 So, good afternoon and welcome to CMC Markets, me, Michael Hueson, hopefully Colin Szynski and this non-farm payrolls webinar. Unfortunately, I think it's going to be slightly overshadowed by the decline in the pound overnight, the flash crash, whatever you want to call it. There's a number of factors at play here, but first before I get started, I have to display a risk warning, just so that you know that anything that you hear here should not be construed as trading advice, invitation to trade or what have you. What we're going to try and do is I try and identify where the key chart points are vis a vis, not only the pound against the dollar, but also against all the other major pairs, indices, precious metals, commodity prices, so on and so forth. And for the purposes of this video, I will also be recording it so that if any one of you wants to listen to it back, then you will be able to do so. So that's the risk warnings out of the way. Let's start and get, let's go and get started. First and foremost, let's talk about the pound because obviously it's been the flash crash overnight, it's been pretty ugly and whatever the reasons for it, whether it's algos, whether it's a narrative of political uncertainty, the tone was already set earlier in the week with respect to the political narrative coming out of the Conservative Party Conference, but what hasn't helped it either is the narrative from the Bank of England. Now we've all seen the economic data out of the UK. It's not been bad, it's not been great either, but it's certainly not been bad and it certainly does indicate that the UK economy has bounced back. And if you ignored all the narrative around Brexit vote and everything else and looked at the actual hard data that we've seen thus far, the PMIs in the past couple of months, the economy actually looks in fairly decent shape. So from that perspective, we are looking at a fairly decent economic performance and ultimately anything else is just conjecture as it is the IMF this week have rode back on their doom and gloom forecast of prior to the referendum and actually predict for what it's worth or for what the IMF's predictions are worth. They predict ultimately that the UK economy will actually be one of the best performing G7 economies this year. They have however revised their GDP forecast for 2017 down from 1.3% to 1.1%. So obviously that is a concern going forward, but ultimately the Bank of England's dovish narrative earlier this week along with the political uncertainty that we've heard from also the political narrative that we've heard from Angela Merkel yesterday within a speech to German business leaders saying that the UK can't have a special deal if they don't agree to free movement of people and France what a land at a dinner last night in Paris suggesting pretty much the same thing certainly not well maybe not in Paris but certainly on the European mainland coming as it's coming as it can you add something yes you can Oh I just wanted to add on that that the when we get these people making these kind of comments it's important to know we're right at the very beginning of negotiations and they're still in the negotiating and in public phase and it's it's to be expected that um that these guys are going to take a hard line because everybody does at this point in the negotiations if they said oh gee no problem that we don't wear that we don't mind if Brexit Britain goes and they can have whatever they want and they have nothing to negotiate with so I think going forward we can expect to see a lot of volatility around these kind of comments but at the same time I think they're responsible I also think they're totally irresponsible because ultimately what you've got is you've got a president of France who won't be president of France when the negotiations get underway you've got a German Chancellor who's trying to play hardball at a time when the European economy isn't actually doing great guns at the moment they've got a banking system that's sitting on a bed of nitroglycerin and they're basically talking about no special deal for the UK which is fair enough but ultimately let's get some adults back in the room and actually have a proper discussion at the moment the narrative is exactly the same as it was before the Brexit vote now whatever your views about the Brexit vote on why people voted the way they did it's systematic of a wider malaise not only here in the UK but in Europe and the US and a populist movement that is continuing to gain traction and for European leaders to not even contemplate changing their negotiating position the same negotiating position that they had in the lead-up to the Brexit vote is irresponsible essentially they're ignoring it shows you how out of touch they are and actually it could prompt the very financial crisis that central bank policy over the course of the past eight years has been designed to avoid now I've been asked a question about do I think that the pound has got further to go at this point in time yes I think there is potential that we could well see a further decline in the pound given where we are at the beginning of this week again sorry given where we are now at the end of this week with the payrolls coming up I would not touch it with a very long barge pole it's way too volatile you know if you want to trade the pound do so at your own risk is a very very bad for what's going on at the moment is it's great for volatility but ultimately if you get caught the wrong side it can be very very painful and you know it's no coincidence that they call the the cable or the dollar sterling rate the widow maker and one of one of the one of the delegates has just said to me what's bad for the UK will be bad for Europe too that's absolutely spot on what we've got what we've got here at the moment is the political leaders basically staking out their political lines if you like but ultimately what they're doing is akin to dancing near the edge of a steep cliff and the big question is who's going to blink first the status quo is unsustainable it's unsustainable in France France what a land said this morning that he wants to save the euro from an existential crisis wake up president or land it's already in one and that gives you an indication as to how out of touch European leaders are and at the moment the pound is the punch bag the pound is the punch bag for investor sentiment around this particular Brexit vote but that could change and I think that for me is the big thing so let's let's start off with the pound against the dollar very quickly because we need to move on to payrolls yeah let's be clear on this also though and you're right it's already happening because even though euros up against the pound euros breaking down against the US dollar this morning so if people in other parts of the world are recognizing this is going to hit the this is going to hit Europe to no question about it so we saw the breakthrough the previous lows July lows at 127.95 earlier this week now obviously this candle here is the the lot is this this flash crash daily low we have that around about 119.5 depending on who you speak to there's a different life I heard some instances of it actually trading as low as 114 not too sure about that I have to say but ultimately we've had a very volatile day and the biggest one day move in the pound pretty much since the Brexit vote when the pound dropped from around about 150 to close down around about 132 so we're certainly looking we're certainly looking at uncharted territory for cable at this point in time it did find support just below 120 it could find support there again but the next resistance level for cable is 125 initially that was my target for this week and we've gone straight we've gone straight below that so I think it's going to find it very very difficult to get back above it why do I say that say that quite simply for this reason here this rally off the lows here stalled just below 125 so for me now that remains the next any next any potential resistance level in the event of a rebound in the pound but at the moment trying to pick where it's going to go to next and it's being a Friday I think it's a very dangerous trade to put on now let's talk about non-farm payrolls because ultimately markets are pricing in the probability of a December rate rise from the US Federal Reserve I think we can pretty much rule out the possibility that we'll get a November rate rise it's just not going to happen really isn't going to happen so in it's seven days before the election yeah seven days before the election and no matter what the Fed does one side or the other is going to try and spin whatever they do and they're going to get caught in the crossfire and I think they're just going to sit on their hands because they're not going to know what to do anyway sit on the hands put out a statement and basically hide behind the hide under the table which is pretty much which is pretty much what the Bank of England are doing right now because ultimately with all this volatility what strikes me is how quiet the Bank of England have been and I think that's I think that's that's a bit of a bit of a worry at the moment the Bank of England have boxed themselves into a corner and it's going to be very very difficult for them to actually intervene to try and arrest the slide even if they wanted to certainly an interest rate rise is not on the table but they may need to change their narrative ever so slightly in terms of their expectations for the UK economy because at the moment it's been overwhelmingly negative now you talked about euro dollar breaking down we've just seen the beginnings of that with this little break out here what are we expecting on non-farm payrolls we're expecting we're expecting a number of in a region of around about 171,000 so anything I think between 150 and 200 is not going to alter the narrative that much with respect to the actual data I don't know whether you agree or disagree on that Colin but 150 to 200 isn't going to do anything no it's not and I agree on that yeah I think the key data that I'm looking for is the average earnings or the average earnings data if that is in any way positive that could actually derive expectations of a US rate rise even further now at the moment is a 65 there's a 63% possibility Fed funds are pricing in a 63% probability I can show you it here of a Fed funds a Fed rate rise in December I would at 23.6 seems worth I still think that's high it is high but what I would say and this may feed into what's going on right at the moment in Europe if there is instability in European financial markets as we head towards December will the Fed raise rates irrespective of what the US economy is doing I'm not convinced that they will I think you're right they already held off before Brexit yeah so we don't know how all of this narrative is going to play out for me I think there's an awful lot of uncertainty out there we've broken to the downside on Euro dollar as long as we stay below 111 80 I think there's a good chance we could trade lower I just got quickly asked about the Dow just then so I'll try and squeeze that in that's in a bit of a downtrend at the moment but look at the way the price action is compressing here it's compressing in a tight range I don't expect it to move that much either way whatever comes out from the payrolls number so we're compressing in a tighter and tighter range with respect to the Dow and I don't really expect it to do too much it might find a bit of resistance at these peaks here around about 18,367 and it's got decent support through these lows here so that and yes and the S&P's fairly similar go on Colin point though we'll probably see the way it's compressing at some point we'll get an explosive move in one direction or another the question is just going to be what's the trigger I suspect unless we get a massive surprise it probably won't be on firm payrolls maybe it's Sunday's debate between Clinton and Trump or something else we don't know about yet at some point there's going to be a big move it's just a question of what's going to trigger it indeed indeed there is one other thing I want to quickly show you before we before we go into the numbers look at this on the FTSE 100 big top at 7120 that's the previous highs also a decent support just below 7,000 so we're right right in the middle of that at the moment I don't expect us to break out of that today I think we'll probably stay within that post a very decent close the FTSE is likely to probably go higher on any sort of neutral payrolls number on the back of the weaker pound so here we go getting ready to go 20 seconds do you want to say something briefly about Canadian unemployment I expected to retrench a little bit from last month because there was a big run up in the full time but and of course in September we get the full time part-time shift over I was calling for 15 the streets about 10 here we go here comes the numbers okay so we are 5% unemployment rates for the US non-farmers 156 on the low end of expectations so that's probably going to be slightly dollar negative only slightly average earnings comes in at 0.2% so pretty much in line with expectations and on a year-on-year basis that's 2.6 which was pretty much as expected the labor participation rate is ticked up to 65 now that's the that's the Canadian sorry participation rate so that's wrong the US participation rate oops 62.9 versus 62.8 okay so that's so that's ticked up and that would account for the tick up in the unemployment rate but the Canadian numbers are very positive very positive so the the non-farm payrolls nothing number massive wow that's a big jump for Canada so that's like that should prompt a nice little sell-off in the dollar CAD I would imagine yeah yeah because the the thing with Canada was people were wondering if the economy was really turning around or not July GDP turned out to be a little bit better than people were thinking and and this is encouraging as well because the Bank of Canada has been counting on a big rebound in the second half and it looks like they might actually be getting it and especially because well we had we did get the switch so full time drop back to 23 from 52 that's as expected big pop in part time from negative 26 to 44 also is expected when the with the summer ending right let's also see if we can find out what the the whether there were any revisions yeah there was a slight revision to the August number from 151 to 167 so you know in turn much accounts for the math yeah it's a wash absolutely it's not really going to move anything if anything it's slightly dollar negative as we can see from the dollar CAD chart but you've obviously got the decent Canadian numbers on the back of that and you've seen a little bit of a spike up so pretty much this non-farm payrolls number has been pretty much an anti climax we're not we're not we're not I don't think we're going to see any significant market moves on the back of this number it doesn't change the it certainly doesn't change the narrative with respect to a December rate rise it's not strong enough to push the odds of a dollar a dollar a US rate rise higher but it's not weak enough to also trigger the calculus in the other direction let's have a quick look at gold prices because they've really washed out in the past few days and actually this chart is quite interesting because from what we've seen here is we're actually teetering on the brink of 200 day moving average here we've seen a little bit of a move higher in the gold price which you would sort of expect on a slightly weaker payrolls number and you can certainly see that on the basis of the five-minute chart I've just been asked a question about do you think the pound will recover properly once Brexit is complete now you're asking me to be a fortune teller and ultimately I think in the long term it's probably going to recover at some point but the big on my biggest concern at the moment is that even if Theresa May triggers article 50 in March there's a two-year process so this two-year process is like the negotiations are likely to ebb and flow so I think it's going to be very very difficult to even talk about where the pound will go in the short to medium term I think as long as economic growth in the UK manages to stay above the flat line or doesn't go into contraction then yes I think it will because ultimately what it will do is it will limit the downside in terms of interest rates as it is the new Chancellor has already indicated that QE may well have run its course certainly that was the impression that I got from him when he was talking in in the States yesterday and that ultimately he was going to focus much more on fiscal side of things will know more about that in the autumn statement on November the 23rd but sterling at these levels I think it's I think it's extraordinarily oversold I think it's a crowded trade I certainly don't think euro sterling is anywhere near where it needs should be with respect to the euro above 90 going towards 93 I think that's way I think that's way too weak in terms of the pound against the euro because make no mistake Europe has massive problems yeah it's that's getting really over done and and the longer the pound stays down the more competitive the UK gets relative to Europe and that's the point there's also the fact that I think inflation expectations while they're rising here in the UK at the moment inflation still remains fairly benign but what I would say is that it's going to it's going to be it's going to be very very difficult for me to justify euro sterling up anywhere near 94 95 because Mario Draghi for a start won't want it at those sorts of levels and what will the ECB do because they do not want a strong currency anymore than anybody else yeah so for me I think in that on a long-term basis euro sterling is overpriced cables a slightly different ballgame because of the direction of US monetary policy relative to the UK and that's really going to be a significant unknown for quite some time but certainly on the basis of this chart here euro sterling is way overbought big question is where do we where do we close at the moment I've had to rip up all my forward forecasts for the pound against the dollar and to be quite honest it's now it's now a dart throwing contest because ultimately politics now is so much a factor when it comes to talking about markets that even if you get the overall direction right it's how you get there that's going to be problematic so if we if we don't close above not point nine at the end of this week then I would suggest that we could drift back lower on euro sterling and that sterling could bounce back ultimately for me in Europe they still have a massive problem with their banking system I have a massive problem with Deutsche Bank and for all their threats if these politicians really do think that hard Brexit is the way to go then I think we could have a new financial crisis on our hands over the course of the next few weeks and months Colin do you have anything that you want to cover that I haven't already done say just wait I think we just wanted to mention that that we are seeing in the the dollar cat is dropping back a little bit on the on the Canadian dollar news so the Looney is picking up on that I totally agree with everything you said about the the pound and and Europe I think we're going to see quite a few fairly sizable swings in it I do suspect that probably this this move we've had overnight has put in at least some kind of a bottom for the near term I think this was a real shake out and flushing of a lot of the the weekends and the and the stops out there and a lot of the program orders that were in there have probably been flushed out like we've seen with with other moves like this in the past in the United States we've had a couple in 2010 and 2011 and other times and and so it'll be interesting to see now I think this these will probably see though we could end up in a situation like crude oil where we've got a trading between 120 and 125 but but big big swings within that range day-to-day and intraday over the next while one other thing the Bank of England from the potential for a November rate cut I've heard an awful lot of people talking about the fact that the Bank of England may cut rates again in November well if they do they're mad but I think it's pretty much off the table I think it's doing their job for them yeah it is I just don't see the rationale for doing that and the markets are putting an eight and a half percent probability of that happening so certainly it doesn't look as if it certainly doesn't look as if that particular boat is going to float no matter how much you may hear people say on TV oh yeah yeah they're going to cut rates again why would they do that I thought it was a mistake for them to cut rates in in the first place in August because basically they've given themselves nowhere to go the pound was always going to slip a little bit they didn't need a rate cut to do that the fact that the pound had dropped from 145 to 130 was the equivalent of a rate cut in exchange rate terms so why do they need to compound it by cutting rates again given how rates have given how low rates already are so let's move on to Brent crude because also that is going to be a bit of a problem going forward when we come to look at the price of petrol or gasoline at the pumps here in the UK because ultimately Brent crude prices are the highest level since June and sterling is at its lowest levels in 31 years so there is going to be a little bit of price inflation coming through at the petrol pumps over the course of the next few weeks whether or not supermarkets try and absorb some of that in terms of trying to get you to shop at their particular brands given the excess competition there is between the big four and LD and little we'll have to wait and see but ultimately there is inflation coming down the pipe the problem is it's not that it's not the best kind of inflation because it's going to get it's going to get hit consumers in the pocket I'm being asked $55 I'm guessing in Brent next I think what we need to do is we need to break through this top here and around about 52 and a half dollars a barrel but certainly it looks more feasible than it did say for example a few weeks ago and actually for me this particular level this dotted line here from this move down here is really the big big level on on Brent crude it's around about $53 and 15 that's a 61.8 Fibonacci retracement level from the from the down move from the peaks that we saw in 2015 to the 2016 lows so that for me I think is the big level on Brent just above where we are now and it's a similar sort of story on WTI so I wouldn't get I wouldn't get too bullish on crude oil quite yet Russia came out this go on Colin oh sir I was just going to mention with with WTI in particular it had this nice run-up on on OPEC and and there's no question about it US inventories are coming down which is really good in providing some fundamental support but we're here at 50 and we stopped at 50 again and the reason we stop at 50 every time is because there's a feeling out there and it's likely true that once you start getting above 50 US some of the US shale production that's been shut down starts to become profitable again so there's a pretty solid cap in this low 50 to low 50s area so we've got it would really probably take something to really get it to move much higher than it already is so we've got a good the the falling the falling inventories in the States provide a good floor but at the same time you've got the issue of that US supply could come back on if prices start getting much higher and recounts have been increasing so that tells you that tells you all by itself I mean having said that as we're heading into winter demand will tend to pick up and I think there's an expectation yeah so that that could well factor in but at the moment we're also we're also you know looking looking at the prospect that at some point that demand supply shift will happen but the Russian oil minister today said that Russia would not be part of the OPEC freeze when they when they meet next week in Istanbul so as I suspected Russia doesn't want any part of the freeze in oil production so how effective essentially will it be and that's what's really interesting because there had been rumors that that non OPEC countries would start to get involved and the only way that happens is if Russia does it exactly aren't yeah so I mean I said at the time when people were speculating on that good luck with that and you know it's it's pretty much playing out as I suspected it might Russia has no has no reason to help out Saudi Arabia because ultimately it's Saudi Arabia now that are feeling the pinch Iran still wants to boost its productive capacity up to four million barrels a day it's not there yet it's around about three point six three point seven so at the moment it's all about production cap or a production freeze whatever you want to call it they never stick to them anyway so really it doesn't matter to a hill of beans and if the dollar continues to strengthen that could also limit the upside in Brent crude so I think we're at very very key levels at this moment in time and ultimately I would be very cautious about being overly aggressively long of oil at these particular levels because I think we could see a little bit of a pullback absolutely among the shortest yeah when we talk about things like the shortest amount of time like how long does it take between the light be love the light going green in the the horn behind you starting to sound another one is how fast between the OPEC people reaching a deal and how fast they start cheating well exactly that's absolutely right and I think on the markets did front run a little bit of a deal so yeah so yeah which is another thing too so I mean at that point your your your balance of probability starts to shift towards a disappointment and oil coming back down when you've gotten on top of that you've got the US production issue exactly okay so before I wrap this up ladies and gentlemen is there any other questions that you would like to push in our direction ladies and gentlemen before before I wrap this up and record it I've been asked to recap what I feel about euro sterling yeah I think euro sterling is why I've done I think that at some point we're going to get near the top now I know an awful lot of people are talking about euro sterling back at parity but that basically then presupposes that everything's fine in Europe and it isn't so I think there's going to be an awful lot of what I would call toing and froing and on a long-term basis I would expect euro sterling to go back to sort of around about 0.83 0.84 before before it gets anywhere near 0.905 mr. Draghi will not want euro sterling anywhere near parity because ultimately the trade relationships that are currently in place between Europe and the UK are are doing fairly well and actually the high euro is hurting European competitiveness when it comes to imported goods here in the UK so mr. Draghi won't want a strong euro so he will probably do as much as he can to try and talk it down so for my from my perspective I think euro sterling at these sorts of levels is overpriced but ultimately I'm struggling to find out a decent place to sell it I'm probably going to see wait and see and have a fresh look at it next week wait for it to settle down a bit because at the moment sentiment around sterling is it's not where I particularly want to be at the moment and having been trading these markets involved in these markets for the last 25 30 years sometimes the wisest course of action is to sit on your hands for a bit being asked about dolly in is there a trend change yeah I think that potentially is what we've seen here is it break above our long-term trend resistance and currently we're holding above this support area which was resistance and has been resistance pretty much since early 2016 so this break up here is significant but what I'd be looking for here is a breakthrough 104 30 that's the root but that's the big key but also it is actually quite interesting you can actually draw a line through the highs here so while I would say there's potentially been a trend change here I'm not totally convinced of it because we haven't broken the September peaks at 104 30 and then even if we do break 104 30 we could still run into trend line resistance all the way up here at 106 as well as a 200 day moving average so you could argue that we're starting to carve out a little bit of a base is this a potential double bottom here you know a triple bottom well it's not because where's your you know you've got this here so yeah I take your point totally but you know you've got this big peak here and then you've got this these these these twin peaks here so is it a triple is it double solid support below 100 the big question is can we get through 104 20 if we can we could go for a little bit of a four or five bigger five big figure run certainly something to show so something we want to consider also here when we're looking at this is we're seeing the pound getting getting treated like there's a big financial crisis going on we're seeing the euro starting to break down and but when we look at the capital flows on the other side we're not getting the capital flows into gold we're not getting the capital flows into the yen when you're seeing that the capital is coming out of the out of considering the UK they're considering UK as a risk market and treating and crushing the pound but we're not seeing the capital going back into the defensive place so we're getting a disconnect here so far all the money's been going into the US dollar but either what you're gonna end up with is either you're gonna end up with more capital going into the yen and gold and if it actually people are do start getting worried about particularly political risk whether in Europe or the United States on the either you're gonna get more of that or if you're gonna figure that okay well this is blowing over and then the pound starts coming back up but you do you are getting a pretty serious disconnect here I think between these markets can't argue with that so we'll get a reversal somewhere it's just a matter of where does it happen and when and so the big one to watch for on US political risk of course is that the the round two between Trump and Clinton is on Sunday night so so keep an eye out on that that's 9 p.m eastern time so it's 2 a.m Monday in London yeah so Sunday night could be interesting in Asia yeah absolutely so you have to bear that in mind as well which again is one of the reasons why I'm a little bit reluctant to run anything over the weekend this particular weekend because so many different things can happen and it's just not worth the risk okay so ladies and gentlemen thank you very much for listening to this non-farm payrolls webinar on the 7th of October 2016 like to thank you for your input your questions and I'll probably see you all again we'll speak to you all again same time next month thanks very much for coming along and thank you Colin thank you Michael thanks everyone for joining us today