 Good afternoon, ladies and gentlemen. Welcome to this non-farm payrolls webinar on Friday 84th of March 2016. Welcome. My name is Michael Houston. For those of you who don't know me, I'm going to be co-hosting this presentation with my colleague in Toronto, Colin Suzinski. Say hi, Colin. Good morning, everybody. I just have to do a little couple of housekeeping rules first and foremost before we get started, namely the risk warning. So anything that you hear from Colin or myself is not intended to be direct trading advice. There is always a risk trading financial markets. Markets can go up as well as down, all of that sort of stuff. But ultimately what we will try and do is try and give you a steer as to how to interpret the numbers. And I think that more than anything I think is what markets are looking for today. We've seen a significant rebound this week. In fact, over the last three weeks we've seen some fairly decent gains in global stock markets from those February the 11th lows. And now ultimately what we really need to decide I think is whether or not these gains can be sustainable because certainly from what we've seen thus far it's been very, very tricky to gauge whether or not this is what I would call a little bit of a bear market rebound or whether we're actually at the start of another bull market. So first and foremost before we do get started let's look at the headline numbers and let's look at what markets are looking to price in. Because at the moment we're looking for a number in the region of 190,000 for non-farm payrolls which is this number here. Now last month we saw a significant miss. We're expecting a number in the region of 225,000 and we came in 151. Now I'm expecting a little bit of a revision higher and I think my colleague Colin is as well. And I'm going to pass you over to him so that he can articulate as to why he thinks is going to be a little bit of a rebound. I've been doing a lot of research into January and February and what happens with non-farm payrolls between the two months. And I've looked back to the turn of the century and the one thing that's come out of it is that January and February are consistently inconsistent. You don't usually see a strong number two months in a row or a really terrible number two months in a row. You usually get one bad and one good. And we had some weakness in January and we had a big storm in the U.S. in January and February, I still think we could get a bit of a bounce here. The weather through most of North America was pretty good in February. Thanks to El Nino, it's been a pretty nice winter here overall. So I do think there's potential for a bit of a rebound in February plus some of the U.S. economic numbers that have come out over the last little while have been reasonably good as well. So I think we could get a bit of a bounce here. I'm looking for a number of 220 which is a little above the street at 190. I'm also thinking we'll get a 20,000 upward revision to January. In terms of looking at the numbers and how I think markets will react on the headline number, it's important to remember the Fed has split itself into three factions over the last four weeks, six weeks or so. You've got the other side that's looked at a lot of the numbers that have come out and said, well, gee, the things aren't going as well as we thought. Maybe we better hold off on raising rates further. Then you've got the hawkish side that says, well, this is what always happens when we start raising rates to the blow over. We should stay the course. And then you've got a larger group in the middle that's kind of saying, well, let's see. We'll look at the data and see what happens. Well, this is one of the last big data points before the Fed meeting on March the 16th. So this is a key one for them and to see which way we'll go. So my thinking is below 100, definitely you're going to see a rate hike get put off. Above 250 makes a rate hike in January emerge much more likely. And somewhere in the middle leaves the whole thing mushy and murky is how I'm seeing it for the headline number. And Michael, you had some thoughts on the wage data? I did. I think the headline number is neither here nor there. I don't think it's really going to sway the argument one way or the other. The unemployment rate's already below 5%. It's a 4.9. I think it's the wage data more than anything else that Mark is really going to focus on the average earnings data. And in January, we saw an annualized up to 2.5%. But more importantly than that, we also saw the monthly rate jump to 0.5%. And that's borne out by the market calendar data items that we've got here. And in particular, this particular number here, average earnings month on month, they jumped from 0.5% in January. Now the reason they did that was similar sort of thing that we had in 2015. A lot of US states raised their minimum wage by a significant amount. But ultimately after that, wages then started to slip back. So what I'll be looking for from this month's numbers is to see whether or not we get a monthly move higher of the same sort of magnitude that we got in January. I suspect we won't. People are speculating about a March rate rise being on the table. I think if it is on the table, it'll be gathering dust. I really do not think that the Federal Reserve will risk raising rates in March given the volatility that we've seen over the last three months. Having come off a rate rise in December, we've seen a massive yo-yo bounce in markets. And at the moment, I think the Fed is going to be very, very cautious about feeding into that. And certainly given the comments by Mr. Dudley of the New York Fed, who's a governor and a permanent voting member, I don't think he's going to find it that difficult to get other FOMC members on board with respect to delaying a rate rise. Certainly, Lael Brainard is another dove. Janet Yellen is fairly well aligned with Lael Brainard. And ultimately, I think whatever the number is, it's likely that the Fed will hold off a rate rise until June at the earliest. I know Mark is surprising out a rate rise pretty much to the end of the year. I think it pays to be a little bit cautious about that. I still think the dollar's topped out. And we can't forget that we've got an ECB rate meeting next week. And the Draghi or certainly ECB policy makers that have been playing down the prospect of a shock and awe type response when they meet next Thursday. And I think that could actually lend a slightly positive bias to Eurodollar. But let's talk about the headline number and what a good number and a bad number would give in terms of the overall dollar reaction and stock market reaction. So I'm going to start with the S&P. I know Colin has got a particular interest in that as well. But certainly we are at a very, very key level in the context of the S&P. We're just below that 2000 level. Now look at that 2011 level. How well this level active is support on the way down around about 1995-2000. We've seen this is a daily chart we're looking at. The oscillators very overbought. Doesn't necessarily mean we can't go any higher. But I would certainly say the bias here is more to the downside than the upside. Let's not say that we can't hit the 200 day moving average, which currently sits here at 2020. But ultimately, I think it's going to be very, very difficult to see a significant rebound through this 2000 level. Having said that, this pattern here, we've seen a significant breakout in the S&P. And certainly on the basis of this potential double bottom, we could well go higher. But ultimately, there's going to be a massive area of resistance through this area between 1995 and 2000. And I think if you do fail at 2000, you'll probably get that retest of that breakout point. That is a classic base building pattern there, that double bottom. And something we have seen across the markets was that the base building patterns that have come in over the last month or so have been pretty strong. And they've been across a wide variety of markets. You'll see them in copper, you'll see them in S&P, you'll see them in oil, and you'll see them elsewhere. And it's a matter now of, are the markets ready to go up out of this? Or is this a false thing where we're going to see them roll back over? What will be key is which way does the S&P go out of this range? Up over 2000, you're looking like a fairly good move to the upside, at least in the 200 day downside. Pull back today, you're looking at a retest of that breakout point. So what's going to drive that? Well, at the moment Brent Crude and WTI have been driving it. So let's look at Brent, because we've seen a significant breakout on Brent prices, and certainly the bias does appear to be towards the upside. We've broken that downtrend line from the October highs, and we can see that there. And now we are trending quite a bit higher. The thing that bothers me about this particular pattern here is it looks like an ascending wedge. And yes, we have broken higher, but ultimately we've got to be looking at the next level of resistance, which is round about these peaks here. So you're looking at around about $38, $39 a barrel on Brent. Certainly if you look at it on a weekly chart, again we've seen a significant move higher, third successive week higher. Certainly the momentum does appear to be with Brent. So what's going to drive Brent higher, a weaker dollar? Because I can't imagine that it's going to be anything else. I suppose it could be a decent payrolls number, but a decent payrolls number could actually give us a stronger dollar because of the prospect that it brings a rate rise ever closer. So there's an awful lot of moving parts in the context of this particular move. And one thing that does bother me ever so slightly about this particular move higher in equity markets is gold. If risk appetite is returning, why is gold breaking up? And let's look at gold. It's starting to tick lower a little bit at the moment. And to my mind it does appear to be a little bit toppy on that basis, but certainly I think you've got a view on gold, don't you Colin? Yeah, this seems to me, I'm really curious to see how gold reacts today because I've been trying to figure out, is this a real breakout or is this a buying climax? As you can see the stochastics are showing overbought. We've broken out to a new high, but at the same time now we're seeing it, we are seeing it start to drift back a little bit. Could we get a key reversal day here? Or are we going to get confirmation of this breakout? And it's really interesting because gold has been acting on a couple of things. That first big rally up in January was a lot of that was driven by defensive flows off the market volatility. But since then we've seen, the end did too, but since then we've seen the NP can start to go back the other way. Gold has been climbing, gold broke out of a symmetrical triangle, which is a consolidation pattern. It's broken out over its previous high, which was 1262. If it holds that it confirms the breakout. If it starts falling back under that or back towards 1250, then you've got a buying climax and a key reversal and this whole thing could start to roll over. So we're keeping an eye on that today. The other question I've been asking myself is with gold is relative to the US dollar. How much of this move was weakness in the US dollar? If it's US dollar driven and gold's going up, that means people are expecting a poor note, they're expecting no rate hike in March. On the other hand, is this being driven by the fact that you've got negative interest rates in Europe, negative interest rates in Japan. And with the exception of the US dollar, the world's pretty dovish out there. And has that taken over again? Because there was a few years where gold traded more related to the euro than the US dollar. Then 30 year and a half ago, it went back to the dollar. So there's a number of factors at play in the gold market. We'll be watching play out as we go through the data today. And just we've got two minutes to the thing. So I just wanted to tell you one thing. We've got a big discrepancy between bond markets and currency markets. Bond markets as Michael said are pricing in no rate hike this year. Currency markets are pricing in multiple rate hikes this year with the US dollar still sitting just below 100 on the index. And at some point, you're going to see some kind of adjustment between the two and probably a fairly violent one. And so it's possible that this is one of the things that could drive that would be the how the markets respond to today's payrolls report. Okay, so let's quickly have a look at some of the key levels on cable and euro dollar because I think there's a potential for a little bit of a cable turnaround. And certainly a sterling turnaround, particularly against euro sterling. Big level on the top side on cables 142, 2030. Why do I think that? Simply because it was a significant area of support on the way down. But also it was the May 2010 lows. Certainly the move that we've seen off the lows thus far this week does appear to suggest that potentially we could be near a short term peak and it's going to take something quite significant to push us through 142 30. So I think the risk is more to the downside than the upside in cable. Similarly, I think in euro dollar that's not to say that I don't think it's going to go higher. But what I do think is that because we're so close to a number of key moving average resistances, I think a positive number, a positive dollar number, so a positive non farm payrolls number could provoke a little bit of a sell off in euro, a little bit of a sell off in cable. But ultimately it really depends on the number. But I think given the gains that we've seen thus far in euro and sterling this week, I think the bias is for a little bit of a pullback in the interim before a push back higher again. So the support level is on cable. I'm going to be looking at around about 140 80, which was the breakout level on the way back up 140 80 90. And on euro dollar around about 109 20 dolly and similar sort of thing here. We're in a range in dolly and it's difficult to say which way we're going to go. But a positive dollar number should see dolly and shoot higher to back towards those highs around about 114 90. And on the downside, potentially good support around about 113 and a half. But there is potential that it could be forming a double bottom on dolly and I'm not convinced that it is. But ultimately, given where we are at the moment, the bias doesn't appear to be more to the upside than the downside simply because we're in a little bit of a range. And we are near the top end of the range. And we're starting to squeeze higher already ahead of those numbers. So keep an eye on the headline numbers 0.2 for average earnings. Below that is going to be negative dollar 190 K non farm payrolls and 4.9% the unemployment rate. And look at our average earnings. That's really bad. But look at the non farm payrolls 242. So that's fairly good number. But it's the payrolls number. This is the average earnings numbers. And look at the way dolly ends just spiked up on the headline payrolls. But we're back down again because those average earnings numbers are disappointing. And I think that's going to be dollar negative. That is what markets will focus on. And that's essentially I think what is happening at the moment. A lot to digest at the moment. Unemployment rate is at 4.9. 242. It's the previous I think that I've done about the revision there. I haven't seen a revision to the 20 key upward revision to 172 Michael was 172. Thank you for that Colin. No problem. So so all in all the headline numbers for the payrolls fairly positive. But those average earnings numbers I think could well cap any upside in as a dollar certainly in the context of any decision that the Federal Reserve make with respect to an interest rate rise. I think they're still going to be concerned about the lackluster nature of wage growth. And as I suspected the spike that we saw in the January average earnings number was not sustained into February. Certainly we're going to have a look at the upside in dolly end. But I do not think that we will find it able to sustain a move higher. So it doesn't suggest to me that we're going to be anywhere near close to a rate rise at the moment. And certainly the bomb markets are reflecting that even if the FX markets aren't at this point in time. So got a little bit of a sell off in the euro dollar. Not really too much of a surprise. Overall I don't think it changes too much the outlook for a weaker dollar long term or in the medium term. But at the moment when we look at the 4-hour slow stochastic I think the bias for the moment it does appear to be towards a move back to the mid-108s before another leg higher. I would be very, very surprised if we sunk significantly below the lows that we saw at the beginning of this week. But certainly on the basis of this chart here I think this more likely will see a drift back down in euro dollar. But as far as interest rate expectations are concerned I really don't think that it shifted the dial that much. And don't forget we also have the ECB rate meeting next week. So I think that is also going to weigh on the upside in the context of euro dollar. So 1-10 on the upside euro dollar I think will probably drift back down. Similar sort of story with respect to cable. Let's have a quick look at Aussie dollar because I think that's particularly significant in the context of the rebound that we've seen in the commodity sector. And we have broken above the 200-day moving average which actually is a fairly positive development. And we've also broken above these series of peaks through October and November. So there's definitely a positive development in Aussie dollar in the context of the commodity price rally that we've seen over the course of the past few days and weeks. And overall I think looking at this particular chart here again it's going to be particularly difficult to sustain a significant move higher in the short term. But overall what these all these charts tell me is that this dollar I think is likely to continue to remain weak and potentially it's probably a sell on rally story for the US dollar as opposed to buy on the dips. There's another factor weighing on my view with respect to dolly yen. I think dolly yen can go an awful lot lower over the course of the next few weeks and months on the basis of this chart here. And this is something that I covered in a video a few weeks ago. We broke out of a very long term uptrend earlier this year. Broke through this neckline at 116, 115, 95. And if we project downwards that really brings us all the way back to 106. But we have to put it in the context of this move took place over the course of a 12-month period. So over the course of the next 12 months I think it's entirely possible that dolly yen can go back to 106. So what does that mean for the overall outlook with respect to the US dollar? It suggests to me that the US dollar is likely to remain slightly softer. And the only thing that would basically make me change my mind about this particular lower dolly yen view is a move back through 116 on a weekly basis in dolly yen. Also what we're finding here is finding an awful lot of resistance between 115 and 116 as well. So I would expect to see more sideways range trading over the course of the next few days and weeks and for dolly yen to drift lower as we head towards the end of the year. And let's not forget we've got the US presidential election and all the fun and games that goes with that. And ultimately that's going to I think weigh on the dollar as well. Because if you've got a fight between Hillary Clinton and Donald Trump then I think the attractions of being long of dollars may well start to diminish somewhat the closer we get to the November story. So all of those political factors are likely to weigh on the dollar over the course of the next few weeks and months. Before I move on to some other charts is there anything that you guys out there would like me to cover for you in the short to medium term? Otherwise I will move on to the DAX. Again similar sort of story here. What we're looking for is a significant resistance, test of this resistance level around about just below the 10,000 level. So we've got this level here, put that in there, put that in there. Looks like we're trading around about 9,905. So that's a bit of a level there. Let me just remove that because I missed that high. You know that's not quite perfect but that's actually looking a bit like a reverse head and shoulders there isn't it? It is, yeah, yeah it is. So again it's a similar sort of potential reversal pattern on the DAX on the Germany 30. We just had a quick pop above 6,200 on the FTSE but we've come back below it again. Let's look at the previous high there. We had a little bit of a flotation with it earlier this week on the future at 6,212 that happened in the Asia Trading Session for the FTSE. So again it's having a little bit of a look at the top side there but again be aware that the 200 day moving average is starting to come into play in a similar sort of way as the S&P and again let's have a quick look at the S&P again. 2003 was that resistance line that I drew in through those lows in November and yeah we did have a little bit of a flotation through it in December but ultimately we weren't able to sustain and move through it. So I think for the S&P to sustain and move higher we really need to push back through towards the 200 day moving average and I'm skeptical that we can do that at this point in time. Was there something that you wanted to look at on the Canadian dollar coin? Sure let's bring that up a little. Can you bring up gold first because I want to have another talk about that now that we're asking the data because that's kind of a big reversal downward. Yeah I mean gold's reversed downwards which is somewhat surprising but I think people are focusing on the headline payrolls now but for me it's not a great rapport. Well I think it's reasonably okay and at this point when it interests me about gold as you've had this spake up it's coming back down now you can see the big negative divergence there in the stochastic this is looking like a buying climax. Your breakout point was 12.62 you've rejected you've gone back under that so you couldn't hold it and you've got gold back at 12.50 which is the next support level so that's that's quite a significant quite a significant reversal here and that could become a key reversal at the end of the day if gold doesn't doesn't start to rebound soon. It's going to have to go quite it's going to have to go some to be a key day reversal because with a key day reversal ladies and gents what we've got to do is you've got to close below that yeah you've got to wait to go on that. You've got to close below the open of the previous candle or the previous bar so the open is displayed over here in the top left hand corner so the open of that chart there is 12.40 $1,240 an ounce we're currently looking at 12.50 $12.53 $12.54 so we need to drop at least another $15 an ounce to post a key day reversal and a key day reversal is when the market makes a higher high the day after which is done but then needs to close basically down here where my cursor is around about the 12.35 between 12.35 and 12.40 and that's what we call a key day reversal or a bearish engulfing pattern. Now I can give you a better example of that with respect to euro sterling because this is a chart that I did earlier this week on Tuesday we look at euro sterling on the daily this is the daily chart here and we can see that we've declined pretty much five days in a row and now we've had a couple of minor rebounds but if we look at it on the weekly chart this is a not quite a beautiful example of a key day reversal but what it does do is we've had this strong move higher last week and then we've pretty much reversed it completely and now what we need to do is break below $76.90 and that's really the low of two weeks ago and if we actually blow it all the way out you know is this a potential for maybe some form of potential double top or maybe we're going to get some form of head and shoulders reversal what we don't want to do is break back above this trend line here which we've broken out of or go back above the 78 level this move higher it looks to have given up the ghost it's still marvelly positive but the key level really sits around here at $76.90 I'm just going to basically underline it for you but certainly the first indication that we could be seeing a little bit of a reversal in euro sterling would be a break of $76.90 on the downside which is basically this this low here and this low here that we saw two days ago but certainly on the basis of the weekly chart I think the bias has now shifted for euro sterling maybe the worst of sterling losses is lower I think it's a difficult call to make and certainly I would be a little bit worried about going longer sterling against the dollar but I would be less worried about going longer sterling against the euro despite market expectations that somehow they think the ECB will raise rates before the Bank of England personally I think I think that's laughable that the market can somehow think that the Bank of England or the ECB is going to raise rates before the Bank of England I think that's very unlikely given what's going on and the other thing is a lot of the weakness in the pound was was totally overblown on the on the Brexit risks last week and and so you're seeing that top out against the euro and that could be the bigger trade with with the US potentially going its own way and strengthening here against some of the other markets I think Michael's right you could if you're looking particularly at that dynamic you're looking more at the euro pound at this point okay so that's a euro sterling let's have a quick look at euro yen because I think that's important in the context of the easing policies of the respective central banks so depending on obviously what what we see next week out of out of the ECB this pan here looks to be quite a nice potential box reversal let's basically do that to a four hour chart and what we've got here is a nice resistance level all the way through 125 we've got a nice little uptrend there now is that an upside is that an inverse head and shoulders or is that a potential double bottom it's too hard to say but certainly in the context of this particular move here there's a good area of resistance through 125 and potentially we could see a move back to this trend line here potentially we could even see a move back to around about 123 but certainly 124 123 the bias does appear to be towards the downside again the oscillator again is starting to roll over which would seem to suggest that euro weakness is likely to prevail over the yen over the course of the next few sessions particularly if we break this line here got any comments on that Colin I know this is looking like a really nice beat and I mean it's a question of is it a is it a double bottom with an ascending triangle or a head and shoulders but also look at the stochastic you got really oversold on the stochastic and that has turned up really nicely as well so you've got a a good momentum build behind it and it's not like some of these markets that we saw over the last month or so where that will go screaming higher for five eight percent gains like the kind of thing we were getting in in Crudewell in particular where you were sitting there wondering well is this short covering or is this legitimate and but something like this is looking pretty legitimate for a base building pattern okay so that's that's the euro yen so that does appear to suggest that potentially there is scope for us to move higher but ultimately I think with this resistance here at 125 it's going to take something significant and the fact this is turning over for that to happen which means that we're probably going to drift lower first okay anything else does anyone else want us to look at a a market that we haven't covered yet any questions use the chat facility here I've just sent a message any questions here that should be any questions here sorry about my typing that's called my lunchtime typing I'm a bit hungry at the moment haven't had any lunch so yeah as I'm looking here at the markets well just before we wrap up we're seeing the Dow has the Dow popped up to 17,000 has started to struggle S&P popped up to 2,000 has started to struggle so they've had a bit of a move up but they haven't really been able to get too much further yet they're sitting there digesting it the Crudewell same thing we're seeing it that's up a little bit we've got WTI sitting on 3350-60 right at a at a resistance level as well so we're bumping up against ground numbers we're bumping up against resistance but we're not seeing any to really go through at this point in time and even gold has bounced up off of the 1250 and it's hanging around just below 1260 at this point right just been asked about sterling yin that looks quite interesting actually because again it suggests that we're going to get a bit of a sterling reversal that looks like a bullish and golfing week but again it really depends on where we close tonight but ultimately I think that ties in with my slightly stronger sterling narrative at the moment we've got good resistance coming in around about 182 but ultimately I think here I think the narrative really is in the same way for euro sterling is to buy sterling depths and I know that feels dangerous but ultimately I think Dolly ends in a range and I think cable's got potentially more upside than Dolly end so yeah we could see a little bit of sterling weakness in the short term and sterling end back to around about 160 certainly in the case of this low here and obviously the low for yesterday and if we look if we look at the four hour chart that pretty much bears it out we're probably we could probably drift back down here but overall again I think I think we could well have seen a short term base in sterling I think most of the bad news is out there and I think it's unrealistic to think the cable will continue to fall between now and June in a straight line I think we're going to get we're going to get term interim bouts of sterling short squeezes and as anyone who's traded cable or sterling nose as I have in the past when cable rallies it tends to rip your face off so I certainly think that there's a good chance of that that might happen and it's certainly worth bearing in mind if you're looking to keep you know if you're looking to sell sterling rallies I think that's probably the weaker side of the trade we've talked about sterling dollar again I think we could drift lower towards around about 140 80 90 because you should find a few bits around there with resistance of 140 42 20 142 30 if you if you want if you want to look at my analysis on various instruments I put them on the chart forums so in the case of cable here I've used this chart here and basically described where I think it's going to go continue to edge higher after breaking about 140 80 yesterday stabilization processes continuing this break could well see us head back towards 142 20 30 which is obviously that resistance level through there in the May 2010 lows but the risk does remain from move towards the 2009 low at 135 while below 142 20 142 30 and with respect to the three green soldiers are you talking about the four hour chart that I was just looking at just a few minutes ago you know who you are I'm not going to mention you by name but I'm guessing that's I'm guessing that I'm guessing that's who you mean or are we looking or are we looking at or are we talking about the daily yeah the four hour chart okay right I would suggest not no certainly not in certainly not in that context I think we are we're seeing a little bit of a consolidation and I think we're probably going to drift back towards these lows here where you got the Ichimoku Ichimoku support so if I draw a line through them there we've got a series of loads through there around about 160 but that also happens to coincide with obviously that low there so you've got you've got a what I would call a congestion area around about 160 and okay the daily you're talking about the daily okay so we'll go back to the daily yeah you could argue that the only problem I have with that is that the middle candle here it's not it's not as full as I would like it to be with three green soldiers you really need three candles of a similar length and a similar height and ultimately well that's a fairly decent one there and that's a fairly decent one there that one's not so you know again I'll be looking at the 160 level to sort of get an indication as to where we go to next and if we drop below 160 then obviously we could find support around about 159 but you know my bias still remains for my bias remains towards the fact that sterling is oversold I just don't buy into this narrative that the bottom is going to fall out of it between now and June now that may change if the narrative changes out of the respective camps but ultimately if you look at the data there's been a slowdown in Europe there's been a slowdown in the UK and there's been a little bit of a slowdown in the US so it's a question of how much you think is priced in and I think a lot of risk is priced in hope that helps guys all right okay so unless anyone has any other questions Colin and I are going to wrap this up we will put it on YouTube in the next 24 hours if anyone any of you want to go back and listen to it otherwise we both like to thank you for your time and hopefully see you