 Right, let's get started with this Monday market webinar on Tuesday, the 15th of June. Welcome to CMC Markets, myself Michael Houston. I'll be taking you through the next half hour. First and foremost, I will be recording this. So any of you who want to listen to any of what we've discussed over the next half hour, I can listen to it back. In the meantime, let's get the obligatory risk warning out of the way. I have to do this for compliance purposes for all UK clients, Canadian clients, and any other listeners who are not domiciled within our sphere of influence. So once I've got this out of the way, we can then get started. Okay, so it's going to be an interesting week this week. I've already been asked a couple of questions with respect to charts and technical analysis. The first question I've already been asked is, why isn't Eurodollar falling through the floor, given what we've heard over the weekend? And that's a very fair question. It's a very fair question indeed. But I suppose you could actually look at it in the context of who really cares whether or not Greece leaves the Euro. Actually, you could argue that if Greece leaves the Euro, the weakest currency actually would no longer be a drag on it. But to be quite honest, that's a rather superfluous argument. At the end of the day, I think the market is completely fatigued with this Greek question. And until such times as we get some form of resolution, it's unlikely that the market is going to react. And even if it does, Greece's GDP accounts for about 1% of European GDP. You can argue that it weakens the Euro from a structural point of view, and most certainly it does. But ultimately, I think there is a risk that you're trading the headlines and not actually the price action. And that's a common mistake that I think people make when you're trading currency markets. Because within currency markets, you always have what I call a push-pull effect on the currency pair. You're buying one currency, but you're selling another. And it's a big week, not only for Greece this week, isn't it always? But it's also a fairly big week for the US dollar, namely in the form of Wednesday's FOMC meeting. And I think more importantly, the tone of the press conference afterwards on Wednesday evening when Janet Yellen basically speaks to the assembled press. And I think more than anything else, when you consider where Euro was a year ago and where it is now, we're already trading at a significant discount. Therefore, you could argue that an awful lot of the uncertainty with respect to a Greek exit is already priced in. Let me dial you back to 12 months. The Euro dollar was around about 135, 140. It's now around 112. So we've already seen a significant decline in Euro dollar over the course of the last 12 months. So if we get a worst case scenario later this week, and there's no guarantee that we're going to get that, because even if Greece does default, they can't really default until the end of June. And that's still two or three weeks away. So there's still, I think, some vain hope that we will get some sort of deal. And given the way that this crisis has played out over the course of the last five years, there's always been an element of pragmatism with respect to the German approach to the Greek problem. That being said, I see no prospect of a resolution between now and the end of the month. Simply speaking, there's too much open water between the two positions. And at the moment, the likelihood is, the most likely scenario is that Greece doesn't play the IMF. And the EU needs to come up with some form of default resolution mechanism. Let's not forget that if Greece is exited from the Euro, you've got the prospects of a failed state. And I don't think it's in anyone's interest the EU's or Greece for that to happen. So they'll figure out some form of mechanism that Greece can default within the Euro, which means that they'll still are likely to use the Euro as a currency. However controversial you think my conclusions are with respect to that, at the moment I'm looking at the charts. And I'm looking at the charts in the context of the price action over the course of the last few weeks and months. Now I'm getting a whole host of questions at the moment. I will deal with them as I get to the currency pair in question. So first and foremost, let's start with the Euro dollar. So this is my four hour Euro dollar chart. We can see from the lows that we posted in the beginning of April and the highs that we posted in the middle of May. At the moment we are trending upwards. And until such times as this uptrend is broken or breaks down, at the moment Euro dollar is still pretty much by the dips, currency pair. Irrespective of what you think of the headlines, you can only trade what you see, not what you hear. And I think that's an important distinction to make when you're trading markets. You're trading any type of asset. Trade the price action, don't trade the noise. What you're hearing out of Greece at the moment is political noise. We may get a default and it's likely we'll get a default, but at the moment trying to get in front of that default is to a certain extent it's a common mistake because it's not going to happen overnight. It could well happen over a weekend. The fact that it hasn't happened this weekend suggests that anything untoward isn't likely to happen between now and the end of the week. Sentiment will change and sentiment will change on both sides of the Atlantic with respect to the prospects of a US rate hike or not, which will affect the dollar's strength not only against the Euro, but also against the pound, but also against the yen. So I think it's important to remember that yet we've got all this headline risk going on, but ultimately you have to put that to one side and just concentrate on what the actual price action is doing right here in front of you. And what this chart here is telling me is that we've got significant resistance around about 113.80. So what we've got there, nice little resistance there, we've got a certain degree of support anywhere around between 112 and 111.80, and then below that we've got 110.52. And 110.52 is quite important in the context of these lows here, these lows here. So between 112 and 110.50 we've got a significant area of what I would call barrier support, but the big, big level for me is 110.50 as well as the trend line support from the lows. It also boils down to perceptions of what I think with respect to US rates are going to do. Now I still believe that it's unlikely that the US will raise rates this year. Simply speaking, I think the risks are too great for them to actually do that, which leaves me to believe that Euro-dollar downside is likely to remain fairly limited. Now those of you who've followed my videos over the course of the last four or five weeks will know that I've been looking at Euro-dollar in a significant amount of detail and there's another factor tying into my narrative that I think we've probably seen a low in Euro-dollar. It has to do with Japanese candlestick charts and I explained that more in previous videos, but certainly in the context of these, this candle here, this is called a bullish engulfing pan. Also in terms of bar charts it's also called a key reversal day and you get them at the bottom or the top. You get them at the end of downtrends or uptrends and here for me this is a fairly bullish signal that we've probably seen the lows in Euro-dollar. Now what we need to make sure that doesn't happen over the course of the next, and this is very much a long-term view, so each one of these candles represents one month of price action. So we can see that in April we rebounded strongly off the lows and actually closed above the previous open of the previous month and the whole of the candle's body engulfed the body of the previous month's candle. That is generally a fairly positive signal and if you look at this move here we've had one, two, three, four, five, six, seven, eight, nine successive down months which seems to suggest that some form of Greek meltdown is probably priced in. There's another factor basically weighing into my belief that potentially we could have seen a base in Euro-dollar and that's the gap between US Treasury yields and the German Bundy yields. That is another story. I'll go into that in slightly more detail. But we also saw a key day reversal on the Euro-dollar on the weekly chart in the middle of March as well. So we can see that it's very, very choppy and it's very, very volatile but there's definite pattern here. We get a strong up move, a down move, a strong up move, a down move and then a strong up move. The key level at the moment in the short term is those two Twin Peaks that are at 113.80 but also behind that we've got 114.85, 115. Drilling down into the detail, we can still see that we've got a fairly good upward momentum here but we need to take out 113.80 and not fall below these lows that we saw last week around about 111.80. So at the moment we're in a little bit of no man's land. We can probably come back and retest these lows here but unless we take out these lows at 110.50 I still think there's potential for Euro-dollar to move higher. That is probably more apparent on the pound against the dollar and we can see that in slightly more detail, better detail here. The pound has very much outperformed the Euro over the course of the last few days and weeks and we have also closed above the 200-day moving average and again momentum here is again once more in the pound's favour. We're getting progressively higher lows, we're getting progressively higher highs through here which would seem to suggest that we've potentially got further upside potential. We've got support around about 154.60 but also below that we've also got support around about 154. If we change that to a daily chart we can see it born out here with a 200-day moving average. We've also seen the 50- and 100-day moving average crossover and start to turn positive which also coincides with this uptrend line from the lows that we saw in the middle of April. So once again momentum is moving in favour of the pound relative to the dollar but at the moment head of the FOMC I would expect to see a little bit of dollar strength, a little bit of sterling weakness because not only is it a very big week for the US dollar but it's also a fairly big week for the pound because we've got a whole host of economic data coming out of the UK starting tomorrow with the latest inflation data. Now the inflation data is probably a little bit of a red herring when it comes to what the Bank of England may or may not do over the course of the next few months. I'm particularly interested in what the wages data does on Wednesday but overall I think if you get a significant bounce back in the inflation data that is probably going to be fairly sterling positive. At the moment we're expecting a rebound in UK inflation for May from minus 0.1% to plus 0.1%. Now if that comes in weaker than that will be sterling negative, slightly sterling negative not massively so but it will probably cause a little bit of sterling weakness in the short to medium term because what we want to see is perceptions of if you want to see sterling strength then what you want to see is a slightly more positive sterling inflation number. But overall looking at that RPI is expected to rebound from 0.9% to 1.1% so retail prices CPI is expected to bounce back into positive sterling which is 0.1%. So that should be fairly sterling positive. If it's weaker than that then we could see a little bit of sterling weakness. Also unemployment data on Wednesday 5.5% not really expecting any great shakes there but keep an eye on the average earnings data on Wednesday. That's expected to jump from 2.2% to 2.5% so again if that comes in pretty much as expected or even better say 2.6% that again is going to be fairly sterling positive. It's going to feed into a narrative that maybe wages growth is starting to take off and that will worry the Bank of England and that will potentially get policymakers thinking along the lines of a potential rate rise earlier rather than later. I'm still in the camp that we probably won't get one this year but certainly wage growth is going to be a concern of the Bank of England. So keep an eye on that number expecting a number around about 2.5% from 2.2% if that comes in weaker again that will be slightly more sterling negative than anything else. So that's the factors affecting the pound but the big event of the week is the FOMC. Now the data that we saw last week let's get on to that because I think in terms of the FOMC let's look at the dollar index because I think that's going to give us the biggest indication as to where the dollar is heading at the moment and we can see from this chart here that since April when Eurodollar hit 104.65 the dollar index hit a high of 100.27. Now the dollar index is important because Euro makes up around 57% of the basket components of the dollar index, 57%. So that's a big component. We've had a rebound that was around about 115, Eurodollar 114.85. We've come all the way back here in the end of May and since the end of May we've been trending lower on the US dollar. So the direction of the dollar index is usually a fairly good proxy for what the Eurodollar is going to do. So at the moment the dollar index is in a short-term downtrend which reinforces the narrative for a short-term uptrend for Eurodollar. I've been asked to run sterling dollar on a monthly chart. I will in a minute. Let me just finish this explanation here. So the key level on the dollar index that I'm looking for a breakup. If you want the dollar to move higher then what we really need to see on the dollar index is for a breakthrough this series of peaks at around about 95, 60, 95, 70. That's really the key level on the dollar index on the upside. Breakthrough there it will push Eurodollar lower back down to around about the 110.50 level which is around about these sorts of levels through here which calls this initial breakdown through here. So what am I looking for for the FOMC? Well for a start I think if we're going to get a September rate rise then what you need to see is for the Fed to be much more hawkish in its press conference on Wednesday and Janet Yellen in particular. Now over the past week or so we've seen a host of US policy makers become an awful lot more dovish in their rate outlook for the rest of this year. You may recall that James Bullard who's the St. Louis Fed President was one of the key policy makers who was actually quite vocal about the prospects of a rate rise sometime this year. He actually stepped back from that last week and was a little bit concerned about the recent weakness in the US economy. So for someone like Mr Bullard who's been fairly hawkish or bullish about the prospects of a rate hike sometime this year to start tempering his expectations is probably not a good sign if you're looking for indications of a potential rate rise certainly by September. Furthermore in March the Fed downgraded its growth forecast and its inflation forecast. So for me this is a matter of sequencing. If you're going to expect a September rate rise then really the Fed needs to start thinking about adjusting its inflation forecast and its growth forecast this week because otherwise they only adjust these forecasts on a quarterly basis. So if they don't adjust their inflation growth forecast in June the next time they can do it is September. Now if they adjust their inflation forecasts and growth forecasts in September I think it's unlikely that they'll raise rates at the same time. It just wouldn't, it would be a little bit of a surprise. So for me if they don't give a signpost that they're thinking along the lines of raising rates in September they probably won't do that because they won't have enough data with which to do it by then. What they'll do in September if they are going to raise rates this year is they'll adjust their inflation and growth forecast in September to signposts to the market that they're leaning in a direction of a rate rise albeit a very moderate one and potentially October or December at the earliest. So June is very, very important in the context of signposting what they could do in September and if they don't adjust their inflation forecast or the growth forecast then I think it's unlikely, irrespective of how good or bad the data is between now and then that they will raise rates in September. They may choose to wait to get much more detail and let's not forget the summer months do tend to be a little bit unreliable when it comes to the amount of data that's coming out because you do get a little bit of a summer lol and there is also an awful lot of seasonal hiring that can actually distort the longer term averages and I think the Fed will want to be absolutely certain about the longer term averages with respect to the way the economy is going before they start to raise rates because if they raise them too early and then have to cut them again they'll end up with the same egg on its face that the ECB got when they raised rates in 2008 and 2011 and then subsequently had to cut them again and given the amount of dollar denominated debt that's washing around the global economy a premature rate hike could actually do much more damage in the short to medium term than waiting a little bit and I think that's certainly the argument that Charles Evans of the Chicago Fed has been articulating for quite some time. He's been saying just wait a little bit longer look at the first quarter of 2016 for potential to start edging rates higher be absolutely certain that the US economy can withstand it more importantly the global economy and I think it's also important to note that the uncertainty with respect to what's going on in Greece I think it's going to be they need to tread very very carefully because we don't know when this so-called SOPE opera is going to end people are talking about a drop of debt at the end of June that could well be the drop dead date but given how often policymakers have managed to kick this particular can down the road we just don't really know how long the Greek debt crisis will continue to go on because for me I think it's unlikely that the Europeans will be allowed by the US to just cut Greece loose Greece's geographical position is just way too important for the US NATO alliance to run the risk of having a failed state on its doorstep especially given what's going on in the Middle East right now and Greece's proximity to that so it's not just about politics it's not just about economics there's a whole host of different factors at play with respect to this crisis so Greece could well default and they'll somehow come to some form of arrangement to try and keep Greece in okay so that's basically my views with respect to that I think the dollar's still in the downtrend and that's what's helping underpin the euro and it's what's helping underpin the pound at the moment if we look at the dollar yen it's a similar sort of story we've had a significant down move over the course of the past this is a four hour chart and we can see that from here we had a little bit of a breakdown from this reversal that we saw on the daily if we can change it to the daily chart you can see what I mean here these strong downward thrusting candles suggest to me that the market's a little bit longer dollars short of yen also what Corotas said last week head of the Bank of Japan would appear to suggest that with a Bank of Japan rate meeting on Thursday morning it's unlikely that they're going to signal any further stimulus measures over the course of the next couple of months so that for me suggests that maybe this trade unless we get back above this neckline here we could actually see a move lower in dollar yen back towards the lows that we saw around about one twenty two and a half in the original thrust lower here at the moment this is sort of neckline reversal exact thing is a slight head and shoulders reversal albeit with a very very narrow and a not particularly great right shoulder but certainly this neckline break here has acted as resistance on the way up we've also got our Ichimoku resistance as well which is doubling up as a resistance on the way down we can probably draw a trend line in through the highs here if we need to but overall I think if we get back above one twenty four then we could squeeze higher but while we're below one twenty four then the balance of risk suggests for me that the dollar yen is probably going to drift lower and certainly if we get a dovish outcome from the FOMC on Wednesday then I think we could well see a return down here to around one twenty two and a half as the dollar starts to slide back so I've been asked about the monthly chart on the pound against the dollar this also feeds into the Euro dollar chart that I was talking about earlier this here is a fairly bullish candle we've made a brand new low here but we've closed well within the confines of the previous candle here now that's not quite a bullish engulfing it's a piercing pattern so it's not quite as bullish as say a bullish engulfing month is but it still tells me that there's potentially a little bit more there's still a few more short positions in here which suggests to me that we could probably come back to around about one fifty eight revisit these highs over the course of the next few trading sessions as I say I've got a slightly minority view here in the context of where I think the dollar's going to go next sometimes the minority view is the wrong view but in my case I just think that the dollar trade is two one way at the moment and I don't think there's really any appetite at the moment for a stronger dollar amongst policy makers in the US also here what we've got is another bullish candle here this was a bullish engulfing pattern here having two bullish reversals in close proximity to each other is usually quite rare we got it on the weekly we got it on the monthly we also had it on the weekly euro dollar and we also got it on the monthly euro dollar and that suggests to me that the market is very very short euros it's very very short sterling it's very long at dollars and at the moment it's very very simple we just put in a nice little uptrend line here and you just play the trend higher and the trend is higher at the moment we can take it to the four hour chart and we can see that there we can also see it on the four hour chart what I would be concerned about however is this does have the potential here to be a possible head and shoulders reversal but we've got the left shoulder here we've got the right shoulder here this could form a left shoulder what I don't want to see it do if we break it down into its component parts I don't want to see it drop below 154.60 because that would suggest we're starting to roll over at the moment even if we do roll over we've still got fairly good support through this line here and we've also got the trend line below there but for me I'd want to try and keep it fairly simple I trade on levels I trade on lows and I trade on highs and at the moment what we've got here is a nice little peak at 156 if you want to see what my ideas with respect to the currency pairs are use the chart forums ladies and gents they're right there that's my latest indication having got within a whisker of 156 on Friday the next target sits at the May highs at 158.15 only a four below 154 level suggests to move back towards trend line support at 152.90 now I update the euro dollar or the sterling dollar every single day on the chart forums so just keep an eye on them I can't give you trading advice on them but I can give you a direction of where the key levels are and the ones to keep an eye out for as I say I update them every day if you want me to update a particular market for you I'm quite happy to do that and can tell you where the key levels are obviously again I can't give you a direction looking at the client sentiment again can give you an indication of which way our top clients are thinking and our top clients are a little bit undecided 40% long, 60% short so the bias is slightly to the short side but not as much say for example as we were yesterday or Friday rather where we've seen a 14% increase in cash pushed onto the short side over the course of the last 24 hours that's what this number here means 14% increase on the day so people aren't as short as they were okay being asked to do Sterling Yen I can quickly do that where are we there we are it's my Sterling Yen chart that's pretty unequivocal that one we're in an uptrend there it's a four hour chart we're above the support line we could well start to drift lower but overall we're in a pretty decent uptrend there and I wouldn't certainly be trying to pick the top on that quite yet because even if we get a move lower in Dolly Yen that could be more than counter counter balanced by a move higher in cable similar sort of story really in Sterling Aussie as well Sterling crosses are very very strong so you really do have to bear that in mind when you're looking at trying to short cable because whenever you try and short cable you've got to bear in mind that Sterling is pretty much strong across the board against everything else apart from the US dollar so I'm going to look at Dolly Cat in a minute what I wanted to point out to you with respect to why I think the dollar could remain weak is the yield story we've seen a significant reversal in the US 10 year note in the prices in the price action now things important that we understand the relationship between prices and yields lower prices mean higher yields so the yield on US treasuries will increase as prices fall what we've seen here is what I think is a potential reversal in prices which suggests that yields could possibly come lower if US yields start to decrease that reduces the attractiveness of the US dollar and as such potentially weakens it now we can look at this in the context of this move or this chart here this chart here is a rates differential chart between German 10 year and US 10 year treasuries now this was where the gap between US 10 year yields and German 10 year yields was at its highest that's when Euro dollar was at 104 or 105 because the gap between the US Treasury and the German Bund was 189 basis points in the US dollars favor that gap is starting to narrow and that's why Euro dollar has rebounded Euro dollars rebounded because this gap between US 10 year treasuries and Treasury yields and Bund yields is starting to narrow in the Bund's favor now yeah we're still 153 basis points in the US dollars favor but it's not about the actual difference it's about the direction of travel the markets were gearing up for much wider gap between US treasuries yields and German Bund yields and it's gone the other way and that's why the market is looking to start buying Euros again and selling dollars because the gap differential is narrowing back in the Euros favor and that essentially is why you're getting or why markets are finding it much more difficult to actually sell Euro dollar because this yield differential here is starting to narrow back in the Euros favor and if it continues to move down this way down towards 140 Euro dollars going to find it very very difficult to go down irrespective of what happens with Greece it's not just trading on what's happening in Europe it's also trading on yield differentials and inflation expectations and German Bund yields were trading at 0.05% in March they were yielding 0.05% so virtually nothing now they're around about 0.8% so that's a big differential that's come in quite significantly and if German Bund yields go back to above 1% and even to 1.2% that is going to be Euro supportive so whenever you're trading Euro dollar ladies and gentlemen always look at the differentials between Bunds and US 10 year treasuries because that will give you a good indication as to whether or not the Euro has got a significant amount of downside left in it if this gap number here starts to get less move in the Euro's favour then it's going to make it that much more difficult for Euro to go down a significant amount so hopefully those of you who are very confused as to why Euro dollar won't go down that will give you some indication as to why it's not just about Greece because Greece on its own it's not going to cause the Euro to fall out of bed we're already down quite significantly already but the fact of the matter is what we're now trading on is uncertainty and rate differentials as well so hopefully that made sense if it doesn't drop me an email at m.hueson.cmcmarkets.com or tweet me at mhueson.cmc I'm more than happy to expand upon that if I need to been asked about dollar CAD more than happy to look at that again dollar CAD we are in a bit of a downtrend at the moment this is the daily chart on an 8 month basis we're looking to trade back through this $123.50 we could well go back to around about this downtrend line here but overall dollar CAD does appear to be trading in conjunction with the oil price which makes it very very difficult to actually definitive guide to where it's going to go to next there's also the fact that we're slap bang in the middle of the breakout of this particular level here, this double top here so I am going to draw in this resistance line here and I would suggest that this is a potential double top we've broken down we should get resistance between $123.70 and $124.00 if we move back through $124.00 then we're probably going to go back to $125.00 but while we're below this resistance line here I think there's potential for us to drift back down again looking to probably sell around between $123.80 and $124.00 for a move back lower on the dollar CAD certainly on the basis of this potential double top that we saw here these two peaks here down here broken lower tried to break back through it as long as we stay below this resistance line that I've drawn through here we should come back lower again okay I've gone slightly over ladies and gentlemen so one thing I would say keep an eye on the FTSE 100 because we've broken below the 200 day moving average for the first time since the beginning January 2015 so that's worth keeping an eye on over the course of the next few hours because if we close below the 200 day moving average there's certainly potential for us to come all the way back to $66.57 which is these peaks that we saw around about the end of December also looking at the DAX very very quickly this channel here testing the bottom of that channel keeping an eye on that previous low there which is around about $10,860 that's going to be a key support level going forward but overall we are in a downward we are in a downward trend and heading back towards those key levels there as well okay if that's all ladies and gents I'm going to wrap this up hopefully I've answered all of your questions if not send me a message at mhuson underscore CMC on Twitter otherwise you can come back on Wednesday at 3pm where me and my colleague Colin will be doing a Q&A on what's going on a preview of the FOMC look back at some of the UK data that we've seen thus far and see whether or not the debate has advanced with respect to Greece's future within the Euro area so that's 3pm on Wednesday you can sign up for that on the CMC markets website I'll quickly show you where to find that now it's right here in the education section scroll down there and it's right there so you just log in to that 17th of June webinar half an hour we'll talk about what's going on in the markets and see whether or not we've changed our view with respect to what's going on in the FOMC otherwise I'd like to thank you all for your attendance today and good luck with your trading today until Wednesday or next week thanks for watching