 Right, good afternoon ladies and gentlemen, welcome to this month's non-farm payrolls webinar with me Michael Houston, where we'll be covering the August payrolls report and where expectations are I think fairly elevated that today's payrolls number will seal or put the seal on a Fed pause later this month. The next Fed meeting is around about the 20th, 21st of September, I think it's the 20th actually thinking about it and obviously we also have another CPI report to come but certainly from the data that we've seen thus far this week and bond markets appear to think that we've probably seen a top in yields. The bigger question now is how long we stay at current levels if we look at the US 10 year this week alone we've seen a big retreat from the levels that we saw earlier this year and if we actually go back longer than that say for example 10 years we've potentially got a little bit of a double top around about the current levels that we saw earlier this week we've seen a similar decline in gilt yields as well UK gilt yields which would appear to suggest that really now we're in the home stretch of where the possible terminal rate is for not only Fed funds but also the Bank of England and the ECB you know and this month I think is going to be very very important in the context of where rates end up over the course of the next two or three months so a soft payrolls report I think is going to be important in that context it will confirm the narrative that we've seen so far this week that the US economy is slowing we've seen the jolts data the job openings data fall to the lowest level since March 2021 that doesn't mean that however that the US jobs market can't still remain reasonably resilient we have to look at the data in the round we can't just focus on one piece of data the ADP payrolls report earlier this week was also a fairly weak one but you also have to remember that the two months preceding that were fairly strong but 177 is heading in the right direction weekly jobless claims around about 230 000 so they're still fairly low though continuing claims are starting to head higher and the unemployment rate is at three and a half percent you know and you know the federal reserve has the end of your unemployment rate of four percent well they're running out a month for that unemployment rate to head higher so you know when we look at that and we look at the fact that inflation aged higher in August then you've got to you've got to you've got to basically look at today's payrolls report in that context and it's not just about the headline number it's also about these figures here 4.4 percent I'm hoping you can see and hear everything that I'm talking about at the moment please tell me if you can't well obviously you can't if you can't hear me but you can certainly tell me if you can't if you can't see but certainly in the context of wages because wages are still fairly sticky but I think there's been a realignment this week in central banks thought processes when it comes to how many more rate hikes are needed given the data that we've seen particularly when it comes to PMIs if you look at the PMIs that we saw today in the manufacturing sector manufacturing in Europe is now been in contraction pretty much for the last 11 months so you know how much more damage do you want to do is the question that essentially central bankers want need to be asking themselves when services which we've got next week on the 5th of September when services is also starting to start to move into contraction territory so Hugh Pills comments yesterday in his chief economist at the Bank of England and he's posted he's he there's a piece in the FT today on the fact that he probably thinks that UK rate policy is restrictive enough and therefore no more rate rises are needed and I would agree with that you know I think central banks are done and now it's really a question of how high you know how long do they stay at current levels which is why Hugh Pills drew a table mountain analogy when he talks about the longevity or a plateau for the current level of interest rates how long do rates have to stay at current levels for inflation to start falling back to target there's also been some chatter about central banks revising their inflation targets up from the current 2% to say a level which is much more realistic say 3% now I think that would be a mistake because what that does is you might as well just say well we can't reach the current inflation target so let's move it the time to have moved it would have been when inflation was below 2% not while it's missing by a mile because essentially what you're saying is we're just going to move the gold post and that's not that's not a place where you really want to be when you're a central banker okay so in terms of what we're looking for today on the payrolls numbers we're looking for a slight moderation from the 187,000 jobs that were added in July there's certainly going to be some seasonal factors at play and the august payrolls numbers which does suggest that we may well see a lower number but I also wouldn't rule out a higher number because ultimately at the end of the day that a lot of these numbers get revised away you get revisions up you get revisions down you know and for me I think what we need to see today is just a number that supports the prevailing narrative that has seen yields retreat this week so that suggests to me that anything that comes in in line in line with consensus is probably going to be a good thing now earlier before I started recording I was asked a question assuming markets react positively if the numbers are not too strong how much of a miss would be worrisome and actually cause a pullback a miss to the upside so if we get a number of 250,000 a really strong number that would prompt a little bit of a pullback in the rebound that we've seen off the lows or stock markets because ultimately it would keep the prospect of an additional rate hike from the Federal Reserve very much on the table the US labor market is still fairly tight it's still really strong job openings are still well above pre-pandemic levels job openings are around about seven seven and a half million leading into the pandemic they're still at 8.8 million now and the unemployment rate is the same level it was a year ago when Jay Powell at Jackson Hole said that he would have to inflict much more pain on the US economy in terms of higher rates you know I think if you'd ask Jay Powell a year ago that he would have an unemployment rate at three and a half percent at the same level as it was when he made that Jackson Hole speech in 2022 he'd have taken that he'd have probably ripped your arm off so certainly I think in terms of the unemployment numbers the Fed is in a good place so there is a there is a thought process that might lead them to think that they can get away with another rate hike I think that would be a mistake certainly in terms of the numbers that we've seen certainly in terms of the numbers that we've seen thus far just been asked about Dolly Yen absolutely I'll actually get rid of the Euro dollar chart and I'll talk about that now because this is one particular call that I've really got around my ears this year because I really thought that Dolly Yen would go an awful lot lower from these sorts of levels here in any event we've gone higher we've retested the 14750 area but I struggle I really struggle with this I really struggle the fact that Dolly Yen is is is currently where it is right now we've got the Bank of Japan later this month I think it's inevitable that the Bank of Japan will have to at some point start to pull back from its very easy monetary policy I also think that ultimately if the Fed does call a halt to rate hikes the dollar will have to go lower but of course you know you've got to push pull effect here at the moment I'm still favouring selling Dolly Yen on rallies but I've been saying that all year and got it completely wrong so you know I would strongly advise you don't take my advice but my good instinct is that we could well drift lower towards into year end but will we get a sharp sell-off you know it's a tough one because essentially what I'm encouraging you to do is trade against the underlying trend which is by the dips on Dolly Yen but this area here around about 147 you know it feels a little bit toppy at the moment but we need to get back below this two twin lows here at 144.5 if we can push back below there then I'd probably feel slightly more confident that perhaps the top is in if we look at say for example let's try and look at a weekly chart to see whether or not we've got any indication here I mean we could have the makings of a bullish reversal here but we had that there we dropped down we bounced off the 50 week moving average and then subsequently rebounded again so certainly the trend is for Dolly Yen to move higher but if we drop below 144.5 then I think we could see an acceleration back towards the 50 day moving average and consequently back to the Sichimuku cloud support in and around there so um so that's Dolly Yen I'm I'm still very minded to think selling on rallies in terms of Dolly Yen WTI I thought that I thought that WTI was something else there for a minute yeah and I thought that was an F not on I but okay WTI uh yeah I mean oil prices that's another thing that really bothers me slightly I think the fact that we started to break higher we could see a squeeze towards $90 a barrel there I think the fact that you've got OPEC and OPEC plus continuing to double down on their production cuts I think that's likely to exert upward pressure on oil prices we're seeing it in Brent we're seeing in WTI but I I still can't bring myself to be overly bullish on crude whether it be WTI or Brent because at some point you're going to create problems for consumption going forward the big level for me I think is on Brent I think if we can hold below $90 a barrel I'm still very much of the opinion that we're range bound and ultimately we will remain range bound I don't think it's in anyone's interests for production cuts to basically push the global economy into recession but then again you know whoever said that OPEC plus policy was based in common sense it probably isn't would Euro Yen is Euro Yen a better bet for being as short than Dolly Yen well certainly on the basis of this chart you'd have to argue yes because you've got a very big bearish reversal on the dailies there and we've reversed that quite significantly maybe a short position with a stop above 160 perhaps certainly there is scope for that but given the volatility in Dolly Yen or Euro Yen you know you have to question whether or not you could probably get away with that but yeah I mean Yen crosses do feel a little bit toppy at these sorts of levels just particularly on the basis of Dolly Yen so hopefully that answers your question as I say I mean I used to trade Dolly Yen so I'm probably more comfortable trading Dolly Yen than I am Euro Yen if I was going to trade if I had to choose between the two I'd probably use Dolly Yen because it's probably more within my comfort zone and I think you I think that's what you really need to do you need to trade what's within your own comfort zone rather than looking at a cross I mean one of the one of the crosses that I actually was quite good at trading in a past life was Swiss Yen but if we look at Swiss Yen that is really a pain trade if ever I saw one particularly if we look at this chart here let's just add a slow sarcastic to that and a couple of moving averages there we go I mean if that's not overextended I don't know what is I mean maybe a short Swiss Yen position would probably be more because you definitely got a double top coming in there with solid support at around about 164.40 so you know maybe Swiss Yen perhaps would be the way to go when it comes to a short position and there's another option for you perhaps anyway so yeah so digressing is there anything else that you guys want me to cover before we go into the numbers Euro dollar I'm going to quickly look at Euro dollar because it's got a really decent trend line here which is so far has managed to hold any dips in Euro dollar we've joined the lows from March this year 200 day moving average there we've also got around about the 10780 level around about here so this area around here is a fairly key support when it comes to Euro dollar we've got fairly decent resistance at 109.40.50 I think that's probably going to contain any move that we see today on the non-farm payrolls certainly I think in terms of what we've seen so far this week we've seen some fairly decent we've seen some fairly decent moves this week but I think if we look at this particular chart on the weeklies we've seen some significant Euro weakness and I would be surprised if we see further Euro weakness much before this month's central bank rate meetings we'll have to wait and see what the prevailing narrative is then over the course of the next couple of weeks when the ECB meets on the 14th of September in terms of equity markets still looking fairly well supported S&P 500 looking fairly decent at the moment but again you know we're sort of retesting the peaks of this week you know have we got any prospect of further momentum FTSE 100 I'm quickly going to rattle through these before the numbers we've got two minutes left again 7200 huge level on the FTSE 100 we've rounded off that three four times this year the biggest concern I have obviously is the fact that these highs are getting lower so momentum is starting to fade but I'm encouraged by the fact that that 7200 level has held fairly well over the course of the last few months and hopefully that will continue to do so the DAX still very much range bound fairly decent support in and around these lows around here as well as the 200 day moving average it's finding a few offers around about 16,000 and these highs all the way through here so again very much towards the top of the range when it comes to the DAX my feeling is that the numbers today will probably come in line with expectations and then the focus will shift to what comes up over the course of the next couple of weeks of course I could be horribly wrong and we could get a huge miss either to the upside or to the downside let's have a quick look at let's just keep dolly in on the screen and just look at a five minute chart to see what the initial reaction is when it comes to but dolly in is looking a little bit soft on this NASDAQ yep thank you sir and almost forgot that NASDAQ let's quickly bring that up again we're sort of retesting the highs looking a little but again looking a little bit toppy around current levels let's see if I can draw a trend line in through these peaks here whether or not that we've broken that so I would say that I was I do struggle with the idea that we can potentially retest the highs but you know nothing is out of the question when it comes to the NASDAQ it's got a bit of a mind of its own okay I'm going to be quiet now we can see what we're expecting the numbers are about to break right now okay Canadian GPs just GDPs come out 3.8 that's a big jump in the unemployment rate to 3.8% that's what it's reacting to 187,000 revision down for the previous month to 157 so that that sort of supports slow down in the US economy weaker dollar and really supports the narrative that the Fed is probably done when it comes to rate hikes and the dollar reaction is pretty much bearing that out average earnings are also average early earnings are also weaker as well so that's certainly bit that certainly supports the idea of a certainly supports the idea of dead in rates so let's see how markets are reacting we know we've got a weaker dollar let's look at equities you got that now and yep as suspected we've got we've got to move higher in equity markets so pretty much going according to plan when it comes to the market reaction to those numbers speaking to a slow slowdown in the US economy good for risk good for bond markets lower yields and buying into the idea that we're going to get a pause in September with the possibility that as we look towards the end of the year as long as inflation continues to come down we will see we'll probably see the Fed will probably see that the Fed is actually the Fed is actually done when it comes to when it comes to raising rates and then really notice the question is how long will rates stay at the levels that they're currently at so 4.3 187 3.8 okay so it's pretty much played out as we suspected it might okay any other questions ladies and gents I don't think I've really got much to add let's have a quick look at bond yields so let's look at the one day on the 10 year sharp move lower on that let's look at the two year again another big drop nine basis points on that let's quickly look at the two year we've seen a big fall there over the course of the past few days so there's a definite narrative unfolding here look at the weekly I mean these are big bearish reversals in all of the charts when it comes to yields you know and it feeds into the narratives that potentially rates have peaked so I'm looking at some of the outlines on some of the headlines rather not our headlines on my Bloomberg striking payrolls fell 37,000 reflecting business closures obviously that was yellow the shutdown there gold's up not surprisingly the downward revision to July was quite significant and June was revised to 105 so the June payrolls numbers revised lower July revised lower and unemployment up to 3.8 I'm just going to have a quick look at the participation rate to see whether or not that had a significant impact on why the unemployment rate went up because if we've seen more people return to the workforce that could certainly feed into a narrative that so if we look there and that's up that's up by 0.2 percent so 0.2 percent of that increase in the unemployment rate was an increase in the labor participation rate of 0.2 percent so we've gone from 3.5 to 3.8 and we've gone from 62.6 to 62.8 and that's the highest since pre-COVID when we were at 63.7 so we're now 9 0.9 percent below the COVID pre-COVID pre-participation rate so people are now being forced back into the workforce by by the cost of living squeeze by higher interest rates and consequently that's being reflected in a higher unemployment rate though obviously you've got 0.1 percent on top of that as well so so yeah positive positive for equity markets the markets are now pricing in lower yields lower dollar and higher equity markets and the next penny to drop will be how much more of the rate hikes that currently haven't been built in the markets will slow down the economy in the second half of this year right next week we've got Bank of Canada rate meetings we've got RBA rate meetings they're going to set us up for ECB Bank of England Federal Reserve in subsequent weeks but ultimately I think no change Bank of Canada 5 percent no change RBA 4.1 percent no change ECB and what was actually particularly interesting it was something that came up on the Bloomberg was that traders have paired Bank of England bets to 25 basis point hikes and no longer fully priced in the wake of those numbers well that's an interesting that's an interesting tip bit of information isn't it though the market is now pricing in a much lower terminal rate for the Bank of England as well and that's all in the space of around about 25 30 minutes just because the US payrolls numbers have seen not only a week as expected August number but we've seen downward revisions to June and July okay so any more questions ladies and gents on anything else that I haven't quite covered I'm just going to quickly look at gold in the wake of those numbers this is quite this is really interesting here because now we've broken to the highest levels since the beginning of August so one month highs on gold we now draw a trend line through these levels through here I don't like that line it's too high probably going to draw it off there but by any stretch of the imagination we could well be heading back towards this series of peaks through the end of July 1960 but the direction of travel does look to be clear also what we've got is the 50 day moving average starting to flatten out and look positive 200 day is already um pointing in the right direction momentum on gold is starting to look very favorable going forward on gold prices so a quick look at euro dollar let's have a quick look back at that and again we've got a fairly decent rebounder there so from this we can suggest that potentially we could be in for a little bit of a period of dollar weakness and could we'll see a retest of those peaks back in 109 40 50 let's quickly look to see whether or not we can retest those peaks in the decks slightly underwhelming that seen a little bit of a spike higher in the decks but close but no cigar so we're still getting a fair degree of divergence between what European markets are doing and what US markets are doing we're hanging on to the gains for the S&P but it's close but no cigar when it comes to European markets I'm wondering how much of that is to do with the fact that the markets are thinking there's a lot more pain to come for Europe when it comes to their exposure to China obviously we've seen a whole host of easing measures piecemeal easing measures from Chinese authorities over the course of the past few days we've got China trade next week and they're likely that's likely to be another set of fairly weak numbers imports and exports and we've also got China CPI and China PPI as well so again that's likely to feed into the deflation narrative that has been coming out pretty much from China for most of this year well actually for all of this year when it comes to PPI as well so just going to check to make sure that there are no further questions before I wind this up I think I think I think we're pretty much done okay NASDAQ I think I did NASDAQ didn't I Leanne so I think we're pretty much covered on that it does appear to be fairly resilient and it does look as if we're probably going to retest those highs the bigger test will be whether or not we take those highs out any other questions ladies and gents okay well in the absence of any other questions and any other queries about what's coming over the course of the next couple of weeks because obviously the next time I do one of these will be in October and hopefully we'll find out whether or not I was right about the fact that we've got no more rate hikes coming I'll wind this up in the next couple of days you'll receive an email asking for feedback I would be really grateful if you could feedback positive or negative because the whole purpose of these things is for your benefit you know a bit of Q&A what are we doing right what are we doing wrong what would you like what else would you like me to cover trading ideas stuff like that because at the end of the day this is about the only opportunity I get to speak to you guys on a monthly basis and it's a useful exercise from my point of view when it comes to feeding back what you like what you don't like what you like to see what you don't want to see and so on and so forth anyway that's it for this week have a great weekend everyone or this month I should say have a great weekend check out my weekly videos for my week heads because I usually do an awful lot of a little bit of technical analysis on those you can find that on the news and analysis section of the website otherwise I'd like to wish you all a great weekend don't forget it's a US holiday on Monday it's Labor Day so trading on Monday is probably going to be thinner than usual have a great weekend and speak to you all same time same place next month thanks for listening and have a great weekend