 Good afternoon and welcome to CMC Markets and this weekly Monday market webinar on Monday the 16th of January 2017 This webinar constitutes just a quick look at some of the key data events for this particular week And we've got quite a big calendar, but before I get into the guts of it. Let's have a quick Digestion of the risk warning because ultimately what I won't be doing is giving any trading advice But what I will be doing is looking at a number of the key levels that I'll be keeping an eye out for with respect to perspective breakout levels at all the major currencies indices and Commodities Because ultimately for me, I think what markets are about it's about levels about where? the stop losses are sitting and Trying to generate some trading ideas based on levels, but to get started Let's let's make a start with the weekend headlines and Obviously the decline in the pound against the dollar now tomorrow Markets appear to have got the knickers in a little bit of a twist ahead of tomorrow's scheduled speech by Theresa May UK's Prime Minister on the Negotiating line that she's going to set out with respect to The triggering of article 50 in March this year and we've seen yet another Decline in the pound over the weekend last two weekends have been significant for significant declines in the pound I think what struck me about this particular decline is that we haven't as yet If we look at this particular cable chart that I've got up right now is we haven't taken out The August flash crash lows and actually if you look at where we opened we are Significantly off the lows that being said Still I've had that being said we still have significant evidence here that ultimately every single subsequent rally since those peaks that we saw all the way back in September have Seen lower highs and that is significant in terms of Market weakness, so if you're looking to play the pound from the long side And obviously the best place to put your stop loss is obviously below the lows As indicated by this horizontal line here around about 119 80 now, I know that the pound did go lower on some other measures of People's On people's price projections But ultimately this chart is a chart of mid prices not bid and offer prices So with respect to mid prices They tend to work the best when the market is trading in an orderly fashion While we've got one 1980 here the spreads on the actual market were a lot wider than the one 1980 bid price. It was around about 60 points wide on At the time that we saw that flash crash low through 128 all the way down to 119 and a half so Certainly in the context of the move lower that we've seen in the pound an awful lot of it has been dollar driven because if we actually look at the way that The pounds declines to measure up if we look at my Bloomberg chart here. We can see that We've seen a significant about sterling weakness But half of it can be attributed to dollar strength Aside from obviously the Japanese yen Which has gained on the back of the fact that ultimately? European markets are a little bit weaker today So there's an element of risk aversion going on with the strength in the yen and the softness in broader European markets now obviously the weakness of the pound has acted as a positive catalyst for the FTSE 100 And we have today thus far seen another new all-time high big question is will we be able to supposed the 15th successive record close Since since Christmas because ultimately when we look at what the pounds done over since Christmas We've come down quite considerably But the FTSE 100 on the other hand has gone significantly higher in that period of time One of the things I would say about this particular sterling weakness that we've seen particularly against the dollar It's not been translated across The rest of its other currency peers to the same extent and what do I mean by that? Well, if you look at the euro sterling or sterling euro We haven't revisited the flash crash lows on euro sterling or sterling euro In the same way that we have for the pound against the dollar if we look at this chart here You can see that reflected In a much more elegant way We can see there's the there's the flash crash lows in sterling euro There's the rebound so we've gone down to a significant move lower there to around about 107 We've gone all the way back to 120. So certainly the rally that we've seen The rebound that we've seen in the pound Hasn't been completely reversed particularly against the euro and I think that's significant. I think at some point all of these concerns about Brexit I mean ultimately for me the discussion with respect to hard Brexit soft Brexit Rather misses the point Ultimately the referendum vote was a vote to try and get control of immigration That's certainly the way I see it. That's certainly the way that Theresa May So I'm set out her stall in October. So ultimately if you want to control immigration and you want to control Laws and be free to create free trade deals then ultimately Leaving the single market is a direct consequence of that So ultimately what she said over the last two weeks is not really a surprise to me and really it shouldn't be a surprise To currency markets. So pulling out of the single market leaving the single market doesn't mean that we lose Access to it and I think that's a distinction that's sort of being lost in the fog of all the headlines that are coming out of The news media because ultimately all sorts of companies and countries have access to the single market Apple wouldn't be able to sell its products here in the UK or in Europe if it didn't so No one's suggesting that Apple pays or the US pays Money in to the single market to gain access to it. So ultimately for me then Theresa May's speech tomorrow is about What sort of access that we get to the single market exports to Europe won't stop In the event that the UK leaves a single market So for me the devil's in the detail and ultimately I think that's why the decline that we've seen Since the Friday close of one twenty seven one twenty one seventy one twenty one eighty has been so modest And I say modest it is a modest decline when you compare it to the clients that we saw here in October but also Back here in June. So here. We've got a very strong decline in the value of the pound in June I've got a very strong decline in the value of the pound in October and we saw a very strong decline in the value of the pound Not last weekend but the weekend before this week's decline has been fairly modest And we've opened on the lows and at the moment we look as if we could well close Well off the lows, obviously we will still close below the highs that we saw at the end of last week But ultimately if you're looking to play the pound From the long side then obviously a risk-reward strategy would be to put your stop loss around about 119 and a half which is below these levels that we saw In October and also the lows that we saw today straightforward risk management looking for a retest potentially of This downtrend that's been in place pretty much since the Hives that we saw in September so we can see from this particular chart here ladies and gentlemen That we've got a very significant downtrend in place from these September peaks But there's certainly potential as long as this 120 level holds for a rebound all the way back to 124 and those peaks that we saw at the beginning of Last week around about one twenty four ten one twenty four twenty So sometimes you have to look at the broader picture. Look at where the key support and resistance levels are and Ask yourselves what's going to be the catalyst to push it below the levels that we're currently seeing right now And for me the risk-reward ratio in terms of selling the pound Even though everyone is very bearish on the pound Doesn't really make a compelling argument for me because we haven't taken out that law at 119 80 So hopefully that makes sense and what's also a little bit of a concern as well Is the fact that euro sterling and let's look at this. We've looked at sterling euro. Let's look at it the other way around We haven't been able to sustain The higher open in the euro that we've seen that we saw in Asia trading. We've come back down now This is a daily chart again. I like to use Fibonacci levels quite a lot and I like to look at what's potentially going to be supportive of the pound or negative for the pound over the course of the next few days and weeks and Ultimately while politics does play a part It's very difficult to factor in how much of politics is already in the price Certainly if you look at the economic data that's come out of the UK over the course of the past few weeks and months It's been predominantly very very positive and certainly if you look at the inflation numbers, which are due out tomorrow It's a 930. We are expecting another increase in CPI CPI is expected to come in at 1.4 percent year-on-year Now that's a significant turnaround from the levels that we saw in November 2015 when it was minus 0.1 So in the space of about 14 months UK CPI has moved by 1.6 percent in In less in around about 14 months. That's a significant turnaround, but it's not just confined to the UK We've seen a significant pick up an inflation elsewhere. We've seen it pick up in Europe last week We saw German inflation come in at 1.7 percent and that's raising concerns in Germany about the ECB is currently loose monetary policy which it announced that it was extending in terms of its bond buying program Until the end of this year and there's also political risk in Europe as well Which I think when people talk about parity in euro sterling my eyes sort of roll a little bit because ultimately I think to myself what's going to cause euro sterling to go to parity What's going to make people want to pile into Europe this year at a time? When there's all this political risk and the ECB remains in loosening mode I think it's highly unlikely the Bank of England will be able to ease any further even if they want to Simply because inflation is likely to keep the Bank of England at the very least on hold for the rest of this year And ultimately could put pressure on Mark Carney if the pound continues to decline to try and push interest rates higher now in 2012-2013 we saw inflation go back to five percent We're at 1.4 at the moment and for me I think the significant area that I'm particularly looking forward to in tomorrow's data is The PPI numbers the PPI numbers are expected to rise from 12.9 percent to 15.8 percent year on year That's a significant increase. The big question is how much of that increase will? Retailers can see it will retailers and manufacturers be able to pass down the supply chain Because ultimately given what's happening in the retail sector right now profit margins are looking fairly fairly thin And that is going to Be reflected in how much Manufacturers and retailers can pass on down through to the customer so in that context on Wednesday Average earnings data will be important, and I'm looking at CPI and I'm looking at RPI, which is due out tomorrow We're expecting that to come in at 1.4 and 2.3 percent respectively wages are currently trending 2.6 percent on a three month weighted average So as long as wages continue to outpace inflation The earnings squeeze that we talk about and we're all seeing it in terms of the way petrol prices are rising at the pumps 120 a liter now for unleaded whereas a few weeks ago is around about 114, 113 So we've seen a significant evidence of inflation there in the fuel prices And obviously the big question is will we move beyond that to 120 or 125? Well certainly in the context of where crude oil prices That does appear unlikely at the moment if we stay at current levels obviously the decline in the pound is going to Potentially put up the pressure on that, but given what Saudi Arabia said this morning Maybe we could see crude oil prices drift lower and the pound rebound difficult to say but at the moment This 50% level this 50% retracement level from the October peaks To the December lows in euro sterling. I think is a key level for me 88 Euro sterling even if we do break above 88 then the next resistance level for me on euro sterling is through this series of peaks through here Around about 89 20 so certainly I think if euro sterling does gain I'd certainly be looking to sell euro sterling around about 89 20 I really do not see how anyone can even think that we're going to go anywhere near to parity on euro sterling Given the concerns that currently abound with respect to political risk in the euro area And the fact the ECB is likely to remain much more accommodative than the Bank of England But that's a debate for another time So that's euro sterling. Let's look at euro dollar because obviously euro dollar is being largely largely wrong chart Euro dollars largely being driven by interest rate expectations with respect to US interest rates and European interest rates and we are still on a divergence with respect to Monetary policy with respect to the US and obviously the ECB's expectations that ultimately There's concerns about tapering and I think that's what I think capping capping euro dollar But also I think underpinning it from the lows that we saw at the beginning of this month This is a four-hour chart that I'm looking at right now. It's for our candle chart There's a nice little short-term uptrend line there from the lows that we saw at 103 50 The at the beginning of this year But once again, we haven't been able to take out these peaks here around about 106 70 107 and certainly this these are these are the levels that I've been talking about in my various comments on the chart forums Over the course of the past few weeks and the past few months So looking looking at looking at euro dollar. There's a nice little trend line support coming in just above 105 From the lows that we saw there But if we actually look at it on a slightly longer term basis with respect to euro dollar one thing that I Did is notable is the fact that we broke this long-term uptrend line from the all-time lows Which broke in December? November actually and we haven't as yet been able to get much it back up We haven't been able to get much above it So the long-term uptrend line for euro dollar from the all-time lows that we saw at the beginning of 2000 and the all-time lows in euro dollar at 0.825 0 On a technical basis, we've seen a very bearish development take place on the monthly chart Now obviously we're going to take this back drill it down to weekly again We haven't as yet been able to get back above this line and until such times as we do on a long-term basis Euro dollar remains fundamentally bearish and we can see that on way the way that it's capped this series of rebounds here and at the moment we are having a bit of a short-term Rebound on the four hour chart. So in essence what you've got here is a break of a long-term downtrend Which is broken below 107 But within that downtrend very long-term downtrend You've got a bit of a sideways consolidation with a slightly upward bias With resistance around about 106 70 so it's like dropping a great rock in a very still pond When when the big ripples ripple out within those big ripple ripples out You'll have lots of small ripples going the other way and that's essentially the way markets work You'll have long-term moves you'll have medium-term moves and within that you'll also have short-term moves So in terms of the short-term moves in the four-hour chart Looking at resistance around about 106 70 so looking looking to sell around about there with a stop-loss Above 107 or looking to buy dips to around about 105 with a stop-loss below a 104 50 this this this sort of What I would call a a pivot point here you got resistant you got support there There's resistance through their resistance through there the way they've reversed their roles over the course of the past month or so Shows a 104 50 104 60 is a significant Pivot level in terms of overall direction now the fact that we've made we've hit 103 50 I think is a negative development and potentially for 103 40 That low there around about 103 50 we've made a marginal no low is a significant development But until such times as we're able to get back above this 107 20108 level the longer term outlook remains bearish even if the short-term outlook is slightly positive So that's that's the outlook for euro dollar and those are the sorts of levels that I'm looking at in the context of The overall direction of the trend and what we have seen moving it more on to the dollar side of things and obviously Trump's in auguration later this week as we've seen a little bit of tempering in Terms of the current rally that we've seen in the US dollar and that's reflected I think in dollar yen particularly in this chart here One oh one 1865 70 as acted as a significant double top now if we take that to a daily chart here That does appear to suggest that if this is a double top then potentially we have got Prospect of a move back to around about 111 35 Why because if you take this as a double top so it's I call this an M formation a letter M With the bottom there comes back there comes down there back there and in down again Obviously has been very choppy. There's a big resistance at 115 60 between 115 60 and 116 The fact is now that we've broken below this key support level between these two Two loads here Then the direction of travel does appear to suggest that we could get further dollar weakness With a target for me. I think is around about 111 35. Now. How do I get that target? It's quite straightforward What I do is I basically take the distance between these two peaks here and measure it from the breakout point So let's say for example. I want to project a price move on a particular pattern It's fairly straightforward. We have something called a Fibonacci price tool on the platform And what essentially we do with it is we project we take we take the two points Yeah, so what I'll do is I'll probably project it from Take that distance there And then I will project it potentially protect put a project it downwards For here and it should should take take me all the way Take me all the way down there. So that brings me in. There's a lot of lines there So I apologize for that. So what I'm going to do with that now that I've put them in is I am going to Try and take them out if I can Struggling a little bit because they've overlapped ever so slightly There we go. So let's remove some of that clutter on the chart I'm not really interested in the intermediate targets I'm interested in the longer term targets. So I remove them and My long term talk my longer term target over the course of the next few trading sessions is for us to move back To 111 60 that sort of area just on the basis that this is a double top We've broken lower and the minimum price objective should be the equivalent of the distance between The piece there and the breakout point which could which has occurred roughly Around about that level there. So looking at 111 60 111 111 80 112 Even if you want to be particularly conservative, but ultimately I think as long as we stay above 115 20 115 30 then there is a significant prospect that we could move back to around about 112 111 60 over the course of the next Couple of weeks could even happen over the next week or so, but ultimately this is this is really what technical analysis is all about it's about Designing a risk scenario based on what the price is doing and how you react to certain movements in the price so now that we've broken this key area of support around about one 115 30 115 40 give or take 10 points then the Momentum has shifted from being in a very strong uptrend which we've been in since November To a little bit of a correction to that uptrend and maybe a drift back down to around about 111 60 Before we then rebounded potentially try and go higher But certainly if if I look at that in the context of the dollar index, which is down here We can see that there's a significant resistance level around about the one over just below 104 I'm and that's better. I think that's better illustrated If we actually look at it on a slightly longer term if we look at it on a slightly longer term chart on my Bloomberg which I'm just about to show you right now and That basically gives you an indication of why it's important to look across asset classes for clothes That's the overall direction of what the dollar may or may not do over the course of an ex-few trading session because ultimately the dollar index will Will Play a significant part particularly in euro dollar Simply because the dollar index is 57% 57% euros So you're going to have a significant effect and you can see here that you've got one two three four attempts at 103 80 104 We've had a failure We're now starting to drift down which suggests that potentially Even though we could get a rebound back to around about one or two and a half one or three The next support level really is around about 100 or there or thereabouts now One of you's just asked me a question and I can see that you're trying to ask me a question if you could direct your questions in reply To this chat, so I'm just about to send a chat message out to all of you In reply to this message and then hopefully I can answer any questions that You may will have so the dollar index there I think for me is a key arbiter of where we could go Overall particularly against the majors given how much the majors make up the movement in the dollar index So what does that mean? I think for Stock markets because obviously we've seen the FTSE 100 make another new all-time high today We can see that here in this daily chart slightly above Friday's highs But on the four-hour chart we do appear to be running out of a little bit of steam and I think at some point The potential is that we could start to run out of a little bit of steam Certainly, I think if we get if we're unable to crack that 120 level today And I think there's potential for the FTSE to pretend to come to come lower Certainly when you consider where we were 7125 which was the previous all-time highs at this level here since we broke above this level here We haven't looked back. We haven't posted a single negative down day since the 23rd of December So at some point we are going to get a little bit of like profit-taking and when we do then I think The potential is that we could trigger quite a few stops because this is a very nice incremental move higher and Since beginning of December the FTSE is up over eight percent It's quite a nice little move No coincidence that the proud the pound is obviously lower as a result So I think if a failure to crack 120 could actually prompt some profit-taking in the FTSE 100 And potentially there is a chance that today could be the first day in 15 that we post a slightly negative close Given the fact that ultimately we still don't know when Theresa May is due to give her speech tomorrow We will have UK inflation data at 930. That's likely to be fairly positive And ultimately I think that more than anything else Given all the other factors that have driven the pound lower Is likely to keep the pound or keep a floor under the pound in the short term in any case So for me, I think as I said previously Unless we break 120 today, then there is a risk that we could go back towards the close that we saw on Friday around about 121 and half So just to recap UK data this week. We've got CPI, PPI and RPI on Tuesday, we've got unemployment data and wages on Wednesday. We've also got retail sales on Friday now retail sales have been the standout item on UK economic data Expected to come in 7.3% annualized now that is unlikely to be sustained So we will get a slowdown in UK consumer spending over the course of the next few weeks Not because of Brexit not because of any other factor than the fact that UK retail sales are around about 7% is unsustainable It's never been able to be sustained above that level in the whole of the last 10 to 15 years If we look at UK retail sales over the course of the last 10 years on a chart every time We have gone above 6 or 7% We have had a correction So ultimately when people say to you the UK consumer Spending will slow down because of Brexit. No, it won't it'll slow down simply because over the course of the last few years if we go back to say 15 Every time we've been up anywhere near six or seven percent We've seen a correction lower here in 2014 here again at the end of 2014 and the likelihood here again we saw in 2004 we've seen a correction at the beginning of the decade obviously we had slightly higher So expecting an increase from 6.6 to 7.3. That's unlikely to be sustained So for no other reason is that we are on a cyclical high for UK retail sales So what else have we got this week? We've got the ECB rate meeting, which is due out on Thursday That's unlikely to spring any surprises But what I think was notable last week was the fact that we got Some evidence that there was an awful lot of dissension Amongst ECB policy makers about whether or not to extend the QE Now one of the things I have noticed over the course of the past few days and weeks is a significant rebound in the gold price Now we do appear to be running into a little bit of a resistance above 1210 or around about 1205 1210 The thing for me is what's going to be the catalyst to drive gold prices higher We've seen a significant rebound from the lows that we saw early this year I would suggest that that potentially could start to run out of steam What could be the catalyst for that? I think it's hard to say But certainly this 1202 level here that I've highlighted on this particular chart is significant We need to gain a foothold above here to push on back above to this 200 day moving average Which we last saw back in November We'll finish off with crude oil prices Have a quick look at the S&P as well Crude oil prices As we can see from this chart here We appear to be indulging in a little bit of range trading Finding a little bit of support around about 53 dollars a barrel But also finding the air a bit thin around about 57 56 57 dollars a barrel on Brent Largely on a result of those Saudi headlines this morning Where the Saudi oil ministers suggested that ultimately the OPEC cuts that they were talking about Wouldn't be needed after six months and after six months they'd be be free to ramp up production To previous levels so that's pushing the oil price down Along with the fact that we've got a slightly stronger dollar Have a quick look at us equities while we're here because once again It's got a nice little top around about 20 000 on the On the Dow and 2280 on the S&P 500 But certainly if we look at this particular chart here, we can see that broadly On the Dow we're in a bit of a range And we can see that range is no better illustrated than on this four hour chart here Given the fact that US markets will be closed today cash Cash markets will be closed today This is pretty much What I expect to Continue to be the case over the course of the past week or so Davos this week unlikely to really offer any surprises apart from an awful lot of hot air and Not much else so That's pretty much it. I think for this week if anyone Does anyone have any questions that I'd like to direct my way with respect to anything that I haven't covered Please feel free to send me a chat message Or a reply to the chat message that I just sent out on the chat Otherwise, I will I will wind this up and then post it on youtube Either that or please feel free to just send me a tweet at m hueson underscore cmc And I will try and answer your question But certainly as far as the markets are concerned this week These are the key things that I'm looking at one other thing. I've almost forgotten just looked at my sheet We've got Chinese economic data out on friday q4 gdp industrial production and retail sales for december And also I think it's important to note that Chinese Um president prime minister Xi Jinping is attending Davos for the first time ever So maybe Theresa May can sort of tap him up for a a little bit of more inward investment While she's out there. She's the only g7 leader Who will be in davos this week. She's scheduled to go there after she's given her speech a brexit speech tomorrow And at a time as yet undetermined Okay, so I'm guessing that everyone's fairly happy vis-à-vis Questions content and anything else If that's the case, I'd like to thank you all very much for attending. Thank you very much for listening And um, I will talk to you all same time same place next week 12 15 on the 23rd of january Thanks very much