 Very good morning. Hope you are well Tuesday the 7th of January going to get you up to speed of latest updates in regards to of course Iran and what they've been saying in response to potential retaliation Against the US strike on their military commander. We saw at the end of last week. So how are markets digesting that? an update Not that it's something I'd be Contemplating that would be forming a trading strategy this morning in the euro or European assets But it's time to be aware of for German economics some data out for car manufacturers, which we know or has been historically one of the key sectors within what drives their Stock index. So we'll have a look at that as well But first off, let's just look at the charts and how These are my charts and as you can see things are relatively quiet for the moment Not too much going on this morning and interestingly after what was a bit of a continuation of the reopening of trade on Sunday night of the risk of Developments and but at this time yesterday, we were talking about the Iraqi Parliamentary decision about expelling US troops We're talking about Iran looking to ramp up its uranium enrichment all these sorts of things just added a little bit of further fuel to the initial more stark reaction that we had on Friday to the initial assassination, but markets have now stabilized and you know as I was kind of inferring in the briefing yesterday, I You know my base case view here is still that It's a de-escalation not an escalation from here forward and then in a few days time and certainly by the middle of next week I think people will be quite Shifting their focus back to the the looming Conclusion or not of the signing of the phase one US China trade deal and Iran will be ongoing But secondary to that factor and markets have seemed to be just getting over that initial knee jerk response already Things have stabilized. I mean the Dow closed up. I think was it 68 points yesterday So US indices managing to reverse course to a certain degree and this morning Things have kind of really followed suit. I mean gold Yeah, a little bit of a move higher overnight in the Asia Pacific session by a few bucks, but generally flat on the day Pretty similar situation for WTI crude or albeit still down about 40 cents but off its lows that was seen at the beginning of the Asia session and Global stock futures seen higher at the moment backs up about a hundred Looking right now as I'm talking this center left chart to have a bit of a test on on the R1 Which was the initial opening high earlier this morning when Europe came into the market So yeah been largely brushed aside, but does that mean that the rhetoric has has slowed from Iran? Well, absolutely not and so this is the kind of Situation that you probably would be familiar with with the likes of say North Korea for example in recent years where You know, they make some pretty inflammatory comments that would if you weren't of the way Well, if you were completely naive and you took everything At face value you'd be wow, they're gonna fire a nuclear missile at us. Well, we know that's not the case So Iran continues to say things but the market, you know seemingly is just brushing this aside for the moment Does that mean that I'd completely switch off this as a potential catalyst to move markets today tomorrow? absolutely not I mean Should they do something as we've discussed before and particularly if they were to target certain strategic areas Of the passageway of Crude oil coming out the Persian Gulf or the infrastructure in Saudi Arabia Well, then sure the whole thing can heat up very quickly But the idea here being the likelihood of that is a lowercase probability But Iran in the far's news agency if you've not heard of that before that's kind of the Semi-official state-backed news organization in Iran and so of course they tend to be Inline with what the rhetoric has been from the top level like the president and the supreme leader and the foreign minister and so on They were quoting the commander or the new commander of the Iranian Revolutionary Guard Who is saying Iran's response will be strong and humiliating to those who assassinated salamani? They will avenge the enemy. There will be no safe place for Americans in the region now that last point No safe place for Americans in the region I did see a quite interesting graphic when I came in on the train this morning and this was Looking at where US troops are stationed in the Middle East And I thought it's it's always good to have a bit of context here And we know that the US military's presence within this geographic region of the Middle East is particularly pronounced Given the importance of the trafficking of commodities and specifically crude oil So here you can see that the likes of Qatar and Kuwait have substantial US presence And neighboring Bahrain is vital to American interests because that's where a lot of their naval support is stations The US fifth fleet and substantial military presence in one of the air bases as well Situated around that same area all of this of course in incredibly close proximity to The strategic, you know kind of importance of the choke point of the Strait of Hamas The passage of 30% of all seaborn going oil and this of course includes the very northern tip of Amman and the southern Iran of course which has been subject to disruption over the last several months From the Iranian Revolutionary Guard. So that the US by no means You know if they needed to And I guess this is one of the things where yes, they could increase troops within the area if necessary But the idea being is that there is a pretty substantial presence there already And so again, these are the considerations that Iran needs to contemplate if they were to take any type of aggressive More confrontational measures in that respect So yeah, I mean the other the other things what's Trump said Well, Trump has made it clear that he's prepared to respond in kind to any retaliation from Iran I think he even talked about targeting specifically Holy sites of significance within Iran one's got to think that although that's a grave threat that That is exactly what it is. I think that's there's no way I think that Trump would really go through with that I mean if you want to If you want to really fire up Extremist terrorism Then that's one sure way to do it You know because there's two different things here. I was talking to peers about this before and we have a shared opinion here That we think that this Iran situation will de-escalate The one thing that you cannot account for of course is an isolated Extremist individual such as what we saw For instance on London Bridge early a few weeks ago There's nothing to say that something like that could happen But you know one would think given the context of the the 2020 scenario right now that I Just think it would be incredibly difficult To conduct something to the tune of 7-7 or 9-11 again given, you know, how intense surveillance is now Globally, so you know these things yes, they're risks But I think they're they're kind of qualified risks in a sense that they're particularly low And so I just hope that this provides a little bit of kind of further insight as to what's happening on the ground within this region The other important thing this definitely does tie in geopolitics. Of course that I thought I would mention was this Why China will not join any Iran Russia coalition against Trump So obviously the global community has has largely been Kind of split it depends which side of the divide that you sit on whether you're a supporter of Iran Such as Russia or you're a supporter of the US who say that well at the end of the day This guy was killed because he was Planning an attack on an American embassy. So it was a pre-emptive strike if you like in order to safeguard their own interest Now what of China said well the foreign minister Wang Yi has said was highly concerned by the action and called it unacceptable But he did not use the words like condemn or denounce like his Iranian and Russian counterparts now Monday yesterday the US accused China of siding with Russia at the UN to block a security council resolution Condemning the attack on the American embassy in Baghdad that precipitated Trump's decision to strike and kill the Iranian commander Salamani so particularly interesting here because because China is caught in Somewhat of a dilemma if you think about China from a strategic point of view China has a particularly Closed relationship. I was reading this morning that Vladimir Putin and President Xi have met more than 30 times over the last roughly five years and China has called their relationship With Russia of the highest and most important kind of relationship that it has now if you think about it that kind of Silk Road long-term ambitious project that China has to deliver It's its objective of becoming the world global trading partner and the top of the kind of pile of the global powers It's very important that they have a strategic alliance and a very strong Relationship with Russia and the likes of Kazakhstan for the infrastructure of the passage of goods from east to west And so this is crucial But the problem that China has they can't come out and condemn the US's actions and Support Russia because that would jeopardize a signing of a trade deal that they're currently in dialogue and negotiation for It's not just about phase one. There needs to be a phase one two and three most likely And so they can't cause conflict with the US at the same time Equally so Your China also has interest in Iran China is one of the biggest Purchasers of Iranian crude, but they also are one of the biggest purchases of Saudi Arabian crude Both of which sit with different allegiances within that region China is quite interesting My end kind of assessment of this and I guess the takeaway home point is That China will sit on the sidelines not say anything This is a issue for the US and the West and it's historical Kind of intervention within the Middle East for them to sort out China's tactic will be I don't want to get involved but while Everyone else is disbenefiting I will Make heed or hey of the the relationships that I can form on the back of this is what China has been notoriously good at over the course of recent years and decades, so Yeah, just quite quite interesting to see there's many You know, this isn't just Iran and the US. There's many different back stories that need to be managed and maintained at this point And it's just interesting how it all kind of interlinks within this trade war and this whole Kind of jostling of power that's happening at the top at the moment But yeah, I wouldn't be expecting much in the way of firm commitment in rhetoric from China or any type of action They're just gonna leave the US to it and let it unfold and continue business as usual undercover if possible in that respect Okay, other than that the only other thing I wanted to mention because it is pretty light with any fresh new fundamental news is this one I Think we've got German factory orders coming out. I think it's tomorrow. Definitely this week But one thing that we will be looking at closely is Going into January February Q1 really of this year is how is the German economy faring given the Contraction of a substantial degree. We've been seeing in their manufacturing sector now What we've been seeing is the car making industry has taken an almighty hit over the course of 2019 At the beginning of last year it was in fact the largest sector by representation within the German DAX And now it's one of the smallest We've had multiple profit warnings out of all of the major German car makers now Combination really of pollution concerns. Remember back in 2015 the diesel emissions scandal at VW We've got trade conflicts going on US potentially targeting tariffs You've then got the risk of a disorderly Brexit disrupting then The Eurozone and you've got slowing economies as well have all been weighing on demand And so we've seen data overnight, which is shown that German car production is now at a 23 year low On waning exports. So again, this isn't something that I'd be looking to see or Have as a major component of a strategy to trade a European asset today. This is much more top level I would look at it more from an economics point of view as a consideration for coming months For what monetary policy could be adopted should the German economy continue to to weaken You know, it's in a fairly precarious state, albeit somewhat stabilized condition at the moment And so where it goes for the next couple of months It's going to be very important for ECB policy going to the first half of this year Okay, looking at the calendar. What is there to come for today? The major things are we got the flash euro zone CPI coming out at 10 o'clock So that is something that you will need to consider if you are looking at things like the euro currency, for example Expectations are the flash year and year reading will be at 1.3% With a range of 0.9 to 1.4 so actually a slight increase from the previous reading We then got in the US international trade German excuse me US factory orders comes out later on this afternoon at three o'clock with ISM at non Manufacturing remember keep an eye out on the employment constituent Of course, we do have non-farm payrolls and traders will be looking at that component as to see whether or not There's an increase or decrease against the previous 55.5 on that particular statistic And then later on this evening fed discount rate minutes. That's seldom a market mover So I wouldn't worry too much about that but then for oil traders We get the API inventories, of course every Tuesday evening and that will lead us up them for the Wednesday DOE release No actual major scheduled speakers by the looks of things a couple of auctions if you are Looking at fixed-income markets 2029 Gill auction out of the UK this morning and a 28 billion of a three-year note auction kicking off the issuance and the states For this week. All right, that is it from me. Let me hand you over to Mr. Sam North and Before I go one final word is and we will be covering non-farm payrolls live on this YouTube channel So don't forget to subscribe hit the notification bell and you'll be alerted as soon as we do go live So I'll see you then hand you over to Sam. Hi guys. Hope we're doing well. I'm just gonna bring in the Euro to start for yourself and I was just having a look at seeing Just on the longer time frame here of the euros put this on the daily chart and You can see it again. We're getting into One of those periods like we had all the last year where the euro just drifts higher and you get a really important trend line And it holds and once that breaks well, we know what happens So just be keeping an eye on that starting on the the low of the 29th of November here on the futures 24th December and then on the third of Jan you can see getting that other test of that point and if that was to go Well, could we'll see a further push down. However, of course if it was to Come back up to the high that we had of this year, which is also the high that we had from the center of August Things could then start to get been more interesting to the upside I've actually seen a bit of talk yesterday on Twitter about people favouring that upside But we'll have to obviously wait and see how that goes for a medium-term trade waiting for the the close and break I have a below trend line or above That's all 113 handle in the futures would be a good way to go about it Just dropping it down to 60 minutes just have a look at it on a more intraday point of view It's going to see remove that trend line as it comes to the low that we had on the on the year. So that would be Around there by the looks of it But just a yeah keeping an eye on the last couple of highs that we've had today Overnight and then yesterday as well you see that's getting squeezed in so potential break of that is an opportunity Just below where we're trading or Kind of the low of the day I'd be expecting a bit of support around here to build up was the previous high of yesterday morning Got the s1 as well Another pointer to keep an eye on the pound yesterday decent push in the morning failure to really get below the low That we had on Friday Decent push and it's coming up to test its high of the day Which is the high of yesterday as well and the 132 handle so for the pound I'll be keeping a watch on this couple of comments Reading this morning about how plans for no deal. It's been taken completely off the table Whether that can get filtered into the markets and not we'll have to to see but a break above there You know you've been looking and targeting maybe 20 ticks higher or so good area Looking back here from the second of the year one 32 20 And 32 29 would be another pointer to keep a watch on below where we're trading you can argue it's a Sort of 40 point range really the pivot yesterday afternoon's lows and up to those highs as well And it's almost I guess a case like the euro and waiting for the opportunity either way to to come through to see what Could happen there stocks Gap lower yesterday to Obviously do what they've done for the last few years and just recover by the bit and it seems like all-time highs are pretty inevitable now Looking at this market the S&P here. You can see late in the day Around sort of what time do we really confirm that break around 5 36 o'clock confirm the break above? the gap and we continue to push on and We're now 32 50 which of course could act as a bit of a resistance point We've had some decent selling around here. Obviously you can argue It's a bit choppy But certainly on this 27th the second and now today as well. We're holding up there as well So bit of a line in the sand perhaps today for the buyers and sellers above there You feel it's it's pretty straightforward to get that new all-time high and it's a very similar picture here You can see for the Dow Jones and the NASDAQ and the NASDAQ closest to making its new all-time high Which of course was made on overnight Thursday Friday. So keep a watch on that gold It filled the the gap pretty much you can see from The weekend what an opportunity that was to buy along with S1 the high that we had back on The third as well and we pushed pretty much since then however the high of the day The previous low of yesterday morning before we then broke through so is an important point 52 15 72.5 people watch on that and you'd argue that's really more of a zone now along with the pivot and then it's also some previous support from yesterday as well so Yeah, a couple of dollars A couple of yeah a few dollar sort of area of resistance however Gold is to continue to come down. You've got a favor stocks getting above 3250 And then we continue to go higher We'll be keeping another watch if we were to drift lower on that S1 If there is this big de-escalation well gold's got a come lower oil course early on filled that gap and We pretty much have and you see that and done most the move and While the low here is important 62 22 I feel if we do come back down to test that area along with 62 dollars It could well open the door up to complete reversal back down to 61 Dollars as well. I think we would need something quite big for us to see a continuation of overall of all of these moves as well Quick look over that that's what it's doing on the open just pushing higher But a big resistance point you can see here from the third so keeping a watch on that We were a couple tests this morning not just an important level because those points But also some decent price action in previous days as well So keeping a watch on that a break above there you'd favor Obviously American stocks to follow suit which of course remain Over the last 12 hours or so pretty bullish but 3250 the obstacle for a real close there You would say any questions usual, please do let us know I hope you'll have a good trading day and they catch up with you later on