good afternoon and welcome to CMC Markets and this Monday market webinar on the 23rd of January before we get underway Have to get a couple of housekeeping rules out of the way the obligatory risk warning Hoping you can all hear me loud and clear and you can see the screen. I did a few tests in the lead up So hoping that any late comers can hear me Once we get the risk warnings out of the way we can move on and Look at the various markets that I'm particularly interested in this morning and this week because I think last week I think markets were very much on tenterhooks as to what Donald Trump would say at his inauguration speech on Friday and Certainly, I think that's been reflected in the behavior of stock markets thus far this year It's been rather schizophrenic in nature. We've seen record highs for the FTSE 100 Around about seven up around 7,300 but since then we've come off quite considerably European markets on the other hand have been pretty boring. They've been pretty mundane US markets also appear to be stuck in the mud near record highs So what to make thus far of mr. Trump's inauguration speech? Well, certainly it's got garnered an awful lot of attention for being a very introspective and protectionist I think there was some Expectation that mr. Trump would tone down his rhetoric Once once he got his hands on the levers of power that doesn't appear to be the case And I think there could be some Disappointment being reflected certainly in the currency market We've seen a sell-off in the US dollar, but we've been we've seen a weaker dollar for quite some time Over the course of the past few days and weeks the dollar index has been on a slow slide Lower over the course of the past two to three weeks in any case and that's I mean and that's that's very well reflected. I think in the behavior of The dollar index which we can see On my Bloomberg chart here, which I'm just about to bring up to give you an indication Because you've got we've got slightly more history on that and I think it I think it bears it out It bears it out quite nicely Looking at that there does appear to be some evidence that we're We're in the process of potentially rolling over on the dollar index and I think that does have implications For the major currency pairs as well I think if that rollover continues then ultimately we could see a higher euro We could see a higher cable And we could see a lower dolly and and certainly some of the price patterns That I've been keeping an eye on over the course of the past few days and weeks would appear to suggest that potentially We could well have seen the bottom in the cable bottom in the pound And that in itself has implications as well for the footsie 100 which has pushed to record highs over the course of the past Couple of weeks since since since we broke above those previous record highs at 71 20. So When I look at the dollar index Keep an eye on that hundred level because I think that could be particularly important in the context of Further further gains for euro dollar further gains for cable and further losses for Dolly yen now earlier this morning. I posted a note Which I tweeted out it's on the website and talking about the correlation between the UK 100 the footsie 100 and the pound against the dollar and I talked about and this is one of my favorite indicators It's the it's the engulfing candles or the key reversal day bullish and bearish engulfing candles So I'm going to start here because ultimately I think this is one of them It's been one of the key movers thus far this year. It's been the footsie 100 now since we broke above the October lows At the end of last year. We've pretty much gone one way within the UK 100 the footsie 100 We're peaked just above 7300 since then we've slowly slipped lower Now if we change that to a weekly chart that gives us a much better idea of What the key levels are on the footsie 100 and for me? It's the key support, which is basically where we've bounced off today Is 71 20? It was also the previous peaks here in 2015. It was the peaks in 2016 before we broke through it At the end of last year the beginning of this year now this candle here is The one that is really drawing my attention. It's a key day reversal because we've made a new high We've we've we've opened near the highs, but when we've closed Lower so it's this particular area here now that on its own It's an enough to make me overly bearish on the footsie But what has peaked my attention and I think this is particularly important is what's driven this rebound or this rally in The footsie 100 over the course of the past few weeks. It's been the decline in the pound So what we're looking for here is evidence that the pound has either got further to fall or It's starting to carve out a base and potentially looking to rally now if the pound starts to rally That's going to limit the upside or any further upside for the footsie 100 So on that basis, I'm a little bit cautious about being overly Aggressively long the footsie 100 having said that as long as we hold above 71 20 Then they're the prospect for a short squeeze back to seven thousand two hundred seven thousand 250 is very much on the table, but the oscillators starting to look over ball We've posted a key reversal on the footsie 100 So now what I'm going to be looking for is some form of not confirmation But further evidence that potentially we could see a little bit of a weakening in the footsie 100 So let's go over to the cable because that is equally as important in the context of where we go to next Now this is a daily chart This is a daily candle chart and obviously this is the very sharp rebound that we saw on Monday and Tuesday of last week the Brexit rebound Theresa May's speech a confirmation that the UK is going to come out of the single market and Potentially the customs union as well. We've also broken above this series of highs through here. We've broken above the 50-day moving average which has acted as resistance and Support in equal measure over the course of the past Two to three months now as long as we hold above this 50-day moving average and stay above this series of lows here See these three days here one two three That there is going to be a key area of support if we're not able to sustain this move higher That level is around about one twenty two and a half So you've got three successive days where the pounds held above one twenty two and a half We've now come higher, you know the early part of Monday We need to sustain that move higher further evidence if if if someone needed is This candlestick here. We posted a key day reversal on cable. We opened lower We haven't been able to push lower sustain those moves through one 1980 So there's a potential double support there with a potential double bottom with a top at one twenty seven ninety five So for me that suggests that if we can break this move higher through one twenty four forty Then potentially we can go all the way back to one twenty eight on the pound against the dollar If we go back to one twenty eight on the pound against the dollar And I think that will potentially put further pressure on the footsie 100 push it below that seventy one twenty level and push it down towards 50,000 so what we've got here is we've got key weekly reversals on the footsie 100 Which is potentially bearish we've got a key weekly reversal on the cable, which is potentially bullish which indicates that Either we're going to get further dollar weakness Or we're going to get further sterling strength or a combination of the two now We've got the Supreme Court ruling tomorrow twenty fourth of January on whether Theresa May can unilaterally trigger article 50 To begin the process of exiting the EU now in December MPs debated that particular course of action and Irrespective of tomorrow's outcome while it could introduce an element of volatility to the exchange rate I don't think tomorrow's ruling will slow down the potential for the triggering of article 50 By the end of March if the Court ruling insists that ultimately Parliament has the final say in terms of whether article 50 gets Triggered then what will happen is that the government will bring forward a bill to Rubber stamp that very process and given some of the mood music coming out of Westminster Than ultimately I think there will be a majority in the Commons to push that through yes There may be to some dissent in conservative and Labour ranks, but ultimately I think that will go through I don't think it will introduce that much in the way of volatility In the pound against the dollar we may see a dip back to one twenty two and a half and that will be the only reason I would revise my Slightly bullish outcome for the pound against the dollar is if we go back below one twenty two and a half I'm not of the opinion that is likely to happen But as with anything with currency markets and financial markets never say never Because we've found out to our cost that over the course of the past 12 months That the consensus view isn't always the right view certainly no one expected Brexit and no one expected Donald Trump and we're faced with both prospects as We speak and certainly we're only in the third day of a Trump presidency Not taking bets on how long you'll survive But certainly I think you've got a base your analysis on the prospect that he probably will be able to survive for years Even if he doesn't you've got to basically work on the basis of the facts at hand and at the moment this price action is telling me that the market is potentially short with sterling and the The sensible trade would be for the moment to keep your shorts Quite small because the potential for a short squeeze is quite high given where we've come from and Historically how the pound has reacted in the past in 1992 Black Wednesday the pound dropped quite sharply From September 1992 and it bottomed out in around about January of February the following year It was a similar sort of thing in 2008 as well We had a sharp fall in the autumn, but the pound bottomed out in and around the Beginning of winter and the beginning of spring the following year So on a seasonal basis after sharp declines the pound does have a tendency to find a little bit of a flaw as it as we come into the beginning of a new year so That's that's very very important to bear in mind given the fact that we were unable to take out that 119 80 level So I think the the rebound that we've seen in the dollar thus far this year could find It difficult to sustain given the fact that mr. Trump has already announced that he's going to renegotiate Looking to renegotiate the North American free trade agreement is withdrawing from the Trans Pacific partnership They're the first policy pronouncements of quite a number of policy pronouncements that we could find Coming out into the into the headlines over the course of the next few weeks and that uncertainty I think has the potential to weigh on the dollar now obviously the Mr. Trump is running up against the Fed Federal reserve is due to meet on the 1st of February next week for the second FOMC meeting. I think of Actually the first FOMC meeting of 2017 In the aftermath of its December rate rise and we've certainly heard an awful lot of chatter From various Fed policymakers over the course of the past couple of weeks That leads us to believe that potentially we could see three rate rises this year now That may well happen But I think it's unlikely to happen any time in the first quarter of 2017 because of the uncertainty Surrounding what mr. Trump might do in terms of policy over the course of the next few weeks So certainly I think there is no press conference for the Fed meeting the first Fed meeting of this year So ultimately we'll have to make do with the statement Certainly some of the comments from Patrick Harker that we heard late on Friday night Would appear to suggest that there's no rush to raise rates at this point in time or raise rates further at this point in time So certainly I think We're not going to get anything before March and ultimately we will then be data dependent and really then it becomes a matter of What mr. Trump does with Barack Obama's legacy and we'll find out what? His legacy will be when we get The first iteration of us fourth quarter GDP on Friday this week That's expected to show a minor slowdown from the 3.5 percent annualized number that we saw for q3 That's expected to come in at 2.1 Percent so the key question I think is what's going to happen with President Obama's legacy We're already seeing the US economy slowing down in q4. I think the big question is by how much so What is this potential dollar weakness mean for euro dollar? Well? Those of you who've been following my chart forum updates Which can be found in the market market pulse section of the platform? Will know that at the moment? I think euro dollar has the potential to trend a little bit higher It's running into resistance at this pullback line that I talked about last week from the breakout that we saw at The end of last year the break-lower through the long-term uptrend line from the all-time lows that we saw at the beginning of The noughties. That's the trend line from the all-time lows 82 30. We've broken below that We're still currently below that. We're now pushing back towards the top end of that line on The on the on the daily chart on the weekly chart at this moment in time So we're finding a little bit of resistance just about just at the highs of the day There is support around about 107 20 We could slip back lower on euro dollar It's quite feasible that we could get some weak economic data out tomorrow We have got French and German manufacturing and services PMI flash PMI data for January That's far from the French and German economies We have seen a pickup in economic activity certainly Mario Draghi In his comments this morning suggests that he's still a little bit nervous about the strength and the resilience of The European economic recovery certainly his comments last week left people under no illusions as to what his views were with respect to further stimulus The ECB still remains committed to adding further stimulus throughout the rest of this year up against a whole raft of political risk We've got Dutch elections. We've got French elections We've got German elections and let's not forget the problems in the Italian banking sector haven't as yet been Resolved they are still an ongoing process and the EU is still talking to the Greeks about the potential for Its new bailout package and there's still no buy-in from the IMF on that So there's a raft of political uncertainty Feeding into that which could send euro dollar back to this uptrend line from the lows that we've seen thus far this year The the oscillator is starting to look a little overbought. So what we could do is we could get a little bit of drift back down towards Towards the 107s and the 106 70 area Roundabout here. So I think if you're looking at euro sterling in that context and I did get asked a question on that I'm going to cover that now I think if you're looking at euro sterling and I talked about this last week and the potential for the euro A lot of people were calling for euro sterling to go to parity Quite honestly, you know, I don't know where people get these projections from I think that's highly unlikely and that's really borne out. I think by the fact that When you look at this daily chart here, you've got we opened higher we opened higher and we weren't able to sustain it We get higher. We've given it all the way back and at the moment We're testing a very very key support level and around about the lows that we saw last week around about 86 10 86 20 That's not the level. I'm looking at the level I'm looking at as this series of highs through here around about 85 80 Yes, we did spike through that or towards the end of last year, but that's far I think we've got some decent support around about 85 75 85 80 So I think if we do get a break below the 86 10 level that we saw in the middle of last week That could only take us down to 85 80. We could get some decent buying interest through there So what I'm looking for with respect to euro sterling is not a break of 86 It's a break of 85 80 and that should then bring us back to this trend line that we saw From the lows at the beginning of December If you actually look at this euro sterling chart on a slightly longer time frame You've also got a very very big big supported 83 now This to me looks like a potential head and shoulders reversal starting to form on the on the weekly chart We at the moment haven't formed the right shoulder yet So it's still a work in progress, but certainly on this basis. We have a left shoulder here of around about 87 10 Yes, we did spike through it in the aftermath of the leaking that Theresa May was going to talk about a hard Brexit, but we haven't been able To actually consolidate that move higher which then suggests to me that ultimately any rebounds in euro sterling I'm probably going to find it tricky to get back through 87 20 Which is essentially the height of this left shoulder here? You ratchet it all the way across that brings us in around about 87 20 87 30 for any pullbacks in euro sterling Things as long as we stay below 87 20 87 30 then the potential for this right shoulder here It still has some decent potential to play out now. This is a weekly chart This is not going to happen overnight. This is going to take a while to form But ultimately as long as we are able to stay below 87 30 in the short to medium term Then I think we could well drift back to this series of lows this neckline Through the 83 level through the 83 20 level and potentially break lower now if we're able to do that Then we could potentially come all the way back through here to these lows that we saw in mid 2016 at 75 25 That is the ultimate That's the ultimate View that I have on euro sterling. I don't buy into the narrative. We're going to go to parity I just don't think the problems that Europe is facing. I Can't see that happening in the fact that the European Central Bank It's going to find it very very difficult To tighten monetary policy at a time when southern Europe still remains a very very weak Yeah, you can talk about German inflation going to two percent two and a half percent or what have you and certainly German inflation is pushing higher But the political Imperatives surrounding a tightening of monetary policy for the southern Europe make it I think very very difficult For the ECB to even talk about potentially tapering much before the end of this year. So Well, I have to see that help how that plays out. I certainly think inflationary expectations here in the UK Are likely to drive the Bank of England to talk about the potential for tightening tightening monetary policy more Than they are for the ECB and that for me is really what drives this putting political risk to one side for one moment Just look at what the price action is doing and the price action is telling me that people are Respective of what your view on sterling being a basket case The price action is telling me that at the moment the risks are evenly balanced with respect to euro Sterling, but certainly it's finding it very very difficult to rally much above the levels that we've seen thus far Through the middle the end the end of September beginning of October It hasn't been able to sustain that momentum and ultimately when I look at the pound against the dollar Then I think the potential for further gains there outweighs the potential for gains in euro dollar and that means lower euro sterling Okay, so Also brings me on to dolly-yen because certainly I think The weakness in the dollar that we've seen thus far would appear to suggest that that we do have potential for a slightly weaker dolly-yen But here the picture is less cut and dried simply because the dolly-yen price is very much predicated on the direction on US bond prices and bond yields in particular and I certainly think the potential for higher yields In the US is likely to act as a bit of a flaw on dolly-yen But certainly I think the downside is probably going to be limited to round about Round about where just just below where we are now So I think we could potentially see a retester around about 112 But ultimately what we're seeing thus far is it's finding the price is finding it very difficult on this four-hour chart This is a four-hour chart that we're looking at here It's finding it very very difficult to get back through this Downward sloping cloud chart that I've got on on this particular dolly-yen chart Also, we're finding that the moving averages are starting to roll over a little bit Which suggests that upward momentum is starting to diminish a little bit We did see a bullish reversal here. We haven't been able to hold on to that That's not to say that we're going to come back down here I think we could actually find that we trade in a range between 115 20 and Currently where we are now. I think it when we when we look at the weekly chart It's very very difficult to sort of gain any clear idea of where dolly-yen is going to go to from here Ultimately, I don't expect it to go racing away massively higher But I don't expect it to drop particularly sharply either and I think that's really borne out in this dollar Swiss chart Which is on a very very key support level as we speak if we look at this daily chart here on dollar Swiss There is potential for a little bit of a rebound from 9970 area Simply because we've got these series of highs all the way through here 9960 9960 there and there so there is a little bit of potential for a bit of a rebound in dollar Swiss Potential potentially a little bit. We're probably near the lows in dollar Swiss probably near the lows in dolly-yen but I think certainly in the context of where The pound is we could see a little bit of dollar weakness dollar weakness there. So Maybe buy some sterling Swiss if you're feeling that way inclined looking at sterling Swiss Looking at this particular chart here We can see there's a little bit of a base around there as well on the weekly chart. We look at it on the daily chart a Little bit of an uptrend in play there as well So maybe we could get some sterling strength and some Swiss weakness we'll see Okay brings us on to US markets because the thing the reaction of US markets was actually surprisingly resilient given The other mark European markets reaction to what mr. Trump had to say ultimately what are the prospects for US markets and to to my mind it's very difficult to say because when we look at the price action here It's been very schizophrenic down one day up the next down one day up the next and down again today I think for me. This is about levels for US markets and it's pretty much going to be pretty much part of the course all the way across if we look at say 2250 2260 on the S&P I think there's going to be some decent area of support through there if we break through that Then obviously all bets are off the next low is really around the level that we saw at the end of end of end of End of December around about 2230. I think that's probably the best way to trade US markets and the S&P in particular if we break below 2250 we'll probably get a move to 2230 similarly For the Dow Jones or the US 30 We have very solid support around about 19700 we had a brief for a we blow that at the end of last week Towards the end of last week, but ultimately proved not to be sustainable If we take it all the way out to the daily chart we can see that there. It's a similar sort of Playout if we do are able to break below 7 19,700 then we could see a similarly Significant move lower over the course of the next few trading sessions But again, you know the direction to travel here doesn't speak to particularly Sharp move higher, but neither does it suggest that we're going to ratchet lower particularly sharply either European markets slightly more of a mixed bag. I think this is very much going to be dependent again It's amazing how the the DAX has performed in a fairly similar way to the S&P so around about 11,400 and 80 some decent support there in the DAX But on the flip side of that, it's really struggling to really make any inroads much above 11,670 which which I've drawn through this series of peaks through here So so again, you know, it's very very schizophrenic down sharply one day up the next down The next up the next and down the next there's no real clear direction here on The DAX so again, I think it's just a matter of playing the range on the DAX One thing I have noticed with respect to risk has been how well gold is performed So that would appear to suggest to me that People are a little bit nervous, but I would again be reluctant to be overly long of gold at these sorts of levels Simply because of the fact that we're we're so close also to the 200-day moving average That's not to say that we can't potentially go higher But there seems to be some fairly decent support in and around that $1,200 an ounce level so unless we go significantly below $1,200 an ounce then I think gold is probably going to hold up fairly well between 1170 and 1202 So again, it's all about levels Crude oil crude oil again finding a little bit of support I think a large part of that is done to the back of a weaker dollar But again at the big level to keep an eye out for on Brent crude is this series of loads through here And again, I talked about this last week $53 a barrel it's found a decent area of support in and around that level It's going to take something substantial to push it below that maybe we'll know more in a couple of weeks time when we get the Production numbers from OPEC to see whether or not they've been cheating at the moment There's no evidence that they have but if history is any guide You can bet there's probably been a little bit of sleight of hand when it comes to Messaging the output figures But we'll only know When the numbers come out, but certainly this pattern here does have all the hallmarks of a potential topping pattern Potential triple top, but we'll only get that play out We've got the top there the top there and the top there a series of loads through this We'll get we'll only see that played out if we get a break below this series of loads through here It's a similar sort of story on WTI and the WTI contract that we've got Here again similar play out with the support slightly below Around about $50 a barrel, but again $4 down move could take us back to the mid-40s Trying to keep an eye on what else haven't I covered their bond markets probably again It's going to it's a it's a slightly different It's a slightly different story here, but certainly I think inflation expectations are likely to play into the potential for a rebound in Bond prices, but the yields are bottoming out do appear to be bottoming out on the 10-year around about 225 so certainly keep an eye out on the prices this series of highs through here if we get a breakout Higher in bond prices then yields are probably going to come off I still think the direction of travel for bond prices is lower and For it given inflation expectations. I really don't see how The disconnect at the moment between bond yields and inflation can continue But again, that's a story that's probably going to take a lot longer to play out and it is in currency markets Okay, so I think that's it for this week. I think the key things to keep an eye out for this week obviously further Further narrative for mr. Trump. So it's probably worth following him on Twitter. I do Not because I like to hear what he has to say or I'm interested, but ultimately if it's going to affect financial markets I want to know We've got UK Q4 GDP coming out on Thursday. We've got US Q4 GDP coming out Friday. Next. We've got next week We've got the FOMC We've got the Supreme Court ruling tomorrow and keep an eye on those key levels on the FTSE 100 a 71 20 and obviously the Cable highs the potential for a move higher on the pound against the dollar Otherwise, that's it for this week. I will obviously Post this online. So if you want to listen to any of it back, please feel free to do so Otherwise, thanks for your attendance ladies and gentlemen, and I'll speak to you all at the same time same place Next Monday. Thanks very much for listening and talk to you all soon