 Good afternoon, welcome to CMC Markets non-farm payrolls webinar on Friday the 5th of April With me Michael Houston, and I will be spending the next half an hour or so Basically walking you through the latest US employment report before we get started a little bit of Housekeeping do a risk warning first and foremost Basically any I will I will not be giving trading advice, but what I will be doing is obviously highlighting some key levels looking at the prospects for A good number a bad number a neutral number what? What the directional impact might well be of the numbers when they released obviously we also not only have the US? Employment report today. We also have the Canada jobs report as well so Got quite a bit to get through but obviously questions are welcome. I will try and answer your questions is Fully as I can obviously stopping short of telling you where to buy or sell I cannot do that Nor would I do that anyway, even if you ask me so Don't even try Nonetheless once we get the risk warnings out of the way We can we can get started. So just get rid of that get rid of that and Now we can have a look at my screen. So Basically, I think Expectations around this month's payrolls. I'm not I wouldn't say they're as high as they were in The February number and I think there's a big big reason for that. We posted a very poor number in February came in at 20,000 missed by a country mile Now there could be a number of factors behind that because the ADP number The equivalent ADP employment report which came out two days before that was actually a fairly decent number So the big question is why would? Why would why would we why would we get a week February number? Well, there could be any number of factors behind that There could be the fact that we had a US government shutdown And that could have skewed the numbers it could mean that we get a significant upward adjustment to the February numbers when the March numbers are Reported in 14 minutes time. Also, what we could get is a significant Significant uplift in the March numbers. So at the moment The disappointing number coming as it did against the 311,000 new jobs that we saw in January is not too much of a concern. There could be another factor as well Behind the disappointing number. It could just be that the US labor market is getting tight and That basically while the vacancies are there There aren't enough people to actually fill them and that's probably why the jobs figure was so low What was encouraging was that the wages numbers came in at 3.4 percent Which is a decade high. It's the highest level since the financial crisis And that would support the view that the US labor market is tightening up and the employers Having to pay their staff more to not only keep them, but also attract new staff What does that mean for the dollar? Well to be quite honest not that much now because since the last payrolls report The Federal Reserve Has come out and changed its guidance quite significantly From where it was at the end of last year In fact, it's actually been quite notable at how quickly the Fed has turned around It's forward guidance because if you think about where we were at the beginning of last year Markets are pricing in up to three rate rises this year If we look at the performance of the dollar index over the course of the last six months and you can see it on the chart in front of you Hasn't really gone anywhere. It's traded between 95 and 98 Which is the equivalent of euro dollar trading between 112 and 115 116 So it's been pretty uninteresting all round And I think that that more than anything else is likely to really I think Dictate what the dollar does today because the change of guidance that we saw from the Fed Where but whereby we are now not expecting any rate rises this year And we've seen a significant downgrade to the growth forecast Means that even if we get a very good us number a very good payrolls number The dollar upside is likely to be fairly limited if we look at this dollar index chart here We can see 96 80 96 80 three levels of resistance all the way through here Now that level is important because what it does is it equates to a low in euro dollar of around about 1 1180 so if we look at euro dollar On a daily chart here. This is a daily chart I've drawn a slight trend line through here. It's slightly skewy. I might have to redraw that a little bit But what it's basically telling us Particularly through these lows here is is a very solid area of support between 1180 and 112 and we're roughly We're just above that now. So if we get a good payrolls number in excess of 200,000 We could see euro dollar push a little bit lower But it's going to take something quite substantial to push it below This 1180 level is it's important for a number of reasons first and foremost It's important because it's the lows of the last Few weeks, but it's also important because it's a 61.8 Fibonacci retracement of the entire up move from the lows at 103 40 all the way back in 2017 end of 2016 to the peaks at the beginning of 2018 so it's important not to underestimate how important this 1180 level is So if we get a move down there We'd really have to see a either a significant push up in wages to 3.5 or 3.6 percent And even then you'd have to ask yourself the question as to whether or not that is likely to cause the Fed to hike this year And my view is it wouldn't because if you actually look at what US Treasury yields are doing They're potentially pricing in a the potential for a little bit of a right cut. So I Think you know, you have to you have to Temporate your expectations when it comes to the likelihood of what may or may not happen with respect to US rates into 2019 and you've also got a temporary into the fact that President Trump has always made it quite clear it's already made it quite clear That he wants rates to go lower From their current levels his new Fed point more nominee Steven Moore has already suggested that it should be a 50 basis point rate cut from the Federal Reserve Now that's not going to happen But the point is that The direction of travel for US rates appears to have topped out That's borne out by the fact that US Treasury yields since non-farm payrolls a month ago Have dropped quite substantially we can see that On this chart here. So this is the March payrolls report Here which was around about the 8th of March and We got we got that We got that disappointing jobs number since then yields have come down quite substantially Now we have seen a bit of a rebound and a good and a good payrolls report could see yields push up And the bonds sell off, but ultimately the direction of travel for us yields remains towards the downside Now so that's euro dollar 111 80 on the downside a poor number could see us push back up To these series of highs through here So we're looking over the last four hours four on a four hour chart We've got a series of highs through 112 40 or 112 50 And we could even see it push up towards around about 113 But i'm not really expecting a number that's going to move it significantly out Of its current range now i'm being asked about the cable very good question And it's no less valid But obviously there is an awful lot of political risk Around the cable, but again, it's a similar sort of story when it comes to the support levels We can look at the moving averages here. We've got the 200 day moving average We've got a series of lows through 120 960 So while we're above 120 960 cable is very much a buy the dip And the same way that euro dollar is a buy the dip while it's above 111 80 for a move back towards Either 113 in euro dollars case or around about 130 170 132 in cables case If you look at the way the cables performed thus far this year It's been a fairly steady range albeit it's moved around quite a lot in today But ultimately what it's telling us is that Traders are reluctant to push it aggressively lower Simply because they're not too sure whether or not we'll get a A an extension to article 50 next friday the likelihood is we probably will Whether therese may has already asked for an extension to june 30th Simply i think she just copied and pasted her last letter to the eu commission asking for the extension to the 30th of june Working on the basis if at first you don't succeed try try try again. So she's going to do that I don't think the EU will give it to the 30th of june. I think they will give her a much longer extension and it will be contingent on The uk participating in european parliamentary elections on may the 22nd or may the 23rd or whenever they are so At the moment while a no deal brexit is the default legal position I think the european union will do all it can to avoid that Playing out because if they don't they'll be as good as throwing island underneath the bus Because they will be adversely affected quite significantly by no deal brexit As will france even though Emmanuel Macron is talking tough He's already got problems with the guillot genre protesters I hardly likely think he's going to want anymore Now i'm being asked if is trump interfering with the fed's independence absolutely He is he's trying to influence what the fed does and I think one part of the reason why you saw The fed call a halt was I think part and parcel of that But I also think the makeup of the fomc has changed slightly And it's become more dovish anyway, and I think the fact that china's slowing down The economic data that we've seen out of germany thus far has been absolutely abysmal I think it's going to be much more difficult for the fed to raise rates when no one else is The ecb is not going to be raising rates anytime soon the bank of england probably won't And the bank of japan definitely won't so I think the last thing that I think The the us wants is a stronger dollar Rates are already very very high relative to the rest of the world And I think that should be enough and there is evidence that the higher rates are affecting the housing market in the us If you look at home sales, they have been disappointing so I think calling rates would be where they are I think the fed's finished its great hiking cycle The big question now is when will the fed ease again? And I think that could be at the beginning of next year It could come as soon as december this year, but much will depend on the data and at the moment The data while it's slowing down. It's not falling off the cliff. So Looking at the cable 12960 if we get a strong payrolls number of strong wages number We could see the dollar move higher towards just below 130, but there's good support down there if we look at If we look at the dollar yen It's a similar sort of story a strong dollar move could see us move up Towards the top end of the range that we've seen over the course of the past few Over the past few weeks, which is 112. It's really struggled to get much above 112 And I think it will continue to struggle to get much above 112 on dollar yen. Let's have a quick look at the Dow before we get started because I did get asked about that And we can see here. It's pretty actually let's look at the s&p because we've broken above these highs here Haven't got much in the way of lines on that. I don't tend to look at the Dow as much as I look at the s&p And if we look at the s&p, we've just posted a golden cross On the daily charts, which is where the 50 day moving averages crosses above the 200 day It's usually fairly bullish What we need to see is a move above 2900 the all-time highs are all the way back here in october The air is looking a little bit thin, but again, it's the direction of travel You don't sell into an uptrend. You look to buy the dips and that is the way that I always work on the basis of You but you basically trade in the direction of the overall trend the overall trend is higher And as such We could well retest the 2900 level. I would be surprised if we move above it today ahead of the weekend I think it's likely that we've probably seen the highs in the short term We may try for a little bit of a push higher But if we look at a weekly chart, we can see that we are looking a little bit stretched at this point in time And also if we look at say for example The footsie 100 as a case in point We are now approaching some very key resistance levels on a lot of the major indices We can see it on the footsie 100 draw a trend line through the peaks from last year Currently comes in around about I would suggest 74 50 Um 74 around about 74 50 so we could see a move up there Particularly if the pound drops against the dollar and a similar sort of story when we look at the DAX 12 000 a little bit of a top there, but if you go slightly above that Here you can see we're also got a significant area of trend line resistance going forward, but Certainly, I think um the direction of travel Still remains by the dip and that's borne out by the fact the euro stocks 50 Has just posted a golden cross as well 50 day moving averages pointing upwards Really solid support now at 32 81 in the euro stocks 50 so despite all the negative data and The poor growth outlook equity markets still look fairly buoyant and I suppose in Europe That's not too surprising because if you've got german yield 10 year yields yielding nothing Then where you're going to put your money in europe if you can't put them in bonds You're going to put them in equities because generally you'll find that as long as central banks keep monetary policy loose Then you should um get good demand for equities. Okay. So here we go looking for 180 000 non-farm payrolls 1 000 in Canada jobs Wages 3.4 Here we go 196 000 for us payrolls wages a bit lower. So that's a weaker dollar number So that's probably going to see the dollar sell off a little bit a euro dollar go up cable go up Canadian jobs report was a negative number Which is a little bit of a surprise and the revision for February was only a modest one. It's gone up from 20 to 33 000 So it's a poor canada jobs report and it's not a particularly It's a good headline number on the non farms, but it's disappointing on the wages So we've got a little bit of a mixed report for the us Slightly dollar negative, but not massively. So wages are still fairly decent. They're still well above inflation But but but obviously the decline in wages is a little bit disappointing. So 3.2 average earnings slightly missing expectations There's nothing in that report that is going to move the dollar out of its range. Let's look at the effects on dollar CAD and Any potential move here. It's a weak canadian jobs report with a negative number. That is likely to see a dollar move higher and Against the canadian dollar and it has and I think we could well see a move back up towards those peaks in march at around about 134 40 Canada weekend up towards there, but I would be surprised if we went much above there because of the aggregation of tops In and around Through march. There's a decent top in the dollar CAD. There's a decent bottom around 133 so I think the range trading that we're seeing in the Currency markets is likely to continue and I think that's that's that's that's been a That's been a consistent problem. I think for several months now is the fact that At the moment markets are trading in ranges But there is an advantage to that because if a market is trading in a range You can play the range you can sell into the tops you can buy into the dips And you can manage your stops much more effectively So in the case of the canadian dollar here if you get a move above 134 it's it's immediately apparent where your stop loss goes. It goes above the previous highs It's manageable. You can put it 20 or 30 points away with a certain degree Of confidence that hopefully it won't go through that and if it does then it will probably go quite a bit higher By the same token if you get a dip back to around about 133 where you've got these lows here Then you can put in a small buy order with a stop loss below the lows and then look for a rebound higher and and that's essentially You know the way that I like to trade the markets. I wait for the market to come to me I'm not one of these people who jumps in on the back of a move higher or lower simply because It can end up biting you and also it'll mean that your stop is likely to be further away than you would like it. So In terms of where we are at the moment Those numbers aren't going to be ripping up any trees. They're not going to move They're not going to cause the Fed to move one way or the other and in fact the softening in wages is more than likely Going to suggest that they're probably going to Not be moving on rates anytime soon and it could actually temper expectations about Slowing down the reduction in their balance sheet, which is due to end in September But could actually happen a little bit sooner But I think overall those numbers slightly dollar negative Will probably see the pound go up the euro go up and the dolly in slip back as far as equity markets are concerned It's a bit of a Goldilocks report because it's not too hot and it's not too cold so If we go back to the DAX, we'll probably see Another test through that 12,000 level the highs that we saw yesterday And look to edge ever so slightly higher. So this is my one hour chart We can see here that pretty much since the end of March We've been trading steadily above this 50 hour moving average And as long as we stay above it then we're probably likely to continue to drift higher However, what I wouldn't be doing ahead of the weekend is taking on Too much in the way of risk because you don't really want to run anything over the weekend 196 is better than expected. I'm being asked 180k dollar should have appreciated Yes, it should have but the dollar is not the headline number is good But the wages number was disappointing and it's the wages number. It's the inflation or the lack thereof Which will drive the dollar direction the headline number on the jobs report is probably good for the stock market. It'll push It'll push stocks up But as far as the dollar is concerned It's slightly disappointing because what investors are looking more closely at is what inflation is doing What wages are doing wages are weaker That is likely to Depress yields and as such the dollar will probably weaken on the back of that but i'm not talking we're not we're not talking You know, we're not talking about a significant amount of weakness or strength either way It's a goldilocks report. It's a good report on the headline But it's a disappointing on the wages therefore what the dollar will continue to do Particularly against the euro and all the other g10 currencies Is it likely to continue to trade within its ranges in which case? You know, if we get a drip if we get a dip down to around about 112 on euro dollar It'll probably rebound from there and go back higher There's there's nothing in these numbers to suggest that we're going to break out of the range that we've been in over the course of the last few weeks So I think now Um It's probably a good idea To look ahead to what's coming up next week because those numbers You know, then they're not really they're not really going to change the narrative Around the direction of the dollar. We're near the top end of the range And they're not going to push it higher and break it out So let's have a look at what's coming up next week And I think one of the reasons why you'll find that the dollar is not making any significant moves against the euros because next week We've got an ECB rate decision And that comes out on the wednesday the 10th of april not thursday wednesday for some reason It's on a different day. Maybe it's because Of the EU summit or something like that. Maybe they've decided to put it on a different day But in any case, I think it will be particularly instructive Given that the ECB at its last meeting said that it would be restarting or implementing a new TL TRO program a loan program To try and stimulate demand Stimulate growth in the euro area. So, I mean And we know we know That the euro zone is In a manufacturing recession. We've seen it with the german PMIs. They've been abysmal As have french as has some of the french data though part of that is driven more by the fact that President macron has a couple of local a few local difficulties With protesters setting fire to things In paris what's also noteworthy is that core prices core inflation core cpi In the EU is at 0.8 percent And that's just above an all-time. It's all-time low Which is 0.6 percent. So there is There is scope for the ECB to try and adopt extra easing policies to try and keep The lid on the euro And that's likely to put downward pressure on it It's still in you know, it's it's it's still I think it's still likely to have another go At that one 1180 area over the course of the next few days What else have we got next week? Well, obviously we have the EU summit And that's likely to push the pound around quite a lot You know the big question is what type of extension are we going to get If we're going to get one at all I think the smart money is likely to be on the fact that the EU will grant an extension It will probably be a year But that remains to be seen. We've also got the latest china trade numbers Which drew out on the 12th on the friday They were really disappointing in february, but they were likely to have been skewed by lunar new year So I think we did see an improvement in the PMIs in china In the last set of numbers and that could impact how the Aussie dollar reacts over the course of the next few days Now if we look at the Aussie dollar We can see there's a big area of support All the way through the 70 level apart from obviously this little flash crash spike That we saw at the end of last year when apple posted that profits warning and we had some disappointing economic data out of china So if we look at the 70 level on the australian dollar and we look at this trend line through here We could squeeze higher to around about 71 20 But if the china data for march is the trade data for march is disappointing particularly imports As well as exports Then we could we'll see further weakness In the Aussie dollar So if as a reminder in february Export chinese exports declined 20 percent, which suggested that demand for chinese product was slowing quite significantly in february Imports were also down 5 percent, which suggested that internal demand Was quite weak as well So they'll be in they will be very very instructive in terms of whether or not we get a march bounce back We also have fed minutes Also out on the wednesday same day as the ecb rate decision and again for me. I think I'll be looking for some nuance behind The real sharp change of tone In the fed's guidance because as i as i suggested earlier We had An expectation that we potentially see a policy mistake from the fed This year with potentially two or three rate rises now We're not pricing in any and what I want to know is what calls federal reserve officials To change their guidance So sharply So those fed minutes should be instructive when it comes to that Furthermore, we've also got bank earnings start us bank earnings jp morgan chase first quarter earnings Wells fargo first quarter earnings. How is the Inversion of the yield curve affected profitability for jp morgan Certainly banks have been closely watched over the course of the past A few months if we look at jp morgan and chases Long-term chart here. We can see that we have We have broken to the downside, but we have recovered a little bit over the course of The past few weeks and we can see that here But is a decent area of resistance all the way through 108 the jp morgan So disappointing numbers here could see Banking stocks in the u.s. Start to roll over So i'll be keeping an eye out for the the income numbers the revenue numbers for jp morgan chase And for wells fargo i'll be looking at the mortgage Lending and the overall business lending data for wells fargo First quarter earnings, which are also out on friday So it's a busy week towards the end of the week wednesday thursday friday and likely to be very instructive for The markets At the back end of next week. So in the short to medium term I think equity markets are likely to drift higher as we head into the weekend and we may well see The currency markets will just continue to range trade between the lows and the highs Of the weak does anyone else have any more questions Before I wrap anything up before I wrap all of this up actually before I do I'll have a quick look at gold because it's always a nice little favorite Good support around about 1276 We're likely to probably see a retest of that on the back of those weak wages numbers Generally tends to feed into a slightly weaker dollar. There's nothing in those numbers suggest that Equity markets going higher gold generally tends to move inversely to that And we could well see a retest of this key level here around about 1276 on gold Looking at crude oil briefly finding a little bit of a top around about 70 70 71 dollars a barrel, but but uh Crucially we do appear to have broken above the 200 day moving average albeit Very modestly you can see it here Let's just zoom it in We're holding above it and I've continued to hold above it for the last four days So while we're above it the likelihood is that we could try and move higher But if we don't make a break for the upside towards 72 dollars a barrel We could well drift back down to 68 in the short to medium term Okay, hang saying yep can certainly have a look at that. We don't have the china a50 But we certainly do have the hang saying it was closed today Because of a china holiday and hong kong holiday But we have broken up to the top side Momentum looks positive. Chinese stocks in general look fairly positive have come a long way But certainly looking at looking at this chart momentum is on its side If we look at the One hour chart As long as we hold above this 30,000 level then I think momentum is likely to remain positive for a push Push up even higher again. It comes back to what I was saying earlier. You trade with the trend. The trend is higher We're making higher lows. We're making higher highs If we're not able to take out this series of peaks Through here around about 30,100 we could see a correction back towards this this pin low here But you've got a nice little hammer there Which suggests that there's decent demand for hong kong stocks in at around 29,790 so again Looking looking to buy the dips on the hong kong 50 Getting asked about the omex. Let's see if I can find that For you That would be Is that the swedish omex auger? Are we talking about the swedish index? Yes, we are. Okay good. Okay Now that's an interesting one We're right on the cusp of a very significant peak on the on the omex Now the big question here is can it sustain this move higher? Solid support all the way through 1550 we're quite we're quite away away from that I would be surprised if we move Significantly above this 1630 level this week. That's not to say that we won't But certainly I think in the context of the weekend I would be a bit concerned about being long as opposed to being short at these sorts of levels This is one of these this is one of these trades that's slightly risky Because you don't want to suddenly find that as you had in the weekend You've got a short position And it's sort of sitting on the highs and it's not really doing anything Um, let me just add a slow stochastic to that Still potentially got momentum towards the upside there You can ask about silver. So absolutely you can It's not too dissimilar to gold really. There's good support Going through 14 at $14 80 But there's a there does appear to be a nice little area of resistance around about $15 20 as identified by these series of peaks all the way through here So again as with silver we're in a little bit of a range so Any any short position you'd probably put a stop loss around about 15 30 Looking for a move back towards the lows around about 15 or 14 90 But again a little bit of a range not really doing anything particularly exciting is silver Okay, so hopefully that's um That's all um, that's all for this week if you have any feedback On the non-farm payrolls webinar and if you found it useful Please leave a google review. That would be absolutely enormously helpful The more good reviews we get the better Otherwise I'd like to thank you for your company this afternoon. Thank you very much for listening I hope you all have a very great weekend and Have a good week trading Over the course of the next week or so. Cheers. Thanks very much