 Good afternoon ladies and gentlemen to the first day of pretty summertime and the Monday market webinar on the 31st of March 2014 and we've got a fairly big week this week in terms of economic data. Obviously today is the last day of the quarter. It's been a pretty good quarter across the board for equity markets all up on the quarter for the first three months 2014. When you consider the backdrop that we've had, obviously uncertainty in Crimea, the Ukraine, as well as concerns about emerging markets, probably not done too badly given the fact that the Fed continues and will probably continue to do so its tapering program. Still have risks obviously concerns about Chinese growth, concerns about the effect that any recession in Russia will have on the German economy and obviously a slowdown in emerging markets as a result of the increase in interest rates that we've seen in countries like Turkey, Brazil, India and political instability in Thailand and Indonesia. Against that backdrop I think the equity markets have done fairly well and as a result I think it's going to be very interesting in terms of the economic data that we've got out later this week as to whether or not these gains can continue to be sustained. One of the surprising factors I think that we've seen over the past few months has been the outperformance in Italian and Spanish markets relative to the more developed markets, the G7 markets of the UK and the US. Again we've seen new all-time highs in the US but we continue to struggle near 1885 and the DAX is continuing to struggle below its lows that it put in the first month of this year. I think at the moment the expectation is after last week is that the expectation is that potentially we could see further easing from the ECB. We could also potentially see further easing from Chinese authorities because of concerns about a slowdown in growth there. I think there's an expectation and I think this expectation is somewhat misplaced but I think there's an expectation that the ECB and the Chinese authorities will step in as the Fed starts to step back. What could drive that? The first data point that we've seen today and this week has been a very weak Eurozone CPI number coming in, came in at 0.5% well below expectations of 0.6% and I think that has created an expectation that the ECB could well look again at easing monetary policy at its Thursday rate meeting. I think that belief has been reinforced by comments that the head of the Bundesbank made last week with respect to quantitative easing in the Eurozone. However, I think markets have read far too much into those comments, far too much and that's certainly been reflected in the continued strength of the Euro. When he made those comments last week, Jens Weidmann, the Eurodollar was trading at around about $138.2530. Now we have seen a little bit of a weakening since then but that has since been reversed and it was reversed once again this morning. If we look at the short-term chart on Eurodollar, we saw a little bit of a spike lower as Eurozone CPI came in below expectations but core prices remained pretty much the same at 0.8%. Even if you put Jens Weidmann's comments to one side and to be quite honest I think you should because I think ECB policymakers are looking at talking at the Euro lower and I think letting the QE genie out of the box for a little bit of air was part of that strategy because I certainly think that nothing really fundamentally has changed with respect to economic conditions in the Euro area. Mario Draghi, the ECB governor, has gone to great lengths actually to suggest that the weakness in CPI has been largely as a result of weaker energy prices and that was certainly the case in this month's figures. So I don't really think that is going to change perceptions about the direction of inflation going forward and I certainly think that any expectation that certain people have about the ECB making a policy change at this week's meeting are probably overstated. Now watch me get egg on my face as they go and do exactly that on Thursday. However, I think you've got to put this particular headline figure in the context of last month's ECB rate meeting and last month the ECB brought in a new inflation forecast for inflation within the Euro area. They also brought in new growth forecasts. So if they then go and cut rates at this week's meeting, one month after bringing in new inflation forecasts, I think it would erode their credibility an awful lot and I think what we'll continue to see is policy makers continue to jaw bone the Euro lower but I think they will be very, very reluctant to embark on any significant policy change between now and Q2, or the end of Q2 June, July simply because the economic data at the moment in the European area is probably not of sufficiently poor quality for them to change tech and even if they do, you've still got the problem with the banks looking to rebuild their balance sheets and that's not going to make them want to lend money anytime soon because of this asset quality review. So I think in the short to medium term, I think they're going to struggle to push the Euro lower unless they do something pretty much unexpected and pretty much out of the box. And given what the German Constitutional Court said earlier this year about OMT being ultra-virus and as such illegal, I think the bar still remains very, very high to any significant change in ECB policy that will make a difference and I think that's the crux of it. They can cut the deposit rate if they want to but it won't make any difference whatsoever and they can cut the headline rate as well. Again, it won't make any difference whatsoever because if you look at bond yields in Europe, in Spain, in Italy, in Germany, in France, they're all at multi-year lows and as such the level of interest rate is not a factor in stimulating demand in the European economy. We saw a fairly good retail sales number out of Germany this morning. We've seen a recovery last week in services and manufacturing PMI out of France which was a surprise. That is likely to be confirmed in tomorrow's PMI data. Let's due out on Tuesday and on Thursday. Now let's look at what we're expecting this week in the context of this week's ECB rate meeting. On Tuesday we're expecting Spanish, Italian, French and German manufacturing PMI data for March, the final readings. We're expecting 52.9% for Spain, 52.2% for Italy, 51.9% for France and 53.8% for Germany. The German unemployment rate is expected to remain steady at 6.8%. We're also expecting tomorrow Italian unemployment to remain at the highest of 12.9% and EU unemployment to remain at 12%. That's the key economic data out of Europe that we're due out tomorrow. Again, I think that's likely to be of significantly above 50 in terms of the PMI to make it very, very difficult for the ECB to look at changing policy. This week's meeting on Thursday, we've got Italian services PMI, Spanish services PMI, French services PMI and German services PMI. Once again, these numbers are expected to come in well above 50. Italy 52.3%, Spain 54.1%, France 51.4% and Germany 54%. EU retail sales are likely to rebound in February after that strong German number that we got this morning. The expectation originally earlier this week was for a decline of minus 0.5% obviously since that German number. That is probably going to get revised higher. Again, expect to see a fairly robust number there out of Europe. Again, it makes it highly unlikely that we'll see any move in rates on Thursday despite calls from all manner of economists and what have you, the ECB needs to do more. Unfortunately, it's a political problem, not an economic one. Unfortunately, the ECB is very limited in what it can do. I think that more than anything is going to limit the downside in Eurodollar. The key support for me in Eurodollar is round about this level here. It's around 137. It's the March lows. We held it on Friday. We're above it currently today. You can see that when you draw the line through there, 137.05, bigger five, 137. Below that, we've got a long-term trend line support coming in from the July lows last year. Again, that is probably going to act as key support as well. That currently comes in if we look at our daily chart here. I can just basically draw the level mode in there. That comes in round about 136.5. Also, when you look at the daily oscillator, that is continuing to look oversold. It looks as if it could well be starting to form a little bit of a base. As such, I think it remains very doubtful at the moment that we'll see an aggressive sell-off in the Eurodollar. Even if we do break this 137 low, we've still got that key support level there coming in round about 136.50. While above 136.50, the current uptrend in Eurodollar is likely to continue irrespective of what US economic data does and the trajectory of US economic policy. If you want any clues as to the direction of US economic policy, Janet Yellen is giving a speech later today on monetary policy. Markets will be looking for any further clues after a comment about six months. Those three words around six months from the end of QE to a potential rise in interest rates. Markets have shrugged that off a little bit, but it certainly has helped push US Treasury prices lower in the short to medium term. We can see that from my Government Bonds Watch list here, because what we've seen not only in the two-year note, but the five-year note and the 10-year note is the bond prices on all dropped below their 200-day moving average. The two-year note was the last to do that last week, and it continues to push lower on the weekly chart as well. Now if we look at the chart on a candle chart, we can also see that's borne out as well here. If we look at the 10-year, we can see that there's key support on the 10-year Treasury price at 124.50. If we break below this 124.50 area here, that should signal high yields. Now at the moment, US high yields in the US are not really being reflected in a stronger dollar against the euro or against the pound. And the reason for that I think is quite simple. Even though the Fed is loosening, sorry, tightening monetary policy ever so slightly, the reason that the dollar is not gaining against the euro is one to do with size of balance sheets. The Federal Reserve is continuing to grow its balance sheet, albeit at a slower rate per month, now at $55 billion a month, whereas the European Central Bank is continuing to shrink its balance sheet. So on balance sheet size alone, the Federal Reserve is essentially still loosening and that in essence is why the euro is not weakening against the dollar. Whereas if we look at, say, for example, something like dollar yen, it's a slightly different story because in April we're getting a consumption tax change in Japan that's likely to feed in to further potential easing in dollar yen or from the Bank of Japan in particular. And as such, it's likely to see dollar yen break above this resistance line here, which at the moment has managed to cap all the gains and could well see us move back to the highs that we saw in March around about $103.80. The big, big level on dollar yen, we all know about that. I've talked about it at a great length in previous webinars. It's around about $105.50. Why is $105.50 significant? It's significant because it's a retracement level from the highs that we saw in 2011 around about $124 to the lows at $75.50. If we break through $105.50, ladies and gentlemen, then I think that's really a good marker for a move to $110. But while we're below $105.50, then I think the potential for further range trading remains quite high because even accounting for the fact or even factoring in the likelihood that we're going to get this consumption tax change or sales tax change in Japan, it's going up from 5% to 8% is the equivalent of our VAT. It still remains at a very, very low level in Japan. 8% sales tax. I wish we were paying 8% sales tax. We pay 20%. I think it's long overdue and at the moment there is evidence that Japanese consumers are going on a bit of a sales splurge to beat the implementation of that tax in April. I think the expectation that we could see a policy using from the Bank of Japan in April or May is probably slightly overstated. Markets are looking for it. I don't think they'll get it straight away, but I certainly think we'll see further easing measures over the course of the next few months. If there is a significant hit to economic activity in say two or three months time. So we've moved above 103. We need to now get above 103.80 in the March highs to kick on towards 105.50. In the short to medium term, there's a very, very strong support around about 101.70.80 in dolly yen and at the moment I think that's really the range trade. I really look to buy dips in dolly yen with good support between 180.80 and 101.80 and not forgetting the 200 day moving average as well, which is going to be a very, very difficult nut to crack in the short to medium term. So that's the dolly yen. So what are we expecting out of the US this week? Because I think that's going to be key in the context of the direction of travel with respect to tapering. It's going to be a big week for the US as well. We talked about the manufacturing PMIs out of Europe this week and Tuesday and Thursday are big days for that. Big days for the US, the Tuesday, Wednesday and Friday. Starting with Tuesday, we're looking for ISM manufacturing in the wake of the recent poor weather that we've seen in the US economy which has actually hindered economic activity. But there is an expectation that maybe we'll see a significant pickup going forward as the weather warms up. The US economy went over to there summertime two or three weeks ago despite the fact that the weather on the eastern seaboard continues to be a bit on the chilly side. We've got Chicago PMI this morning, this afternoon for March. That's expected to come in around about 59.5, but the big number is tomorrow. It's ISM manufacturing. That's expected to improve from February 53.2 to 54. And then on Wednesday we've got the starting, the starter if you like, the aperitif for Friday's main course of non-farm payrolls. On Wednesday we've got US ADP employment report for March. That's expected to see an improvement from the February numbers of 139,000 to 190,000 new jobs added. We're also expecting factory orders. Weekly jobless claims continue to decline, 311,000 last week, which brought the four-week average to its lowest level for quite some time. Expecting a slight push higher to 319, 319,000 on Thursday. And ISM services expected to improve after a very sharp decline in February from 51.6 to 53.5. It's important any numbers above 53, we're going to continue to see an expectation that the Fed will continue on its tapering program going forward. And when you've got FOMC voting members like Bill Dudley, who's probably been the most dovish member of the FOMC for the last two or three years saying that the bar is very high to basically raining back on the tapering, then you have to listen. You have to listen. If you've got the most dovish member saying that the bar is high, then it's likely to be the case that the Fed will continue to taper into April, into May, into June, July and August, unless there is a significant shock to the US economy caused by potentially geopolitical unrest. Where that comes from, it could come from any number of places. It could come from Russia. It could come from the Ukraine. It could come from an event in China or anything like that. But at the moment, the direction of travel appears pretty well established in that context. So what are we expecting for non-farm payrolls on Friday? If you want to listen to the non-farm payrolls or listen in, there will be a webinar on Friday, which I will be hosting at 1.15 until 1.45. So you can listen live with me on Friday, 1.15. Sign up on the website. Two of the non-farm payrolls are expecting a better number than we saw in February. An improvement from 175,000 jobs in February to 200,000 in March. And we're expecting the US unemployment rate to decline as well from 6.7% to 6.6%, not really so much of an issue now since the Fed dropped that from their forward guidance. Now they're looking at a range of measures, allow Bank of England. So it's going to be very, very difficult in terms of what the expectation will be with respect to any Fed reaction to the jobs numbers, but really technically speaking, it's unlikely that we're going to see a number that's really going to change expectations about the direction of US monetary policy. So we're expecting a decline to 6.6 from 6.7, and we're expecting the labor participation rate to remain the same at 63% of the working population. So that's non-farm payrolls out of the way, so please feel free to join me for that. As for the UK economy and the direction of the pound, again, it's a question of by the dips because certainly we're not seeing any expectation or any slowdown, an expectation of a slowdown in the UK economy. And again, it's about the direction of interest rates and the expectations of the next change in monetary policy. And like the US Federal Reserve, the likelihood is that the next move in rates for the UK economy is likely to be towards the upside. And that's certainly helping in the context of the pound against the dollar. We can see that we've seen five successive up days in a row for cable. The last time we saw that was in February, and we topped out round about 168.20. Now we are approaching a resistance level. It comes in from the highs that we can draw from the February highs. It comes in round about 167.5. It also coincides with the March highs as well. Now those of you who listened to me a week or so ago will know that between 168.170 we've got huge amounts of technical resistance. But that doesn't mean that we can't go higher from here. We can definitely go higher from here. But we need to be very, very aware that there remain significant resistance between 168.170. And that's borne out by this chart here. We can see, just remove that moving average for a moment, we can see on this chart here how big that resistance level is. We just draw it through those lows in 2005, 2006, comes in through the highs in 2009, and basically comes in through here as well. So on the monthly chart we've got a massive amount of resistance between these series of highs through here. 168.73 there, 173 there, 168.20 through here. And that's really down to an expectation that at some point we will see a rate cut before, a rate hike before the ECB cut rate. So what does that mean for euro sterling? Well it means that euro sterling really has to weaken over the short to medium term. I can see no other reason to buy euro sterling unless you're short of it. And the trade for that at the moment appears to be based on the 200-day moving average selling into any euro strength. At the moment we're trading just above the lowest levels for March. The lowest levels for March are around about 8205. We're trading around about 88.90. Now we can squeeze all the way back to 83.40 initially. The big, big level though remains at 84, and that's these two highs here. We got the bearish engulfing candle earlier in March. We have since drifted lower. Let's look at the weekly candle to give us any further indications again. A very strong downward move in the February candle. We've had a bit of a rebound in March, but certainly nothing to write home about. Certainly on the weekly chart we remain pretty much neutral in terms of where we started the month. We started the month of March around about 8205. So we had a strong three, four-day move down last week. So you'd have to think that maybe the weakness that we've got and the potential for a rate rise is starting to get priced in, but you've certainly got a significant amount of what I would call resistance around about 83.30.40. We can extend that back there. So you can see the resistance level there. So we could get a short squeeze back to here, but overall I would expect to see a move back to the lows that we saw at the beginning of this year and subsequently a move lower as we head into Q3, the end of Q2 and the beginning of Q3. I can't see any reason why you would be long of euro sterling unless particularly in light of the fact that the pressure is going to increase on the ECB to move on policy and the likely move on policy is likely to be an easing as opposed to a tightening. So what else do we have later this week? Will UK economic data to keep an eye out for are the latest PMIs for March? And we've seen net lending this morning rising, though mortgage approvals fell. There is a concern that the recent recovery that we've seen in economic data has been driven far too much by UK consumers. The hope is that an improvement in the construction and the manufacturing sector will continue into Q2. Certainly in March it's certainly showing no signs of slowing down. The manufacturing PMI for March, which is due out for tomorrow, is expected to come in round about 56.5, a slight reduction from February 56.9. US House prices on Wednesday are expected to show continued rises. Construction PMI in March on Wednesday is expected to show an improvement from February 62.6 to 63. So again an improvement there. No Bank of England rate meeting this week. That is the coming next week. But again, not expecting to see any change in policy at all. The Bank of England Governor, Mark Carney, is going to be talking later tonight and I'm expecting him to just reiterate the guidance that he's given that interest rates aren't likely to move anytime soon. But having said that, when you've got one of the most dovish members of the Monetary Policy Committee in the form of David Miles saying that consumers need to start thinking about when rates are going to rise you've got to think that they're going to come sooner rather than later. So on Wednesday we finish off with services PMI. Obviously that's the biggest proportion of the UK economy and again we're expecting to see that to stay just below 60 round about 58.1, 58.2. And that's likely to 0.2 a growth rate in Q1 of around about 0.7, 0.8 pretty much the same as Q4. And again that really equates to around about 3% annualised growth rate which is not too shabby for 2014. Certainly 0.7, 1.4, 2.9 annualised growth rate that's not too bad. So that should support the pound over the course of the next week or so. What else have we got out later this week? Well those of you who are interested in the Australian dollar we've seen a significant breakout in the Australian dollar of that inverse head and shoulders and the break of the 200 day moving average that I was talking to you about last week. Now we have peaked a little bit around about 93 which does seem to suggest that we may get a pullback but certainly with an RBA meeting later this week it really depends on whether or not the RBA highlight any concerns they have about the current level of the exchange rate and you'd have to think that they do have concerns about a strong grozzy. Having said that, having broken this level here as long as we stay above 91.50, 60 then the potential for a higher Aussie remains towards the upside. We can certainly see that borne out on this chart here as well as this support level here. So as long as we stay below 93 then the potential for a pullback towards around about 91.70 remains high and as long as we stay above the 200 day moving average the current bullish scenario for Aussie dollar remains pretty much intact for the time being. Irrespective of what this oscillator is telling you the trend is up and as you can see if you try to pick the top in this earlier this week sorry early this month rather you'd have ended up being squeezed all the way and now above the 200 day moving average the centre of gravity continues to move slightly towards the upside a slightly stronger Aussie, a slightly weaker US dollar. Okay so what does that mean for equity markets overall? As I say we've seen the Euro stocks 50 hit its highest level since 2011 but at the moment the S&P 500 continues to remain capped by the highs that we saw at the beginning of March and I think really it's all about earnings expectations now let's look at this chart here and we can see that we're starting to get a little bit of what I would call compression so we've got a nice little triangular consolidation here ladies and gentlemen and I'm still of the opinion that for us to see really strong gains above 1885-1900 we need to see an improvement in earnings and at the moment given my concerns about a slowdown in China and a slowdown in the global economy as a whole the US markets have pretty much got the best case scenario already priced in so all we need to see is a significant improvement in the Chinese data which is out later this Thursday we've got manufacturing and non-manufacturing official PMI data out later this week keep an eye on that if that shows signs of weakening that's going to increase expectations of some form of stimulus from Chinese authorities however I think markets could well be disappointed by the extent of it because if you've got a shadow banking crisis and you want your banks to rain back on their lending then I think the last thing you want to be doing is encouraging them to lend even more money when they're looking to rebuild their balance sheet so despite what the President of China is saying about the likelihood of further stimulus I think they're very constrained about that and that's likely to limit the upside in the S&P 500 in particular but certainly this little triangular consolidation here is certainly something that's well worth watching we can certainly see in the context of the FTSE 100 that we remain stuck in this range that we've been in for quite some time I don't really expect that to change anytime soon so we're currently finding resistance around the mid-March highs here let's have a look at the long shadow on this candle here and we can see that there's a bit of a resistance at 6680 so again that's slap bang in the middle of the range good support around about 6,500 if we break below 6,500 then again 6,400 indices are pretty boring at the moment they're not really telling you an awful lot about where the market's going one way or the other and the same thing pretty much applies to oil prices as well certainly we can see that in the context of US crude prices they remain towards the upper end I think of their current range we can see that from here 105 on the downside 105 on the upside rather 99 on the downside again it's the same for Brent crude before I sign off ladies and gentlemen just worth keeping an eye on the Brent crude price here because I think this chart in particular is certainly well worth watching if we break towards the downside this is a weekly chart that I'm showing you here look at this from the 2009-2010 lows we can see that we've also got the 200-week moving average last earlier this month we bounced off support level we also bounced off the support level for the lows this year so any break down in this particular chart around 105 could see a sharp sell-off on a technical basis so keep an eye on that before I sign off is there anything that I haven't covered that anyone would like me to cover actually I've just remembered let's look at gold that's always a good old favourite right gold weekly chart this worries me slightly we've had a push lower we've had a bearish engulfing week a couple of weeks ago we've had another bearish week the key level on gold for me ladies and gents is 1280 we can get a drift back down there but if we break below there then the potential for a move lower towards these lows in January remain fairly high at 1230 but we remain fairly oversold on the daily oscillator so I would be surprised if we got much of a move below 1280 really depends on the economic data it depends on the non-farm payrolls strong numbers there are going to feed in to expectations of a fed taper or even a faster fed taper and that could well be on the cards especially if you as hawkish policy makers talk about accelerating the tapering process so gold prices need to get back about 1310, 1320 in the short to medium term to argue for a move back to the highs that we saw two weeks ago around about 1340, 1350