 Good afternoon, ladies and gentlemen. Welcome to this month's non-farm payrolls webinar with me Michael Houston on Friday the 3rd of September and this this overview of today's non-farm payrolls report which It's likely to be an interesting one. I won't lie about that, but I don't think in the wider scheme of things it will affect the Fed's policy when it comes to a tapering of asset purchases. What it might do is it affect the timing? so if we cast our minds back to Jackson Hole a week ago J-PAL made a speech which depending on who you talked to was either dovish or it was hawkish You know, and obviously that's that's the big problem I think with with markets at the moment is that depending on your positioning it can be both for me The important thing that pale stated Last week was he created a clear delineation between the Fed's inflation mandate and its employment mandate And that reassured markets that while the Fed was likely to taper and the debate was moving in that direction He basically doubled down on the fact that tapering does not mean a very very quick route to tightening All that tapering means is that instead of Expanding the balance sheet by 120 billion dollars a month They're just doing it at a slower pace so the balance sheet is still expanding it's just not expanding as fast and you know it makes sense for the Fed to do this because If you look at when they started out on this tapering process the unemployment rate Was nearly seven percent at the end of last year is now come down and could come down today to five point two percent and Therefore the economy has improved sufficiently to warrant a slight reining back of The current accommodated monetary price process now Richard you've raised the point Why is Pyle trying to decouple taper from rate rise? Well because they're totally different things Tapering is not tightening a rate rise is All that a taper is is you're slowing down the pace of the balance sheet expansion So you're still expanding you're still expensive in terms of your monetary policy And what is adding 120 billion dollars a month to the balance sheet gate you that 60 billion dollars a month doesn't get you Given the fact that the problem is that the US economy is suffering from at the moment are not demand driven The supply driven you've got you've got contractions in supply chains You've got factories shutting down because they can't get Semiconductor components to produce new motor vehicles and you're getting inflation Pressures as a consequence of blockages in supply chains. It's not for want of a lack of demand That you're having a problem with the economy and a slowdown in an economic growth It's because of problems within supply chains. It's problems with respect to stimulus starting to roll off and You've got a workforce that at the moment in the US is still in receipt in a lot of states Of stimulus checks so they have no incentive to return to the workforce now There is you know as a consequence of that you've seen yields fall back we can certainly see that in the context of The US 10 year yield if we look at this 10 year yield chart here That I've got in front of front of me right now US 10 year yields have been in decline Pretty much since March now. We started to rebound back Which suggests that we could start to see upward pressure on yields And if we do start to see up the pressure on yields Then you could start to see the dollar rebound But there's a fairly decent cap in and around 137 138 and you've also got a downtrend line coming in here So while we've seen a short-term base in yields around about 112 from 13 We've also got a short-term cap around about 138 and at the moment we're trading that range So at the moment the market is undecided in terms of when a taper is likely to occur Will it will it be an ounce in the September meeting and which is on the 22nd of September? for to start in October or Well a weak payrolls number push it back Towards December and potentially the beginning of next year and that essentially is what the debate is about at the moment. It's not about Will the Fed taper? You know that's that's priced in it's really a question of when will they start and then how quickly will they end now? There are a number of policymakers on the FOMC committee who wanted to set the taper to finish by the middle of next year Well, that still gives us another nine months of tapering But another nine months of an expanding balance sheet or be it at a slightly lower rate So for me today's payrolls report is not so much about whether or not it will stop the taper or Make a taper more likely. It's about when that taper starts So if we get a weak payrolls number and there's no there's no reason to suggest That we might yes, we look at the ADP payrolls report earlier this week, which was disappointing We look at the ISM manufacturing and the employment component in that which slipped back into contraction territory and all the point all the all the evidence points to Potentially weaker payrolls report, but we've come off the back of two 900,000 plus payrolls report. So even if we get a number in an area in the region of between 650 and 850,000 it's not the end of the world The midpoint of that is 725 the lower estimates for non-farm payrolls today are 400k The upper estimates are around about one million There's some way you would like to think Things to point to a weaker payrolls report Obviously, I've mentioned the weaker ADP numbers that to drop in consumer confidence that we saw in Tuesday as a result of rising Delta variant cases in August Obviously weak car sales as well People being signed off sick as a result of getting Covid As well, so there is a concern that People won't have been rushing back to the workforce in August because of the fact that because of school holidays as well All of these employment benefits now expire in September So some states have already rolled them back So you could see a jump in the states which rolled back their unemployment benefits forcing people back into the workforce But on the flip side of that you could also see In the states where they haven't done that People will have been reticent to return to the workforce for fear of a getting Covid Or B because they haven't got anywhere to look after their kids before they go back to school. So There's an awful lot of Turing and throwing ebb and flow in terms of the payrolls numbers if we look at the weekly jobless claims numbers They've been continuing to come down pre-pandemic low earlier this week I mean this week's numbers don't aren't included in this this month's pay in the August payrolls report So they don't matter that much but they still point to the fact that we could get a September report that is equally as strong so for me, it's really about Will the unemployment rate come down to from 5.4 to 5.2 percent How much of a slowdown have we seen in the payrolls report for August does it matter Given the fact that ADP was weak in July and we still got a bumper July non-farms report More importantly, what will it do to the timeline for a Fed tapering of asset purchases? And for me, I think I'm still looking somewhere in the November of December of the likely start of The tapering of asset purchase program. So what does that mean for currencies more broadly? Well We've talked about this dollar mechs. I think I don't think we really need to say too much more about that But what I would say about this the dollar in general is the dollars come off this week Largely predicated on the fact that we we could well get a week number So a week number, I think by and large Is priced in to a certain extent? So I think for me If the dollar continues to weaken, obviously that will push it push Stuff like the euro gold Higher Because it will essentially drive yields lower and that will in turn Diminish the attractiveness the attractiveness of the US dollar And even though euro inflation came in at 3% this week in its latest numbers I don't think anyone for one minute would expect the ECB next week To signal that they're likely to tighten monetary policy anytime soon So I think if anything a weak number today merely defers a dollar rebound It certainly doesn't postpone it. We can certainly see that played out in euro dollar We've seen a fairly decent level of weakness over the course of the past few days On the basis of a weak number, so you could argue that now we're back around 110 119 17 there's a big big barrier to further dollar weakness with respect to euro dollar And I think that for me if I think that for me is the key component here I think a weak number needn't be particularly dollar negative It will certainly Try and push it lower initially But I struggle to see where the additional downside Is going to come from Unless it's a really horrible number and by horrible. I mean at the lower end of expectations Which could potentially push a taper out Towards Potentially the beginning of next year That is not my baseline It would certainly a poor number would certainly push The us 10 year back below 1.3 percent where it is now And it would certainly push gold Up towards weight towards 1835 and we can talk about that because if we look at the way euro is trading And we look at the way gold is trading. It's not totally dissimilar In terms of the way the price action has been moving if we look at this chart Here you've got a series of peaks all the way through here in gold So it doesn't look dissimilar to euro dollar In terms of the rebound that we saw from the flash crash lows just over a month ago And we've got a very decent significant barrier ending around this 1834 1835 area So golden euro are acting as a little bit of a proxy for dollar weakness at the moment So it'll be very very interesting to see whether or not that continues In the wake of today's payrolls numbers Um, certainly just going to have a quick look at any other questions that I might have missed and try and address them before the actual numbers themselves so With respect to the question about um You're right the sterling Aussie in euro was he just steven remind me of that if I don't cover it before the numbers Um, so the the question about trying to decouple taper from rate rise I think i've explained that essentially They're completely different things A rate rise is a de facto tightening of policy whereas a slowing down Or balance sheet expansion isn't really So It's really about managing expectations if you say something Often enough and long enough markets will slowly get used to the idea And when it when you actually do it there shouldn't be that much of a market reaction I call it I call it hand-holding if you like the market is like an errant toddler sometimes it needs its hand-holding to keep it calm While you're trying to get it to do something that it doesn't really want to do Um, and and I think you know, that's that's essentially what central bankers are having to try and do at the moment Trying to navigate the way around the toddler The every time you slightly change the uh the game for it throws a bit of a tantrum Um, you know, and it's going to be very very difficult I think over the course of the next four or five years for central banks to pull back From the current easy monetary policy that they Have currently thrown at the markets in the wake of this pandemic that nonetheless I think They are going to have to start down that road whether they succeed in going down that road Is a completely different question entirely the ECB certainly won't be in a position To tighten any time soon and that's before we even talk about the thorny aspect of the Europe the german elections which comes at the end of this month And where angela merkel is stepping down and there is no really obvious successor to her so As I say week of dollar keep an eye on those resistance levels on euro dollar at 1910 And gold around about 1835 if we get a break above there then we could see Further dollar weakness Obviously a poor number on dolly yen We'll push us back down towards 109 10 But when I look at that chart You know the price action is pitiful really it's very very difficult to say with any degree Of certainty which way it's going to go But if I was going to uh one way or the other I'd suggest that we might see A drift back lower, but at the moment one 1020 109 20 pretty much covers it and The problem with dolly yen at the moment is you've got the fact that Japanese prime minister has just stepped down And as a consequence of that you could see a little bit of a yen weakness if the market thinks that any any of his um successes Could start on a significant stimulus program if we look at cable for example You know I still I still think that we can see a little bit Of dollar strength in the wake of these numbers simply on the basis of the fact that um We are probably near near the near the highs of the week when it comes To the sorry the lows of the week when it comes to the u.s. Dollar highs of the week for cable highs of the week for euro so I think the risk trade at the moment Is probably less to the upside and more to the downside In terms of sterling in terms of euro Which means that the dollar could actually start to The pound could start to drift lower and the dollar start to push back higher And we've also got the small matter of the u.s. Labor Day holiday You know if we look at the if we look at the dollar index I'm just going to try and pull that up for you just keeping one eye on the time because I am aware That's what we are starting to run out of it as we come to the numbers and just chart Bring it over here Look at the dollar index when we've seen some pretty hefty falls and On that basis I would be surprised if we see Significant amounts of further weakness this week, but you know I've been wrong before I mean if you you know if you had to push me in one direction or the other I think there's potential for a little bit of a short squeeze On the dollar as we look ahead to The numbers in three minutes time. So what are we expecting? Well 725,000 on the headline number. We're expecting the unemployment rate to fall back from 5.2 to 5.4 percent And we're looking for the participation rate and this is the key thing here We've got a whole host of job vacancies not over 9 million job vacancies at the moment in the u.s economy and no sign at the moment that There is any evidence that they are looking to get filled nonetheless There is certainly more jobs in the market Looking to be filled Then there are people who've fallen out of the labor force Since february 2020 when the participation rate was 63.4 percent. So I would be surprised If we don't see the labor participation rate Nudge up from its current 61.7 percent now Expectations are for a move higher to 61.8 If we get a move higher in the participation rate and a fall in the unemployment rate, that's unequivocally positive Because it suggests people are returning to the workforce and getting into jobs in terms of the Headline number. I've already talked about that 725 watch for a revision to the july number. That was 943 And average early earnings. They're expected to moderate slightly from 4 percent current 4 percent to 3.9 so In essence, I think anything above 800,000 i'm calling for about 800,000 on the payroll's numbers Anything above 800,000 is likely to be dollar positive even if we come in as expected I would expect to see a little bit of a rebound In the dollar, but it really does depend on the overall numbers in terms of us markets and key resistance and support levels quickly do the S&P 500 we can see this line here Basically tells its own story Looking to buy dips those of you who basically Sat through my last payroll's number will have known that you know if I've drawn this line in before the 50 day moving average continues to hold Hold the upside on that and as that less less so but it's still fairly positive and We are now 30 seconds away from the headline number So I am just about to get ready Send a notification on the headline numbers In anticipation that We should get a fairly decent number in around about 10 seconds time footsie 100 is the top end of its recent range So 71 90 is the key resistance level there for those of you who want to know it. So here we go Oh, this gracious me 235. That's the dreadful number. All right. Okay. So that's below That is certainly below Most people's expectations So let's try and disseminate these numbers because that is not great average earnings. Let's get rid of that 235 They revised the previous number up to over a million And the unemployment rate has fallen to 5.2 percent And the participation rate 61.7 percent so It's hard to really drive anything from that, but certainly it's dollar negative I had to double take that let's go and pull this out. So let's see how Euro dollar behaves Around about 1 19 10 1 19 20. I was expecting a slightly softer report. I certainly wasn't expecting that So let's look at this chart here. So it'll be interesting to see whether or not Um, we get a break above this series of peaks through here No question. It's a disappointing report Certainly markets are not reacting particularly positively to it Um, simply because I think they're trying to make sense of it. So Um Going back to the actual numbers themselves I think the key thing for me is what does this mean for tapering of asset purchase? It certainly makes the fed's job much more complicated Going to have to disseminate the numbers more broadly. But what I would say is that While the numbers are disappointing it probably means that An october or november taper is off the table at this point in time It means the october payrolls report is likely to be much more important than the overall scheme of things And it means that a taper is probably likely to happen Much more closer towards the end of the year Than in october or november. So for me what this means is taper delayed More than taper deferred But even though they're probably the same thing um, so better dollar weakness Probably see a retest of retest of these peaks here One nineteen ten on euro dollar see a retest of one eighteen thirty five forty on the gold price As I suspected we probably wouldn't dolly. Yeah, and I'll probably drift back down to around about 109 20 Um over the course of the rest of the day right, um Any questions? Is there does anyone want to basically ask me anything more about this this particular payrolls report? Yes, it's disappointing um, but in the scheme of things Does it really change anything? I don't think it does In terms of of a taper. It's obviously very disappointing, but it's also not particularly surprising in terms of What the u.s economy has gone through in august, I think q3 Is likely to be slightly disappointing in terms of the growth numbers this payrolls numbers would appear to suggest that um And as a consequence of that you could probably see a little bit of dollar weakness heading into the end of the day But I don't think it undermines the overall um feeling that I have is that this dollar weakness is temporary and that um We should still look to buy the dollar on dips because I still I still feel that um in the absence obviously of Any further delta disruption? Obviously, there's been the storms On the on the east coast this week, which probably will of course a little bit of disruption as well um, you should see a bit of a bounce back in september for um You know as the schools go back after the labor day holiday, which is monday um, so when we're having another look At 1835, but we're really struggling to move above it now. We're falling back quite sharply on the gold price I would expect something similar to happen on euro dollar We could see a little bit of a drift um Back down on the cable as well though probably not as much right Can I look at the hong kong 50? Yep. I'll look that in a second Okay, sterling on someone asked me sterling ozzy in euro ozzy. Yep, so I'll have a look at that Has anyone got any other questions about dollar before? um Before I move on to sterling ozzy and euro ozzy And then hong kong 50 Have we discussed sterling dollar? Um, we have but I can go over it again. Just write that down Hong Kong 50 Okay, right First come first serve so sterling ozzy for steven We're suffering a little bit on the back of the Of the rebound in the ozzy dollar The only thing is potential for a little bit more weakness in sterling ozzy If I put in some fib levels Knock out the 23.6 because I don't need that And also draw in some trim lines Okay, so in terms of sterling ozzy, we've got a peak in and around These juniors of around about 185 24 So I certainly think there's potential for further weakness back to this fibonacci retracement here Where we could see a little bit of a rebound But overall I think there is potential for a little bit more weakness in the short to medium term Before we rebound. I don't think we're quite there yet Obviously on the daily chart. There was this nice bearish Daily reversal there which prompted a sharp move lower. We've continued to see that I think it'll probably be important if we're looking at sterling ozzy to also look at dollar ozzy as well Because that can sometimes give you important clues as to about Overall ozzy strength more broadly. Thank you for that close that notification. I don't want that ozzy dollar So here's some analysis I did earlier on ozzy dollar Um So I've taken the february highs to the lows that we saw Back in august We've come back and we're currently testing This resistance level here, which is a 38.2 retracement of this entire move here So that would suggest here that there is a little bit of resistance selling pressure in and around 74 60 74 70 Which we would need to overcome to push higher in terms of ozzy strength And I would suggest that maybe Given the fact that it's friday we could find It difficult to crack this particular level in the short to medium term on the ozzy dollar So ozzy strength may be starting to taper off a little bit On the mainstream ozzy chart. There's also euro ozzy wasn't there steven. So I want to cover that Okay, let's just draw a nice little trend line in on this Those of you who notice that I do like trend lines And I do like to draw quite a lot of it not too many not too many But just to give an indication Of price direction and price strength and again here We've got a decent area of support in euro ozzy Around about the 11th of august lows of 159 so Euro ozzy is finding a little bit of support around about 159 Which covers sides with that low there and that low there So if you are short of euro ozzy, it might be worth Maybe taking a little bit of profit Ahead of that line there because you've then got the 200k moving average and this trend line support coming in slightly lower down It's never a bad idea to take a profit um, okay Hong Kong 50 With everything that's going on in china and what have you That's looks to me as it could be on the cusp Of finding a little bit of a base it's had two goes At 24,700 There are there abouts But for me, I think if we're to make further progress on euro ozzy Sorry euro ozzy Hong Kong 50. What am I talking about? Hong Kong 50 we really need to to break through That area there because it was support On the way down we broke below it. We tested back above it. We couldn't get back above it We need to get back above 26,770 And 70 signal that a base is in on the Hong Kong 50 and push up a little higher Right sterling dollar I'm just being asked about natural gas and just quickly jot that down So I don't forget and I'll tick them off as I go That's a Hong Kong 50 Sterling dollar it's in and up trend This is a four hour chart that I'm pointing out here Um As we can see we've seen an initial bit of dollar weakness, but now we're starting to come back Um, I think there is potential for us to come back to the To this trend line here. So 137 80 In the short to medium term we are finding a little bit of resistance Anywhere through 138 70 and 139 That's not to say that we won't break that but I don't think the momentum is there quite yet To push higher so for me I think sterling is very much By on dips Which means that I'd be probably looking to try and get back in on a pullback down towards This line here And the 50 day moving average now every day on cable on the spread back platform I post forum updates on the cable which can be found On the forum There on the left hand side And I also outline my analysis Um on that particular Asset class or currency pair or product or what have you? So I'm still fairly bullish on cable Um, but I think we could see a little bit of weakness first Before we try and retest that 139 area Over the course for the next few days now natural gas Let's have a look at natural gas Yeah, that's looking a little bit tasty, isn't it? I mean what I would say about that is that it's well out over its skis as far as the 200 day moving average is concerned And that at some point It's going to need to come back to its long-term average The big problem with that Is timing it is problematic in the extreme one thing I would say on this daily chart is though that Um, this candle here would suggest that there is some natural selling interest here Um, but unfortunately, it's very difficult to extrapolate where we'd like to go to next I might have to go out slightly further To try and get an idea of where the previous highs are And you've got a series of highs through here in November 2018 Which It's likely to be a big barrier. So the highest close In 2018 was 403 4463 50 So I think if we close Well, if you know if we close anywhere near here I'd be a little bit concerned because this weekly candle is suggesting to me that we could well see A retest of these peaks here You know, and this is a big worry if we take out these peaks all the way back here We could well see further gains and if you go all the way back You know, it's it's not a pretty picture So we're approaching a very key resistance level on natural gas at the moment Which if it holds Should be enough to keep you in but I certainly wouldn't be betting my mortgage on it Which is probably not what you want to hear. I'm afraid but You know, that's about the only encouragement I can give you that we're approaching a very key resistance level from 2018 Any other questions Ladies and gents Where I wind this up quickly have a have a quick look at Brent Brent Crudes I'm approaching very key resistance level pushing right up against it OPEC class just announced another 400,000 barrels being added to Being added to the the daily daily supply And with another 400,000 barrels a day set to be added in October So this is a quite key. This is quite key trend line here on on Brent Which if it breaks could we'll see a retest of 76 The previous peaks there Go back to gold. Where are we now back down again? So this resistance level has still held And let's have a look at the S&P so all those gains that we saw In the in the in the pre-market is starting to come back a little bit As we head into the long Labor Day weekend if we look at a weekly chart on this We can still see we've seen some fairly decent gains on the S&P so I would suggest that we may well have seen the highs for this week On the basis of that payrolls report Certainly the the spike higher that we saw in the aftermath of the numbers Doesn't really appear to be holding But it's early days okay, so it's 145 does anyone else have any other questions? Otherwise I will wind this up I've also posted a My weekly video which will go live at 4 p.m. Today On the news and analysis section of the website Where I cover the ECB meeting next week um, talk a little bit about the German elections that are coming up and Just generally look ahead to The next few days as for next month's payrolls report um at the moment There's a possibility that might not happen because I'm supposed to be on annual leave. It's my wife's birthday. I'm taking her away for a for a week But there is there is also a chance that I might actually get back in time to do it So I'll know more That two weeks before the payrolls number But at the moment it's 50 50 as to whether or not I can get someone else to do The payrolls number in my absence, but I'll work on trying trying to get the I'll work on trying to Trying to get someone else to do it in the meantime Otherwise, thanks all very much for listening ladies and gentlemen. I'd like to wish you all a great weekend and Thanks very much for listening today and till the same time same place. Hopefully next month