 Good morning and welcome to CMC Markets on Friday, the 25th of September, and a quick look at the week ahead beginning the 28th of September. Before we get started, just go through a couple of disclaimers, but I think while you digest the information and the disclaims, I don't think it's particularly controversial to argue that it's not been a particularly good week for equity markets. We've seen some fairly choppy trading. We got off to a very poor start to the week, largely on the back of concerns of an escalating situation in Europe when it comes to coronavirus infection rates. Significant increases pretty much across the board. Concerns that if these were to continue on their current trajectory, then we could will see further lockdowns going forward. And more importantly, I think it's really raising questions about a sustainability of the recovery that we've seen in Q3 being sustained into Q4. We're already seeing pockets of weakness being played out and some of the flash PMI data that we saw out this week. And in all honesty, we've really struggled to recover from the declines that we saw first thing on Monday morning, when a combination of factors saw a big, big decline in markets across the board. Now, we have seen some attempts to recover, particularly in the US, but I still think it's quite likely that we're going to finish four US markets down for the fourth successive week in a row. When we look at the outlook for equity markets more generally, particularly in Europe, we're likely to see another big down week on the back of these recovery concerns. But I think also on the back of the fact that the prospect of further fiscal measures to help support the Q3 rebound appear to be diminishing significantly with every passing day. We're now less than 40 days from the US presidential election. I think it's quite unlikely that we'll see any significant form of stimulus plan from US politicians. We've seen the US dollar rebound this week, and I don't think it's that's a coincidence that we've seen the dollar rebound when you've had a succession of Fed officials talking about the need for further fiscal stimulus to complement the monetary policy stimulus that the US central bank is feeding in to the US economy. And you can see this borne out in the CMC markets US dollar index as the US dollar has risen, equity markets have fallen back. So there does appear to be a bit of a correlation between the strength of the US dollar and the weakness in equity markets more broadly. If you look at the weekly charts on the CMC dollar index, I think there is a significant reason to think that the US dollar may well have bottomed in the short term, in which case that could have significant repercussions or risk going forward as we head towards that November the third election day. And it's interesting to note that I'm talking about November and we haven't even got into October yet. And I think as we look ahead towards October and next week's payrolls report, what we're seeing is, I think, significant possibility of further deterioration in not only US economic data, but also global economic data more broadly. And that should be or could well be a net dollar positive. And I think that's borne out by this weekly chart here. We've also seen gold come crashing off quite substantially over the course of the past few days as well, which might be slightly counterintuitive. But that could merely be a case of a little bit of liquidation as investors start to cover margin calls as stock markets fall off quite significantly. I mean, one of the things that has been particularly notable is how volatile the tech sector has been. And that, I think, continues to drive equity markets more broadly, particularly in the US, but I still don't think it's going to prevent another negative finish for US equity markets. The key level that I'm looking out for on the CMC Dollar Index is this 1,000 level on the upside for confirmation of a break higher. So I'll be paying particularly close attention to that over the course of the next few days. If we look at equity markets more broadly, we can see the German Dax has finally broken lower. We did that on Monday. We broke below that uptrend line there. I think it's quite likely that we will at some point test the 200-day moving average, which suggests that for the time being, while there is an awful lot of pessimism about the future direction of equity markets, I think it's also important to remember that pretty much since June, we've gone pretty much nowhere. There's fairly decent support in and around the 200-day moving average from those lows that we saw at the end of July and the beginning of August. And I think it will struggle to really push significantly below those levels in the short to medium term. What is slightly more worrying is obviously the underperformance in the FTSE 100. Now, there are a number of reasons for that. Obviously, there's the fact that the FTSE is very much overweight in terms of banks, big oil and what have you, and very much tied to the global economic cycle. But it still remains pretty much in a very slowly sloping downward channel. And I think it is also important to understand that we are still above the lows so far for this September. That doesn't mean that we probably won't trade below them. Certainly, the fact that we're trading in this broadly downward trading channel suggests that the potential is there for further equity market weakness. And thus, Ergo, further weakness pretty much across the board for equity markets in general. So I think we're starting to turn ever so slightly away from the by the dip dynamic to particularly in October, which is always a very choppy month, equity markets anyway, to a little bit of a sell the rally type dynamic. That's certainly the case, I think, in the case of the FTSE 100. Particularly so, since the pound is starting to look a little bit perky. And that is another thing that I will be keeping an eye on next week, as we get a whole host of further UK data coming out, as well as obviously the resumption of UK European Union trade talks. So despite all the negativity coming out there, the internal markets bill and the breaking of international law and what have you, the likelihood, I think, and this is just my interpretation. So, you know, it could be way off. Accusations of bad faith, they've been going to and from over the past couple of weeks, got a lot of hand wringing going on over the UK government's willingness to break international law, putting to one side all of the hyperbole about that. I think it's important to remember that while October has been touted as the deadline for any sort of agreement to be ratified, it's unlikely that we will get an agreement. These discussions always go to the wire. It's always lastminute.com with respect to the European Union. And that means that we may not get any significance or clarity by the end of the year when the transition agreement is likely to come to an end. But certainly the mood music really changes on a day-to-day basis. One minute you've got an awful lot of what I would call a little bit of aggressive rhetoric from the likes of Michel Barnier and the EU delegation. And then that's followed by similarly hawkish rhetoric from Sir David Frost, the UK's chief negotiator. But ultimately I think for me the important thing to take away from this is when you strip out all of the noise, and I think this is where technical analysis really does come in handy, when you strip out all the noise, for me it's about levels. There's always the possibility until the transition agreement ends, for all the hyperbole is for somehow the lost ground or what have you to be clawed back. And if we look at the CMC sterling index we can see there's a very, very big base anywhere near and around these sorts of levels here. So we have seen some big falls early on, but now we're ratcheting back higher again. And I think any type of sterling strength over the course of the next few days is likely to probably act as a little bit of an anchor on the FTSE 100. We can sort of see that also in terms of the way the cable has been trading over the course of the last couple of days, fairly decent support in and around 126.75. We've also coincided with the 200 day moving average. If you actually look at the CMC markets weekly, the weekly chart, you can see that there's a very long lower shadow which suggests to me that for all the bearishness about sterling, people are still very reluctant to be aggressively short of it. And I think the reason for that is that there's an awful lot of pessimism already baked in. And as such, I think the potential for an upside surprise is greater, despite the risks of a no-deal Brexit. And this is where risk management essentially comes in. It's being able to park your emotions and just trade on what the price is doing. So we are finding a fairly decent area of support in and around 126.75. What we do need to see, however, is a break above 128.70 to stabilise in the short to medium term. And we do have some data out next week, which is likely to be important from the UK point of view. Obviously, we do have the final UK second quarter GDP number. And that's where we'll finally get to see the full scale of the economic damage, wrought by the lockdowns in Q2. The last reading showed a contraction of minus 20.4%. April was the low point in terms of the economic shock. We obviously saw a slow rebound in May and June, as lockdown restrictions were eased. And I think as such, I think as more of the June data becomes available, and obviously then we go into July, August and September, the likelihood is that we'll have seen at least half of that economic activity that we lost in Q2 come back in Q3. Even the September flash PMIs that we saw out last week have shown that manufacturing is still held up very, very well, as has services in the September numbers. Of course, the new lockdown restrictions that have been announced this week rather puts a little bit of a dampener on that. But certainly, I think in terms of the Q3 numbers, it's less focus on that now than there is about what's going to happen in Q4. Now that not only the UK is imposing new COVID restrictions on the hospitality sector, as well as the travel and leisure, but also the same thing is also happening in Europe as coronavirus infections increase. But undoubtedly, the pound is proving to be much more resilient in the face of dollar strength than say, for example, euro-dollar is. If we look at euro-dollar, we can see that we've broken below this potential head and shoulders reversal. Here we've broken below the 50-day moving average as well. And that really brings us, this really brings into focus a target for further euro-dollar declines. Now in the short term, we have found a little bit of a base around about 116.20. I expect that base to give way. If we take the high here of 121.10 and then project it downwards from the breakout point here, which is around about 117.60, that brings us all the way back from 117.60 down to around about 115.20 at the very least for euro-dollar over the course of the next few days and potentially even lower than that. Ultimately, for all this talk of euro-dollar at 120, and certainly there has been significant pushback on that, the likelihood is, I think, in the face of further dollar strength that we will see the euro decline further. And I think one of the key factors behind that will be the fact that when we look at the latest flash CPI numbers for September, the lack of inflation in the euro area isn't going to be a new problem for the European Central Bank. And I think the recent rise in the euro as a result of the weakness of the dollar will have acted as a further deflationary effect on the European Central Bank's ability to generate or even get close to its 2% inflation target. Now, at the most recent ECB meeting, Christine Lagarde tried to navigate a middle ground with respect to the recent strength in the currency. However, she appears to be at odds with the ECB's chief economist, Philip Lane, who I think for not unreasonable reasons wants to keep a lid on the euro at 120. And now in August, annualized inflation slipped a minus 0.2% and a four yellow. We hear all this talk from central bankers about wanting to hit their 2% inflation target. The ECB hasn't seen inflation above 2% since 2003. So for all of this talk about looking to hit their inflation targets, I think it's unlikely they'll hit their inflation target anytime soon. And it could well be 20 years before they even get close to it. Certainly in terms of 2023, 2003 was the last time it was above 2%, briefly touched 2% back in 2015. But other than that, it's got nowhere near it. And that's going to be a problem for all of these central banks as they try and meet or even get close to their average inflation target of 2%. So keep an eye on EU CPI, September flash CPI, that's out on the 30th. We've got second quarter GDP, the final iteration for the UK on the 28th of September. We've got global PMIs for manufacturing on the 1st of October. Again, they are going to be a mixed bag. Certainly they point to a slightly bipolar recovery when it comes to manufacturing and services. Services is where the pressure points are likely to be. Those particular numbers are likely to be out on the following week around about the 5th of October. But certainly the manufacturing numbers, while positive, can't disguise the fact that services is going to be on the frontline of any recovery or lack thereof as we head into the fourth quarter, obviously of which October is the first month. The main headline, I think, in terms of this upcoming week will be the US employment report. And that has continued to show significant signs of an improvement since obviously the big, big declines that we saw in April. The August payrolls report, it the continued trend of a slow recovery in the US jobs market. Now, there is, I think, a little bit of a concern that weekly jobless claims may have found a bottom around about 850, 860,000. We saw them tick up to 870,000 in the latest set of numbers. That being said, certain parts of the US economy are still looking fairly resilient, new home sales, for example, durable goods also looking slightly perkier than they have been. And certainly there hasn't really been any significant indication of a slowdown in retail sales. That being said, it could just be that US consumers may still have some of the money left over from those $600 a week stimulus checks that rolled off at the end of July. So what are we looking for for the US employment report? Well, certainly, I think Jerome Powell, fair chair Jerome Powell, has been very, very insistent that without further fiscal stimulus that we could well start to see the recent improvement in the jobless numbers start to bottom out and start to head higher. But at the moment, the expectations are that that won't happen quite yet. The September expectations are for 865,000 new jobs to be added and the unemployment rate is expected to fall further to 8.2. However, don't be surprised if the August numbers turn out to be as good as it gets. It's very, very difficult to really ascertain what the real level of US unemployment is. At his most recent press conference, fair chair Jay Powell, more or less made that very same point. He said that the US central bank wasn't even sure how high the real unemployment figure actually was. He said that given the volatility being seen in the data, it could well be 3% higher than the actual headline suggests when under employment and people who have dropped out of the workforce are taken into account. So it could well be still well above 10% despite the fact that it's expected to fall to 8.2. Ultimately, we don't really how bad the effect and the impact on the US economy is likely to be in the same way that we don't really know what the final impact will be on the UK labor market. The furlough and the job retention schemes that we've seen here in the UK are disguising the full impact of any potential economic shock as we head into Q4. I think that is what is starting to spook an awful lot of investors. That is what is spooking equity markets at this point in time. And that's why you're finding, I think that's why we're finding it so difficult for equity markets to rebound. We've also got the latest tank and survey out of Japan, which is likely to give an insight into how big business in Japan see the Japanese economy, certainly on the basis of what the PMI numbers are telling us, the Japan manufacturing and services PMI numbers, the flash PMI numbers, they are still they are still in contraction territory. And that is a real concern. That is that is a significant concern. I think going forward the fact that even though we've seen a big rebound in services and manufacturing pretty much elsewhere in Japan, economic activity has continued to remain subdued. And that's going to be a problem not only for the Bank of Japan, but also for new Japanese Prime Minister Mr. Suga. So we will have to see how that goes. Certainly in terms of the rebound in the dollar, we're starting to see more dollar strength, even in dolly yen, which in a risk off scenario is actually fairly unusual because the yen usually strengthens when equity markets sell off. So you can see some of the usual correlations are starting and continuing to break down. If we look at a weekly chart on dolly yen, we can see that overall we're still in a bit of a downward move or a downward channel here. So I suspect that the upside in dolly yen is likely to be fairly limited on a technical basis. So keep an eye on that 50 day moving average there because that could well be actually a little bit of a barrier given that it's done so pretty much since July all the way through here. So what else are we looking out for this week? Well, obviously we've looked at some of the key levels on the various indices and what have you. We've seen the break lower in gold and if we look at the gold chart here, we can see that we've broken below the lows that we saw in August, but we are approaching a little bit of a support level at around about 1836. So while we could well see further declines in the short to medium term, I wouldn't expect gold to drop much below 1760 and these series of highs here. I think there's certainly potential for us to drop a little bit further while we're below 1900, but I think as long as we hold above 1763, then we could then rebound from there. If we look at some of the key chart points on the S&P, we can see we've also broken below that trend line there. We've also broken below the 50 day moving average. That is important. I've talked about that quite a lot and that suggests that while we're below the 50 day moving average, we'll probably head back towards the 200 day moving average. These technical breaks are important. It's not only happened on the S&P. It's also happened on the NASDAQ as well. And as such, I think U.S. equity markets are likely to feel, see and feel a little bit more weakness towards these Fibonacci retracement levels here. What I've done is I've drawn them from the lows that we saw back in March to the highs that we've seen, the all-time highs that we've seen earlier this month. And that suggests to me now that we're below the 50 day, that we could well head back towards this 38.2 Fibonacci retracement level of the entire up move from lows in March. So certainly I think on a technical basis, the technical picture for U.S. stocks looks a lot weaker than it did this time last week. And as I've always said, once the price dynamics change, you have to alter your outlook. So from buying the dips now, unless we break back above the 50 day moving average, then I think the focus now shifts to potentially looking for further losses over the course of the next two to three weeks, particularly in the lead up to the U.S. presidential election. And obviously, the first of the U.S. presidential debates, which is due to take place next week between President Trump and the Democratic challenger, Joe Biden. Okay, so finishing off with a couple of significant earnings announcements. We've got Boohoo Group, first half numbers for the year 2021. They've had a bit of a roller coaster, roller coaster few weeks, largely as a result of bad publicity about one of their factories in Leicester, which was operating below the required standards as required by UK Health and Safety. Now, they've just published the findings of an independent review by Alison Leavitt, who's a top Queen's council. And while it hasn't exonerated Boohoo from blame, they have pledged to take steps to make sure that the issues addressed in the review have and will be fixed. That being said, the bad publicity did cause them to lose an awful lot of goodwill from a number of very key celebrity influences. And that could well have cost them in terms of lost sales. So it'll be interesting to see how much the upcoming update will have had on the overall sales for the first half of this year. We've also got the latest numbers for Grex, the food chain. Share price there looks and it looks, it looks, it looks a pretty weak outlook. If you can draw a line through these highs here, it's broken below these lows here. Technically, it looks susceptible to further losses and obviously being a food chain, food retail, it's been in the crosshairs pretty much of every bit of bad news that's come out over the course of the past few days. That being said, eat out to help out is likely to could well have boosted its numbers in its third quarter. I'm going to be more interested in what Grex has to say about its Q4 outlook and how well it's done in Q3. And as such, we may well see a rebound if they're slightly more optimistic than perhaps people think that they might be. Anyway, that's it. I think that's pretty much it for today's weekly market update. Just bring back the disclaimer like so. And in the meantime, I'd like to thank you all listening. As I said, once again, if you have any questions or anything that I've raised in this particular video, please feel free to tweet me at mhuson underscore CMC or alternatively drop me an email. Otherwise, have a great weekend and have a successful week trading. Thank you very much.