 Good afternoon, ladies and gents. Welcome to CMC Markets on Friday the 3rd of December and this month's non-farm payrolls webinar for November. It's certainly I think in the context of where we were just before Thanksgiving. I think in the in the wake of the Omicron scare there was a perception perhaps that today's webinar and Today's payrolls number, I should say not today's webinar today's payrolls number may have lost some of the importance that perhaps we were thinking about prior to The news of Omicron basically dropping around about Thanksgiving and obviously last Friday when we saw those big falls In equity markets, there was a perception perhaps that this new variant might perhaps delay the Federal Reserve in in terms of its reaction function when it comes to tapering This asset purchase program and as a quick recap I think what we can say is that there was an expectation that having started its tapering program There's an awful lot of people me included who think that the Federal Reserve is behind the curve when it comes to managing inflation and The wider discussion about the T work transitory So given the uncertainty around the Omicron variant and the fact that we still really are a little bit in the dark About how serious it could be relative to Delta I think the noise around Omicron obscured the fact that Delta is still a very serious problem Particularly particularly in Europe and I think there was an awful lot of hysteria around Omicron Given the fact that still right now Infections for Omicron are still lagging well behind Delta and I think The bigger question is not whether or not Omicron is more infectious But whether it's more deadly and at the moment Anecdotally that does not appear to be the case So does it really affect the wider picture when it comes to the US economy and how well that's doing? But also in terms of the Federal Reserve and whether or not we're likely to see an acceleration in the tapering of its asset purchase program when it meets in December the 16th of December and I Think your own powers hawkish pivot Was a little bit of a surprise On Tuesday when he said that it was time to retire the word transitory With regard to inflation from the central bank lexicon, and I think the problem is transitory means different things to different people I mean at the end of the day you could argue that we're all transitory in terms of the fact that we're only here for a limited period So transitory could mean a lifetime. It depends on your you know, it depends on your definition of what transitory means When the Federal Reserve was talking transitory in March, there was an expectation that was probably going to be six to nine months And yet here we are Looking at the end of the year an inflation is at a 31 year high in the US That's 6.2 percent. We've got US CPI next week For November and that's likely to move up to six point seven percent with core CPI around five percent, so It's a real problem And I think the fact that a number of Fed policy makers even if you ignore Omicron completely The fact is the Federal Reserve was was concerned about Inflation even before Omicron hit the airwaves and sort of rather muddied the waters so in his change earlier this week Today's payrolls number is really important in the overall Conversation when it comes to whether or not the Fed will go from 15 billion dollars of tapering to potentially having a conversation about 30 In December December the 16th, and that's why this today's payrolls number is important to a point But I think it's going to have to be really disappointing for the Fed to deviate from potentially Doubling their tapering to 30 billion dollars a month, which will take it down from 105 Which it is now went from 120 to 105 in November from 105 to 90 billion Now that still means that they're built. They're growing the balance sheet They are still being very accommodative but in terms of pricing In terms of pricing when it comes to rate hikes Obviously, it means, you know, what are we pricing for two rate hikes in 2020 or three rate hikes in 2020? And that's the bigger conversation So let's look at the two-year yield because for me, that's the most important Chart in terms of rate hike expectations for next year because if you compare it say for example the 10 year That's the 10 year this year We are still at the lowest levels pretty much that we've been since September we're at three month lows on the 10 year The movement in terms of US yields has been in the two year. It's been at the front end So it's been two year and five year. So the yield curve is flattening. The two year is getting closer to the 10 year That has consequences it essentially means that the Fed is still looking To go fairly slowly the markets are pricing in a fairly slow pace of rate hikes and that's what's basically moving us up from here Now I can remember Three months ago. We were talking about a break above 0.2, 0.3 percent It's being bullish for the dollar in terms of the two year and that certainly proved to be the case if you look at the Dollar index. It's moved quite a bit high. You've got euro dollar below 113 The big question for me is whether today's payrolls report pushes this two year above the peaks that we saw Back just before Thanksgiving. Obviously we saw a big drop here last Friday as The market started to price out the prospect of a taper and rate hikes next year now they're pricing them back in So, you know today's payrolls number is going to be quite key in terms of what we go to here And we've certainly seen that started to get priced back in the in the last couple of days. So Average earnings numbers if they go up to five percent average hourly earnings if they go up to five percent The decent payrolls number As the unemployment rate drops back a number in the region of five to six hundred thousand again All very very positive The big question is is whether or not it started to get priced in or priced back in from where it was just before That news here about Armacron. Obviously, that's the big drop on Friday another drop on Monday Then Tuesday Wednesday Thursday and now we're back here. So We're pricing it back in the big question is is whether we start to price it even further And that I'm a little bit concerned about this week's volatility It's really thrown into sharp relief as to whether or not we can expect Significant further upside when it comes to equity markets this year more broadly me myself I think we could well have seen the highs for this year now Why do I think that we're simply speaking if we look at the s&p this year that's year to date If you're an investor and you're coming into the Christmas period and you've had a really good year Are you going to be looking to take profit? Or are you going to be looking to build up more exposure? My gut reaction would be I would look I would looking to be selling to any strength in a moment we're finding to we're finding to We're capped around about 4,600 4,620. Now, that's not to say that we can't go higher into 2022 um, January February And potentially we could drift higher, but I can't help feeling that It's a tough ask to suggest that we could Revisit the highs that we saw back at the beginning of Thanksgiving week Simply because there's so much we don't know so much. We don't know about iMacron. There's so much we don't know about whether or not Countries in Europe will impose further lockdown restrictions on the population. You've only got to look at what's happening in Germany And imposing restrictions on the unvaccinated population And potentially mandating vaccinations going forward for all of those who are unvaccinated. I mean, that's a big step It's certainly something that i'm very uncomfortable with Um, and i'm you know, I'm fully vaccinated Um, but do I favor stigmatizing people because they're unvaccinated? It doesn't sit right. I can see the logic behind it It doesn't necessarily mean that i'm comfortable with the idea of it. So looking at this um You know, could we see further upside? Potentially a decent payrolls number is that good for risk going forward again? That's a tough one because obviously it pushes the dollar higher. It pushes yield higher And could and and could adversely infect affect The s&p Probably less probably more constructive on it simply because it's cheaper But again, I think we're constrained by the 50 day moving average here We've got the 7000 level which looks fairly solid in terms of the support levels Going forward But on the upside this 7200 level is another barrier again if if I cast your mind back a few months We really struggled to get back above 7200 um All the way through here here in here acted as support back here and here and here Now we're back below it again, and now we're struggling to get back above it. So again on the long term i'm still fairly constructive on the footsie 100 The big question is can we get back above 7400? By the end of this year and that's a tough. I think that's a tough call at the moment Again, if I hit the year-to-date option Here we've we've not done we've not done too badly on the footsie 100 So the big question is do you put all of those gains at risks in the hope that we can go higher? I think if we close below 7000 we could see a correction back lower But judging by these charts here, there does appear to be fairly decent demand With the footsie 100 below 7000 now the decks is a slightly different story That is looking increasingly vulnerable, but again We got fairly decent support around about 15 000. So again um If we do get a dip on the decks Then we're likely to find that you know fairly decent support in and around there Simply because of how the market reacted when we were when we got down there on wednesday earlier Well tuesday earlier this week. We had fairly decent support down there, but as the upside 15 500 We look at that there. We look at that there. It was support there. It was resistance there So there's a bit of a barrier around about 15 500 in terms of the dollar Particularly euro dollar if we look at this chart here We can see that there's decent resistance around about 113 80 all the way through here So that's a bit of a barrier for me. So even if we get a disappointing number and euro dollar spikes higher I'd be surprised if we get a significant move back above 113 80 I think we'll probably see another revisit of this one 12 area dollar strength I think is probably the predominant theme heading into the fed meeting on the basis the fact that the bank of england Has gone rather soft when it comes to the prospect of a rate hike in december michael saunders this morning Talking down the prospects of a hike in december. He was one of the hawks If you recall from the last bank of england meeting But and it was was one of those people who was potentially arguing Or making the case for a rate hike. He's gone soft on the idea because of omicron That's likely to weigh on the pound in the short to median term So again, if we look at that that cable chart here We really need to see a move back above 134 the price action at the moment is looking a little bit soft We saw the bottom of this channel here, which I've drawn from the highs in june Through the lows in july we rebounded off it earlier this week I think there's potential for us to drift back down there around about 130 160 why 130 160 Or here or through here That's simply on the basis that it was also the low back in december last year So we're pretty much back at the lows of december last year on the cable I would be surprised if we broke significantly below that On the basis of the fact that euro sterling if we look at where the euro is Christine Lagarde's already said it's unlikely that the ecb will raise rates next year I think the bank of england will raise rates next year. I'm not sure the ecb will so in terms of where we go to In terms of euro sterling if we look at the daily chart here I draw a line from these peaks through here Any rebounds are likely to find a bit of a barrier around about 85 40 and then 85 70 through here if I draw a line through these highs and we've also got the 200 day moving average So euro sterling. I think salon rallies unless we get a back above this sort of area Through here. So what can we expect for payrolls going forward? um, we're expecting 550 000 For november payrolls, that's for the period up to and including the 14th of november So any hiring that has come from 14th of november to Thanksgiving won't be reflected in these numbers Will be reflected in the december numbers which come out the first friday of january So if it's a disappointing number or slightly below expectations not overly concerned about that Been looking at a number of the earnings results from from from companies like walmart and target Fedex and companies like that and they've said they're having to pay up The staff that would suggest to me that this average earnings number That is expected to come in around about 4.95 percent here If we get a move higher Then that is likely to push the Fed Towards an accelerated taper and we've heard any number of policy makers say that they need to accelerate the taper Because it gives them optionality when it comes to a potential rate rise going forward So watch the average hourly earnings year on year decent number there 550 on the headline and obviously the unemployment rate at 4.5, which is expected to come to 4.6 You've also heard me talk about the participation rate the the labor participation rate. I want to see In terms of where we look going forward Whether or not the participation rate goes up because at the moment is 2 below Where it was in february 2020 where it was 63.7 percent. There's five million americans Who still haven't returned to the workforce? How many of them Will actually Come back how many of them will have actually retired because of record high stock markets And how many of them will actually come back? So if we look in terms of the dollar yen in terms of how the market perceives The robustness of the payrolls report i'm going to basically display that just a decent report the dollar should go up um, I imagine That the knee jerk reaction on a decent number will be to Buy the dollar the big question is Whether or not it's already priced into a certain extent in terms of the fed getting more a bullish and whether whether Power's testimony earlier this week has done an awful lot of the market pricing already in anticipation of a number So the numbers are coming out now Average earnings is 4.8. So that's slightly softer Um, the payrolls report is disappointing 210 000. So very much dollar negative um Which is a little bit disappointing, but the unemployment rate has dropped to 4.2 percent from 4.6 so You know all in all again a really mixed bag Really got to struggle to find out what's going on here because that is a fairly weak number And i'm struggling to understand how it can be such a weak number while at the same time It's be Seeing such a big drop in the unemployment rate. So let's have a look Why the unemployment rate is dropped. I'm just checking the participation rate for the Labor force Participation and that's gone up to 61.8 So the headline number yet disappointing But when we look at everything else it's actually fairly decent Um, so and the revision to the previous month fairly neutral 546 so take the bones out of that the headline number Is disappointing in terms of the payrolls number the unemployment number falling back to 4.2 percent Is pretty good. It's very good in fact and a participation rate has gone up So I think while the headline number is disappointing The rest of it is actually fairly decent and that's why the dollar is starting to come back We've dipped down to 113 and now we've had a bit of a rebound As the markets digest the numbers more broadly and now you're getting a little bit of dollar weakness creeping in the euro dollars back above 113 20 And overall equity markets are giving it pretty broadly a pretty Pretty big meh when it comes to the actual numbers themselves So for me, I think while the headline number is disappointing It doesn't change the calculus when it comes to the fed's discussion With respect to A taper in december or an accelerated taper now phil you've asked me about gold I really struggle with gold. I've got to be honest with you It's really uninteresting. You've got a decent area of support all the way through 1760 through here Today's payrolls number for me does nothing when it comes to changing the outlook for a potentially stronger dollar Yes, the headline number is disappointing But everything else about that report looks fairly decent and actually what we could see in terms of the december number Is which will cover the period up to and including the 14th of december we could actually see a strong rebound Let me cast your mind back To when we last had a week number I think it was september september was supposed to be a strong number. We had a week number came in at 197 It was subsequently revised up to 314 so I think we have to be very very careful about Basically drawing too much of a conclusion from one month's number because generally what happens Is the revision higher in the subsequent you get a revision higher in a in a subsequent month So for gold decent support through 1760 we can see it through here low there low there low there Let me just draw that in for you feel and then we can see that but overall I think we're probably going to stay in a range between 1760 and 18 in 25 1830 I really can't get enthusiastic about Gold it's in a range and it's likely to remain in a range for quite some time to come I'm actually surprised It's not higher if I'm honest with you because you know when when you're talking in terms of safe havens You would have to respect all that stuff about omicron to have sent it all the way back to the highs This year and that didn't happen didn't happen at all um And that is a little bit of a surprise to me and to be quite honest I'm struggling to find out. I'm struggling to understand why but when you actually look at what gold has done this year And everything that's been thrown at it Slower and you would you would expect it to be higher and I think a lot of part of the reason for that is people are putting money in cryptos They're putting money in bitcoin. They're putting it in ether because they can generate a better return on that and to be fair Counter-intuitively It's acting as a little bit of a haven. Um, I mean personally I wouldn't I wouldn't touch bitcoin with a barge ball It's just too volatile. It's too choppy And it's not something that you'd really want to trade on a leveraged basis You know if if I'm totally honest with you. So for me, I think Gold is probably going to trade in a range between 1750 and 1800 and if it does come back down to 1720 You know, it's very much a range play. So I'm sure that's probably not what you wanted to hear but unfortunately With gold it's it's you know, a bit of an enigma has been for most part of this year. So in terms of I think steven you asked asked me about dollar mechs, didn't you? So let me just jump into that for you to get an idea of where that might go and I look at dollar mechs and I think to myself In terms of timing and looking to buy it again I'd be reluctant to buy it where it is right now Simply because it's just too far away I mean, yes, it has potential to come back down to around about 2080 and if it does Then these previous highs here are likely to act as some degree of support over the course of the next few days, but up here You could potentially See an a lot, you know, a lot more weakness in the short to medium term So in terms of buying dollar mechs on dips I probably wait for it to come back to around about 2090 2080 perhaps Um and look at it from that point of view there, but certainly not where it is here I think there's potential for a little bit more weakness looking at this chart in terms of copper being asked about copper Let's have a look at my copper chart Okay, so this is my copper chart and as we can see from here there's fairly decent support All the way through this level here around about 419 But the big the big concern I think I have here is that every time it's rebound to 450 it's come back But we have long-term support coming through here at around about for around about 410 and we've also got fairly decent support for 419 so very much a buy on the dips is copper. Let's face it. I think if the supply chain disruptions get sorted and We get a significant economic rebound as we head into 2022 then demand for demand for copper will pick up at the moment It's been trading sideways for the past six months since may when it peaked all the way back here But it's found fairly solid support pretty much since june anywhere between 400 and 410 So in terms of the overall longer-term outlook as long as we hold above this these key areas of support through here Then we should continue to make some fairly decent gains on that when it comes to Brent This is my Brent chart As we can see it's it's it is quite noisy But the one thing that I took away from what we saw yesterday Was that we do have fairly decent support coming in through these loads through here And the fact that even though we dropped below $68 and we closed all the way up here Suggests there's fairly decent support for Brent crude anywhere down towards this blue line here And for a move back towards around about 76 dollars I think the sweet spot for crude is between 65 and 75 dollars a barrel I think in terms of The overall outlook OPEC plus won't want it below 65 But they won't want it above 75 and I think that was one of the reasons why markets were so surprised That they decided to go ahead With the output increase of 400 000 in january I think it was because they were very concerned that if they did cut back In january And then this omicron scare turned out to be the storm in a teacup And we got a really strong rebound heading into 2022 that The supply shortage could lead to an element of demand destruction Particularly when you've got people talking about a hundred dollar oil or a hundred dollar oil What would that do to global demand it would kill it because people are complaining about higher energy prices higher fuel prices If that eats into consumers disposable income Then obviously it could tip the world into recession Particularly if prices do go above 86 87 dollars a barrel that for me. I think is a key tipping point on Brent crude Why did I draw that horizontal line in there? Well, it was because it was the peaks in october 2018 so a technical break above That red line there On a technical basis would trigger us a really sharp move to a hundred dollars a barrel. OPEC does not want to see that Global economy does not want to see that So we have seen six successive weekly declines in Brent You know, do we want to continue to see that sort of decline? So if OPEC can keep it in a sweet spot between 65 and 75 dollars a barrel Hopefully everybody's happy And that for me. I think is where they want to keep it And that's that would explain why we saw the extent of the rebound by them inserting optionality into The Decision to leave output exactly where it was so As I say we we will To my mind I think we could probably drift drift higher from here and head back towards around about 75 76 dollars a barrel and if I can keep Brent crude there Then that will suit them just fine. And I think it's going to be a similar sort of story Say for example, we look at WTI. It's a similar sort of story through here If I take my trend line from this chart here Draw it through those lows in march Draw that through there Again, it's a similar sort of story. We got a break lower We weren't able to sustain that break a very long shadow Which suggests there's some decent demand there and we could well head back to the 200 day moving average on that So for me, I think oil remains very much By the dips OPEC does appear OPEC plus does appear to have a handle on it And any dips are likely to be Fairly well sought after so I hopefully that answers your question on that natural gas Again, that's that's bounced off the 200 day moving average So from a technical point of view That's probably going to find quite a few bids around there. You've also got the 200 day moving average Helping to support prices all the way back in april So again here fairly decent support through there But you've also got the lows back in august as well Which are likely to act as a fair fair degree of support through there with european natural gas prices Continuing to surge higher I think any downside in natural gas is likely to be constrained by what we saw all the way back there Okay, so let me just see if I've missed any other questions out I'm hoping that I've got everything that you guys wanted Um, we're heading up to 1342 I'm looking back at dolly yen Gone back to the five minutes and now we're back higher again. We're starting to wedge back up In terms of the overall outlook for dolly yen I think the bias I think remains for a little bit of resistance at 114 I think we could well drift back down towards around about 112 overall I think potentially we've seen the high end dolly yen looking looking at this chart here This cloud area should act as a fair degree of support on any dips towards the downside And also the fact that we've got these peaks all the way back through here in september They're likely to act as support as well So if we do see dolly yen start to drift lower Over the course of the next few sessions. I think it's likely to find a decent area of support around about 112 um Going back to um, I think I pretty much covered that euro swiss Um, it's made another six year low So that's likely to keep the pressure on the euro going forward We look at euro swiss here. We can see that there We go all the way back I think the euro is likely to remain weak and that's likely to constrain the upside On any euro crosses as well. So that's worth bearing in mind When looking at euro dollar, which is why I think it will continue to be capped around about 113 80 is there anything that I haven't covered ladies and gents that um You want me to to look out before I sign this off? um for 2021 And we talk again in 2022 obviously I still do my weekly videos um, I think the last one of those I will probably do will be on the 17th of december that will be the last one until January next year because I will probably I will be taking time off between the 20th of december all the way back until um The the payrolls webinar the first payrolls webinar on on the first friday in january dollar CAD A bit of a non-popular one euro dollar. Okay, let's do dollar CAD because we had the canadian payrolls report um earlier today All right, let's clean this up a bit because that's no longer relevant. We don't need that um looking a bit toppy and dollar CAD we can see look at these series of highs all the way through here around about 12850 I would suggest that um the bias for dollar CAD is likely to be um a little bit of weakness um while below 12850 Um, and I and it also ties in with my slightly more bullish um view on oil prices because ultimately if oil prices go back to 75 dollars a barrel Um, then the cash should benefit from that and the US dollar should weaken So we could well drift back down to the mid 127s In this area through here um Such a petro currency um And to strengthen the oil price the weakness in the oil price Over the course of the past six weeks has hurt the canada And the dollar is appreciated as a consequence of that. So if you think the oil price is going to strengthen Then dollar CAD is likely to drift lower um Euro Aussie we've got the rba next week. That's that's going to be a diff. That's going to be an interesting one um, so let's talk about that um Obviously we've seen quite a bit of a weakness in the Australian dollar over the course of the past few weeks um I think this one is probably going to be more of an Aussie story Thomas. Uh, let's look at the Aussie I was looking at this earlier today We've seen an awful lot of weakness in the Aussie over the course of the past few weeks But for me, what's significant Is this series of loads that we saw in september 2020 and october 2020 Now as I said, we've got the rba next week and governor low did last month he talked about Potential rate rise not happening much before 2023 Now I would dispute that um, the rbnz hiked rates last month by 25 basis points to 0.75 percent The rba is sitting at 0.1 Is that sustainable? No, it's not Now they abolished yield curve control. They got rid of yield curve control at the last meeting And he was very dovish But I do not see The lowest assertion that Australia doesn't have an inflation problem isn't in any way credible. It's not The whole world has an inflation problem now the Australian economy Was actually slightly more resilient over the third the last quarter Because we were expecting a a contraction of 2.7 percent The economy actually contracted by 1.9 percent. So that was much better than expected So the Australian economy is in much better shape than perhaps an awful lot of people give it credit for That for me should constrain the downside In Aussie dollar to around about 6990 6980 Which would suggest to me that perhaps we could Get a hawkish surprise Next week next week the rba could spring a hawkish surprise. I think the market is short Aussie dollars And that we could The rba could surprise and the surprise could outweigh any expectation that the fed is likely to be hawkish fed hawkishness Is priced into the Aussie already I would suspect now. I could be wrong here um, you know and let's face it, you know Looking at the price action I don't think I'd want to be short Aussie dollar down here if I was currently short already I'd be looking to take a little bit of my short positions out And start to pair that back a little bit I mean the downside in the Aussie based on the fact that we've got this support level around about 70 We're probably gearing up for a little bit of a short squeeze heading into the Christmas period That's just my that's just my humble opinion so Take it take that what yeah, it is in a downtrend Absolutely the trend is lower But look at this. I mean look at you know if we if we change that to a weekly chart And then spring it all out there this level here is huge 69 90 70 if we break through that You know australian dollar has declined one two three four five weeks in a row so You know on a risk reward basis If you were short Aussie now What would you do? And that's basically all you know, that's all I'm going to say on the matter on a risk reward basis If you were short Aussie now, what would you do? I'd lower my stop Because the risk reward now for being short Is starting to It's not it's not it's compelling It's not it's compelling. So the rba. I think could be it could be a significant It'll be an interesting it'll be an interesting dynamic as to how low Governor low steers market expectations about future rba interest rate expectations going forward because it can't be overly bearish on the australian economy Given the recent data that we've already seen. So how does he walk that tightrope? Anyway, okay, so that's that's that's that's the Aussie dollar anyone anyone else ladies and gents All right. Well, thanks very much for your company This year on these non-farm payrolls webinars. It's been Most enjoyable. I appreciate all of your feedback. It's really useful If you do Have any comments to make on anything that you've heard today or what have you I'd appreciate all the fit any feedback good or bad But if I don't speak to you before christmas or to speak speak to you before next year I'd just like to wish all of you Um A very christmasy very good christmas and a very pleasant new year um Thanks very much for your company and I'll speak to you all same time same place Next month and thanks for your company. It's um, it's been great. Cheers speak to you all soon