 Good afternoon ladies and gentlemen and welcome to the February, 6th of February, not the 6th, it's the 3rd, isn't it? I'm already wishing the Friday away. Welcome to this non-farm payrolls webinar on Friday the 3rd of February with me, Michael Hueson and my colleague Colin Sizinski where we will take you through the non-farm payrolls number, the January non-farm payrolls report and certainly I think expectations are fairly high while I work through the risk warnings. I think expectations are high that we will get a fairly decent number as I think there's a number of factors at play with respect to our thinking on this and I know Colin and myself have basically laid out our thinking in our morning notes which can be found on the news and analysis section of the CMC Markets website. We post them there. We post them there every morning when we come in just to sort of give you an indication of our thoughts for the day. So just get rid of that risk warning. We're now ready to go. So basically looking at the last non-farm payrolls report of the Obama era, January and yes, I know Donald Trump became president on the 20th of January but I think we can pretty much call it the last Obama payrolls report and the big question is whether or not we're going to see a similar sort of bump in the official payrolls numbers that we saw in the ADP number and this is something that Colin and I would like to sort of kick around before the numbers. This is a spreadsheet of the ADP payrolls report and the non-farm payrolls report next to each other here and here. So obviously that's the January report earlier this week and then we had the December report in November but look how closely correlated they are to the non-farms on a month-to-month basis. There's never really that much of a difference between the two over the course of the last 12 months. Apart from here in July when there was a 38,000 difference and here in March when there was a 30,000 difference, for the past 12 months we haven't really seen more than a 30,000 difference between the non-farm payrolls report and the ADP report. Now obviously that's not to say that this one will be similar but based on historical precedence and I'm big on those sorts of things being a technical analyst, I look for patterns and the pattern here would appear to suggest that non-farm payrolls if the pattern is going to be repeated is going to be pretty close to the ADP number which is why I've gone fairly high at 210 from the consensus which is 180. Colin on the other hand doesn't appear to want to play things by half so he's gone all in, haven't you, mate? I have. I've gone to 225 which I actually split my calls between the revision and the headline number. I've gone for 225 for the headline number plus I'm thinking a 20,000 upward revision to September which is 245 or gives you pretty much in line with the ADP number. My thinking is that December was a little bit late and the reason I felt that was that we had this huge amount of pent-up hiring demand heading into the U.S. election. Some of that showed up in November where people stepped in, started hiring right away and then we had to drop off in December and I think what happened was that some jobs you can fill fairly rapidly, you can just go out and hire somebody within a couple of weeks and a certain number of jobs sometimes the hiring process will take six weeks to two months or two weeks of holidays in there and I suspect that some of the hirings that you might normally, had we not had Christmas, had it not been December and it had been in the summer say or in October or something you would have had two months of strong hirings but instead because of the holidays you went soft in December and I think you made that back in the first couple of weeks in January where people came back from the holidays ready to make their hiring decisions and I think that's what happened there. The other thing Michael and I have been kicking around this morning is the government hiring. It doesn't matter. There's about 4,000 jobs that turn over during an inauguration month and then of course Donald Trump came in and also announced a hiring freeze so government jobs could play a bit of a factor in this month. We were just debating before the call whether the 4,000 people quitting their jobs and being replaced by 4,000 other people doesn't really matter because it's not really net out to zero at the end and do you get this where people leave and maybe they show up in the numbers and then the next group of people get hired and they show up in the next month or how does that work? We're not totally sure. Again it's about 4,000 or 5,000 people that we're talking about anyways. Yeah so it's not a particularly high number but nonetheless it could constitute a skew one way or the other. So for me it's still a factor just not a particularly large one. Certainly not when you're talking in the context of say 30,000 jobs and then that's really what we're talking about in terms of differentials when we're talking about today's payrolls report. I think it's really interesting Michael you've put up manufacturing payrolls there because it's something that I was thinking about but forgot to mention in my notes do you want to speak to that? We have seen a particularly big pickup on the ISM manufacturing component earlier this week. There was a big jump in jobs there. The big question is will they get included in the January numbers or will they actually get rolled into the February because sometimes there isn't a decent correlation between the ISM and the actual official payrolls numbers. Sometimes there's a bit of a lag and what I was struck by actually was how there was such a big difference in terms of the Chicago PMI and the disappointing number that we saw there and the ISM manufacturing and the fairly decent number that we saw there. So certainly in terms of manufacturing I think that's going to be a fairly decent indicator as to whether or not we're going to get a good number. One other thing that I did notice on the ADP payrolls number was the fact that of all those jobs that were added 246,201 of them were services jobs. So that's which is quite big. So it does beg the question the quality of the jobs relative to the rising wages. One other thing, rig counts have risen quite substantially. Now obviously if rig counts have risen that means the jobs that man those rigs have basically come back online. So will that be? Those are good high paying jobs. So that could feed through into wages to the average early earnings. And I also wanted to note on the manufacturing with all the talk we've had lately about the Trump administration about currencies, trade, tariffs, walls, you name it. It's all going to focus in on the big thing they're going to be trying to goose for the next several months is manufacturing payrolls. So that's another thing. If that comes in at a low number again you'll probably hear some squawking out of the political side this morning. I think that's going to be an area that's going to be particular. I get a lot of focus from Trump in the next while. There's quite a few people now on my Twitter timeline going quite high on NFP guesses. So I've obviously set a trend. Now they're starting to kick in. We've set a trend, mate. We need to be careful about that. So basically the key numbers I'm looking for because I think the big question is for me is if this is a good number what effect will it have on the dollar? Given Peter Navarro's comments this week and given Donald Trump's comments recently it's quite apparent to me that the new administration does not want a stronger dollar and agreed Mr. Trump broke with convention by actually specifically saying that the strong dollar was killing us. I think that was the exact phraseology that he used. Presidents aren't normally in the habit of talking about the currency for the very simple reason it's just not the done thing whether it's weak or whether it's strong. So for me I think there's been a little bit of a sell-off in the dollar index as a result of that and certainly the dollar is actually very strong today. If we look at this currency ranking today for all the currencies against the dollar we can see that pretty much the biggest fall is the Swedish Krona then it's followed by the pound and we'll cover the pound in a minute I think there's a good chance we could test 124.20 later today that's a really really big level for me on the cable but again also 50 day average there? Yeah the 50 day moving average and obviously the previous peaks on the move higher so that's a big level and what's more important I think is if we look at the dollar index and we look at a graph and the reason I'm showing the Bloomberg chart this suggests to me it's a real key inflection point here around about this 100 level it's actually just support there it's actually just support there it's been below it it's now trying to get back above it so the big question for me I think is whether or not we can actually break below this 100 day moving average which is on the dollar index more importantly I talks in my weekly video about the importance of dollar Swiss and the chart there because there is a decent correlation between dollar Swiss and the dollar index if I look at this chart here I can show it to you look at this here again it's the big big support area through here also the the 200 day moving average it's broken below this 99.70 area it's now trying to get back above it and it's also in a significant downtrend so there is some evidence that potentially we're at a very very key level for the US dollar if we're to break lower we need to break below the 200 day moving average on the swissie and we also need to break below the 112 level on dollar yen and obviously held overnight we've made marginal new lows on the dollar yen at 112.10 around about that sort of level from 12.55 to the dollar swiss level here because we've been in a nice little downtrend in the dollar swiss we've been in a nice little downtrend in the dollar index and I'm just surprised at how well they match up the moving averages are quite different but certainly the trend gradient is actually quite something that's pretty steady and solid distribution one other thing I was going to mention there's no easy talking about the currency but he stopped putting pressure on the Fed to raise rates hasn't he, he's gone very quiet on that and I think we're back to looking at well I'm still at 2 and I think you're still at 1 I'm sort of one and a half I mean if you can call it that I think we'll definitely get 1 but we could get 2 I think it really depends on what other central banks do because ultimately I think Mark Carney was very dovish yesterday with respect to his inflation forecast and quite frankly I think he's wrong I think inflation is going to be much more of an issue as we head into 2017 than people currently think I get the impression he doesn't want to raise rates because if he raises rates he might as well admit he was wrong to cut them in August and I don't think he wants to do that let's quickly look at the key levels even though he was wrong everyone knows he was wrong the big big it's a real problem the big big levels, S&P 2290 it's held pretty much since we broke below it we've got a nice little gap there so between 2290 and 2295 you're going to get a fairly decent bit of resistance through there decent support around about 2270 I don't think we're going to break significantly above that over the course of the next few sessions because I just think if we come out of Trump and his cohorts this week I think people are a little bit nervous of protectionism and a trade war again here 20,000 level on the Dow big big level again will it be resistance on the way back up we gaped lower we may well have another go at it if we get a fairly decent number let's quickly look at the cable because I think this is important this 50 day moving average sorry 100 day moving average here and it's 12420 it's this level here, the blue line and also these peaks here that for me I think is key what's worrying me a little bit is we saw a key reversal day yesterday which could suggest that maybe we'll come back to 12250 but it's come so close after this key reversal week the other way suggests that we're probably going to get a bit of a bumpy ride on the pound against the dollar to move higher but we could actually get a very sharp correction lower first towards around around about 124 dollar again let's quickly look at that big big support as you can see around between 1205 and 12010 big resistance at 114 so I think that's really going to be the extent of it decent number, decent wage growth wage growth keep an eye on that I think that's the big one if anything in excess of 2.9 then I think you're going to go and see the dollar go for a bit of a tear and that's what we're expecting on the annualized number 0.3 this number here on the monthly number that's not so much of a that's not so much of a number I'm looking at the annualized number and I will now be quiet and we will digest the numbers as they come through so here we go 2.7 and a 175 upgrade unemployment is slightly higher 4.8 and average hourly earnings 2.5 that is a really weak number on the average hourly earnings so that is probably going to move the dollar the average hourly earnings number because Cable it's not really done anything let's have a look at this well that tells you all you need to know really I think there's a dollar I think there's a fairly dollar bearish view I think weak average hourly earnings I think they're going to pay more attention to that than the payrolls number it was a good payrolls number don't get me wrong 2.27 but that also suggests to me that there's not an awful lot of slack or there's more slack in the US labor market than maybe people currently think which is what the Fed was kind of hinting at on Wednesday something that struck me about the statement from the Fed was how much they were talking about the inflation and the lack of inflation inflation is below our target we don't see it getting to our target they were really dovish on inflation and this will add to that dovish inflation case at the Fed yeah I think I'll keep them on hold probably through mid-year well to be quite honest Colin I always thought March was a non-starter this pretty much takes March off the table I think and you're really sort of talking you're really sort of talking June at the earliest I think yeah I thought March was pushing it the only way they'd go in March is if they were serious about 4 which I never figured since I've been saying 2 so yeah I'm with you on this one it's definitely it keeps inflation soft because wage pressures are the sticky ones that's the one you've got to worry about and down wages are the one that you've got to focus on along with the core inflation there is another one the dollar index is still dropping here it's now down to $99.75 and heading lower that actually becomes a technical confirmation of $100 as resistance you've had the reversal of polarity $100 with support it's now become resistance so this is a quite a significant retest here for the dollar index $125 back above $125 for cable yeah to recap let's look at the key levels because I think now that the dollar is probably going to weaken I think we're going to get a retest of the lows so certainly keep an eye on this dollar Swiss chart that I was talking about earlier I think we're probably going to come back down to a test around about $99.20 also look at the dolly yen the dolly yen is obviously the big mover that is really the responsive one in terms of wow that pretty much tells you all you need to know so for me I think for this downward momentum to really be maintained we need to stay below this $113.20 area that we saw earlier we're getting a little bit of a pullback at the moment but ultimately it's not going to be paid to any potential dollar rebound today and that's probably going to be reflected I think in my dollar page here there we go so the commodity currencies are obviously taking up the slack a little bit Australian dollar not altogether surprising probably going to see a bit of a higher in gold prices as a result of that let's have a quick look at gold because that's again near a key resistance level for me on gold if you have any questions by the way ladies and gentlemen feel free to sling them over more than happy to there is some resistance around $1218.1220 on the upside if you look at this here you've got a big big level through here $1220.240 I think it's ranging gold we we tested $1180 in the early part in the late part of January we haven't been able to get back below that I don't think this will be enough to send us through $1220.240 maybe Peter Navarro will come out and basically spook somebody or spook investors or Donald Trump himself by saying I think the dollar is too high I want it to go lower obviously I don't think you will do that I've lost it given some of the stuff he's come out with in recent days let's face it threatening to invade Mexico isn't wouldn't be on top of my list of things to make friends and influence people and then hanging up on the Australian Prime Minister I couldn't believe they picked a fight with Australia that seems strange well the stock market likes the numbers even if the dollar doesn't so stock markets retesting that 20,000 level on the Dow be interested to see whether or not we get back above that and obviously again we'll look at the S&P we talked about that earlier between 2290 I would doubt that we get back above there but I've been wrong before but I'm going to put it out there I think it will be pretty tough to get above there and actually if we look at the FTSE 100 in particular I think the FTSE is going to struggle to get back much above 7,200 yes it's oversold on the daily RSI let's zoom this in and look at it on a 4 hour chart we can see that through 7,200 we've got a series of lows through here and then some peaks through here we have found a little bit of support just below 71 7,110 71,27 was the previous highs but the thing that makes me doubt that the FTSE has significant upside in it is really this chart here this key reversal week on the FTSE 100 now that would suggest to me that it's going to be very difficult for the FTSE to get much above 7,200 we weren't able to do it last week we weren't able to do it last week so the big question for me is what's going to take us back above there certainly on the RSI we are starting or the slow stochastic rather we're starting to roll over and that weekly reversal there also coincided with the weekly reversal that we saw on cable on the cable chart so the big question for me is what's been the biggest driver of pushing the FTSE up here it's been sterling weakness if you longer have that then what's going to drive the FTSE 100 higher in the absence of sterling weakness I think you've still got the same relationship between the FTSE and sterling that you've got between the Nikkei and the Yen right now and they're just basically trading opposite to each other and I guess US dollar and gold but those are kind of those opposing relationships and I think that's what you're really looking at with the FTSE and cable here and with cable back above 125 I don't see how you're going to get the FTSE back above 7200 in the near term especially when you're overbought and rolling over I noticed someone I think is trying to ask a couple of questions you need to reply to the chat that I've just put reply to the chat message that I just sent out about a minute ago so questions here if you reply to this message here we can then respond to your question I'm afraid I can't see any other messages unless you actually reply to this message that I've just sent out to everybody here just what we're stopping for I just wanted to mention we aren't covering Canadian jobs this morning because they're not out this morning the Canada jobs are out next Friday this sometimes happens when the first Friday falls in the first couple of days of the month it's not unusual but I just wanted to mention that it's not unusual I've been asked how would the non-farm figures affect the FTSE 100 they affect the FTSE 100 in terms of the way the dollar reacts on the exchange rate so certainly that's the way they've been reacting at the moment so if it sends the pound higher it's going to weigh on the FTSE 100 because predominantly that's why the FTSE 100 is really rallying generally equity markets tend to move in lockstep with each other so what's generally good for one equity market is good for the other so I certainly think there's potential for the FTSE 100 to move higher but I don't think there's potential for it to move much above where we are now so maybe another 20 points and I think that for me is how equity markets affected global equity markets are affected by one set of numbers in this case the non-farm payrolls numbers it's basically everything is interlinked being asked what we see is the next key level of resistance for cable there's a huge resistance intermediate is probably a little above 125 I think it was 12540 but the huge resistance for cable was in and around where we saw it top out earlier in the week in this 127 to 12730 area about 12730 there's actually a cluster of Fibonacci resistance levels that kind of contained the recent rally in cable here just below 127 so what's that first line Michael if we look at this we've got a potential double bottom at 120 and we've got the first reaction high which is 12795 now we've come all the way back here to around about 120470 120430 here basically the next resistance level minor resistance level is around about 12545 if I take this out to a four hour chart we can see that there which is a series of peaks and that low there but ultimately I expect I would expect the pound to try and retest the highs that we saw earlier this week earlier this week around about 127 and ultimately retest this peak here from November 12795 which is also support so it's potentially carving out a base the cable interim resistance around about 125.5 but ultimately we're looking 12795 128 what I wouldn't want to say in the context of this up move is for us to go below 124.20 so hopefully that makes sense what I really like about this up move is not only did you have that strong green candle up off the double bottom but since then the 50 day moving average rated by 124 has come in this really nice support on these last two weekly candles and that's really encouraging to me that each time you've seen the bears try and pound cable back down it's getting contained by the 50 day moving average it almost looks like a cup with handle patterns starting to form which is like a larger saucer bottom and then a smaller one starting to form here and that could be quite bullish as well for cable in the long term it really does look like there's a pretty big base forming here. What we've also got though ladies if you look at the 50 day moving average over the past six months very often it's acted as support and resistance resistance resistance resistance resistance a little bit of support broke below resistance resistance support support again so when you see that sort of when you see that sort of sequencing you can't ignore it it's going to give you a trading signal and ultimately if you're looking to play that then it gives you a fairly decent risk-reward ratio because essentially what you'd be doing is you're buying the pound as close to that moving average as possible but your stop-loss is going to be just below it by 30 or 40 points and that really keeps your stop-loss tight while at the same time and minimizing your risk at the same time in the hope of a decent rebound so for me the next key level of resistance on the cable for me at the moment is 125.5 simply because that was the series of peaks that we saw earlier this week I'm also being asked is the 0.2% difference on average earnings a large difference or just classed as a slight difference are we talking on the monthly or the, yeah we are talking on the monthly it isn't it isn't the bigger number which obviously I don't have up here is the annualized number the annualized number posted a drop from 2.9% to 2.5% that's a big drop everyone was expecting just a modest drop to 2.8% they weren't expecting a big drop down to 2.5% so when you look at it through that sort of prism in terms of what markets were expecting it's quite a big drop particularly on an annualized basis when you consider that inflation is actually rising very very quickly so inflation is rising quickly but wages are stalling out and at the moment central banks will not raise rates if they perceive that wages are not rising in line with inflation because all that will do is exacerbate an income squeeze on those people who are being squeezed by inflation so hopefully that makes sense does anyone else have any other questions on any of this I can see someone else I'll just highlight here I think someone else has tried to ask a question but again I can't see it I just wanted to note while we're waiting for questions that we still have some more data coming out in the United States this morning so we could see some other announcements the market service PMI is at 5 a.m. that's 245 in London the big one is 3 o'clock in London 10 a.m. here in the east coast is ISM non-manufacturing composite streets expecting 57 and US factory orders street is expecting a rebound to 0.5% after a 2.4% drop 2.4% drop again that could have gotten distorted by the holidays so we could get a rebound and we also have the rig count at 1 o'clock this afternoon and Michael was right and something I wanted to mention on the rig count it's two things, one it is increasing as we normally see seasonally but on top of that a couple of weeks ago we finally had the crossover where drill rigs are running higher than they were in the same week a year ago so we're definitely starting to see that the higher oil prices which are basically running double what they were this time a year ago is starting to have a positive impact on spending, on exploration and that's a good thing because those are good high paying jobs that are going to be starting to come back and help a lot of the US economy in kind of the middle of the country let's call it that center piece that runs from North Dakota down through Texas right through the heart of the United States will definitely be helpful I've just been asked about dollar Turkish lira you're brave whoever you are yes it has broken through support and it looks as if it's going to head lower so certainly on the basis of this four hour chart that I've got in front of me here certainly a decent break lower the next area of support is probably quite a little bit lower certainly in the context of that I must admit it's not something that I'd be particularly brave enough to trade but yeah it does look as if it's broken through a fairly key support level on the four hour chart could have been asked about dollar CAD Colin affected by the oil price yeah of course it is it is affected by the oil price but ultimately the oil price is not really doing anything at the moment so any move on dollar CAD today is likely to be driven by the dollar the US dollar and not the oil price though we are seeing oil prices at their at multi-month highs if the oil price does continue to push higher then obviously it will have a double effect on the weakness of the dollar because it will cause the Canadian dollar to appreciate yeah on that on the on dollar CAD there's a big support zone for it between 129.75 and 130 129 is a Fibonacci level and 130 even of course is a round number if you break then we've seen a couple of times here recently really since September as Michael's showing in the chart here this zone is held as support for quite a long time now if you look though you've also got a trend of lower highs heading into this you've got a really nice ascending triangle that's telling you distribution and that the Canadian dollar has been recovering so if the oil price and the same thing we're actually seeing a nice little ascending triangle in the oil price itself showing accumulation so if the oil price continues to trend upward and eventually breaks out of this 50 to 54 range it's stuck in on WTI that would be bullish for CAD if we start to and the other piece that we're seeing though with the Looney is it is getting a little bit of a boost and that people are starting to come around to the idea that Trump's probably not going after Canada in trade talks I mean if NAFTA goes we still have an existing bilateral free trade agreement with the United States that can go back into force because it didn't have to basically built on that anyways and so basically although so primarily I mean Trump has a lot of other countries in his sights even the Mexican peso to be honest has rebounded a little bit over the last week or so as as he's kind of starting to turn his sights elsewhere away from NAFTA it looks like he wants to fight a lot of battles of once rather than picking people off one at a time which is a dangerous thing to do could you put up a dollar Mexican Michael just so I can point that out sure that it actually has been quietly recovering for the last week or you can see there it actually peaked right about inauguration day to be honest and it's actually been that the peso surprisingly has actually been recovering it surprised me I thought it would blast through but it hasn't it's actually starting to to turn back down with so with so many things going on heading into the inauguration people were really worried Trump was going to go full force on NAFTA and that depressed the loony and it depressed the peso they've now come off and had a relief rally now I do think that support level there which is 20 and what 20 40 that'll probably contain it I don't see the peso busting 20 I think and for sure I think they're not yet anyways I think that that'll kind of contain it for now just because there's still risk out there of that one day he turned it around and refocuses on Mexico and that could turn the whole thing right around again so this is likely to be a volatile pair to be trading over the next well year at least I think it will continue to see some big swings in a lot of if Trump lost that long sort of their relations yeah Donald Trump lost that long yeah that too alright ladies and gents I think we're pretty much done for this week as I say I have recorded this so I will be posting it on YouTube at some point over the course of the next hour or so but thank you very much for your attendance today hope you found hope you found our two-ing and fro-ing useful and please feel free to log into my weekly webinar which is on a Monday at 12.15 otherwise both Colin and myself will see you again same time next month for the February payrolls report sounds great have a great day trading everybody