 Okay very good morning Friday 5th of July. I hope anyone in the States I know Jose Stubbs is watching. I hope you're not too hungover Jose and you're ready for non-farm payrolls later but of course non-farm payrolls coming out later that is the main focus of today's session so my plan here is I'm gonna gonna whip through a couple of headlines to be aware of and then what I'm gonna do is a more kind of thorough insight as to what we can expect for non-farm payrolls and how the market might react under different circumstances. Again I will be doing though a full kind of briefing ahead of the actual release and we'll probably do that about half 12 in good time where we'll revisit this but quick look at the charts this morning one thing just capturing my eye here is the DAX just a little breakdown the DAX breaking the the range after obviously a very quiet day yesterday and you can see that that level is quite an important one actually the DAX is just broken now that being the 1st of July low you can see these other areas of support that have held resistance there as well back on the 3rd and this is quite typical I guess of DAX movement not that there's a great deal of of new information coming out this morning one thing we did have was let me just transition my screens these are levels that's just looking at in the DAX here so this is the 1st of July and you can see that just breaking so a bit of an extension of losses here quite quickly as you might would have seen on my screen just then the German factory orders this morning were weaker than expected albeit I wouldn't say shocking we have been much lower in February of this year and it tends to be a very volatile data set but the number in itself came in at minus 2.2% expectations were for basically flat so a little bit soft maybe that acting as a bit of a catalyst but if anything and one thing we're definitely going to discuss with non-farm payrolls it's almost as if the worst things gets the more positive it becomes for equities because of this idea of central bank support but I'd say this is probably more technical led DAX you can see the WIC now reversing as probably a lot of stops just getting run on the back of that breach of the level there just targeting down around the the S2 US index features just seeing a slight move in sympathy with that the S&P just edging below the 3000 level which had a bit of a test it looks like in the the overnight session obviously very quiet yesterday markets in fact closed of course in the US short and electronic trading hours and you can see we're just kind of coming back down to that range that 3000 level currency markets very quiet Dixie a touch stronger but major pairs broadly flat gold as well not doing a great deal at this point perhaps a trend line just keeping an eye on there that I'm sure Sam will have a look at forming over the last 12 hours or so the US 10 year just unmoved as you would expect as we just await payrolls and oil roughly the same so let's get let's get into those headlines and let's have a look at things then we'll look at payrolls so German factory orders as I said we can expect it this morning the other headlines of note are that China's reiterated its demand that US must lift all tariffs so you remember as I said yesterday bit of more PR than I think actual credible threats Trump renewing his calls that China amongst other countries are currency manipulators but I think as I said that's just a bit of a management of the July 4th holiday for the general public in America from the president and so we revert back to where we were which is a bit of a stalemate and actually as much as I wouldn't say this is an outright market moving headline I do think there's a little bit of a reality check to the G20 positive response that we've had because I don't think the US are going to meet this demand from the Chinese what the Chinese want is that look we'll engage in talks and we're happy to get a deal done but it needs to be conditional on the fact that you need to remove all of the tariffs that are currently in place and America aren't going to do that that would be too much of a removal of the main credible threat that they have over China at the moment so I do think that this kind of puts us back at where we were which is a stalemate situation and maybe a little bit needs to come off the table in reflection of the kind of run-up in a rally that we've had this week in the equity market obviously as a catalyst payroll could definitely add to that the other thing is talking about this yesterday to a few of the guys here about how it's amazing the news narrative has shifted and it's not the tensions in the Middle East have gone away far from it they're still definitely simmering in the background it's just that the markets been so focused on other issues the Fed in particular and this idea about the rate cut how aggressive they might be and also obviously the G20 but this is still happening at the moment and what we've had yesterday was UK Marines seized a tanker which is renewed diplomatic tensions with Iran basically this was a super tanker bound for Syria actually it was going round instead of the Suez because this particular super tanker carries roughly two million barrels of oil is my understanding so it's it's huge so by default then from a transportation route it cannot travel through the Suez due to the size so it needs to go around the Cape of Good Hope circumventing then Africa going all the way around back into kind of towards the Mediterranean into Syria basically that that trip from Iran to Syria is 14 and a half thousand miles it's quite incredible but obviously you think of the cost implications of this and and really this is a byproduct of the fact that Iran at the moment is really struggling to to sell its oil I think its production has fallen down the last 12 months by a circa one and a half million which if you think about it that's that's about almost a third of its entire supply that it's pumping on it on a daily basis so yeah more seizing of these tankers causes more friction and so although oil's not moving it's just a you know something I think oil traders should still be monitoring and be mindful of because it only takes you know a couple of episodes in the iranian revolutionary guard in certain strategic choke points whether it being the Strait of Hormuz or the Bab El Medab or wherever it might be and you can see quite a pop in prices moving on the other thing is Bank of Japan they continue to beat the dovish drum deputy governor saying won't rule out any option if more easing is needed talked about the idea of taking interest rates further into negative territory is the end reacting no because as your if you've watched these briefings you'll see every probably other day there's a member of the Bank of Japan coming out talking about this idea of doing further policy easing so it's unsurprising okay moving on then let's talk a little bit about non-farms again I'll give you the kind of overview we'll do a more thorough insight on trading live.com well go in the chat room and I'll talk about this in much more detail but main thing is here first of all as the headline suggests usually if the way the kind of the dates lie a lot of bond traders will be well I don't really want to come in after 4th of July in America how it typically works it's not that they leave the country but they do have to travel and so in that sense they want to have an extended long weekend so they basically take Friday off but the point being here is that they may need to rethink that strategy because the last time that there was a non-farm payroll report it came out after what was then 4th of July on a Thursday payrolls on a Friday this happened so it's 2013 July 5th when the jobs report came in stronger than expected it was a beat on the headline and it was a higher average hourly earnings figure and the yields spiked aggressively so you know if everyone's not in the marketplace what this can lead to then as a function of volume and liquidity it can create or exacerbate price movement so that's that's one factor I think that definitely needs to be taken into consideration when it comes to today the other thing of course is non-farm payrolls as far as the job creation number has got a little bit more interesting normally we're kind of almost entirely focused on the average hourly earnings because of this overarching attention on the inflation situation as being the main factor of what what forces the Fed's hand in their decision-making when it comes to setting monetary policy however I would say things are quite quickly moving in a direction where the entire US economy is showing some signs of let's say late business cycle fatigue and overlaying then some uncertainties ongoing with trade war then we've had this low unemployment situation but the fact is is that actually maybe now the fears on the trade war in the future are starting to feed through into more consistently slowing down signs of the US economy now here we had last month 75,000 big downside miss you remember ADP was the same payrolls came in way below expectations one thing to consider the Fed don't react to one number and one number alone they tend to look at things like non-farm payrolls as a headline figure as a three month average so a lot of people are talking about this idea well you know 75 last month what if it comes in at a double digit again this month surely that's gonna fuel the flames of this idea that not only are the Fed gonna cut in July that they're gonna commit to three cuts in the rest of this year 2019 and in fact they might even go for a 50 basis point cut in six weeks time or less than that excuse me four weeks time at the end of the month so I think actually rather than just focusing outright on that average hourly earnings number that still will be important but I think you still might get more you might get this time a bit more payoff on the actual headline figure in itself will become important now trying to ascertain what that headline figure is going to be is really about then going back and thinking about what have the job indicators pointed toward in terms of a healthy or a worsening job situation in America and this is when we go through the various different data sets that we have in the build up to the the labor report from the government so challenge job cuts layoffs were actually down which is a positive factor the weekly jobless claims really have been a non-event they've four week averages remain pretty much on track as it has been no real fluctuations ISM manufacturing and non-manufacturing have have have give mixed signals the one thing I would say though is that the non-manufacturing PMI employment subcomponent fell by 3.1% whereas the manufacturing employment component only rose by 0.8 so in the service sector it was quite a dramatic fall from the prior month where it's only a slight gain in the manufacturing side University of Michigan you know pretty much standard fare nothing really to take out of that reading we've had in the last month the conference board consumer confidence indexed falling by 13 points to just above 120 level so that was a negative ADP employment that's probably the one of which most people traditionally give the greatest waiting to and that was quite a big disappointment 102,000 against the 140 expected the second consecutive severe disappointment so that's quite an interesting point there remember we're looking for consistency within the non-farm payroll was 75k we had last month and not an anomaly a one-off or is there something more to it the ADP would suggest the latter because ADPs now had back-to-back consecutive severe disappointments against market expectations the job job openings actually was a positive though so all in all it's not a outright you know doesn't make you on the balance of this information think well even though payrolls expected at 160 we're gonna get another 75 print because these points are a lot more mixed than that there are a couple of positive signs challenge job cuts the manufacturing PMI and ISM and jolts would buck that trend but on the balance you would say you'd be looking for a downside figure if anything on the headline number now one interesting thing that I did see was this and this would fly counter to this logic that we've just discussed this is because analysts at Goldman Sachs are actually looking for a number above market consensus so consensus on the street is 160 GS is going for 175 they said that actually the number that came out last month does not believe the Mississippi River flooding or bad weather more generally can explain the last month's job growth slow down instead it's preferred explanation at Goldman's is a modest deceleration in labor demand coupled with seasonal labor supply constraints now the reason why I put this chart up is because what Goldman's are saying is that if that is to be believed the June arrival of students and recent graduates into the labor force should support a reacceleration in job growth that would be visible in today's report so if you think about it all the students finishing their studies they got to go back into now the workforce that should then give an artificial spike from a seasonal point of view and the point they're making is that this has happened in previous years so you know how much credibility do you want to give to that well that's Goldman's take that doesn't necessarily mean that they're right and in fact I just seen something that you know could be useful which is what are exactly all of these big firms going for well look there's there's your there's your list if you wanted to know who's the most optimistic on the street BNP are going for 220 city up at 194 so let's just put this into context BNP Paribas the French Bank are expecting 220,000 so definitely if you believed in this idea like Goldman's that maybe there's a seasonal factor maybe it's a one-off last month and we were expecting then almost pent up there's going to be a snapback of job creation in this recent month then you know BNP city are right up there you know circa 200 on the downside Scotia JP credit Suisse de Moura they're all below the street estimate which is more like 160 so yeah quite quite a wide split you would say that I think the actual survey estimate range is about 100 to 220 at the high is what we're looking at so there are more bearish probably smaller research houses even looking down like Scotia down at 100 importantly let's talk about more about how the market might react and I'm going to use the equity market as a good barometer for this so I think when you're interpreting non-farms today you need to put into context the rally which we've had this week now this is that circle here the ellipse this was the gap up the almost the perfect gap fill there and the re-entry you know I know a couple of people would have got hold of that absolutely technically perfect to that point the markets then gone up gone higher we kind of again technically you can see how this you know when you're playing these kind of this idea of you know picking sound entry points for the rally up market comes up you can see on the daily r1 previous high gets rejected because really that's the end of the Wall Street session really big rally up to the closing bell you get a bit of fatigue in the overnight Asian session where does it go to again technically sound on the pullback comes back down to the previous high that we had markets move back up we have first test second break r1 back to the same level which was that level again we push up and so where do we target on that acceleration well that's when you've got to say we're going to three thousand we hit three thousand and as we've discussed before you get that push and consolidation that tends to be the way of which the market moves push consolidation push consolidation same in the oil market on the moving higher and inverse moving lower so yes I'm quite you know if you were looking a little bit more perhaps medium term but even just being patient and waiting for these more key levels there's been some nice setups throughout the week in playing this move higher in the in the S&P but the point comes where we are now and you know we're up around three thousand now we've built in what I would say is this idea of dual fold positive outcome on the freeze on the the trade war stuff at least for now and also this idea that the Fed are gonna come and they're gonna come in heavy and start cutting rates multiple times now this is meant that the equity market has rallied it's almost like a perfect storm you've got easing of trade tensions and yet that can help then people reinstall confidence the economy can pick up supported further by the idea that you're gonna have a extension of a low interest rate environment because the Fed are gonna take rates rates back down towards the lower bound now problem is here what if you get an exceptionally strong payroll number what if we get a 250 what if we get a 250 and average hourly earnings are really strong all of a sudden that's counter to what everything else has been telling us about the US economy everything else has been indicating well maybe the Fed are right to want to cut maybe then this idea of 50 basis points isn't that that crazy after all but if we get a really stellar jobs report that dispels any notion that there's issues here potentially surfacing on the labor front if wages are going up well then maybe wages and in future inflation isn't so tepid as we might thought and therefore do we get quite an aggressive pullback actually in the equity market on the idea that this number needs to be unwound a little more i.e. this 30% probability of a 50 basis point rate cut you know if jobs creation is booming and wages are growing strongly why do they need to cut 50 at this point and so as a net result the way equities are responding to this you know do we see that pullback you know and a pullback at this point I would say areas that look interesting I mean the first port of call probably would be down to your pivot then you've got that previous high on the third so if you were scaling this down you'd be looking at these areas here here and the bigger level of course being there given its strong resistance and support that it's provided in the weeks price action so I don't think that that's unrealistic under those conditions I think certainly we could get get down to that point but how about we flip it the other way around what if non-farm payrolls if we go back to this chart here what if non-farm payrolls comes in at 50k and what if then that that cements then enough evidence you would think that the Fed have got to start reacting to this idea on an average basis this isn't an anomaly this is a actual occurring pattern of weakening state of the US economy by companies now who are reticent to take on new employees under the uncertainty emanating from the trade war that means then that also potentially wages could start dropping off and if that is the case well we get the reverse this numbers got to go up and actually forget about a hundred percent credibility for the rate cut at the end of the month well we know that how about it's now a real credible force that it could be 50 basis points it's almost if the worse it is I would say you've got to think about it this way and this is a little bit strange to think about my logic perspective but if non-farm payrolls is bad I think actually you get a little negative reaction but relatively contained but if it's really bad actually the equity market rallies because now the Fed have got to come in heavy-handed and start cutting policy and therefore you might get initial dip and then a rally and then we break the these highs of the range that we've had over the last quiet range bound independence day impacted area 04 we target up at the all-time high and then we punch higher because then the market will buy into this narrative that hey the Fed have got a got a cut they got to do it I got to do 50 now in that situation obviously currencies the dollars gonna gonna get hit and the dollars been rallying if anything and in recent trade in the last morning let's say in last couple of hours so I'd be looking for a full reversal of that move the dollars got to reprice this idea of more aggressive rate cuts currency pairs like euro dollar and cable would spike higher the the yields would plummet so treasury prices would rally breaking our one no problem but again all on the idea if we were to get a real catastrophic number by that I mean not only have you got to see a job number sub 50 remember expectations are for 160 so I'm talking about extreme outlier here but it need to be supplemented with low average hourly earnings and also maybe an uptick in the unemployment rate and the downward revision to the to the previous month and a negative two-month net revision so again for these types of things to play out in that type of severe market reaction this is the thing with payrolls it's a multiple is a multifaceted release and you need all of the chips to kind of fall in the right place for that type of thing to play out possible but normally a bit more mixed in that regard so look I'm not going to go any further than that otherwise we could be here all day talking about this and I'll go over things again in more detail when we do the more thorough preview an hour before the release so let me hand you over to Sam and he can look over a couple of charts for this morning otherwise I'll wish you guys a very good day ahead good luck for payrolls and have a fantastic weekend thanks hello everyone happy non-farm payroll Friday and of course hopeful those who celebrated the 4th of July are feeling okay I put some some charts into into the chat room of the levels that I would be looking at today with the the celebrations probably still continuing now across the pond wouldn't necessarily expect there to be the most volume traded into the morning but with non-farm payrolls it certainly like I was saying could be quite interesting especially if it is a really bad or really good number I'm just going to start with the the currency so I'm going to quit look here at the euro bringing in a little trend line break that we had this morning you can see yesterday's price action was was limited as you'd expect we just had a little break down there of this trend line and the nice retest so okay technically looking all right next sort of level to be aware of having broken the load of the day where you can see some previous or you might not actually look at the camera there's some previous resistance here obviously acting as potential support before we could then get down to the s1 level which of course on cqg will remain the same as yesterday due to the bank holiday to the upside this trend line quite well respected from yesterday into this morning as well in the early hours but keeping a closer watch on that point as well and then midway through that you have a breakdown this morning at 1340 that other have a close watch as well to the upside obviously quite a lot of resistance around pivot could be something to focus on later in the day and of course will come on to the mic ahead of non-farm payoffs to discuss some of these points but it does seem that we have broken out of this little pen and 1329 and a half certainly on the futures would be a next level of interest I'm gonna move over to the pound and you can see just how tight that range was yesterday but just like the euro we're just coming to the back end of this this trend line here didn't want to go just yet you could argue the trend line actually from both the the lows of yesterday and the low the day before that matching up at the same point on the futures around 126 1213 that's contained for now but a break of that could be one to have marked up and then to the upside you can see price getting squeezed as well so all from the highs here to the lows price getting squeezed in and the idea would be if we do get a decent break to target down towards those lower and higher points of the the price action getting squeezed as well how about relative low volume in the morning and certainly historically ahead of the non-farm payrolls there's not that many great trades in the in the European session to be aware of Aussie dollar yesterday could absolutely understand people can look into it to get long previous high and it gets it worked whether you could have got out just before that previous low I guess if you using that zone you would have we're now just testing the back end of that range to the downside holding firm you can see probably best opportunity here would be waiting for the break lower or higher however we are again just getting squeezed in from both directions here for the Aussie if we were to come down through 70 30 you've got the previous highs of the afternoon of the the morning of the first and then the afternoon of the second and morning of the third to be aware of where down at S1 looks like a pretty good point to get in however I'll just be wary of how we get to S1 if we were to break this trend line with some force it's not going to be too interesting to then get in as it could lead to a overall change of sentiment there as well on that trend line break the yen just have a quick look just coming off a bit the dollar up a tenth of a percent but a nice trend line here as well I like the look of just from those highs you can see getting pushed down following that trend so nice break of that could lead to a good opportunity to get long towards the pivot however we have of course broken through yesterday's low and the low that we have overnight on the second next key level I'd be monitoring I mean could even be all the way down towards S1 where you had the the opening sort of prices that we had on Monday morning or Sunday evening to we say that gap open so be keeping a closer point of interest around this S1 and that level where this could go down to it would only be disappointed in this trade not going lower if it got above this area here yesterday's low and the overnight low from these second as well moving over to equities we are just drifting a bit nice little trend line break early hours you can see nice push through on the volume following the the Dax move lower on that almost making down to the lower point of the day I'd say not a bad place to look to take some profit around that area pivot remains as it did yesterday a key point of interest around 2992 below that 98 and then those previous all-time highs you can see quite well respected and then to the upside of course you could get excited if we were to break back above that trend line and 3003 up towards that all-time high on the futures trading at 3006 incredibly of course having a look over to oil we just drifting lower here as well when we broke out this this range of bits you can argue probably would have got stopped out a couple of times if you wanted to go too aggressively around half seven we have now broken but not by much not by much 11 or so ticks also quite a steep sort of pendant here as well getting squeezed from both directions if volume was there s1 to be the target and then looking really at all these lows from the previous day well two days ago on the third and the other night second around 56-23 looks like a good area of support or a target to get through 57-24 high of yesterday midday quite like the look of as an area of resistance and a quick look over at gold to wrap things up again you can see price just getting squeezed in from the upside so break above that could be a half decent trade we just found support on the low that we had on the third so unless that was to go I wouldn't necessarily want to be in a trade unless we get above here or back below here and s1 certainly as it trades at the moment looks quite an interesting level as you do have the high from the second there is well to keep a watch on having a quick look over then the the general picture here you can see that which led to that move lower in equities are spiking through those lows we have snapped back so unless we were to close back below the lows that we had from yesterday in the fourth and then the third where we had decent price action I'd say these would just stall up in the states as well if we were to break through it could be a decent opportunity there as well the pound just pushing down as well so keep an eye on that that bottom trend line likely to be relatively quiet so not looking to be too aggressive but I think all things considered should be a pretty interesting non-farm payroll so you know opportunities in the afternoon but anyway hope you all have a good trading day and an even better weekend