 Okay, very good morning Tuesday 16th of July. I hope you are well a quick overview of what we're going to cover Talking as you can see here a little bit about Brexit I'm going to update a couple of comments out of the Treasury Secretary on When we can be expecting further dialogue between the US and China on the trade talks a little bit about the debt ceiling as well With that looming in a couple of months time some movement as well from Stephen Manchin RBA minutes overnight. What did they say any impact on the Aussie and we've got quite a busy calendar for today combination of Lot of Fed speakers as we were indicating in the briefing yesterday You've also got Mark Carney speaking later on this afternoon, but more broader topics rather than anything explicit But nonetheless the governor will be hitting the tape And then we've also got quite a few important economic data points coming out from the UK From Germany and from the US and the form the last year of retail sales. So before I begin, let's just have a look at The overall charts this morning The dollar touch firmer the dollar index up about one tenth of one percent so I can see both major pairs Slightly lower under performance arguably in the pound having broken through you can see in the center top chart here The range that we're seeing in the Asia Pacific session Cable already moving down to its respective s1 and as you can see both euro dollar and cable as I'm talking right now are printing fresh session lows Elsewhere though the other asset class is particularly quiet US index futures pretty pretty flat very minor positive similar kind of situation likes the euro stocks and the DAX Gold and T-notes pretty much unchanged in the same case at least for now for good futures And WTI crude only down about 14 cents So if anything I'd say a little bit currency movement perhaps a little bit of underperformance in the pound Which is unsurprising as we're going to go through some of the Brexit headlines Also as well as reading interesting article on Bloomberg this morning talking about the month of August and from a seasonal point of view The pound does underperform. I think they were looking at euro sterling in particular in the cross But for the last five years tends to be a generally a negative month for the pound now over laying the economic situation with the political uncertainties and And it does make some sense of why we would be moving to the downsize my fundamental perspective This is the headlines though that we're looking at this morning. Brexit talks get more hostile as EU considers sweetness to deal now a couple things to be aware of here if I run you through the main Gist of the article Stephen Barclay and the EU chief negotiator Shell Barnier they were meeting last week and apparently just given the stance of the Tory Candidates at the moment both Jeremy Hunt and Boris Johnson although one slightly more harder in stance than the other both Have talked about their seriousness of being able to leave With a no-deal exit if the block will not talk and As such again, this does need to be reflected into the pound as the timeline obviously Shortens as we get closer towards that October 31st deadline now a couple things to be aware of here Both candidates as we've been listening to these these hustings between the two Hunt and Johnson both candidates for the prime ministerial role have promised to renegotiate the Irish backstop Obviously that's one of the most contentious issues of the entire deal and has often been the main sticking point why we've remained at this Impasse they both though have reiterated in their leadership debates yesterday that the measure has to go Tweaking it is not enough Does sound rather familiar to to where we were you know just a few months ago under Theresa May and This whole remember when she was getting these votes of no confidence in her about what seven eight months ago that failed It was the ERG Which were particularly prevalent and they were talking about this idea of the backstop But then we couldn't make any progress and I fear now we're kind of going to a similar situation What does that kind of leave us? Well, this is the Updated decision tree and I was speaking to a couple of the the newer interns yesterday about the outcomes for Brexit And the point being is there is really not a lot of clear clarity over which one of these potential end games for Brexit is going to really win out because They're all fairly even whether that is A no deal of which you probably assigned a slightly lower Probability of actually occurring. I think the split across the major banks Goldman's has that assigned at about 15% of the moment. The more is up at about 30 But obviously general election second referendum a smooth orderly Brexit with a transition a general election If we make it to 2022 is looking less and less likely as time goes on but few things here The current status hasn't changed from the EU's perspective. They've said that the deal is is not up for renegotiation However There are early discussions internally over a package of measures that would aim to make it more palatable in the UK So that the next Prime Minister has a chance of getting it ratified by a divided Parliament now the block is wary of offering hunt and particularly Johnson's significant more than they gave May You can kind of understand that because you know if you give an inch They'll take a mile and as far as the negotiation tactics are concerned However officials have said there is still some ammunition left as they held some Concessions back when it became clear that Theresa May was unlikely to get her deals through Parliament Brexit diplomats from 27 national governments in Brussels have been told to be on standby throughout the month of August should discussions between the two sides resume in earnest and They aren't expecting significant movement until the second half of the month at the earlier second half of August that is Definitely it's going down again to the to the wire so to speak but I think actually I Personally think this headline maybe a little bit Misleading yes current talks are fairly hostile, but it's the first time really we've started to hear about Well, potentially the EU may make some concessions the fact that they're talking about that now so early when the deadline is still months away I kind of see that as quite a positive actually although that's not reflected in price this morning I'm talking about the end game here as much as I feel a no deal will not happen if Boris Orhunt can come away with a slightly more improved Version of Theresa May's deal well then perhaps that's the best you're going to get maybe then as it said in the article more palatable for Parliament to then get behind and back so we can move forward with an orderly Brexit Because let's not forget the mandate of the government is still to deliver just that a Brexit So I think that's actually quite a significant thing here that really isn't being looked at too much the fact that the EU is Considering considering these sweeteners at this point for the moment though market seems to be taking its cue from the fact that You know economically the country is starting to fill fill the squeeze in various different measures Certainly evident in the recent PMI series that we had And now the kind of current state of play is one of hostility given the fact that the EU Moment are still not willing to renegotiate Albeit they then according to unidentified sources looks like they might well be so perhaps a good strategy from the likes of Boris to push The pushed a narrative at the moment Moving on elsewhere few other things to be aware of the trade war since the G20 has gone a bit quiet Obviously Trump's been dealing with other issues like being labeled a racist at the moment given some of his Recent tweets at the weekend about some of his opposition but This is due to come back soon enough the Treasury Secretary I said trade call with his Chinese officials likely this week and depending on the outcome of those talks all being well They'll look to them meet again face-to-face Trump earlier said China wants to make a deal as economy slows Trump a little bit critical post the G20 about China not fulfilling its Commitment to buy various different agricultural goods from America of which China obviously imports a large amount of goods However, China has said they have been doing that and there'd be more than willing to do more all being well that these calls Come out with a with a positive outcome To continue to push the negotiation forward. So I would say Keep an eye out for anything more that comes of this issue But quite frankly, I think it's Trump's slightly more sidetracked by domestic issues given some of his recent Comments that he's made which have caused quite a quite sharp reaction in the public The other thing as well, this isn't really being too talked about the moment But it's worth just mentioning so you are aware of it But The Treasury Secretary again in the press talking about the deal to raise US debt ceiling is getting close. I think the By the numbers will be expecting to hit the predefined debt ceiling in the US by not October or November But actually I believe it's September time. So that's not too far away This is kind of a regular thing that tends to come up almost Annually when America gets close to hitting its predefined debt ceiling what tends to happen then as they'll Congress will meet What's Steven Mnuchin is saying here is that there is no need really that or threat of a government shut down Because that is often what can happen here because those who want to be more Fiscally prudent don't want to keep bumping the debt ceiling higher But it almost is inevitable that the debt ceiling normally gets edged a little bit higher Just to facilitate the ongoing working of the the government in that respect So what he's saying is that that's getting close, but a deal is it will be in the making soon enough elsewhere RBA I wouldn't say there's been a particularly sharp reaction in the currency overnight I don't really think this changes how markets were positioned anyway Remember we've been seeing rate cuts from the antipodean Central banks now for some time recent months and the RBA said they're monitoring job market closely into adjust rates if needed So keeping open the optionality of cutting rates further again pretty much what markets were thinking anyhow But I guess the one thing to be aware of if you were trading the Aussie in the overnight session Particular focus on the job market and inflation in Australia So if you ever get CPI data or jobs data I would imagine that rather than these minutes which by by default are quite dated I would say the latest readings of which the central bank will take their direction from is going to derive from those two data points So whenever you have those economic releases I would say you want to be particularly cautious and aware if you're looking at the Aussie and existing positions Or if you look to trade the actual currency in the overnight session that will probably see the biggest sharpest reaction in the in the Aussie Quick look at the calendar because there are a number of big data points coming out today to be aware of from the UK we've got the unemployment rate and the unemployment change and the average earnings data So all really need to be taken in as a collective rather than one isolated figure to give you a real Underly picture of the situation now if you remember wages have been Particularly robust in the UK despite these kind of obvious uncertainties and an economic troubles being experienced at the moment the Fact of this which is the UK Unemployment rate which is currently tracking at 3.8% now if you look at 3.8% it's been a fairly consistent the last two readings and 3.8% is the lowest unemployment rate in the UK Since 1974 So, you know healthy amount of people in work Contributing then to what has been a fairly robust Prince of late in the data sets related to earnings, which obviously is a is a is a positive It's translation then into the fact that that mitigating that situation in 2017 of a disparity between stagnant wages and rising prices We've got now something which is more healthy in terms of real wage growth comparative to inflation So that's something to look out for a hot bus nine going further forward. You've got then the German ZEW Coming out at 10 o'clock now This was ZEW last time It was a shocker last time this data came out. You can see it down here came in at minus 21.1 It was way weaker than expected and it was a severe negative print comparative to the prior three months before Combination really of the intensification of the ongoing trade war between the US and China will Germany in particular come into sharp focus for Trump given the nature of their Export industry and the reliance on what has been according to Trump a weaker euro Instigated by the European Central Bank You've also got increased military conflict risk in the Middle East and of course this Probability and uncertainty surrounding and no deal Brexit have all been things which have kept then the forward-looking Outlook for the German economy as far as analysts and economists are concerned Fairly pessimistic now looking at the range. I've got a range here of ZEW on the headline of minus 30 Where would minus 30 put us? Well, that's definitely off the charts as far as the last 12 months are concerned minus 30 is going to put us back down to looks like here around the Crisis point of the the sovereign bailouts that we were experiencing So we had the financial crisis Recovery and then we kind of hit that low late 2011 into 2012 when we were seeing Greece Island Portugal and someone getting bailed out and the contagion effect and uncertainties at the time across the eurozone So yeah, that would be certainly Interesting potentially leading to some more euro weakness boon strength if that was to materialize today I think minus 14 is the range high that really is not That surprising I mean that would come in still well below obviously the zero figure Which has been the case with data set for a majority of the period of the last year So I'd say a breach of the lower bound towards 30 or more would definitely be of interest for potential reaction Otherwise moving further forward Having a look at the US afternoon. You've got US retail sales Import and export prices. You've got US industrial production cap utilization business inventories So quite a few things coming out probably the most interesting here from a economics or Economy points of view is going to be retail sales and industrial production Having a look at US retail sales few things to be aware of This is what the pattern has been like it's been a little bit up and down However, we have had three consecutive positive numbers one thing to look out for with retail sales if you're trading around that data set is It's not just one number You've got month-a-month year-on-year ex-autogas month-a-month year-on-year You've got revisions then to all four so that's eight numbers You've then got to the control group coming out the control group is sales minus building materials motor vehicles and parts and gasoline and food service receipts So it's a fairly pure number if you like which is used to calculate the personal consumption expenditure component of what Contributes to GDP calculations in America So the control group is the one that most of the investment bank models look at in order to calculate future GDP Expectations remember that Atlanta Fed model tracking at about 1.4 percent for q2 us growth comparative to 3.1 percent growth in q1 It's also mimicking the same as what is issued by the government and how they calculate GDP as well So the control group keep a close eye out for that the control group. I think retail sales expected at point one Excuse me month-on-month, but the control groups expect to rise by point three percent Remember to give you a bit of context wages were three point one percent higher on the year in June With the PC inflation running at one point five percent in May Representing a healthy rise in disposable incomes non-farm payrolls as well Remember the beginning of the month with 224,000 job creation So if anything given that that set up you would think that retail sales should be fairly healthy So the consumer part of the economy should be ticking over in the States and obviously the market has been so Infatuated with such a dovish Fed given some of the other things that we've been monitoring I think maybe this is could be a little bit of a silver lining So, you know if we get a robust Better than expected breach of the higher bound strong control group knocking point five percent plus on The month-to-month reading and certainly maybe a little bit further dollar strength Perhaps we see yields move a little higher pressuring t-notes below their pivot level in the future space final few things on the calendar you do have the Oil infantry is coming up the API this evening, but you have a whole slew of speakers today This is something we talked about yesterday knowing your In advance who's coming out and when on on what are they speaking? So remember go back to that crib sheet if you need it. I did tweet it You can just find it on my Twitter account one of the recent posts But you've got Bowman Bostick Kaplan pal Evans. They're all speaking Remember some of them are just speaking at this Bretton Woods 75 years later conference That really is less a significant But some of them like for instance Evans who is a voting member this year the FMC Neutral stance is speaking on current economic conditions and monetary policy always those types of topic or speech titles Are the one that are going to be most relevant for what we look at The final thing is earnings we had city group yesterday As I understand stands solid profit growth in the rebound and it's struggling consumer operations But trading revenues were weak and the bank reported tighter net interest margins Which I think is pretty much going to be the case across most of these big banks of which we're going to get JP Morgan GS Wells Fargo All coming out pre-market today also looking out for one of the bigger pharmaceutical names Johnson and Johnson as well On that note. I know this is a little bit small But I will share this in the In the chat room afterwards, but basically here's a running Chronological order of all the companies coming out today. So Johnson and Johnson and JP are up at 1145 A.m. London time. So late morning Goldman's at 1235 Wells Fargo at one o'clock Is is the or schedule for earnings releases? As per the slate this morning, okay, that's it from me I'm going to hand you over to Sam now and he can talk you through the charts in more detail I'll catch you in the chat room and I wish you a good day. Thanks very much Hi guys, hope everyone's doing well. So I'm a quick look to start off with the pound which Is drifting lower here. It's pushing through the the s1 For the day and turn around that area before the first test we had a bit of support come in as was the low of the Afternoon of the tenth and that's just broken on the second time of asking at least some half an hour Can do anyway next key area to Focus on let's say if we can get through 125 20 would be looking down towards s2 Where we had support on the same same day on the on the 10th as well and Also around there the 125 handle not looking too good for pound Euro pound again After decent enough day yesterday pushing to the current high than now So with the pound bit of pressure the data are not expected to to be all that great So just having a look to below over trading s2 important and then the low But to move that above the camera the camera from the 10th and the ninth as well Would be pretty key levels I think unless we were to really push above the the highs of the day in this trend line that Contains price. We're not really looking to We're not really looking to to go long. I would say euro wise to have a quick look Range bound you have to say stuck in in this range those highs from yesterday We're the higher of last week the low While chopper a bit on Thursday could argue s1 could be a pretty important level We did get a break off of the pivot yesterday eventually on the XYZ time of asking that offered a bit of resistance but the push down the breakdown was was pretty limited Pivot, I would say still remains an interesting enough area 1320 and 21 on the pivot as we did have that resistance What was previously support so I'd say that's almost your line in the sand, but whether you'd want to get to involve in this before You know before break out of that range or not not necessarily too sure some a quick look here to see This range just coming in Potentially just before the s1 so the trend line I should say the low from the ninth and the 10th she getting squeezed in you've also got the low from the 11th As well around that point on the futures. That is 113 O3 so the 113 handle right on s1 or a tiny bit below quite a key level I would have marked up there for for the euro speaking of markets getting squeezed in you can see Gold is doing exactly that From the from the lows and the highs not too much going on and I would say that would would be the same unless we were to really get Decent break out of this you can you can see in the early session We did push higher but very choppy on that low volume You can see maybe the better opportunity could come if we were to break the downside here Where we can just get in these higher lows getting squeezed in and maybe if we were to see Epidies continues to push higher or some overall dollar strength come back into the market We could see a decent push lower as we know how quickly gold can move For now price just getting squeezed in and not doing too much there One other currency to have a quick look at is the Aussie dollar and it'd be interesting to see where we finish the day today This trend line. I'm just going to move the pivots quickly You can see starting on the the higher of 2018 that trend line Broke yesterday initially and then dropping that that down. You can see we're almost coming back down to test that 70 40 the level Pretty much marked up along with yesterday afternoons low So quite a key point to have a look at if that was to hold I know we had the the dovish comments overnight from the RBA from those minutes which yeah as answered were dated but if You know if that was to hold it could be a decent enough opportunity to see you know further push higher the dollar a tiny bit stronger today In in the European session the yen feeling that as well Which has just come down to an area of support which you can see is well if it was to come down again would be that fourth test of the level we made back on the 12th and the The range trade I guess you know this morning wouldn't have been too bad at all to the upside. I think you'd be Happy to see this trend break You can see we're getting squeezed in from the top and also the bottom as well If we have a trend line on sight and on the on the low of the tent You can see that would also come to the low of the 12th and then potentially to this area right now Where you've got the load yesterday This morning the trend line as well So quite an important zone there for the yen and then to the upside you can see that getting squeezed in as well quick look over at oil which Started relatively well yesterday We had that that great break of the the trend line from starting on the day with that the Thursday that broke through led to a decent push higher Then came to the high that we had last week Which as we know just making this chart along the time frame you can see how important this was and people were talking about You know getting the getting in the short there and you know what a trade that that would have been We then led to a decent decent break lower So to the upside now what was the the lower guess they morning around the pivot 59 85? Pretty important level and then to the downside the top end of the 9th So the the API spike you see just a 30 cent below here So you now got perhaps a new range forming For that waiting for these areas around the pivot of 59 11 as it stands right now. I think might be The preferred trade in the low volume It does look like we've broken just this lower part of the trend that we did make from yesterday You can see decent enough opportunity when it broke through and came back And so I'll just be keeping more in today, you know watch on 59 37 and 30 39 Where it was the initial low from yesterday So maybe a further push lower if that was to go But certainly the more important there is it seems pivot and 59 11 quick look over Equities which on the the open on the cash open did push lower the failure to push above that level saw a strip back down and Well, I was I was waiting for the pivot all day, and it just didn't want to come just didn't want to come down And even when it got close enough the reaction was was pretty limited So relatively subdued day yesterday for The S&P We did have a moment post cash open when the trend lines were breaking and it's a half decent opportunities To have taken on I know it will be right on 230 and that breakdown was was held for for a while Looking at this now You can still see what was the pivot area that I was half interested in yesterday Comes in around the s1 30 11 on the futures Would still be somewhere to have marked up to the upside You know if you're not looking maybe into the back end of the session. We've got a trend line Holding you know up from the all-time high as a breaker that could see a further push on and then just a reminder For those that didn't watch the briefing yesterday or CR our strategy report You can see that top part of the trend channel looking to come in and obviously that's gonna keep moving up the longer We don't get there, but today still around 30 31. So just keep an eye on that should we get a further push higher Whether we can you know get a test of that today or not remains to be seen Potentially just having a new trend line here formed as well from the lows that we had Back on Friday afternoon. So just keeping an eye on this price just getting squeezed in a bit volume Unlikely to really be there Any questions as usual? Please do let us know And we can get back To as soon as possible euro as well here just pushing down the dollar just starting to strengthen the touch more As well cover quick look over that pound just to see how that's reacting So you can see found a bit of support on 20 before breaking through and this was actually a previous high Before the push higher that we had on the on the temps are an interesting area of support next level 125 and the S1 Hope you will have a good trading date and I'll catch you in the chat