 Hello and welcome to CMC Markets on Tuesday the 5th of August and the weekly market update. It's certainly been an interesting few days. We've seen significant declines in equity markets. The German DAX in particular has been hammered quite hard. But so far we're still managing to hold above some very key support levels. And it's really in that context that I'll be looking at the S&P 500 because I think the direction of equity markets overall will be determined, I think, by what the S&P 500 does over the course of the next couple of weeks or so. There's a key support coming in around just between 1900 and 1910. But I think there's also a little bit of a resistance around 1950. So we'll look at the key levels on that. Last week we saw US employment report which was a little bit disappointing. Nonetheless, inflationary pressures within average wage growth actually offset inflationary concerns that were brought about by a significant jump in the employment cost index for the second quarter. And we have seen some very mixed US economic data over the past week or so. We've seen a very good Q2 GDP number coming in at an annualised 4%. But on the flip side we saw an absolutely appalling Chicago PMI, absolutely created for July, coming in at 52.6%. So there's still a lot of conflicting evidence as to the strength of the US recovery. And in that context I'm going to look at the US two-year treasury. And I'm also going to be looking at the US dollar's performance, particularly against the pound, given the fact that it's going to be a fairly big week for the pound here in the UK. So we've seen some significant declines in equity markets over the past week or so. And European markets in particular have been significantly softer than the US counterparts. And I think in this context I think it's useful to look at the S&P 500. Now those of you who listened to my non-farm payrolls webinar on Friday, will know that I identified a key level. That aside, there is a recording for that webinar on YouTube which can be found on the YouTube channel, youtube.com. The key levels on this daily chart are outlined by a sloping upward trend line from the lows in May. And that currently comes in around about 1910. We also have a significant support level through the April highs around about 1900 level. So again, keep an eye on that. And on the top side, there's the July lows or the mid-July lows around about 1950, which now we're under those levels, I think really needs to act as a significant resistance to keep the current downward momentum intact. If we get back above the 1950 area, then I think we could see a little bit of short-term stabilization and we could start to slowly edge back higher again. So to recap, the key levels on the S&P 500 are around about the 1910 level on the downside and 1950 on the top side. We've heard an awful lot of speculation about when we're going to get a dollar rebound over the past couple of years. And so far, we've yet to see any evidence of it. And I think really the speculation is really surrounded on when the Fed will look to tighten. Now if we look at this two-year treasury chart, we can see that since 2012, we've had significant attempts to move lower in treasury prices. But as yet, they've been unsustainable, they've bounced back quite strongly. Now, when you get a move lower in treasury prices, you get a spike higher in yields. And we can see in 2012, we've got some very long lower shadows on the weekly candles. We've also got them on 2013 on at least two occasions. And last week, we got a similar sort of move. So the key question, I think when you're looking at charts and you're looking at technical analysis, is you look at the past to try and get an indication of what will happen in the future. So based on the history of that chart and the fact that we weren't able to sustain the down move that we saw in treasury prices and the move higher in yields, the likelihood is we could well see further consolidation. Despite the concerns about higher inflation in the US, the bond markets at the moment don't appear to be pricing it in despite last week's little spike higher in yields. And I think it's in this context we need to look at speculation about when the Fed is going to raise interest rates. Look at the two-year chart. Look at the two-year yield until we get a significant extension of the move through these lows on the support on the weekly candle chart. And a move through 2.55, I mean 0.55% in two-year yields, 0.55%, not 2.55, that's a 10-year. 0.5% on the two-year. Then the likelihood is we're going to continue to see dollar range trading. Okay, so what does this mean for cable? Because over the past few months speculation has been rife that the Bank of England could well raise rates sometime this year. Now I've been fairly insistent in my belief that I do not think that will happen. So really begs the question, who's going to raise rates first? Is it going to be the Federal Reserve or is it going to be the Bank of England? Well, we've had some economic data out this week. Services PMI and construction PMI which would seem to suggest or would tilt the balance of probabilities towards a potential rate hike by the end of this year. Again, I maintain that's highly unlikely. We have seen some sterling weakness over the course of the past week or so. And I think this week's manufacturing and industrial production data could well reinforce the mixed picture that we're seeing about the UK economy. In May we saw some very weak industrial production and manufacturing production figures for the UK. Now the numbers out tomorrow could reverse that or they could reinforce that. So I think have a look at those numbers, have a look at the trade figures later this week. Bank of England meeting on Thursday. I think we're going to get the status quo with respect to that. Will we find out whether there's any dissent? We won't find that out for two weeks. So as far as the Bank of England meeting is concerned, it's likely to be a non-event. What does that mean for Cable? Well, let's look at the four-year chart on your screen right now. And as you can see from the July highs, we're trading in a slow downward trend with trend line resistance around about 169.20. So we need to get back above 169.20 to argue for a move towards 170. Let's move on and look at the daily chart. We can see on the daily chart that there's a potential reversal. If we look at the number of downward or down days on the daily chart, we can see that there's 13 out of the possible 14 down days. That's a significant rate of decline. You've got to think we're going to get some form of bounce back there. So once again, key level 169.20. Also, the oscillator is starting to potentially turn higher. Let's look at the weekly chart on the candlestick chart. And we can see again that maybe we're starting to get some form of head and shoulders reversal. If that's the case, then I think the limit of any downside move is likely to be around about that 167 weekly support on the weekly candle. On the top side, then resistance will be on the potential left shoulder around about 170. But above all else, it's all about the data. It's all about US data. It's all about UK data. And the differentials between UK two-year yields, US two-year yields, UK guilt yields and US 10-year bond yields. Those differentials, if they move in the UK's favour, will be positive for the pound. If they move in the US's favour, we could see downward pressure be brought to bear on the pound. So that's it for this week's weekly market update. It just remains for me to say we have our monthly traders network this Friday between 10-2. It's open for active clients only. If you have any questions for me about any of the things that I've discussed in this update, then just contact me on the Twitter handle below. Otherwise, thanks very much for listening. This is Michael Houston talking to you from CMC Markets.