 Good afternoon. Welcome to CMC Markets, this August Non-Farm Payrolls webcast on Friday the 5th of August. With me, Michael Houston, unfortunately, my colleague Colin Suzuki will not be joining us today because he's earned a well-earned vacation. Enjoying the Canadian summer, I would imagine. But before I get started, I have to display the obelisk tree risk warning, basically just outlining that nothing you see or hear today on this webcast should be construed as trading advice, directional or otherwise or indirectly. Go through the risk warnings for the various regions for the UK, now for the rest of the world and obviously Canada as well. And once we've got them out of the way, I can get started. Before I do get started, however, if any of you have any questions whatsoever about a particular asset that you are particularly interested in, then please feel free to use the chat facility, send a message, send a reply to this message that I'm sending out to all of you now and I will try and answer your questions as best I can. And certainly been a very interesting week. I hadn't really thought about this week's payroll as a number, pretty much until five o'clock last night because I think like a lot of people in the market, we were all preoccupied with the Bank of England rate decision and the potential outcomes of that. And they did certainly bring a surprise, they certainly caught me out. I didn't expect them to act in the way that they did and ultimately pretty much called it wrong. So from that point of view, when you do call it wrong, you just basically have to take it on the chin, dust yourself off, pretty much have another fresh look at where we go to next. One of the things I would say with respect to the decline in the pound over the course of the past 24 hours is that actually I'm surprised it's not an awful lot lower given how much the Bank of England threw at it. But now for today, this is going to be a pretty much a US dollar story. And certainly over the course of the past week or so, the dollar has taken a little bit of a nosedive. Certainly in the context of the dollar index, we've seen quite a significant decline in the US dollar on its trade-weighted basis over the course of the last few days. Certainly since mid-July we've come down quite a bit. And I think a large part of that can be attributed to the fact that first and foremost last week US GDP came in for the second quarter, came in much lower than expected. And I really don't think that's too much of a surprise given the weak payrolls number that we saw in May of 11,000. I think the US economy did hit a little bit of a soft patch in the early part of Q2. But then of course that begs the question as to where we go to next, because certainly I think in the context of some of the comments that we've seen earlier this week, certainly with respect to Charles Evans, we've certainly seen the Fed still try to make the market think that it still has a rate hike in its sights sometime this year. Unfortunately for the Fed the market doesn't believe it. And in that context I can give you an indication of the market's thinking as to the probability of a rate hike over the course of the rest of this year. This is my Bloomberg terminal that I've got in front of you here. And this is WIRP, which stands for World Interest Rate Projections. I've just seen a question and I will answer that on the end in the Swiss franc in the normal course of my deliberations. I haven't forgotten you. I will get around to you. Going back to the US dollar and the prospect of a rate rise or otherwise, prospects of a September rate rise are now down at 16%. Now that's really low. I mean that's the lowest it's been for quite some time. No one I think really expects the Fed to hike rates in September in any case, in the aftermath of what I would call very disjointed economic data. Certainly the jobs report for June was way better than the jobs report for May. So the big question there is which one is the outlier? Is it the May number or is it the June number or is the truth somewhere in between? And in that context I think today's jobs report will probably give us some indication. The three month average for US jobs is around about 148,000. So if we get a number round about that in that sort of area then I think really we're not going to see that much of a reaction in the US dollar. If we get a number in excess of 220,000 or 230,000 jobs then we could see the dollar go higher. Will it also the calculus with respect to a rate rise? I'm not sure it will because we've got the presidential elections coming up and the twoing and froing between Hillary Clinton and Donald Trump and I think in that context it's going to make it very, very difficult for the fair to even contemplate raising rates but there's a more important factor at play as well. The fact that the Bank of England cut rates yesterday for the first time in seven years has now created never bigger divergence in global monetary policy. Certainly two years ago everyone was expecting the Bank of England to be one of the first central banks to hike rates. Now they're probably likely to be one of the first central banks to cut rates even further over and above what they already done yesterday. With the ECB also likely to remain in full easing mode it's going to make it very, very difficult for the fair to diverge away from those two central banks particularly when the Bank of Japan is also looking to ease monetary policy. The last thing the Fed wants is a higher dollar. So I think your perspective of what these numbers come out at today, the Fed is unlikely to be raising rates by the end of this year. It certainly won't be before December. It'll be December at the earliest. That's not to say that we won't get a very negative or positive dollar reaction in the event that we get either a disappointing number or a very positive number. But in the context of the overall rate debate I think the actions of the past month or so with respect to the Bank of Japan, with respect to the European Central Bank and with respect to the Bank of England the calculus has shifted. The calculus has shifted away from a potential Fed tightening to just a Fed holding still. And I think that's something that will probably be a continuing theme or a recurring theme over the course of the next few days, weeks and months. Now I'm just basically pulling these up because we've also got the Canadian Jobs Report which is equally as important to our Canadian clients as it is to all of our other clients. So I'm just pulling these over here. Now when we look at the jobs numbers I'm particularly interested in terms of how good or bad the market seems they are. The best barometer for that and Colin and I have talked about this before in lengthy, lengthy detail. The best barometer of a good or bad jobs report and the market reaction to it is Dolly Yen. And the question that I was asked a few minutes ago is why are the Yen and the Swiss Franc such safe haven currencies? Well ultimately you look at the Yen, the reason the Yen is a safe haven currency is ultimately because all of its domestic debt, its private debt or public, government public debt, it's domestically owned which basically means that Japan never has to worry about the kindness of strangers in funding its external deficits. Ultimately it will always be able to print enough JGBs to pay out and also the carry is very, very low. So this is a similar sort of thing for the Swiss Franc. The Swiss economy is not in bad shape despite the fact that they have negative rates. The reason they have negative rates is they want to stop people from putting money into the Swiss Franc and it's the same thing with respect to the Japanese Yen. You've got that situation whereby they're not running massive current account deficits. Neither country is doing that so they don't have to rely on external funding and that's why their safe haven currencies and that's why the pound isn't because while Japan and Switzerland to a certain extent run current account surpluses and not all the time, the UK runs a massive current account deficit and as such that's why the pound is never really treated as a safe haven currency in the same way as the Swiss Franc or the Japanese Yen. So hopefully that answers your question. Moving on, I think really the key question now is what are we going to be looking for with respect to a market response in terms of the overall market reaction? Well I get this feeling that equity markets are starting to look a little toppy. Now it may be not a view that you guys share but I'm certainly looking at the FTSE 100 which has really outperformed pretty much every other index over the course of the past few weeks and this is a chart that basically I prepared earlier and we can see that from the lows in June we've gone 1,000 points trough to peak. Now that suggests to me that we could be starting to get a little toppy. 6,800 is going to be a very, very big barrier on the FTSE 100 and I think we're only really going to see a move above that if the cable rate moves below 130 and a half or 130 we could see a test hire on the FTSE 100. So why would that happen? Well that could be as a result of potentially a weaker pound, a stronger dollar. So a potentially good payroll number could push the dollar higher. The dollar is a little bit weaker at the moment pretty much across the board. You've got cable at 131.5, you've got your adult 111.50 and you've got dollar yen 101. It's a similar sort of story when you actually look at US markets because while the FTSE 100 is continuing to make new multi-month highs we aren't getting what I would call a little bit of a tapering effect on the S&P 500 and the Dow. We're really, really struggling to make new highs but by the same token we don't look as if we've really topped out quite yet. What I would say is the key support on the S&P is around about 2135, 2137. So if we do drift lower and we don't get back above this line around about 2175 then I'm looking around about 2135 to contain any falls back. At the moment we were looking as if we were going to open higher. We're starting to taper off a little bit in terms of the S&P 500 and the Dow Jones. It's pretty much a similar story here. The Dow is probably more pronounced in terms of its declines probably because it's much more heavily weighted towards much more bigger cap stocks but again there does appear to be a little bit of a potential for a little bit of a rebound here maybe. Maybe we've seen the lows. Certainly decent support between the lows that we saw earlier this week and the highs that we saw in April. Moving on to the German DAX very, very quickly. We can see from this chart here which I've drawn that once again since we peaked in 2015 we are struggling to make headway from that downtrend line that we saw from the peaks earlier. We did have a little peak above it but if we look at the April peaks here around about 10, 480 there's a big, big top around that sort of area which equates to the Euro stocks 50. Similar sort of peak here. So again this is a correlative chart. I look at the correlations between the two. This is slightly different here. We did open above this at the beginning of the week where we've come straight back down again. So again the direction of travel does appear to be a little bit of weakness. If the Euro goes up that's going to constrain the upside on European equity markets but again here what we've got is very, very difficult to make a case for Euro dollar one way or the other at the moment. We appear to be in a broad range and have been pretty much since the end of June beginning of July. Bit below 110 offered above 112 which is pretty much where we are now but it's a similar sort of thing for the pound against the dollar now. This is a chart that I was looking at a while ago. This is a four hour chart of cable and this is the pattern that I was talking about in terms of the trend line higher which we broke out of yesterday when the Bank of England eased monetary policy. However what we haven't done is we haven't broken out of these series of lows through here around about $130.50. So a decent payroll number could see a test of the lows at $131 yesterday. We are very oversold. We could go to $130.50. If we go through $130.50 then we could go even further back towards the lows but otherwise while we're above $130.50 I'm still of a mind that we're in the range that we've been in since the beginning of July and are likely to continue to do so. Dolly Yen, similar sort of story here. We've got big, big support just below where we are now, around about $100.60, $100.70. We can look at that on the 15 minute chart. Actually let's look at that on the 30 minute chart and that gives us a better indication of where we are now. As I say, as long as we can hold above this area of support where we found support on a number of occasions then again a disappointing number could see us and we're off. The numbers are off, 0.3 average earnings, 255 non-farm payrolls, down 31,000 for the Canadian employment report so that's bad for Dolla CAD, not a good number for Dolla CAD, 4.9 on the unemployment rate. So yeah, very positive number for the dollar there and we can see that straight away in Dolly Yen. Now the big level that I'm looking at in Dolly Yen is the highs that we've seen earlier this week around about 101.70, 101.80. We've found significant selling interest through that area throughout the week so we need to be very, very careful about looking to buy into this move higher because while 255 is a good number, we have to be aware that there could be some revisions to those numbers so I'm just going to quickly check out the revisions for the non-farm payrolls numbers to make sure that we haven't been given or haven't been fed up up there and the revision is higher in the June numbers to 292 so we've gone from 287 to 292 in June and we've got 255 in July and average earnings up 0.3 so that's mildly dollar positive, certainly mildly dollar positive. Let's look at the annualized number for that. It hasn't moved the annualized number however that's only 2.6 so these are positive numbers for the US dollar. Does it move the dial in any way in terms of whether the Fed hikes rates in September? For the reasons stated previously, I very much doubt it. So we're going to move that dolly in chart to one side. Bear in mind we need to keep an eye on the peaks through 101.65, 101.70. Keep an eye on that because it's going to take quite something to move us back through that. If we do go back through that then we could go quite a bit higher back towards around about 102, 102.5. Let's look at dollar CAD. Probably won't be surprised to see a chart move higher there and that's exactly what we have seen. But again we've got several areas of resistance on the one hour chart in dollar CAD here just above the levels that we are right now. Certainly I think we could see some selling interest around those sorts of areas. Let's draw that in, 131.50. Let's now redraw it for an hour to see if we can get any further idea of trend. We've got, if I can just keep my hand steady enough, snap that to the high. We've broken the downtrend from the peaks that we saw in late July. The question now is whether or not we can break these series of peaks through here between 131.40 and 131.50. Certainly in terms of the slow stochastic there's certainly potential for us to move higher in dollar CAD on the back of that particular move. Whether we'll see it today, that's potentially doubtful. We're coming into a weekend so we may see a little bit of profit taking given where we've come from over the course of the past few days. We're pretty much back where we were at the beginning of the week, slightly positive, but no more so than that. Obviously that number is not going to be great for goal prices and that's reflected in this particular move here. But again, if we look at where goal prices have been for the past few weeks, it's always been toppy around about 13.60 and a little bit bottomy around about 13.10. I don't expect that to change. One thing I do think at the moment is that oil prices may well have potentially found a little bit of a short-term base despite the fact that those numbers are fairly positive. If we look at the way crude prices have reacted over the course of the past week or so, we can see that the slow stochastic indicator is starting to turn positive. But more importantly, if we zoom in here, we've got a bullish engulfing day and that generally tends to be quite positive. What we need to see now is a break above this level on the WTI around about 41.60. We may well get that when the rig counts come out later today. They've been rising over the course of the past few weeks and that's helped drive the oil price down from the highs that we saw in mid-June down almost 20% at one point. But we've still bottomed out around about this dashed line here. This dashed line here is the 50% retracement of the entire up move from the February lows to the June highs. Now, we've got the 200-day moving average. We've got the retracement there. We've got a potentially bullish reversal here. We can fall back here without negating that bullish reversal. But what I want to see really is a break of this series of resistance levels through here. We can zoom in on that. This is the way that I always analyze an awful lot of my charts. I drill down into the short-term detail after taking a top-down view. The top-down view here is that we've got series of resistance levels pretty much all the way just above where we are now, around about $41.80 and looking for a breakup through those levels to head on towards $42.50 and $43. We're going to see if that correlates with Brent crude because another thing about oil prices, I always try and look for a confirmation with respect to Brent prices and WTI prices because for me that's very important. You need confirmation of moves on both sides of the equation. I've looked at Brent crude and as we can see here it's a fairly similar sort of story. We've oscillated around the 200-day moving average. We have dropped quite sharply, but again we've got this bearish reversal here. Now we don't have the definitive line through the highs or the lows that we had on the WTI chart. That's not as important. It's important to a point, but it doesn't define what I think, but if I drill down again into the four-hour chart I can automatically identify a potential turning point and turning point on Brent crude is just above $44 a barrel on our cash contract. On the cash contract around about $44, so what I would want to see for a break higher on oil prices is for Brent crude to break out through $44 a barrel and the WTI to break out of its resistance level at the same time and that in turn should take both prices higher and hopefully that will then push prices up towards this sort of area here which is around about $45 a barrel which had up until the end of July supported Brent crude prices. Let's quickly look at Euro-sterling because this Euro-sterling chart is actually quite important in the context of sterling direction as well. This is a four-hour chart that I'm looking at here. It's looking very overbought, but if we look at these series of peaks on Euro-sterling all the way through 84, 90 and 85 we can see that this particular level on Euro-sterling is very, very important. It's something that I have highlighted on a fairly regular basis on my chart forum posts throughout the course of the week. On the right hand if you click on chart forums whenever you look at your charts if you want to see any analysis of a particular asset then we're not going to do all of them but certainly my colleague Jasper and I do fairly regular updates on some of the more popular products that we do. This morning's update I basically stated that we saw a sharp rebound yesterday from the 8360 level obviously down here. We've again run out of puffs at around about 84, 90, 85 and this for me I think is the key level. If we want to get back to these highs that we saw in April which you could also argue corresponds with the 128 cable lows then what we really need to see is a break through these highs here. Otherwise the risk management trade here is to sell Euros and buy sterling with a stop loss above this resistance level here. That's the effective risk management strategy rather for Euros sterling. Certainly we've seen it try and get through that 84, 90, 85 level four or five times over the course of the past day or so. It's not to say that we won't get it to do that but what I've seen thus far we've seen a lower low there and a lower low there. We could see another test hire but ultimately the low risk trade in terms of losing money relative to your potential profit which is a move back down here, the odds favour a short-uro trade long sterling trade if we get back towards 84, 85, 84, 90. That's essentially how I manage my risk the whole time. I wait for the market to come to the levels that I'm comfortable with and then trade accordingly. Now looking back at the sterling dollar we have broken the lows that we saw yesterday which now brings these series of lows here into focus and this really for me is the next key tipping point for the pound against the dollar. If we break this low here then I think it's quite likely that we're probably going to see a move back towards the lows that we saw in early July and we can see that reflected in the way that the euro sterling peaks were. The only difference here is this is a dollar move as opposed to a sterling move because we're not seeing an equivalent move in euro sterling. We're also seeing euro dollar fall a little bit lower as well simply because it's a dollar move but again we've got a series of lows through here around about the 25th of July that could well provoke a little bit of a rebound if we get there around about 110.60, 110.70. Again it's just breaking it down, breaking the currency pairs down and looking at key support levels, key resistance levels, looking at where the market's found support in the past, looking at where it's found resistance in the past trading accordingly. If I break this chart down here it's a similar sort of story if I just draw the line through the lows there, helps if I draw it in the right place but we can see straight away around, there has been decent support around about 109.50, 109.60. Again you're managing your risk once it gets to within a few pips of a certain level you can put on a fairly low risk trade with a fairly tight stop loss because you're taking a view that if a market has found resistance of support at a previous level in the past there's a good chance it'll find support or resistance there in the future. And ultimately for me it's no more complicated than that. I don't tend to overburden my charts with too many lines. Sometimes I get a bit lazy about not taking lines off when I'm not using them anymore but ultimately what I try and do is I try to keep them as clear and uncluttered as I can. Now you can argue that this chart does look very, very cluttered and who am I to argue? But certainly in the context of where we've been over the course of the past few days and weeks this chart's really got very, very few areas of support or resistance on it. It's trading in a range and we can see the bottom of the range and we can see it very, very clearly here as well. If we extend this line to the left that's the post Brexit referendum lows. So it spikes lower but we pretty much close a long, long way away from where we actually traded on the lows. Pretty much up where we are now around about 110, 111 even, 110.5, 111. So it's not really painting a particularly inspiring story but certainly I think in terms of where the line of lease resistance is on Euro dollar it does appear to be edging ever so slightly lower. I'm certainly borne out by this 50-day moving average here because if we look at the way that it's behaved over the course of the past few days it's found support, support, close below it, resistance, resistance and now we're retesting the 200-day moving average which is pretty much just below the, which is just below that line that I drew in a few minutes ago. So the moment we're trading in a corridor on Euro dollar, the bottom of that corridor is around about 110.5 and the top of the corridor is around about 112. And that's why I keep those moving averages on there. I tend to disregard them when I change to a four-hour chart. The only time I have these moving averages on a chart, 50 to 100 and 200 I only look at them in the context of daily and weekly charts. Other than that I ignore them. So even though they're on my four-hour chart, I don't really take that much notice of them. Right, before I finish up, a couple of things to look forward to next week. We've got Chinese data out next week so that could be fairly important in terms of risk appetite. But certainly in terms of where we are now, if Chinese data disappoints next week then certainly I think there's a distinct possibility that we could see further fiscal stimulus from the People's Bank of China. And that could certainly help, I think, keep a certain amount of a certain bid bias to equity markets going forward. Again, just reiterating on the main indices, keep an eye out on that 6805 level on the FTSE 100. I think it could struggle to get through there. I think we could certainly have a look at it. It certainly feels like it wants to go there. And it's a similar sort of story, I think, for the S&P. I think he really wants to try and have a go at these previous highs that we saw earlier today. So I think for the rest of the day we're going to see a fairly positive dollar story. We're going to try and push lower. I don't think we'll have the impetus even to push lower. But as we head into the end of the trading week, another thing to keep an eye out for next week is also the latest manufacturing and industrial production data for the UK for June, because that could give us an indication as to whether or not we'll get a downgrade to Q2 GDP growth for the UK, which came in at 0.6%, which I was actually quite surprised by. I thought we'd come in a lot better than that. But if we get disappointing prints on Tuesday from June industrial and manufacturing production, that could actually feed into the overall dovishness that we've seen over the course of the past day or so. And potentially way on the pound. Really I want to see a move back above 132 on cable to really make the case for a move back to the highs that we saw earlier this week. But ultimately I don't expect to see a move much below 130.50. And I think we'll continue to range straight between 130.50 and 133. Okay, so I'm pretty sure I've covered everything that I've hoped to cover. Before I finish off, ladies and gents, is there anything else that you would like me to cover? If not, I'd like to thank you all for your attendance today. And look forward to talking to you on Monday, or my colleague Jasper on Monday, where he will be hosting his weekly look at the markets at 12.15 on Monday afternoon. All right, being asked about Stirling Yen. Yeah, actually that's a very, very good point because I talked about Stirling Yen in a previous chart. A few weeks ago we saw a very nice bullish reversal on Stirling Yen and ever since then we've pretty much gone lower. I'm a little bit concerned about Stirling Yen at this point in time. It does look a little bit soggy. But I'm still of the opinion that what we really need to see now, I think on Stirling Yen, now that we're below 133.75, the bias remains I think for a retest of these lows here. But if we get back and hold above 133.75, then I think potentially we could go back and retest 135.140. At the moment I'm a little bit undecided about where we go to next. We broke below this series of lows through here at 133.75 and we've now traded sideways. My biggest concern is we drift lower and that certainly is a concern now that Cable is looking as weak as it is. And I think there is also potential that unless Dolly Yen gets back above 102 or those highs that I talked about earlier today, 101.60, 101.70, that it could drag this lower. So I want to see this get back above 133.75. Otherwise I think there's a good chance we could drift back down again. Good question. Why don't I pay attention to moving averages on shorter timeframes? The reason for that is because ultimately on shorter timeframes they're much less effective because there's still a significant lag. Moving averages by definition are lagging indicators. Shorter term time frame charts, I tend to want a quicker reaction or a quicker response time. And because moving average is lag, obviously it really depends on the moving average time frame that you use. But let's say for example you use a 10 event or a 20 event moving average, you're going to have a lag of at least two or three candles or two or three bars before you get any potential idea of a turnaround or a change in trend. So moving averages are all well and good, but they are a lagging indicator and I think that support and resistance levels are much more effective because they're certainly much more immediate. You can identify them straight away. Whereas with a moving average, you need a little bit of a sideways range to start to trade before you start to get a downward sloping moving average, start to turn into an upward sloping moving average. Does that make sense? I'm hoping it does. Perfect. Okay. All right. Well, I will be posting this on YouTube later today. But otherwise, thanks very much for listening, ladies and gents. And if you do have any questions about any of what we've discussed, you can find me on Twitter at mHusen underscore CMC. Otherwise, thanks very much for listening and all of you have a great weekend.