 Okay, very good morning Thursday 27th of May. Hope you're doing well and usual routine. I'm going to get up speed We'll look at some of the charts from a technical perspective and try to lace in some of the latest news flow main thing is going to talk about the fundamental side of things are Talks telephone call between the US and Chinese officials overnight and also some latest Fed commentary and A bit of an idea here around the tapering side of things which we can also explore But looking at general market sentiment this morning things are relatively flat But let's walk through a couple of these charts and the dollar index is pretty flat this morning But you'll recognize if you did as a European UK trader leave the market yesterday afternoon Then we did see a continuation of dollar strength generally through late Kind of in the evening UK time into the end of the US session and that continued through into the US session Albeit it has abated a little bit here over the last few hours But that explains then that dollar movement of the major pairs seeing some downward moves had some rubbish commentary I don't easily remember Panetta as well yesterday in regards to ECBs bond buying and their policy on the timeline for for any alterations on that front so let's look at sterling and the euro first on the charts and One of the things was watching yesterday, which was being nicely respected was this trend line going back to What last Thursday? It's had a couple of tests. We did break down through there Little bit rough around the edges here in some of the price activity seen at the US exit But then acted as an area for us then to push back lower We saw an eventual low just sub 141 in the futures, which was around the low We printed back on the 17th of the month. We have reversed course and as we come back up here to these levels I would be quite interested to just see how cable reacts training at 141 17 up at 141 26 You've got the trend line with the horizontal highs that we had from the US Evening and a commencement at the Asia pack session, which was respected. So Be looking at that as an area of resistance and to be interested to see whether or not we Given the recovery that we've seen during the Asia pack hours if we were to see some further Dollar strength do we then start to see the market trend back to the downside from here and let's target the Back to the lows that we've seen in recent hours. So again, that would all be contingent though And the thing I'd be looking at is not so much UK, but dollar movements in that respect There's a lot of pressure as well at the moment giving Dominic Cummings hearing on Boris Johnson Lot of the newspapers making a bit of a meal out of that in terms of the pressure on bojo I don't think it makes any difference to be quite honest You know as bad as Boris might might have come out from what Cummings were saying I think everyone knows what Cummings agenda is. So you wrote wise again pretty Strong downward trend that was seen through yesterday's training session. We have found a bit of a flaw here So I just put the ellipse back on we have found a bit of a flaw in the Asia pack session at around a Point of technical support that was seen in the previous Asia pack hours on the daily chart One thing I am keeping an eye on is you know Europe's had a really great time of it of late given Combination of diverging fundamentals in one sense where the dollar has been a consistent weakening trend under the Fed rhetoric About holding firm on the transit review of inflation Whereas in Europe things have been picking up some optimism coming back with the better rollout of the vaccination program now And so forth and so here then I'm just keeping an eye on the daily because the low in the euro is getting close Proximity to that trend line going back from the commencement of the move higher in the pair that we saw from early April And it's held through May on a couple of different tests And just given this this technical action here on the daily We have traded above but failed to sustain the move, which was that February high So that kind of marks your top end and your bottom end of the range here You've got those previous lows that was seen back on the 19th and the 21st an area of resistance as well back on the 29th of April There's quite a good horizontal just level anyway, but then throwing the trend line as well We're looking at this is quite a key level of of support And if that does hold and that helps the euro stay above board And one thing we have been seeing of late is whenever we have these bounce of kind of Short-term dollar strength they generally have been faded and so this could be Areas here to pick this up for a move back to ride it up to these previous highs that we were seeing Early in the week if that were to be the case All right elsewhere Let's have a quick look at US equities And I'm only going to look at the S&P here and then we'll look at some of the stories that have come out Just looking on the S&P 500 very choppy price action You know we we pushed up higher what this was back on Tuesday We hit then this recovery high well and above the 42 hundred again And we've then kind of had this pattern of Sell-offs to then rallies another sell-off rally another sell-off so on the pattern though getting What's interesting here is actually the net result is we are Gradually moving higher in a very kind of kind of wave pattern almost and so What I would say here is that try to trade these indices at the moment can be a little bit tricky I don't think there has been too much in the way of a great deal of new Macro developments the market still trying to at the moment just judge whether or not this market can go higher or not so one of the things I was saying to the guys yesterday was Try not to just overthink the fundamentals too much I think when the market is going through these ebbs and flows And particularly as you know the market tends to go down quicker than it goes up It can seem like quite a bit of momentum perhaps you've missed something You know it feels like all this could be it now We could start to see a deeper move and inevitably then we just find a technical area and we start to bounce again So I think just be aware of that adapt to those new conditions I do think more broadly this is a phase of consolidation if anything else and if we actually look on the daily chart here We're above that key level remember. This is the level we'd be looking at all week We're looking for the breakthrough which we did have at the beginning of the week Confirmation on the close above and look we've held each day One thing here is the highs are getting lower So it definitely is worse watching this because if we did break through this level We couldn't run heavy down to quite a bit lower and probably down to around 4150 type area But for the moment as long as that's holding then I think the market continues to respect this range And one of the things we're just looking at here is some short-term trend lines over the course of the last two sessions or so As you can see here just being respected on the downside during Asia pack hours If we come back up not that interested really at pivot probably take that level off to be honest But if we come back up, how does the market react if we come up to here? Which was the previous highs that we had at the commencement of the Asia pack session because we did initially drift lower before bouncing late on and that trend line So during the US afternoon if it does come up that would be a key area of resistance just to keep an arm for the day on that front then let's throw in the first bit of news which is that of the US China trade talks And what exactly is going on here? Well, US and China trade chiefs had a what they what they're terming a candid First conversation is this whose size try to resolve their differences over trade At the same time tensions remain as the White House top official for Asia said that the US is entering a period of intense competition with China separately as well, you'll remember yesterday Politicizing the origins of COVID-19 would hamper further investigations and undermine global efforts to curb the pandemic This was called into China's US embassy and this of course came after Joe Biden Has ordered a new intelligence report on the on COVID-19 origins now A lot of this you've got to see through the lines and see it as tactical Maneuvers in order to have the strongest possible hand going into a top-level negotiation So Where did the where did the virus come from? I think most people will be of the view that this origination was in China But this is something which the Chinese will be very defensive about Will not be enjoying. There's lots of other proxy things that are going on still at the moment Of a fairly tense nature in the east China sea And lots of this is a very multi-leveled political Negotiation and so for me It's positive that they're having a phone call And that they are in conversation But a couple of things I wouldn't expect any Great movement on the trade side anytime soon I would not expect any rollback of tariffs, which is what the Chinese want But I don't think Biden will yield to that if anything He'll just continue to keep that pressure point firm at this point in time And so I think there's still quite a few things that this needs to play out at the moment and To be quite honest when if you step back from this situation And given the fact that midterms are next year And we're yet to see really the full recovery take hold in the u.s Where there's still millions of people who are not in work who were in work prior to the pandemic like seven eight million And so for me, I think that the the the Chinese situation is one that the u.s will want to manage Not particularly resolve and an end result of a trade deal of sorts Because of the fact that I think he's going to have to focus more biden's administration on the domestic issues Confronted with joblessness at this point on the back of the pandemic and getting the economy back reopened In time then for a major domestic political event in the midterms Which is in the year's time or so. So I think At the moment, I this is positive. They're talking, you know, it's not so aggressive as say the trump era But I wouldn't be looking out for anything to happen anytime soon I think the markets see that the same way and you know, there's no reaction to these discussions overnight I mean, if you were to see a reaction at this point, it would have to go against of what I'm saying So basically it would need to be They'd walk out of the the meetings or put the phone down in this case They say there's no point in talking or the opposite They start making noises about rolling back tariffs, which is not going to happen in my opinion And the market might rally in that instant. So They would be the things and how I'd quantify market reaction to these talks The other major talking point, um, of course was this one I'm pretty much sure I'm always say this guy's name wrong. So I apologize to randall qual But he has come out and he is one of the the more senior officials of the fed because he's the vice chair And he basically said it'll be important for the central bank to begin discussing In the coming months plans to reduce its massive bomb purchases if the economy continues to power head coming out of the pandemic Now this sounds a little bit more Optimistic about this idea of tapering comparative to the fairly resistant rhetoric We were hearing with what the fed was saying just a few weeks ago I think what's important here is to recognize that the fed are very aware of how markets are trading and yields have backed off And markets have stabilized as we said before it's almost like the markets now have yielded Their hawkish kind of view on tapering and started to listen to the fed and as such the markets have reacted in kind So the fed now are just playing this this communication guidance game to me Which is well don't get too far flipping the other way We are going to taper at some point in the future And so this for me is just management control of those forward comms if you like I think important points here is Don't be or don't misinterpret what the fed are saying here So this chap is saying he seeks taper talk in the coming Meetings coming meetings could put us many months down the line For me, this is strategic because we have a june meeting coming up in a few weeks And that would be important because we get the latest projections in the Summary of economic projections from the fed and we'll get updates on what they think about growth unemployment inflation and the rates Not only that then you get followed the month after in august with the Jackson Hole symposium These are the first very small incremental steps towards just keeping the market honest With the idea that look tapering is coming at some point Um tying it to the metric which I think is sensible, you know, it's data over dates to coin a phrase And so therefore um as long as the data is good Well, they are going to have to adjust at some point But at the moment that data is not really constituting that given the fact that say the jobs report We saw a few weeks ago was so bad amongst other things as well so Yeah Not to over interpret this I wouldn't say. Oh, yeah This is reason to buy the dollar in yields are going to spike and t-notes are going to fall and equities are going to sell off today I think that would be an over interpretation of what they're trying to communicate would be my point of view Um, let's have a quick move over to some of the commodity markets and a quick look on the charts gold You know gold's seen some nice, uh, technical response to some levels Uh, I can see here Into the u.s trading hours last night. So when you walked away, we did eventually start to see some downward pressure come in Um amid some of the persistent movement that we had in the dollar tracking gold at the moment, I think is um very much relevant to to keep an eye on dollar fluctuations at this point in time. They seem fairly well correlated in their moves in an in an inverse Relationship and here as we've come down um This level was quite Obviously quite symbolic 1900 That was the area of support on the leg up that we saw Before then the push on that came in the age of pack session this time yesterday Once we broke through that we hit the daily pivot came back up to test that exact level Back down towards that same area of the low and then we've come back up and now we use that as a Kind of springboard for then European participants to just Bit it back up again so Here again 1903 spot eight same level looking at yesterday. I still think remains technically important But otherwise above here um Perhaps you could look up at that some of that range high from what we had yesterday afternoon at 07 spot 6 if you are managing a long trade on exiting out of position With an overall target back up to the r1 and and relative highs that we've had in this day Just push higher this week. Otherwise any reversal Then be looking back down to those late u.s. Session the age of pack blows down at 18 95 type area On the commodity front worth bearing in mind. I know some of you guys look at copper There is some copper news bhp billetin overnight confirmed the chili control central workers will begin their strike today And noted it will take contingency measures that's bhp While other workers in the spence and escondida, that's a very important Mine, it's the largest copper mine in the world They said they will continue working though during the remote operation guild strike So I think just to be You know clear although there are some copper strikes going on in the country at the moment, which obviously On a more broader level could have a distinct impact on supply of copper Which is integral to many different things on an industrial basis The escondida mine is operating as per normal is the latest of what we've heard this morning And that's the one to watch if that situation were to change then obviously that could be very bullish for price okay Final thing just to mention just so you're aware of it on the coronavirus front We have had in the age of pat session australian authorities have ordered a seven-day lockdown at the state of victoria In a bid to prevent a new cluster of 26 cobit 19 cases in melbourne from any further outbreak Markets haven't really reacted to this And I think this is just precautionary measures very proactive And so that's good on that side of things. I don't think people would see that as a reason to sell the Aussie Elsewhere one thing is One thing we were looking at yesterday was that big bid we had in the kiwi after the back of those hawkish rate forecasts that were issued by the rb and z in their rate meeting yesterday And the market shot higher really nice short opportunity there on the longer term trend line If sam north was still with the amplified team or if he is watching this this is a this is a sam north trade Long term distinct patterns in the market, you know, we've got going back to All the way back to march. This is here for that initial high the retest in may We came up there in quite an oversold moved in some respects yesterday on various indicators Aligning up with the top end of that kind of trend channel and then we've just drifted lower and you know having traded up Yesterday in the overnight at 73 18 we did come down to 72 66 Into the beginning of the asia pack session. So that's still a key level to watch on the upside As we go further forward for the kiwi All right critical calendar, and let's wrap things up Before I do that final look at crude oil just to wrap off the commodity space Pretty range bound at the moment as you can see here. So once again The iranian sanction news flow continues to kind of roll on I don't think there's a great deal of Too much emphasis on that at the moment. I think the general understanding in markets is that these things are going to take time In order to get a compromise tantamount to an agreement And so therefore again kind of like equities. We're just in a consolidation phase And it's just about respecting that at the moment and not getting too aggressive in either way Not unless anything unexpected were to materialize Same thing with tea notes as well just in this bottom chart We've had that decent move this week You know if you look at it This is tea notes moving from last thursday up to where we are we've done over a full point now As yours have continued to just slowly decline And so we're in this consolidation phase now between 132 26 and 3301 now on the upside. I'll be watching today Okay, calendar wise what's on the agenda for today? Quickly flip over It's a quite quiet day for the morning At least in terms of uk and europe We've had some german data out already this morning the gfk consumer sentiment reading minus seven So it was actually slightly worse than expected, but it's not I wouldn't see that as a market moving number So then focus and concentration really is at 130 for the us data You've got us durable goods us weekly jobless claims and you've got the second reading of q1 us gdp Which is expected at 6.5 percent jobless claims expected to show Another improvement so four to five from previous four four four And then you've got pending home sales coming out at three o'clock Speaker wise no fed speakers on the docket, but we do have a couple of e-spee members Probably the most notable being schnabel Speakers at a forum on the new economy text to be released at 2 p.m. london time Bank of england member flaga gives a speech on what government bond yields can tell us about future growth and inflation So could be of interest for any sterling traders. That'll be a midday fixed income 62 billion dollars in a 70 a note auction And that's your wrap So I'll leave you to it. Let you guys get on and I wish you a great day ahead Thanks very much