 Hello and welcome to CMC Markets on Friday 25th of May and this quick look at the week ahead beginning the 29th of May. Number of data items that I've been keeping an eye out for this particular week, obviously non-farm payrolls, US employment report is the standout item, but we also have manufacturing PMIs, global manufacturing PMIs and the latest CPI numbers out from the European Union. So if you look at that, I think it's important to look at the overall backdrop to the price action that we've seen this week and European markets look likely to post their first negative week reversing a run of eight consecutive weekly gains and I think a number of reasons can be attributed to this turnaround, obviously markets can't go up in a straight line forever but I also think that what we've seen this week is we've seen rising concerns about a breakdown of trade talks between the United States and China. We've seen rising concern as to what type of Italian government we might get and whether or not they'll adopt an extremely confrontational stance with respect to their relationship with the European Union. More importantly, we have started to see weaker than expected economic data out of France and Germany and I think there was an expectation going forward as that we headed into the second quarter of this year that the slowdown that we saw in the Q1 GDP numbers would show some signs of picking up in Q2 and the flash PMIs that we saw out of Germany and France particularly in services were much weaker than expected in Germany services PMI came in at its lowest level September 2016 obviously geopolitical concerns are still rumbling away in the background we've now got the potential for a bit of an on-off summit with respect to North Korea and the United States after President Trump counseled the June 12th summit in Singapore the summit may well take place at a later stage but at the moment this appears to be the latest in a long line of potential posterings negotiating stances or what have you with respect to the North and South Korea question. So the last couple of days we've seen a bit of a turnaround in sentiment we can see that displayed on the DAX here two very strong negative daily candles if we change that to a weekly candle it becomes even more instructive in that we've posted a key week reversal we've also broken that trend line from the lows that we've seen in March and when you actually look at the lows in March and how far we've come we really are overdue a little bit of a correction it's a similar sort of story when we look at the FTSE 100 we can see that displayed on this chart here on the daily chart again we've seen significant we've seen significant divergence on the oscillator the we've got a nice little reversal pattern here potentially a evening star candlestick pattern we've broken below 7800 after making a new record high if we also look at the weekly chart here and we haven't quite posted a weekly reversal on the UK 100 but that's not to say that we could be starting to find the air a little bit thin at these sorts of levels on the currency front dollars had a fairly good week now that could that could come under a little bit of a reassessment as we head into the week beginning the 29th of May we've got a whole host of data coming out non-farm payrolls being the most important item and in particular what we'll be looking for in contrast to the data that we saw last month where actually wages have remained a little bit on the weak side they haven't really gone back to the levels that we saw at the beginning of this year when average earnings came in at 2.9 we saw some weak numbers last month and we also saw a revision lower to the previous month so they've been flatlining wages in the US around about 2.6% which is a little bit surprising given the fact that there was some evidence that the labour market was starting to tighten up an awful lot more the unemployment rates at 3.9% more importantly the headline non-farm payrolls number came in at 164,000 which was significantly less than what was expected now for the coming week or for May we're expecting payrolls to come in at 190 again if it is a low number that's not necessarily a bad thing it just means that the labour market is tightening up so in the context of the overall picture I still expect based on the charts that we're seeing here the euro dollar is likely to come under further pressure one of the reasons for that is the fact that EU CPI still remains fairly low 1.2% on the headline rate 0.7% on the core and given the weakness that we've seen in some of the economic data the flash indicators and whether or not that's confirmed later this week in the actual official numbers on the Friday the European Central Bank is going to find increasingly difficult to talk up the prospect of tapering its asset purchase program we're going to get what we look like we're going to get is probably a 100% certain we're going to get a June rate rise from the Federal Reserve and that would suggest that the potential is there for further euro losses and further dollar gains now the next target that I have on my euro dollar chart is around about 116 as long as we can stay below 117 1718 1820 these sorts of series of highs through here then the line of least resistance for one of a better word is for a lower euro and a higher dollar and it's a similar sort of story with the pound found a little bit of a base after those very decent retail sales numbers that we saw in April again they were much better than expected but April seasonally tends to be a fairly strong month in any case the last three years we seen a very poor March number and then a very strong rebound in April so the main numbers are going to be very key in the overall context of where we go to next obviously we have UK manufacturing power by out on Friday there does appear to be some evidence of a little bit of a rebound in UK economic activity but whether that will be enough to support the pound against the dollar is open to debate I still think there's potential for the pound to drop further against the dollar towards around about 131 but also this trend line from the lows that we saw at the beginning of last year so other things I'm keeping an eye out for later this week are the G7 meetings they're due to start at the end of the week they'll probably be fairly interesting in the overall scheme of things with respect to the geopolitical picture obviously the Iran nuclear deal whether or not pressure will be brought to bear by EU leaders for President Trump to change his mind but overall I think the key the key headlines that I will be looking out for this week is going to be European Union CPI non-farm payrolls and average average hourly and average weekly earnings out of the US and obviously keep one eye on the overall political geopolitical backdrop with respect to US China trade and obviously the North Korea situation so that's it for this week thank you very much for listening it's Michael Houston talking to you from CMC 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