 Okay, very good morning to everyone Tuesday 23rd of July. I hope you are doing well I'm just having a quick look at the charts first thing this morning Usual routine I'll go through some of the headlines and then I'll hand you over to Sam to look at the markets more technically Overall though, I was off to desk large portion of yesterday, but I understand it was pretty quiet And I think that's probably Due to the fact that there are some major things happening later on this week and as I go through some of the news here It's not that the the calendar in terms of economic data is particularly busy But there are definitely some looming events and particularly earning season tends to follow that pattern of hitting its peak in the middle of the week really Defined by Wednesday and Thursday the latter of when you get those big tech names like Amazon and Alphabet And so a lot of people I think they're just sat on the sidelines at the moment You've got the ECB meeting on Thursday as well, which is going to be a particularly interesting one as we're going to talk about in a moment But this morning just having a look at the general sentiment equity markets mild Positive movement seen overnight in the Asia-Pacific session kind of translating into some slight gains this morning in the futures market both European and US futures Elsewhere though currency markets seeing a bit of movement You can see here top left both euro dollar and cable under a bit of pressure a few questions this morning about dollar strength I think really it's a combination of a few different things As I'm going to talk about with the ECB money markets are pricing in about a 40% chance But potentially the deposit rate gets cut this week on Thursday as much as I don't think that that's going to be the case There's that's a decent market pricing. So I guess, you know fundamentally Could explain some softness in the euro and then obviously for the pound you've got this Announcement coming up for the Prime Minister. I don't think it's a particularly shock that if Boris Johnson wins We have also had some comments last little run lower here in the pound breaking its respective s1 on the daily pivots But Bank of England's most hawkish member Michael Saunders just came out a few minutes ago and said the Bank of England is not bound by forecasts implying rate hikes Saying a no-deal Brexit would push the pound lower UK economy is weak and clearly not overheating That's a shift from the most hawkish member to sounding quite explicitly dovish And that's the first time he's made those type of noises. So the overall composition here If you remember about two months ago The Bank of England was being seen as the last standing more hawkish-minded bank given the low employment the high wage situation But even the most hawkish guy is now shifting and so the overall composition of the bank Tilting much more dovishly in preparation of what is to become this no-deal scenario Elsewhere well, I've just seen the DAX take a bit of a break here on the upside. Let's just put it on the minute Yeah, it's been really moving since the the cash equity open Obviously being benefited a little bit here by technical breaches and some of the range from the overnight Asia-Pacific session You've got the weaker euro as well, which tends to lend its hand to some of the more export-heavy German index Given the components constituents that reside in that particular Stock index elsewhere gold a little lower despite the dollar strengths and still kind of Licking its wounds so to speak on that technical breach of the trend line that I'm sure Sam was talking about Yesterday quite heavy selling pressure coming in does of course come with gold in recent sessions touching on fresh Six-year highs so at these elevated levels having gone up to around the kind of four 1450 type mark a little bit of profit-taking around there may be warranted one of the news items we're going to discuss as well is that one other lower ranking risk to markets was the Potentiality of another government shutdown, but that's now being removed because a deal was struck on Capitol Hill last night In regard to government funding going forward for the next two years fix income Relatively quiet T notes pretty flat just a bit of resistance around the pivot at the moment the opposite the case of the bund With the pivot level providing some near-term support to price as has done during the Asia-Pacific trading hours Again, I'll leave the rest to Sam To have a look at I'm talking about the Fed The probability of a 50 basis point rate hike does continue to decrease slowly It's dropped another few percentage points. It's now 21.4 percent. So again might explain a little bit of unwinding of any recent dollar weaknesses Markets come back to the reality of going 25 not 50 basis points at the end of the month As we go into this now blackout period one thing to further follow up I did get updated from the guys at Ransquark who said on Friday night There was a Wall Street Journal source report which basically said the Fed aren't going to do 50 So again ratifying what we were discussing on Monday Given the rollback of some of the comments that we had from Williams and Clarida at the end of last week Moving on then let's talk about some of the main news items Timings had a lot of messages Via Twitter yesterday asking me what times the announcement for Boris Johnson So this is the actual near-term timing for this morning. So 1140 a.m. The announcement of the next Conservative Party leader begins 1147 declared by the 1922 co-chair and then 1150 the new leader makes their first speech On from the morning so today is all about the results Wednesday then Technically of Johnson wins. He would enter Downing Street at about 4 p.m.. After Theresa May conducts her final session of PMQs The regular fixture on a Wednesday She then needs to go and see the Queen to hand in her resignation and then Johnson would take over the helm later on that afternoon Thursday this week would be the appointments of the cabinet and the ministerial team by whoever the new prime minister is And then on Friday the new PM outlines their vision for the country Delivering a speech in the north of England. So that's the plan both for the morning So we're looking at around just before midday for the confirmation who the prime minister is and then You're looking for this pattern to play out The formalities to happen Wednesday the announcements of the cabinet So if Johnson wins you're looking for people like the Chancellor Philip Hammond to resign Probably on Wednesday once this result has come out could be other movements as well to be to keep an eye on Before then the key speech which if it is Johnson to see how much he then pursues this idea of do or die no deal scenario Does he push that in this speech on Friday first things to be said though is that? Even though the markets and bookies odds are very much in the realm of kind of 90 10 that Boris will win I might remind you we have been here before we were 90 10 supposed to not leave the EU As far as market pricing was concerned going into that June referendum so I definitely Strongly believe Boris Johnson will win that very much is both the Political and the odds point of view from the bookies But all I'm saying is that if Hunt does win I would be expecting an aggressive rally in the pound in an immediate fashion We were talking Sam and I about this this morning. I don't think that you you could discount a move of 150 to 200 pips on the back of a hunt win in pretty quick succession Just given the fact that the market is very heavily priced in this no-deal mantra under Boris Johnson So looking at the pound this morning obviously has been under just seeing here under a bit of pressure And this obviously has come with these latest Saunders comments As I said the hawkish member turning quite distinctly dullish is a new development on that regard a couple of things though on the Boris Johnson front that I'd just like to go into One is a lot of people have been talking about the parliamentary arithmetic Monday began with the resignation of a former minister or the foreign minister Alan Duncan And he then floated the question of whether Boris Johnson would even be entitled to become the prime minister In terms of the Constitution Prime Minister in Britain has to command the support of the House of Commons in order to assume the role But given what's been happening Resignations there's been another minister that's been accused of sexual harassment. There's also been temporarily Kind of removed at this point yet to be confirmed whether he comes back or not So technically has reduced the government's majority in Parliament to just two That obviously goes right on the brink on whether or not The Prime Minister even could command the House and therefore do we need to go down the route of having a SMAP election to sort this out so It's almost as if Boris Johnson takes over the helm and an even weakened position more polarised than what Teresa may had and With a the slimmest of slim majorities at this point. So this is definitely Why a lot of people are quite Reticent to believe that you know, he's gonna have the silver bullet to fix this Brexit situation could actually end up being quite to the Contrary Boris Johnson could end up being the shortest surviving prime minister ever in history If that doesn't play out correctly, and if we did have a SNAP election, then if he were to lose of course The other key issues that that again will go down this idea that Boris wins that he's gonna have to face is an Escalating crisis with Iran We've seen this definitely in focus over the course of the last few weeks and it's only seen seems to be escalating given that Vessel that was captured by Iranian forces at the end of last week Of course the Foreign Secretary at this point is Jeremy Hunt who in itself Boris has got an interesting decision to make here We're right in the midst of a conflict with Iran But Boris has you know kind of behind closed doors suggested he wants to fire Jeremy Hunt Couldn't be worse timing in terms of addressing quite a key issue globally on in the foreign affairs front on the telecoms front Of course a decision has been basically delayed and delayed on whether or not The country will use equipment from Huawei technologies That's a very Sensitive subject particularly with addressing the relationship With the US because Donald Trump obviously very forceful about the way of which He feels that China have been covertly using technology to breach various different security rules and so Boris has this difficult decision to manage between Do you want to appease Trump or do you want to as we have at this point be more open to these technologies and having a Closer alignment with the relationship with China So yeah, not plain sailing At all at this point, but I mean that's more bigger picture in the short term The tail risk here is a is a hunt win an aggressive spike in the pound Once Boris gets confirmed I actually think the move is is already priced in and so there's very little risk I'd say to downside at this point The only risk that might come is if when he gives a speech at around midday if he really does bang a Super no deal hard Brexit drum then That could I guess force down a little bit more movement following this trend. They've generally Some sterling weakness emanating from some of the NPC comments this morning and just the overriding euro weakness Contributing to dollar strength this morning as well Other stories to be aware of Just wanted to mention this one quickly And this isn't due of course the ECB rate announcement until Thursday And it's these types of factors why I think the markets have been relatively quiet to get the week underway Traders are pricing in a 40% chance of a rate cut. I mean that that's surprisingly high I thought this morning when I read that and a couple of comments though that I wanted to Go through through some of the big Wall Street banks. So Goldman Sachs They've said that the ECB will ultimately over deliver Relative to expectations and see more room to price QE Goldman's expect a 20 basis point cut and tiering to happen in September So not Thursday and a renewed asset purchase program including buying of sovereigns QE to start at 25 billion euros per month for nine months if you remember the last phase of QE which ended in in Q4 of 2018 was when we were at a pace of about 15 billion So they're looking for around a reversion back to where we were in about the Q3 era of 2018 Commerce Bank Commerce Bank foresee a risk that ECB could quote go big and cut the deposit rate by 20 basis points this week They're probably the most aggressive on the street They say that the ECB might want to preempt any potential Fed easing Which is 100% priced in for later on this year because remember if the Fed ease Then then technically speaking then this could put pressure on the euro and Therefore consequently could the ECB want to get ahead of that and cut themselves this week JP Morgan though had to talk more balanced Their call is that ECB will alter language in the statement this week with policy rates at present levels or lower To open the door to further rate cuts with a 10 basis point cut and deposit rate to be delivered at the September meeting I must stress despite the more Kind of aggressive calls out of goldman's and commerce the JP one is more the general broader market consensus And the one that we have here on the desk We're looking for a language change to open the door an optionality to the cut to come at the September meeting Is what we feel I did mention briefly President Trump announced a bipartisan deal to suspend the US debt ceiling and boost spending levels for two years This removes one obstacle which potentially could have seen the government shut down as again As soon as September October time so that appears to be averted But it's all not yet completely assigned to deal the house has to approve the agreement this week before members leave on July 26th for a six week summer recess The Senate can put it to a vote as late as next week So it still needs to be ratified and obviously stranger things have happened But at this point reading some of the press articles it seems that everyone's you know had their compromises Got what they need to be able to come together to sign a deal off at the moment I must stress that if you read some of these articles the level of Debt and that the US are getting into it's getting Very high at this point under the terms of the agreement the budget cap for discretionary spending will rise to 1.37 trillion 2020 rising to 1.375 trillion in 2021 You know these are Particularly high levels the new spending and limit savings to deal will likely push the annual budget deficit of America Over one trillion dollars next year So this isn't really a factor for right here right now, but definitely from a broader perspective It's worth just noting These kind of numbers and then I just wanted to mention as well although most of you guys I know will trade will trade outright positions rather than a more complex kind of hedging strategies But it did see a note out of goldman's this morning and they were talking about the fact Then the increase in gold price volatility Obviously we've seen gold up at a six-year high in the last week To give you an idea percentage wise gold is up about 11% on the year And what Goldman is saying is that the increase in gold price volatility has made bullish Options on the traditional haven more expensive than their yen equivalent So gold up about 11% for the year. The Japanese yen is only up about 1.6% Against the dollar. So if you're looking at those classic safe haven instruments, there's better value Potentially in taking the yen trade rather than the gold one But again, I am talking about options market not about outright day-to-day positions in the intraday market Obviously gold and the end could both benefit in the case of a shock US intervention to weaken the dollar Something which was on the table and been doing the rounds last week That was prompting some of the comments and response that was coming out the Treasury secretary So you've kind of got a protection from potential intervention from the US. However Likely or unlikely that might be but then the idea being that It's too expensive now to get exposure to gold and better off being exposed to yen given the differentials And the lack of real-price moon yet at this point in the Japanese yen comparative to the dollar so far this year Quit looking at earnings. What have we got coming out from the earnings front? Not too much actually tomorrow and Thursday are much more interesting from a broader index point of view But if you are looking at the single stocks the ones to keep an eye out for pre-market coca-cola Perhaps United Technologies Biogen slightly larger firms after market you have the likes of visa and if you're looking at more of those kind of Social media type names snap is reporting after the close Calendar wise though for today in terms of the schedule. We have A pretty quiet morning. Nothing really at all going on. One thing is the Spanish have their Plenary session followed by the first vote of Sanchez's government formation is a two-vote process the second of which happens on Thursday But could be quite interesting to have a look at I don't think that's really going to be too much of a factor for the euro Potentially might see some movement in related Spanish assets in yields and the Ibex But worth keeping an eye out for that Otherwise, it's more of a US centric session from the from the scheduled events existing home sales at three o'clock API all of the treatment until the afternoon How Dane is also speaking from the Bank of England following on from those Saunders comments Which weren't scheduled and were dovish in nature? Surprisingly from a hawk the interesting to see how how Dane the chief economist comes out and what he has to say as well so That is it from my side With that I wish you a good day ahead And I'll hand you over to Sam now. He could look over the charts going forward. Thanks guys Hi guys, so we're all doing well. Let's have a quick look over The markets and you can see it's probably go over to the currency's oil just popping down here over the last 20 odd minutes or so just After having pushed to the higher day, we had a bit of resistance back yesterday as well I've just seen the market drift down And you've got a bit of a potential trend line coming in around these areas here That's just looking to to break through. It's worth keeping an eye on there on oil there I've got a fair bit of support just below here from yesterday 55 85 and it was a decent Point as well on previous sessions So we're having that marked up and then obviously the high of the day just above And some key resistance that would have marked up where we didn't quite reach it but 56 61 another important point to the upside you can see we're also getting squeezed in Here as well You can see from the top end of the the 17th time yesterday was also the highest day So that's that reason we didn't quite make that 61, but just seems like we're having a go at potentially Breaking out the bottom side of this pendant. So just have that Marked up if that was to continue You can see if I just make this a bit bigger here Those loads of the days coming in on the handle at 56 on the futures moving over to To the currencies that we just Bring in the Europe See we had a really key level which we're talking about in the briefing yesterday really strong level support over the last well, not just a couple of days we're going back to 240 you can see going back to the beginning a middle part of June as well And you can see we're there overnight breaking through that and in what was a very lacklustre day Yes, so we had a bit of a trend line I didn't want to quite break the high of the day then acted as the top end of that range on Multiple times and then finally early hours of the morning We get that break through and and we've now see pushed well below the S2 level looking at this from an Opportunity to to get in for a trade obviously because it's so low down whether you'd want to keep getting short Unless we get retracements around the S2 or even you know the previous sort of low here around 1 12 45 Is see it needs to be made Just price you can see here just Staying below this trend and actually now just coming up to look like we want to have a test of it So I think for any shorts For you're a dollar you prefer it to be a bit at least a bit higher up In terms of levels to be aware of if we were to continue down you can see if I just move this above my Camera there you can see the lows back from 30th and the 23rd of June around 1 12 15 Not a million miles away, but those would be the next sort of points of interest retest though of the The lower part of that range from yesterday would be ideal Well on paper anyway around 1 12 54 you can see just how strong that support level was The pound obviously worth waiting for the announcement And as I mentioned we were talking this morning if it was to be hunt. Yeah, you get a decent decent push higher and imagine you will have a Few people interested in taking that that trade on Just as a bit of a almost a not a necessary a risk-free trade, but certainly the reward of that is Could be very lucrative looking to the downside You've got key support just above the the s2 area 124 60 the lows from the 17th high from the The back end of the 16th as well That would certainly be an area I'd have marked up and then if we can get that retracement You can see anywhere around the the s1 124 81 84 Our levels where you could expect some resistance, but of course with 11 o'clock Approaching and that time being sort penciled in for the announcement I'll just be a bit on edge for that you can see from yesterday We have been trending low as well so it might well be After the dust has settled And it's kind of sell the rumour by the fact And we may well get a nice break of this trend line and and see a decent push to the upside Quite quite a key one respected well since yesterday In what was a pretty quiet day as well We Obviously broke back above the towards the s1 previous lows of the asian session acting as resistance late In the day around sort of four o'clock just before that european close And look at the the yen yesterday. We talked about that that trend line Which eventually broke through you can see we go back from the start of the 10th Going through all of yesterday, and then you get that break in the early hours Unfortunately, that's sometimes the way it will go with the yen and and the Aussie alike is is that the best trades sometimes do happen in the early hours And you can see a really strong push down there And we actually almost got down to the s1 s2 I should say for the day As well where there actually is quite a bit of support just below that going back to the 17th more intraday Retracement wise people will be You know iron up the the previous lows or we had a double bottom this morning before that break through But I'll just be careful just to see how we get there Are we going to maybe break this trend line aggressively that makes you not want to take that ideally You would want it just to grind its way higher to find support On a resistance I should say on that previous low looking at the Aussie just to wrap things up for the currency pairs those trend lines Literally right on The retest of the one from january 2018 if I just bring that in here you can see If I smart that up just testing that now we had a bit of a bounce from it and that coming in around 26 so 90 96 or so higher from from that point as we as we're printing at the moment Also worth having marked up here the the trend line from the early part of december 2018 To obviously the april level as well and you can see that Has come into to play just before the 71 handle So prices getting squeezed in from from both areas and it might be that actually you do want to see a bit of dollar strength on here and the trade could well be a break of all of those and the 70 handle to the downside But for now that trend line from 2018 high Reacting is a bit of support on that that breakthrough Once again having a look over at gold So you had a couple of trend lines in play yesterday one that Didn't want to break and was very choppy And every time we sort of got up towards near the high of the day or just before it did Find support however the and that and that was this trend line here It's got choppy every time it wanted to go through But also the one from the 18th, which you can see was marked up quite nicely once we made the The three o'clock low if you like that broke through early hours in the morning You can see this on the lower time frame and to make this a bit bigger and easier to see You can see just how well that was respected Around 11 o'clock. So yeah, it would have to have been You know up at your screen at that sort of time But would have been a very rewarding trade as you can see it's just drifted lower since then And again like the euro below us too, so whether you'd want to be getting insane now with it being so low down or not I'm not too sure but looking for Areas where it could retrace to obviously got any of these previous lows where you can see we had support Let's move that again above the the camera of the 19th and then this morning. So 1421 Could be an area people will be ironing up and obviously below where we're trading You can see there is some decent Support or we found some decent support and what was the high Back on the evening of the 16th a couple of times before finding support the next day on that breakthrough So correctly level at 14 14 and 0.6 Also to the downside you'd be looking at any of these highs that we had back in the morning of the 17 And obviously 1400 a bit below that would be a pretty big day for us to Get down to that point. I'm going to quick look over us equities as well We're pretty contained last night. You can see the pivot was Ultimately chopped through quite a lot um Again relatively range bound but not that much in the way of movement and we haven't Uh, I was reading yesterday had a 0.5 percent gain for for quite some time in stocks Happened a few times last year as well, but just slowing down a touch To the upside However, we have just drifted on and you can see it does look quite messy quite a key level was tested Last night that that low that we talked about in the briefing yesterday from the From friday before the breakdown the first test late last night held well And then we're just keeping knocking on that door Also above where we're trading the breakdown at 95 75 would be a point that I'd have marked up And then to the downside only three really feel comfortable should we break this trend line Which was formed at the back end of yesterday's session and at the moment that looks like it could come in Well anywhere around 89 Potentially if it was to to take its time getting there but at the moment come in at 29 87 And a bit you can see here nasdaq trend line still on still well respected again testing now So that could be certainly one to look at ideally you would want there to be a bit more volume in this This trade to to take on But certainly would have that marked up as well I'm going to look quickly at the backs. You can see just pushing High has just stalled a touch We made our way to test what was quite a key level of Resistant the breakdown that we had back on the 17th little pop through there However, all looks like a false breakout now and you could also be looking at any of the previous highs of the day That we did we broke through on that open any questions as usual, please do let us know Starting to to get a bit more interesting this week after a relatively slow day yesterday But if I don't speak to you, I hope you have a good trading day And rest of the week