 Good afternoon. Welcome to CMC Markets on Friday the 21st of August and this quick look at the week ahead beginning the 24th of August was me Michael Husson. Certainly been an interesting week for equity markets. If anything, it's been a little bit dull. Been fairly tight ranges all around. Not really been an awful lot of volume. Volatility has been fairly low, but one thing that we have seen over the course of the past week has been continued appreciation in US stock markets driven primarily by the tech sector. We've seen new record highs for the S&P 500. We've seen new record highs for the NASDAQ. And even though we did see a little bit of a sell-off in the wake of the latest Fed minutes, that sell-off proved to be rather fleeting simply because I think investors took fright at the fact that the Federal Reserve was a little bit reticent about outlining its future forward guidance framework ahead of Jackson Hole. And to be quite honest, I'm not really surprised that the Federal Reserve was a little bit non-committal on that. We have one of the key events of the year taking place on the 27th and the 28th of August. It's the Central Bank Symposium, which ordinarily would be held in the Great Teton National Park in Wyoming. Jackson Hole Symposium. This year it's going to be held virtually. And the theme is navigating the decade ahead implications for monetary policy. So I think the fact that Fed officials were a little bit non-committal about the framework for monetary policy was not altogether a surprise. It's not a surprise either that they were concerned about the US economy in the absence of further fiscal support. And that's why we've seen the dollar continue to weaken over the course of the past week or so. And we do look very much if we look at the CMC dollar index as if we're on course for the ninth successive weekly decline. If we look at this chart here, we can see that we've hit a low earlier this week before rebounding fairly strongly from this 985 area. And I've highlighted this 985 area because I think it could be significant. It's called a bullish key day reversal. We've made a new low on the day, but we've actually closed above the highs of the previous day. And that typically is called a key day reversal. Now you could argue that this potential here could have actually been a reversal pattern. But the thing with this reversal pattern was we didn't take out these series of highs through here. In the case of a three pattern candle that generally needs to be confirmed. The fact that it wasn't confirmed by a break above the 1000 level and the sustainable move above 1000 level meant that the pattern didn't pan out as planned. The key difference between this reversal and that reversal is again, this reversal will also need to be confirmed. So I think for me, while we stay above the close of this candle here, which is 986, if we maintain a move above 986 and we're able to break above the highs that we saw earlier this week around about 993, then we could well see the dollar start to squeeze higher. Certainly it's well overdue a move higher as we look ahead to the end of August and the beginning of September. And you can really make a case for the fact that equity markets have been very much in the August doldrums. And I'll look at them in a minute, but I think as a counter to the potential for a dollar rebound, we also need to have a look at Euro dollar simply because of the significant weighting that the Euro dollar has with respect to the overall US dollar index, which is also posted a similarly positive daily candle earlier this week. We look at Euro dollar and the move that we saw up to one nineteen sixty sixty five seventy earlier this week. We then posted a similarly negative candle here. Again, we've seen a little bit of a pullback. But as with the CMC dollar index, I won't. I'm going to take a slightly different measuring objective in terms of the peaks. If we're able to get back above these two peaks here on the one nineteen twenty thirty area in and around there, I would argue is probably a decent area of resistance. If we're unable to get back above significantly above one nineteen twenty, then there is certainly potential for Euro dollar to come all the way back down to one sixteen eighty ninety. So of course, that would be dollar supportive simply because of the fact that Euro is such a high weighting and not only the CMC dollar index, but as the dollar index as a whole. So I think there is evidence that the dollar may have bottomed out in the short term and could start to strengthen over the course of the next few trading sessions. Now, obviously, that's heavily caveated by the fact that we need to run a tight stop loss on it. But overall, I think there is an expectation or a perception on my part that we could well see a little bit of a dollar rebound over the course of the next few days. Now, whether that as a result of the numbers that are coming out over the course of the next few days, it's hard to say, but ultimately the momentum would appear to suggest that the euro has probably topped out in the short term. And a large part of that reason may be concerns about the economic recovery in the euro area. The latest flash PMI is out of France and Germany suggested that maybe economic activity peaked there in July and started to slow down in August. Certainly, I think the services flash PMIs that we saw from France and Germany are worrying in the face of rising infection rates that we're seeing in not only France and Germany, but also in Spain and elsewhere across the European Union as well. And various localized lockdowns, the quarantines that are being implemented pretty much across the whole of Europe are likely to mean that economic activity is likely to be, it's going to be very difficult to surpass the levels of services activity that we saw in July. Even though the flash PMIs for the UK for August were much better than expected, but I think a large part of the reason for the fact that the UK has bounced back strongly, more strongly than Europe has in August, is simply because we're a little bit further behind in terms of our opening up of the overall economy. And that is why you saw the flash PMI reading for services in August come in over 60 in this morning's numbers. And that for me, I think suggests that Q3 for the UK is likely to be an awful lot better than say Q3 in, so for example, France and Germany. So it's important to think of the recoveries that we're seeing in the PMIs in the context of how various economies have not only locked down, but also opened up the UK opened up later. So as a result, they're slightly behind in terms of the cycle of reopenings, say for example, Europe is so. Certainly in terms of Euro dollar, there are signs that we could well be topping out. Certainly in terms of cable, it's slightly more nuanced. We have been able to break above 132, but overall here I'm also a little bit concerned that the air may be a little bit thin in and above 132, 132 and a half, particularly when you look at the way these candles are behaving, you're getting an awful lot of volatility in cable. Obviously the Brexit talks are probably going to play a certain part into the narrative around that. But what we have seen is some elements of sterling strength over the course of the past few days. But overall, I think still very means very much a range trade with decent support in and around the high 129s, the low 130s and resistance in and above 132, 132 and a half. But at the moment the momentum does appear to be in sterling's favor overall. But there are concerns that it might find the air a little bit thin given the propensity of highs that we've got in and around December 2019. These highs through here and when you actually look back at the highs in December 2019, we only really went above 133, 134 for a very, very brief time before coming crashing back down. It's not near the top end of the recent range when it comes to sterling dollar. When we look at euro sterling, it's a similar sort of story, finding decent support on euro sterling in and around the 50 day moving average, but also around these lows here. So 89, 20, 30, it's going to be a very decent area of support in the short to medium term as we look ahead over the course of the next few days as we head into the end of the month. So what am I keeping an eye out for over the course of the next few days? Well, it's not particularly heavy week when it comes to data, but certainly I think some of the data is probably going to be more important than others. One of those numbers will be US weekly jobless claims. Why? Well, because after a brief flotation below one million weekly claims and the latest claims numbers, we saw a big rebound back above one million again. So after a brief move below one million to 960,000, we're now back above one million at one point one million at the last set of claims numbers. And that does suggest to me that we may have had a little bit of a lag in the wake of the impact of the ending of the $600 a week enhanced unemployment benefit package. Which expired at the end of July. An awful lot of people were expecting a big rise in the claims numbers in the aftermath of the expiry of that unemployment insurance package. We haven't as yet seen that certainly continuing claims of below 15 million, the lowest levels that they've been since early April. But the big jump that we saw in weekly jobless claims in the past week would appear to suggest that the honeymoon period is over. And maybe a continued rising claims in this week's numbers will give food for thought for US politicians who seem remarkably complacent in the face of what appears to be some weakening economic data out of the US. And I think it's very easy to be complacent when you've got the NASDAQ at record highs, the S&P at record highs and you've got jobless claims below one million. The fact that we've bounced back above one million may give food for thought and may possibly bring the prospect of a stimulus plan and the mood music around a stimulus plan that much closer. We've also got second quarter GDP numbers from the US due out at the end of the week on the 27th, an annualised decline of 32.9%. Not really expecting any significant change to that number may see an upward revision to minus 32.6%, but overall it's not really going to tell us anything new about the US economy. What will be interesting is US personal spending, which is due out on the Friday in the wake of the recent retail sales numbers in July, which were also a little bit on the weak side. We saw some really strong rebounds in May and June. The 1.2% rise that we saw in July was below expectations and I think once again speaks to uncertainty about the rolling off of the US fiscal stimulus that came at the end of that particular month. So looking at the FTSE 100, again, I think we're very much range bound with slight downward bias when it comes to the daily candles. But as we can see from previous weeks, we're pretty well supported in and around between 59 and 30 and 5950 and decent area resistance around about 6,300. It's a similar sort of story when you actually look at the German DAX traded pretty much sideways. So pretty much most of this week really haven't done anything particularly exciting, pretty much a range trade. Anything above 13,000 appears to be fairly well offered anywhere above between 12,700 appears to be fairly well supported. So again, pretty much a range trade on the German DAX. Now we do have some German economic data out this week. It's the IFO survey for August. Now I think we have seen some decent IFO numbers in July. The IFO business climate survey rose to a post pandemic high of 90.5 after slipping to a record low of 74.2 in April. Now it's quite clear to me that a lot of German businesses are concerned over the prospect of a second wave. The weak PMI numbers that we saw at the end of this coming this this particular week would appear to suggest that maybe we could struggle to see a similar rebound in IFO business climate simply because I think of the tail off that we saw in the services number in the flash number for August. I think if we're looking for a move back to the levels that we were seeing at the end of last year, when the IFO was posting numbers in the mid to high 90s, then I would expect to see a significant improvement in the flash PMIs and we didn't see that. So even though we're expecting an improvement in the flash PMI in the German IFO survey, I wouldn't be surprised to actually see it drop back. So it really depends on whether or not you're a glass half full or a glass half empty. We've also got the final German GDP number out for Q2. And again, that's expected to come in around about minus 10.1%. That's expected to be confirmed pretty much at that number. So to sum up, we've got second quarter GDP numbers from the US on the 27th, second quarter GDP numbers from Germany on the 25th. Not really expecting any differentiation between the first iteration of those numbers. So for me, it's about the weekly jobless claims for the next week or so. Will they have risen from the 1.1 million that we saw previous week? Jackson Hole Central Bank Symposium where Fed Chairman Jay Powell is going to potentially outline a path for forward guidance for the Federal Reserve going forward. How are Fed policy makers going to outline the implications for monetary policy or potentially yield curve control. Further QE, a policy of pledging not to tighten until inflation is well beyond the Fed's targeted mandate of 2% could be one way of doing that. Certainly forward guidance needs to be credible. Certainly, I think Mark Carney found out at the Bank of England that you can set targets for forward guidance. But unless you stick to them, they can come back and bite you very, very hard. So I think the symposium is probably going to be very, very key in terms of what to expect from the Fed meeting that comes out in September. In terms of gold prices, we've seen a little bit of a pullback in the past few days as expectations around a rebound in the dollar. And I think that's another reason why I'm probably a little bit more optimistic about a dollar rebound over the course of the next few days simply because of the way gold prices have been behaving. So I think the key level for me on the gold price at the moment is around about this $1,920 an ounce level. If we draw a horizontal line through here, we can see that we've got a decent area of support through here over the last three days. We've also got this trend line support from the lows that we saw in March. So this is going to be a key area for gold over the course of the next few days. See how it reacts around these sorts of areas to see whether or not we could actually see a drift lower. If we do get a significant dollar rebound, there is potential certainly on the base of the weekly candles for us to move lower. But how it reacts around $1,920 will be very, very important in terms of the overall direction going forward. In terms of numbers coming out, I've got my eye on three. Rolls Royce is latest first half numbers. In particular, given the concerns that financial markets have about Rolls Royce's balance sheet. They've had problems in spades. They're one of its major shareholders value acts sold down at stake over concern over the long term viability of the business model. They've had another problem with another one of its engines, the XWB84, which powers the A350, which coming as it does on the back of its Trent 1000 issues, is not really something that you want to hear, particularly given the problems with the aviation sector at the moment. But they have recently signed a new deal with reaction engines to develop a new high speed hypersonic propulsion system. So that is a positive going forward. But I think the big question remains how much extra capital the company will need to raise in order to bolster its balance sheet and whether that capital raising will be in the form of a rights issue or a disposal of assets. I think there's expectation that it needs to raise another two billion pounds. So that will be very, very important. I think in the context of where we go to next, with respect to the share price. In terms of retail, US retail has performed absolutely really, really well over the course of the past few earnings numbers. We've seen blowout numbers from Target or Tarjay. We've seen blowout numbers from Walmart. Some of those shares share prices are at record highs. And I think they starkly illustrate the difference between certain parts of the US retail sector and their ability to adapt to the online sales, digital sales. And here in the UK, William Sonoma is one of those. Another US retail stock that is trading also at record highs. Again, like Target and Walmart, it's a very key bellwether of the US economy. They specialize in a range of household cookware, bakeware and furniture, which I suppose in lockdown has prompted US consumers to indulge in cookery, baking and that sort of thing, which is probably why it's done so well. It's also owns the pottery barn and the West Elm Brands. And in January, it posted some really decent numbers apart from that brief dip that we saw at February. These were the previous all-time highs. These are the new all-time highs. Expectations management here, I think to a certain extent. I think given the rise that we've seen in Walmart and Target, an awful lot of the good news could well be already priced in. But certainly, I think in the last set of numbers, they blew past expectations, which means that there could be potential for a decent set of numbers here. Similarly with Best Buy. Also have done much better than a lot of people had been expecting. Another US retailer that has managed to leverage its online operation very, very well turned itself around in the early part of the last, in the early part of 2010 to 2015 and is now reaping the benefits of that. So those are the key markets that I'm currently keeping my eye out for over the course of the next few days. And hopefully, there won't be too many surprises from them. In the meantime, I'd like to thank you for listening. I will probably speak to you all same time, same place next week. Thanks very much for listening. It's Michael Houston talking to you from CMC Markets.