 Good afternoon and welcome to CMC Markets and this Monday market webinar dated the 8th of May with me Michael Huston and this look at the key events for the week ahead but first and foremost before we get started have a quick look at the risk warning which I have to show at the beginning of every one of these events for compliance purposes and once we've got them out of the way we can we can swiftly we can swiftly move forward so any case I think obviously the key events over the past weekend or the past couple of days is the market reaction to the unsurprising result that Emmanuel Macron was announced winner of the French presidency and markets I think reacted in a way that really I sort of expected we had we've had two weeks of pretty much expected gains and now what we're seeing is a classic case of buying the expectation and selling the outcome by the rumor sell the fact so what does that mean for the euro going forward more importantly what does it mean for European equities I think initially what we're probably going to see here's a little bit profit little bit of profit taking as I think we've digest what ultimately is going to be the effect that a Macron presidency will have on the growth outlook for France but more importantly on the political outlook the political and economic outlook for the French economy now that we've removed completely the tail risk of a Le Pen presidency markets are now going to be focusing on the next key event which is likely to detail where the French economy goes to next and ultimately that's going to be the June assembly elections that are going to be taking place later this year in June actually in between June 11th and June the 18th well there will be elections for the 577 seats in the national assembly now at the moment France Emmanuel Macron does not have any representation in the French parliament now that could well change and is likely to change over the course of the next few weeks but what is I think what's unlikely is that they will become an absolute majority given the fact I think it's very very new he's coming from a significant way back and I think to get a better indication of the type of performance that we can expect to see in the French assembly we need to go back to his performance in the first round of the French elections and the first round he only really won 24-25 percent of the vote so I think the June elections will be much more representative of what Mr Macron can hope to achieve than what we saw at the weekend where he won a 66% landslide and I think what was actually quite notable about the French elections or the second round over the weekend was even though Marine Le Pen only won 34% of the votes she got 10 million votes Emmanuel Macron got 20.7 million what was more telling I think was the fact that 16 million votes were either spoiled or blank so that gives you an indication of the fact that 16 million people were not prepared to vote for Emmanuel Macron so ultimately Marine Le Pen did come third behind spoiled and blank but ultimately they spoiled and blank papers only polled four million votes less than the actual winner Emmanuel Macron so that suggests to me that even though he's won the presidency real hard work starts now and anyone expecting that he will be able to implement his program his manifesto program that's going to be a big ask because his ticket is cutting 120,000 public sector jobs a 60 billion euro cut in public spending and a lowering of the unemployment rate to 7% they are the key measures that Emmanuel Macron will be running on okay so 7% unemployment rate let me put that in perspective French unemployment has never been at 7% in the last 30 years the lowest it's been was at the end of 2008 beginning of 2008 when it was 7.2 other than that it's trended at around eight eight and a half percent so he set himself a really really big bar to clear so so what is that so basically the the you know the outlook is very very the bar is very very high so let's look at what that means for French assets we've seen a significant rebound from the vote from the first round vote higher we're now getting a little bit of profit taking kicking in so ultimately I think the next key support level for the cat cat on is the previous highs around about five thousand two hundred eighty five thousand three hundred so we can potentially come all the way back there we are also very overpought look at the negative divergence here on the slow stochastic which means that we could see a significant amount of profit taking we are very overpought and to give you an indication of how how far overpought we are let's have a look at the weekly chart let's also have a look at the monthly chart so the next level I think really for the cat current as long as we stay above the previous peaks through here and the previous lows through here around about five thousand three hundred we can potentially go higher but we are susceptible to a little bit of a pullback in the short to medium term and I think the same is also true of the euro dollar as well because if we look at the euro dollar and the way that's behaving in the aftermath of the rally higher that we've seen in the past couple of weeks this candle here or this bar here is a warning sign that we could actually be near the near a short term top in euro dollar this is a potential potential key reversal day now key reversal days generally tend to be precursors to a little bit of a a setback towards the downside or the upside if they happen at the end of the downtrend this is happening at the end of a nice little uptrend here we you know it doesn't it doesn't alter the overall view that ultimately the bias for the euro is towards the top side but I think if we're unable to close significantly above 110 or even 109 60 70 today then the risk is we could get a little bit of a sell-off back to the 200 day moving average that we broke out above a few days ago in fact two weeks ago we could get a little bit of a pullback here more importantly is what the dollar index is telling us as well in the aftermath of those payrolls numbers that we saw on friday because this is not a but this is not a binary story it's not euro goes up because macron wins dollar goes down there's push pull as well with respect to interest rate expectations on the dollar side of the equation and if we look at the dollar index and let's not forget the dollar index is 57 euro dollar we've got a potential bullish reversal on the dollar index as well so if the dollar is able to rally from the lows that we're currently seeing over the course of the past 24 hours then that is going to have a drag effect on euro dollar because of the heavier weighting on euro dot of the dollar index on euro dollar and we can see that if we look at the bloomberg dollar we if we can look at the dollar index on my bloomberg terminal which I will show you which I will show you right now let me just pull that over so that you can see it there we go US dollar index let's go and make that a line chart turn it into a candle chart here make it year to date so I'll give us slightly more detail here so this could end up being a little bit of a a little bit of a short-term low for the dollar index over the course of the next few days need to get back through above the highs for today at the moment which is around about 99 and that that could act as a little bit of a short-term base over the course of the next few trading sessions if that's big if if we close where we currently are at the moment so what does that mean for euro pretty much across the board well the weakness of the euro against the dollar at the moment doesn't bode well future gains over the course of the next few sessions so what does it mean for euro sterling now euro sterling in the context of euro sterling it doesn't look particularly positive either let's look at these daily candles here at a very strong move up we've had a very strong move up from the lows that we saw in April but we do appear to be starting to develop a little bit of what I would call a sideways consolidation so let's basically draw in the lower lines here bearing in mind that we've got the Bank of England later this week bearing in mind also that we do appear to have started to have broken out a little bit of this triangular consolidation that we've been in over the course of the past five or six weeks now we have broken down through this trend line support year but don't get too carried away with this particular euro sterling move because we're still above this key support level that we've got here so I think in the short to medium term we can drift a little bit lower towards 84.05 but I certainly don't think we're going to come crashing off the cliff because later this week we've got the Bank of England inflation report we've also got obviously the rate decision now you may recall at the last meeting Kristen Forbes dissented from the overall policy and voted for a rate rise now I wouldn't read too much into that because she's going to be leaving the committee at the end of June in any case so I think what will be interesting will be whether or not she gets any of any more support for her stance for a rate rise given the slowdown that we've seen in Q1 GDP now we were expecting a minor slowdown from the 0.6 0.7 that we saw in Q4 the fact that we got a weaker than expected number at 0.3 was a little bit disappointing but it also wasn't altogether surprising because ultimately the GDP number that we got only accounted for around about 40 45 percent of the data that we saw at the beginning of Q1 and really didn't include and doesn't include the data that we saw in March was which was actually significantly stronger so I think the potential there is for a slightly slightly higher revision to Q1 GDP which should be broadly sterling supportive what we've also got is obviously the political machinations going hot you know the political risk going on ahead of the the June the 8th general election but ultimately I think it will be a major surprise if there was anything other than a conservative win or should I say a Theresa May win rather the conservative win because that's what they're branding themselves at the moment it's Theresa May vote for me as opposed to vote for the conservatives and it's a subtle distinction but ultimately it's it's sound it's it's likely to be a fairly effective one given how toxic the conservative brand is in some parts of the current some parts of the country so looking looking at the outlook for looking at the outlook for the pound I think it's still broadly positive we are finding a little bit of a barrier at 130 but ultimately that is a barrier that I expect to be broken over the course of the next few days and weeks once again we are significantly overbought on the daily charts but we go back to this triangle breakout that I was talking about and have been talking about for several days and several weeks this triangle breakout here if we measure the minimum price objective and we're going to keep going back to this from the breakout point the minimum price objective is 133 so this triangular breakout took place over the course of a three month period ultimately what I would expect is over the next two to three months is for us to achieve that target so for me sterling still remains by dips I think it's only a matter of time before we break through 130 for that to happen we need to stay above this 127 56th area that we've seen I was seen towards the end of April that's the key support a little bit of a flag here we've broken higher we're still trending higher and we can actually probably drill into this chart here go on a four hour chart and potentially draw a line through the lows through here so let's go and do that right now take those lows there through those lows there and you've got a nice little upward trend line going through those series of lows from the beginning of April which brings us around about 120 128 80 128 70 there or there about so we could get a drift back down in the short to medium term on the pound but I think as long as we hold above 128 20 which was the lows that we saw last week then ultimately the bias towards the upside should remain Friday's payrolls numbers haven't really changed the calculus with respect to us rate rise expectations I think we'll still get one this year really the question is around the timing now if you look at the Bloomberg terminal the markets are pretty much pricing in a US rate rise in June well they're not pricing in is one in September and I would doubt that the pricing in one in December either I would expect to see one but I don't expect to see more than one we're already hearing President Trump talking about a government shutdown in September if that turns out to be the case the Fed's unlikely to raise rates in September so if they don't raise in June they're not likely to raise in September unless he rose back on his comments that the US could do with a good shutdown in September which is a rather dull thing to say for a sitting US president but there you go these are not normal times so really in terms of US rate rise expectations Fed officials are talking about the potential for two or three this year obviously we saw the one in March those payrolls numbers that we saw on Friday to me don't speak to another two rate rises simply because the wage growth that we saw was particularly disappointing if you're looking to raise rates what you want to be seeing is an increase in wage inflation and wage inflation actually showed a significant slowdown from numbers that we saw in March to from 2.7 to 2.5 so the last thing you want to be doing for an economy that's very consumer driven as as pretty much like the UK economy is the US economy is driven very much by consumption the last thing you want to be doing is tightening credit at a time when wage inflation is starting to slow down because ultimately you could have the unintended side effect of causing the very slowdown that you want to that you want to avoid so so for me at the moment the dot the dollar the dollar bull story needs to overcome some significant obstacles and one of which is this nice little move that we're seeing in dollar yen now i talked about this at the payrolls on the payrolls webinar on Friday this big resistance level around about the 113 area it also coincides with the cloud support on the ijimoku chart but also the trend line resistance from the highs that we saw at the beginning of this year for dollar yen to push higher and dollar yen tends to be a decent proxy of rate rise US rate rise expectations dollar yen to push higher we really need to gain a significant foot hold above 113 at the moment we're finding support around about 112 20 112 30 there are there abouts we could see that from this this the days lows here around about 112 39 112 40 we can drift a little bit lower from that but certainly if we look at if we look at these peaks here and these lows here we know that there's decent area of support between 112 20 112 40 so drop below 112 will probably be see a significant fall down to around about 111 in fairly short order because if you've got a long position in dollar yen where are you going to put your stop loss you're going to put it below this series of lows through here and this is basically what when you're looking at trading the markets this this is this is what it's this is what it's all about with respect to finding levels if you're looking to find levels then you're looking at the lows of the last two to three days and I would argue that the lows of the last two or three days here are around about 112 so you've got a potential double top on the two-hour chart through here so looking for looking for a breakout in this case it's fairly straightforward that's your channel of price action you can see a little bit of minus support around 12 112 40 but through 112 you've got a decent area of support potential double top in place and a break below 112 which could then signal a quick underpoint move down towards 111 as I say it's about levels and picking your levels and for dollar yen that for me I think is the trade at the moment trade the channel until such times you get a break and then trade the direction of the breakout okay so let's move on to the Aussie dollar which has taken an absolute hosing over the course of the past few weeks on the back of a selloff in commodity prices and I think this is the one key concern that I have about the the growth story and the rebound that we've seen in european markets over the course of the past few weeks all the focus has been on europe and the decent rebound that we've seen in PMI data in the euro area and and and obviously the UK it's been the slowdown that we've seen in the china data and we saw that I think born out in this morning's Chinese trade data it was still fairly decent in terms of the overall numbers but I think what was a little bit concerning I think from from my perspective on this is that when you look at the chinese import numbers there was a significant slowdown in the imports from the march numbers in march we saw a big jump in imports to 20.3 percent we still saw a nice little we still saw a nice jump in imports for april but it was half the level that we saw in march and exports were also half the level that they were in march we saw chinese exports for april rise eight percent they rose 16.4 percent in march so even though they were still in the positive territory there was a little bit of a slowdown and I think a large part obviously of that has been the sharp slowdown that we've seen in terms of iron ore prices which have dropped quite sharply and let's have a quick look at them on the balloon burg because obviously we don't have them here so if we look at iron ore here we can have a quick look at the slowdown that we've seen over the course of the past couple of months and we can see from levels of 95 dollars a ton we've come down to 60 dollars a ton in the space of two or three months okay you have to put that in the context of the rally that we've seen since the lows that we saw the levels that we saw a year ago but that is a significantly sharp slowdown on its own I probably wouldn't be too worried about it but when you also put it in the context of the declines that we've seen in copper prices since february again a sharp decline back to the levels that we saw towards the 200-day moving average and we're once again we're lower again today and the worst performing sector on the footsie 100 today has been the miners basic resources but also what we've seen in Brent crude prices as well we did see a nice little rebound on friday not really surprising when you consider the extent of the move that we saw over the course and we've seen over the course of the past few weeks but nonetheless the sharp sell-off in commodity prices over concerns about oversupply and slowing demand there is a concern I think that maybe we're seeing the the beginnings of a little bit of a slowdown or whether it's just a slowdown before a rebound as I say markets can give slightly slightly differing views of where we are but certainly I think in the context of this decline it is a little bit worrying despite the sharp rebound that we saw in oil prices on friday what does that mean I think for oil prices going forward well I think if we look at the march lows that was the catalyst for the sell-off that we saw last week so if we draw a horizontal line through there then I think for me we need to get back above this 50 dollars a barrel level and the 200 day moving average to suggest that we're not about to roll over on crude prices what is a little bit worrying I think in terms of the overall crude story is all the long-term indicators are starting to roll over as well so you've got the 50 day moving average starting to turn over the 200 day moving average is still positive but that could start to roll over the longer we're unable to get back above that 50 dollars a barrel mark that we've got that we've indicated here so that's Brent WTI tells a similar sort of story we're already hearing Saudi Arabia talking about extending the output freeze beyond the end of 2017 and into 2018 that in itself should be crude positive and it's actually not happening crude oil prices are actually down on the day now we could we could well recover as we go into the as we head into the middle of this week and the back end of the week but at the moment markets don't seem overly convinced that we can actually have the legs to move higher and that is a little bit worrying certainly if we look at the 50 day moving average on WTI relative to Brent that's rolling over even further so the outlook for commodity prices looks a little bit weak and that is a worry if you believe in the fact that commodity price is a parameter of the health of the global economy so the big question is is the data that we've seen thus far as good as it gets and at the moment the price action for equity market still looks fairly positive if we look at the US market in particular and the fact the S&Ps back around 2400 it's made new all-time highs on Friday in the wake of that payrolls data which was okay but it wasn't particularly great you know it's around about the average 200,000 what I find a little bit concerning about that payrolls data is the diverges between the march data and the data that we saw in April you can talk about whether related effects all you like but the weather related effects in March didn't affect the ADP numbers yeah they voted they affected the PLS numbers so US markets don't look as if they're going to fall off a cliff but again they still look quite richly valued if we look at the German DAX again we've got a significant potential for a little bit of a bit of a turn around here we opened higher but we've gone we've gone pretty much we've gone pretty much the other way so again I think the daily close here is going to be particularly important in the context of the overall short-term direction the long-term direction is still positive while we're above 12,400 but certainly this this candle here suggests to me that we could be in for a period of a sideways consolidation and we could have seen the highs in the short-term over the course of the of the next few sessions as investors get used to a new trading range for the DAX. FTSE 100 again we're back above 7,300 but this I think is going to be the key level for the FTSE 100 over the course of the next few sessions this trend line resistance from the peaks that we saw in mid-march if I can draw that line in there I would suggest around about 7,350 is likely to be toppy on the FTSE 100 I would suggest that we're probably near a short-term top on the Cat Caron and the DAX given the way those candles look as if they're playing out and the same sort of applies I think for the Euro 50 as well. Before I move on to other markets does anyone want me to cover anything that I haven't covered already if you do have any questions please direct them or please reply to the message that I'm about to send out on the chat right now so any questions please reply to this particular message that I'm sending out to you right now more than happy to answer any questions that you might have quickly look at gold seen a little bit of a rebound in gold prices and that's best basically because we've come off this key support area of 1220 that's acted as support in the past here you can see that I draw an awful lot of horizontal support and resistance lines here on my various charts and there's a simple reason for that I'm looking for areas of previous highs and lows that have acted as support and resistance in the past simply because they tend to be where the buy and sell orders tend to accumulate on any given market try to keep it as simple as possible okay so I'm being asked about sterling three week yep I'm happy to look at that that has been a significant outperformer over the course of the past few weeks but we do appear to be starting to trade a little bit sideways at the moment that there this candle here is potentially bearish what we haven't done at the moment is taken out the previous highs so I think in the overall context of the peaks at the moment I think we're potentially near a short term peak around about 189 but we're trading in a little bit of a trading range at the moment between those between those peaks there and these lows here so you've got the potential here for a little bit of a double top but at the moment we're trading a little bit of a range with support around about 185 60 let's try and see if we can determine some see whether or not we're overbought or oversold now slow stochastic that I generally tend to use is a 10 6 3 slow stochastic it tends to be less noisy than others this is a rather bespoke one usually you have 10 6 6 5 3 3 I use I tend to use a mixture of the two so we're going to use 10 6 3 just going to select to get a little bit of what I would call a little try and select the highs and the lows there yeah it's a 189 185 it looks like we're trading sideways at the moment certainly the bias on the daily suggests that the next move could be towards the downside but certainly on a four hour chart the likelihood is we'll probably we're probably we're probably near a short term base towards 185 60 so I would still be looking to buy the dip on sterling Kiwi while we're above 185 185 60 70 in the short to medium term is it head and shoulders too no not really but that doesn't really matter whether it's a head and shoulders too what's important I think in the context is of the measuring objective in how you do it there is no left shoulder on this so you've got you've got two you've only got two peaks with with a head and shoulders you need you need a mountain of price action which is above the shoulder on either side so oh you mean inverted head and shoulders well yeah but head and shoulders is a reversal pattern it can't really act as a continuation pattern so it's neither here nor there because ultimately when you break out of this you trade the break out and the break out the distance between the two levels here 188 90 and 185 60 would be your target to either the upside or the downside so whether it's an inverted head and shoulders whether it's a sideways channel breakout the description doesn't matter the measuring objective is what matters so ultimately if we break out of this sideways consolidation whatever you want to call it the measuring objective for your measured move is the distance between the two levels here and your stop loss then becomes if you break out to the top side your stop loss comes in inside the pattern and if you break out towards the downside again your measured move is 200 points to the downside with your stop loss back inside the pattern so whether you call it an inverted head and shoulders a double top breakout or just a channel breakout your measured move objective is exactly the same and so is your risk management so I hope hopefully that makes sense um quickly quick view on dollar CAD up in asked so yeah more than happy to do that that's being buffeted from a slightly stronger dollar and a weaker royal price at the moment this is the two hour chart on the dollar CAD looking a little bit better bid at the moment so let's have a quick look at that I mean I don't I don't think there's any question at the moment we're in a little bit of an uptrend there starting to turn a little bit higher what I want to see on this chart though is a break back above this little moving average here which is acted as a decent area of support until we break below it at the end of last week so looking at dollar CAD maybe looks to sell rallies back to 137 217 13740 because ultimately I think that we are very much given this daily candle here potential for a little bit of a turnover a weaker dollar a slightly stronger candidate over the course of the next few sessions but I would certainly look to be a little bit concerned if we went much above 137 30 137 40 because this daily candle is very much bearish which would suggest that we've seen a medium term top in dollar CAD in the course of the medium term so slightly bearish on dollar CAD in the short to medium term also being asked my thoughts on German bonds monthly divergence on bond yields a market's beginning to anticipate a position ahead of the table from the ECB this year I think that's a very fair question I certainly think with the Macron win expectations around German bonds would be for yields to start to come in certainly if we look at Eurobund here let's look at that how soft are yields at the moment we're in a little bit of a range on this so in terms of prices if I look at that there we're pretty much in a sideways range let's look at let's look at German bond yields so German tenure and we will look at that that one there we go to the line chart and it's pretty much a similar sort of story I think yields look toppy on German bonds and ultimately I would expect a rebound in prices sell off in yields back to around about 0.3 because looking at this I don't expect ECB expectations to change that much economic data has been improving in the euro area certainly in terms of French PMIs now you've been outperforming German PMIs but really I think it's a question of how you how you price in inflation expectations and certainly I think inflation expectations given the slide in commodity prices that we've seen over the course of the past couple of months are likely to feed in to a perfect excuse for the ECB to do absolutely nothing so while we've seen a little bit of a taper from 80 billion euros to 60 billion euros a month what you're going to get is the markets and are less likely to trade on yield expectations but yield differential expectations and that more than anything I think is likely to what's going to basically drive the euro going forward I see no evidence whatsoever and we're going to see a pickup in yields on German bonds you might see us you might see yields move slightly more on the shorter end than the longer end so if you look at two-year yields where two-year yields are minus 0.7 you might see a shift there but in terms of long-term yields I'm not entirely convinced that we're going to see a significant increase in 10-year yields over the course of the next few sessions you might see a change in the two-year more than you would in the 10-year so I hope that makes sense Dan seeing as you're the one who asked the question any other questions on anything that I haven't covered thus far okay all right well in that case I'd like to thank you all for turning up today if you do have any other questions that haven't occurred to you tweet me at mcusen underscore at mcusen underscore cmc on twitter and I'll try and answer them now obviously I can't give you advice but I'll certainly give you a view as to where the key levels are otherwise thanks very much for listening and have a good week trading thanks very much