 Good afternoon and welcome to CMC markets on 1st of February and this non-farm payrolls report webinar for January Thanks for thanks for dropping by before I get started have to go through a Load of disclaimers for you because nothing that ultimately you hear and see here Is an invitation to trade or anything like that what I'll be doing is going through the key levels Identifying the key chart points trying to interpret the data as best I can and hopefully try and generate some form of direction for the markets as I make my way through the The bits and bobs of the actual payrolls report so Been an interesting week By and large seen some very decent Gains for equity markets Seen actually a decent January decent start to the year and I think one of the things that's really struck me more than anything else over the course of the past two to three weeks is Why despite the wall of worry? And the fact that we had such a poor fourth quarter Why equity markets have suddenly turned around? Certainly had a decent January we haven't Rebounded from the losses that we saw in December, but we certainly done a good Attempt at it as we can see from this S&P chart here If we look at the last Few months we can certainly see we've moved quite a little bit lower But we've pretty much recovered a good proportion of the losses that we saw in December and we're consolidating certainly in the S&P Near the highs but just below the 200 day moving average and that's really I think a key level for me on the S&P 500 the 200 day moving average because Ultimately acted as a little bit of an oscillation point in October and November as we try to trade around it There's a big big top just above 2800 and the rally that we've seen thus far Shows little sign of running out of steam now that we've broken this trend line from the highs in October and I think one of the reasons for the turnaround in sentiment despite the deterioration in Economic data has I think really been a Significant change of tone on the part of central banks. We've seen the People's Bank of China Start to step into the market ease liquidity In the Chinese banking system to try and free up liquidity there And we've seen a significant change of tone from the Federal Reserve And that change of tone came in the wake of last months Absolutely bumper blow the doors off payrolls report of 312,000 jobs and that was one of those reports that under any normal circumstances would have been You know all good on every single level But the problem with that payrolls report was actually it was too good because it was raising expectations That the Federal Reserve would continue to raise rates On a regular basis throughout 2019 the prospect of that now has diminished quite considerably and it's not because of a deterioration in US economic data We haven't really seen that I think what we've seen is an acknowledgement on the part of the Federal Reserve That there was a perception amongst those in the market that they were moving too fast and Too far If you look at US rates They've come up that we've seen we've seen eight rate rises since the end of 2015 and when you look at that against a backdrop of How the rest of the central bank world has been doing that's a significant divergence in monetary policy And that divergence in monetary policy was causing problems in emerging markets it was also causing problems elsewhere and We're also got a slightly more emollient tone from the US with respect to trade policy and one of I think one of the one of the One of the outcomes of that change of tone from the Federal Reserve has been a little bit of a sell-off in the US dollar And in terms of the dollar index I think there's a number of key levels that I'm going to be paying particular attention to When it comes to where we go to next and if we look at this particular chart I'm going to draw a nice little line through these series of lows there Now that comes in around about the 95 area so at the moment we're trading around 95 and a half 95.5 So a move lower in the dollar index is probably going to equate to a move higher in euro dollar Of around about 115 20 115 30 So there is potential for us to move quite a bit higher in euro dollar But you've also got to put that in the context of the range that we've been in for euro dollar over the course of The past few months. So I'm looking at the dollar index We appear to have topped out here when we a now do appear to be trending lower So in terms of the dollar, I'm very much changed my mindset To more of a set-on rally than a buy on the dip and if we look at euro dollar It gives us a similar sort of look We're at the top end of the range. We're still finding the air very thin apart from here Above 115 and for me, it's going to take a significantly weak Payrolls report to really push the euro dollar much above 115 Because irrespective of where you think u.s. Monetary policy is going It's highly unlikely that the euro is going to go significantly higher at the same time because the Europe Europe has its own problems Italy's in recession The likelihood of a rate rise from the European Central Bank is pretty much split between slim and none and Given those PMIs out of Germany this morning and Italy. I think it's highly unlikely that the ECB will be raising rates this year if at all in 2020 and I think that that's really a really a big concern. What does the ECB do next if the European economy continues to fall back lower and Certainly if you look at Italian GDP look at German GDP the outlook for European growth doesn't lend itself to a European Central Bank That's going to tighten so I think that the range that we've seen in euro dollar will continue to hold sway Irrespective of what the Federal Reserve does now one of the one of the key takeaways that I took away from this week's FOMC meeting was The the Fed actually modestly downgraded its language with respect to US growth It downgraded it from strong to solid now. That's still fairly decent and I certainly think this This this payrolls report that's coming up in around about six minutes time Will reinforce that but in essence this change of tone on the part of the Federal Reserve rather renders today's payrolls report a little bit moot because if it's good Then obviously the dollar will get a bit But it still won't change the calculus with respect to when the Fed raises rates next a March rate rise is off the table And I would suggest the June rate rise is 50 50 if we get one at all and certainly I think if you look The way the US 10 year Treasury yield has behaved over the course of the past Few months that would that really supports that view We've seen a big big move lower in US treasuries to around about 255 at the beginning of January. We've had a rebound but obviously since This week's Fed meeting yields have ticked lower back down to 2.63 2.64 And I think this is this is a bit of a minority view I think the Fed's done in terms of the in terms of the Fed rate-hiking cycle because I think US jobs growth is probably peaked. I think it's going to be very very difficult to Even consider another rate rise this year because the last thing the global economy needs now is a stronger dollar The last thing it needs is further divergence in Monetary policy. There's already a really there's already a very big gap between US rates and the rest of the world and When you've got concerns about China slowdown, you've got concerns about Brexit risk and you've got concerns about Chinese US trade relationships Concerns about European growth and what have you I think it's very very difficult to Make a case for further central bank tightening for the rest of this year I think they'll be much more concerned about trying to support the the economy of In you in in Europe's case Europe obviously the ECB in the ECB ECB's case Europe in the Bank of England's case obviously the UK economy and in the US's case a Bit of a slowdown in the first and second quarter because at the moment We don't really have any clarity on what sort of damage the US government shutdown has done With respect to the US economy The reason for that is obviously we haven't seen a good good chunk of US data and at the moment there doesn't appear to be any Inflationary pressure as you can see from the 10s 2s curve The key the yield curve still appears to suggest that inflationary pressures are very muted You've got 16 17 basis points between the 10 and the two-year yield, which is an extremely narrow gap If you consider that the outlook for inflation is Entirely aggressive in it and it's not the bond markets are basically saying inflation outlook is likely to remain very weak this morning's inflation numbers out of the European Union came in at 1.4 percent Core prices did tick up slightly to 1.1 But the highest core prices have been in the last 10 years have been 1.2 1.3 So that doesn't really tell us anything constructive in the ECB's target rate is 2% or around 2% So the ECB is well away from its target rate and it's unlikely to get anywhere near to it Anytime soon. So what does that mean for euro dollar? Well in terms of euro dollar, I think if we get a decent payrolls number then euro dollar should drift lower on the back Of a slightly firmer dollar in particular the wage growth number I think that's likely to remain fairly flat around about 3.2 percent still fairly decent and Obviously, we've also got the unemployment rate, which again Likely to come in around about 3.9 percent if we get a disappointing a slightly weak number in wages 3.1 or 3% that's going to be probably a little bit dollar negative And we might see euro dollar head up towards around about 115 115 20 But overall, I can't see this payrolls report really shifting the dial that much We don't also know whether or not that the US government shutdown has affected the collation of the data for the January payrolls report We're expecting a fairly weak number Relative to the strong December report But even if we do get a number I think it's going to be very difficult to really take an informed view of where we go to next with respect to these numbers It's probably going to take us at least a couple of months To get an idea of what's the damage was to the US economy and that's assuming We don't get another government shutdown in two weeks time because the funding has only been released for the next two weeks If we look at dollar yen, we can see that we're at the bottom end or mid-range really between 110 and 107 50 so I think a weak number will probably see his head head back towards 108 But overall again, I think the top end of this this range for dollar yen It's probably going to see a move back to 109 20 109 30 in the event of a positive number So a positive number I think for me would be anything in the region of 200,000 for non-farm payrolls Which we're going to be slightly dollar positive, but it will be the wages numbers that really I think do drive things overall I think a decent wage growth number will be positive more positive for the US economy in a benign inflation environment Given the fact that wage growth has been weak for such a long time. I think the fact that wages are strong Is actually a good thing in terms of consumer sentiment and retail sales But at the moment with a government shutdown, it's highly unlikely that we'll see the effects of that For at least another two or three weeks. So I will be quiet now and I will then Get ready to To see what these numbers actually come out 304 that is my word, right? Okay, so it's 304 for January, but the previous December numbers been revised lower to 222,000 so very good report Wages have been revised upwards for December to 3.3 percent good number again, but it's coming at 3.2% so at the moment the market's trying to make sense of all of this as am I But old overall, I would say that this is a very good report certainly very dollar positive and I would suggest that Unless we can get back above 115 euro dollar, which doesn't seem likely we are probably going to drift back down Towards around about 114 30 114 20 Over the course of the over the course of the rest of the afternoon because there's nothing in that payrolls report That tells me that the US economy is slowing down the unemployment rate has ticked slightly higher And let's see whether or not that's because of a rise in the participation rate So I'm just going to have a quick look at my Bloomberg on that because if it is it generally means that People are coming back into the workforce and that is in fact what has happened The participation rate has risen from sixty three point one to sixty three point two percent So more more people are being incentivized to come back into the workforce and as a result the unemployment rate has moved back up to four percent So in terms of the Dow Jones, I'm being asked that should be positive. I think for stock markets in general Here we go and sure enough it is I think as long as we can stay above twenty five thousand on the Dow We should go and move higher because ultimately the Federal Reserve are taking the prospect of further rate hikes off the table in the short term The US economy is in pretty good shape. So why would you not buy US stocks? So for me, that's positive for the Dow. It's positive for the S&P And that should mean that we could well head back Towards the levels that I was talking about earlier in my summing up towards the 200 day moving average on the S&P 500 Doesn't change the calculus for a melt-up in stock markets in general What does that mean for? European stocks probably going to continue to get divergence on that Slightly positive, but with the DAX those of you who've been following my regular weekly updates will know that We broke above 11,000 and I talked about this in my video at the end of last week We broke above 11,000 a few weeks ago while we hold above 11,000 on the German DAX This is likely to mean that we're probably going to head back towards 11,400 and the top of this or the top of this trend line here around about 11,700 You could actually argue that what we've got here is a little bit of a reverse head and shoulders on the DAX Which we've now broken out from and could well be heading higher to Retest these peaks here around about 11,700 it could take a while it could take two or three weeks in the same way that it took two or three weeks to Consolidate between these levels here and these levels here, but overall I think the sentiment around stock markets has shifted slightly to buy the dip because of key breakouts on particular levels The 50-day moving average on the German DAX is starting to starting to flatten out So as long as we stay above that level and obviously this support level here Then I think the likelihood is we're probably going to shift higher if we move back below This level this 11,000 level on the DAX then obviously all bets are off, but In terms of levels and this is something that I look at an awful lot For me trading the markets is all about levels until a level changes I generally have one particular view It's either a buy the dip or it's a sell the rally as soon as that level gives way breaks or what have you I then revise my view revise my opinion and revise my and revise my strategy I don't revise it on every single bit of news that comes out I revise it on the basis that something Fundamentally has changed in the price action. So looking at the footsie 100 We've got a bit of a barrier around about 70 20, but again even with that I'm still of the opinion that we could probably drift higher as long as the pound doesn't get too strong Which at the moment doesn't seem particularly likely Given the uncertainties over Brexit and the fact that we're probably now in a holding pattern until the 13th of February When the next meaningful vote is likely to happen on the Brexit withdrawal agreement We do have the Bank of England rate meeting next week and we have the quarterly inflation report The likelihood is the bank will downgrade its growth forecast and inflation forecast for next week But overall I don't expect it to be too put too pessimistic or too optimistic for that matter Certainly looking at the cable on the basis of those numbers We are finding a little bit of support on the 200 day moving average and round about these lows here around about 130 20 But overall looking looking at those those payrolls numbers You've got to be slightly more positive dollar wise and negative sterling wise, but we are still on a decent run higher If we break below 130 20 on the cable then and we could well drift back down to around about 128 and a half But at the moment there is an awful lot of latent short positions on the pound and it's a position It's a position at the moment that is fraught with risk Headline risk more than anything else. So at the moment where cable is at the moment I would be very very cautious But I would suggest it's more prone To a move to the downside than it is to the upside because if we look at all these areas of resistance through here We've got quite a lot of resistance between 132 and 132 and a half Given where we've been over the course of the past six months So it's going to take something really substantial To push the pound significantly higher and given that the uk doesn't leave the eu until the 29th of march At the earliest that's assuming that we do do that then You know the headline risk is likely to be quite high dollar yen Slightly to be likely to be positive on that on the back of that report So we'll probably go back and retest this series of lows through here Yeah, let's just draw a horizontal line through that Again, it's levels So we're looking around about 109 I would say 109 20 is probably a little bit of resistance Simply because it was support On the on on the way down through here So you'll probably find a little bit of selling interest In the high 109s for a drift back down as I say that the payrolls report It's a fairly decent report, but it's a little bit of You know a little bit of good a little bit of bad It doesn't really tell us an awful lot about the u.s economy and that's a big downward revision from 312,000 to 222 to get it 90,000 wrong Is you know, it's it's more than just a rounding error. So It makes you question how accurate The payrolls numbers are for january given that we've had a u.s. government shutdown as well So You know there are significant concerns to be had Something's just hitting the wires u.s. Withdrawing from the nuclear treaty with russia trump says I think there was talk about that. I think he was talking about that at the end of last year So I think he's just confirming that news might get a little bit of a dollar reaction on the back of that But but overall I wouldn't expect Too much too much of a move higher or lower Before I'm before I head off. Does anyone have any questions on any currency pairs that I haven't covered? Actually, ozzy dollar is a good one because we're at a very very Key level on ozzy dollar On the daily charts and we do have an rba rate meeting next week And I was looking at this just before I came on air And looking at the 200 day moving average in the daily chart here We've got a big big level of resistance at 73 On the ozzy dollar And that would suggest that with a china slowdown and everything else the rba is likely to be fairly dovish when it Updates the markets next week and that could well cap The upside in the ozzy dollar now at the moment on the daily chart It has tried to go lower It is finding a little bit of resistance, but if we were able to close above 73 Then the downtrend that's been in place Since the beginning of 2018 Could actually See a break higher towards the highs that we saw at the beginning of december at around about 74 So keep an eye on the ozzy dollar at around about 73. That could be a particularly interesting trade Being asked about the footsie 100 so I did mention just previously that around about 70 20 is probably likely to be A decent amount of resistance, but ultimately I would say that If you think that the s&p and equity markets in general are going to drift higher You've really got to think the same thing for the footsie So for me, I would expect if we can gain a foothold above 7 000 Not below and not dip below 6 980 Then I think there's a decent chance we can head back Towards these peaks at around about 71 80 between 71 50 and 71 80 Over the course of the next week or so, you know, unless we get a significant Shock or surprise or what have you central banks likely to remain in fairly Accommodative mode. We've got Bank of England next week as I said earlier The outlook for Growth in the UK economy. It's not it's not it's not bad, but it's not great either But ultimately what it's likely to do is keep central banks Fairly easy when it comes to further monitor your policy adjustments And as such that should be fairly supportive of stocks if we look at the earnings numbers that have come out thus far There's been more good than bad. I think there was an awful lot of pessimism At the end of last year and some of that pessimism is starting to drift and end up away and that should I think Bring in a little a few more cautious buyers. I'm still not uber bullish I have to say that but I certainly think there's potential for a little bit more upside over the course of the next Two or three weeks as for the here and now as we head into the weekend I don't really think we're going too far in either direction So I would expect the footsie to be captured around about 70 20 And find a few buyers around about 69 70 69 80 wti is Looking fairly well supported again. We've broken about we've broken above A very key level around about 50 dollars a barrel. We are starting to edge a little little bit higher So the overall direction is slightly positive in the short to medium term But we really do need to break out above This key key resistance level here around about 54 70 It's trading in this little corridor here between 50 dollars and 54 70 Um, and until we break out of that little corridor, I think we'll bounce around in between it You may you may have noticed that I like to draw horizontal lines between highs and lows for me, I think that really helps in terms of defining your trading range and also I think in identifying way to put stops and take profits because I think picking the right stop level is just as important as knowing when to take your profit And I think that's something that doesn't get as much attention as it should people talk about their loss levels But they don't also talk about their profit levels and ultimately if you're looking for crude to move higher Then for it to do so you need to break through this area of resistance through 54 dollars 50 54 60 Otherwise, you're going to continue to play the range and and essentially not Not get the breakout that you're looking for so at the moment For the rest of the afternoon I would expect range trading to be the order of the day with a slightly With a slightly positive bias towards the dollar dollar CAD similar sort of story right on the 200 day moving average On this particular chart here, and we've also got a decent trend line support from the 2018 lows It's not dissimilar to the Aussie dollar in terms of how that's been trading in terms of its testing a very key Support or resistance level of support level in this case So in terms of in terms of the canadian dollar, it's going to take something significant A significantly stronger oil price to push the canada up and the and the us dollar down My best pick on currency apart from Aussie dollar Well in terms of looking for a move one way or the other You've really got I'd have to I'd have to look at dollar CAD simply because it's near a long-term up trend line and Probably offers the best risk reward in terms of a potential Of a potential profit because your downside risk Is you put your stop loss below this trend line and you could get a decent rebound all the way back to around about 133 132 and a half If you break below the 200 day moving average in the trend line You're likely to go quite a bit lower So the the key trick is If you're trading if you're trading levels is to keep your stop losses Fairly small as possible, but look for the most the potentially the biggest upside And dollar CAD and Aussie dollar offer The best opportunities in terms of the risk relative to the reward on that basis Any other questions just going to quickly have a look at gold because we had a nice little break higher in the gold price Um at the end of last month to break through 1305 and this trend line From the highs in 2018 would appear to suggest that Some investors are starting to load up on gold and there was a story in the ft this morning that central banks Were loading up on gold and that's probably why you've seen the gold price edge higher So with respect to gold, I think the outlook is fairly positive as long as we stay above $1300 an ounce Okay, so ladies and gentlemen that's um, I think that's me pretty much done unless anyone has any questions that they'd like to ask me um Copper okay, I can look at copper for you. I can't look at zinc because we don't have Zinc, but I can certainly have a look at copper for you And really again This is a similar sort of story if we look at a daily chart We can see quite consistently that copper prices have found a bit of a barrier Just above $2.80. We've also got the 200 day moving average. We've got these series of highs all the way through here Let me draw that through you So we're in a bit of a range I'm afraid between 280 285 And 260 Wouldn't really expect anything significant to happen with respect to copper prices until We break out of that range and one of the reasons we could move higher in copper prices if we get a significant improvement in the chinese economy Well, it's chinese new year next year. So february tends to be a quiet month for china So if we do get a breakout, it's probably not going to happen much before march for copper prices Because most of the chinese economy grinds to a halt as people head home for chinese new year Um, so that's copper zinc. I don't have a zinc chart. I can show you I'm afraid Any other questions ladies and gents? Okay, well in that case I will round it all up hope you will have A good weekend and speak to you all same time same place Just over a month from now. Thanks very much for listening and speak to you all soon And if you want to leave a google review Please do so. Thanks very much for listening