 Go right good afternoon. Welcome to CMC markets and the 22nd of May and this This weekly market update and I look ahead to the key events for this week. Sorry about the technical problems there earlier Unfortunately, they sometimes happen and I'm hopefully hopefully we won't be having any more first and foremost Let's go through the risk warning Anything you see in here today is should not be construed as trading advice. It's just an indication of key levels key events and Hopefully a direction of travel in terms of what we can expect to see from the key market events this week So we're going to start I think we're going to start off with the events of the last The last week or so and the big declines that we saw in equity markets On the Wednesday of last week now since then we've we've come back quite considerably But I think there is a concern certainly on my part that We could This could be the beginnings of a little bit of a pullback in stock markets, particularly US markets We have we have bounced back quite considerably from the lows that we saw At the tail end of last week an early Thursday But ultimately we still remain below the lows that we saw sorry the highs that we saw at the beginning of the month at 2400 levels, so we'll be keeping a close eye on that particular level over the course of the next week or so because While mr. Trump may be embarking on a nine-day tour of the Middle Eastern Europe ultimately he still faces the same problems that he was facing at the beginning of last week and that is an investigation into His conduct with respect to James Comey the former FBI chief who will be I understand testifying On Capitol Hill on Wednesday of this week, so that's going to be I think I think that could be a key risk Elevent or key risk event In the event mr. Comey comes out with some little nuggets of information that we aren't quite aware of From from what we heard last week So the other key event this week will obviously be the release of the latest Fed minutes They're due out on Wednesday and while I don't expect them to be a significant market move I certainly think in the context of How Fed policy makers view the runoff their balance sheet They could actually Signal a key change of policy If there is significant detail on what Fed policy makers are looking to do towards the end of this year now at the moment Markets are pricing in the prospect that we will see a June rate rise Now I still think that it's too early to suggest that that is a done deal And certainly I think currency markets would appear to to really bear that out if we if we look at This Bloomberg book chart in particular on the dollar index that we've got here We can we can see that this is where the Fed raised rates in December This is where they raised rates in March and we're now Pretty much the lowest levels since before Trump won the presidential election on November the 8th So the direction of travel I think for the dollar at the moment I think is clearly defined. We are very much looking towards a move back potentially, I think to Levels that we last saw at the beginning of November or around about those November lows of around about 96 that also mimics the behavior that we've seen in the US Treasury market as well if we look at the US 10 year yield We're testing a very very key support level around about 216 And that while we have seen a little bit of a rebound of that in the past couple of days I think that's going to remain a very very key level I think it's also interesting to know that again, this is where the Fed raised rates in December This is where the Fed raised rates in March. I think Markets are still pricing in the prospect of at least another two rate rises this year That could still happen, but ultimately we're still quite some way away from Where we were say for example a week ago where we were pricing in a hundred percent probability The Fed would potentially raise rates if we look at say for example this chart here This tells us that the market is pricing in a hundred percent probability The Fed is going to raise rates on 14th of June Well, we're quite some way away from that and a week ago or just around about three or four days ago that dropped around about 70% in the wake of the sell-off that we saw in equity markets on Wednesday So that can move quite significantly between now and The 14th of June. I think those hot those odds there are way too high If we look at the way currencies have moved over the past five days We can also see that amongst the best performers Over the past five days has been the euro And again, I think that's largely as a result of changing changing expectations on the part of Traders as to whether or not the the european central bank Will look at tapering Monetary policy before the end of this year now at the moment The ECB remains full on dovish mode. We've still got the german elections coming up in september and We've still got the start of the brexit talks, which is due to start on the 19th of june We've also got a fairly decent or improving economic picture In the context of the economic data that we've got coming out of the euro area And I will be particularly interested in given the given the the rally that we've seen in the euro over the course of the past few days And particularly in the past Since the beginning of may As to whether or not we've got further to go In the context of further euro gains and certainly on this chart There is certainly potential for us to go quite a bit higher. We've got the november peaks at around about 113 We've also got the september peaks just above that and we've also got the august peaks just above that so We're certainly running into an area Where the european central banks not likely to be particularly pleased that the euro is heading back towards 113 and 114 They really do want a weaker euro Notwithstanding the fact that a number of weaker European countries have got a whole host of debt rolling over in the june and july months So I think we need to be careful about being overly bullish On the euro They certainly won't want bond yields in the euro area to Jump significantly higher and I think expectations of a taper of monetary policy could actually result In exactly that happening because I think declining us rate expectations rising ecb rate expectations currently The deposit rate is minus 0.4 percent I think if The data continues to improve the ecb the european central bank will find it doubly difficult To argue that their policy can remain loose when the when the economic data continues to improve So in particular we'll be looking at the gdp numbers tomorrow for german gdp And that's the final number for german gdp for the first quarter That's expected to be confirmed at 0.6 percent more importantly. We've got flash pm is From manufacturing and the services sector for france and germany and they're both out Tomorrow morning as well around about 8 am uk time and 8 30 am uk time and there For may these are the numbers for may These are still expected to show fairly decent levels of economic activity not only in france But also in germany so These numbers have come in mid 55 mid mid fifties. We're talking 55 56 in germany you're talking 55 and 58 So those decent numbers will feed into a narrative of a continued improvement In the french and german economies Against that backdrop it's going to be very very difficult for the ecb to argue that a loose monetary policy Into next year is justified. You're certainly going to hear an awful lot more german Monetary policy makers arguing that monetary policy needs to be a little bit tighter So that's that's that's the narrative that i will be looking at going forward over the course of the rest of the week And certainly we'll be looking for any indications on wednesday When president dragy ecb president dragy will be talking And looking for clues as to whether or not he's being pushed into a corner with respect to moderating the tone Of any monetary policy announcement that could be coming down the pipe. So it's all about expectations the ecb can argue So it's blue in the face That it's going to keep monetary policy loose, but if the data continues to improve they're going to make it They're going to find it much more difficult To argue that case and that's why we're seeing the gains that we're seeing in the euro And have seen in the euro over the course of the past couple of weeks. We can see that here We've only had one down day in the past six or seven so Upside momentum is clearly in the euro's favor And that's no better borne out not only in euro dollar, but also in euro sterling where Much against my expectations. We have broken out to the top side on that as well We can see that on the daily chart. We've broken above the 200 day moving average We've broken above the 50 and we've broken above the 100 so there's a significant breakout taking place on euro sterling And as such we could well see further gains going forward But if we actually draw a line through these peaks here We could find once again Upside progress start to run into a little bit of a wall around about 87 10 Which also happens to coincide with the peaks that we saw at the end of March there's also we also got to bear in mind the fact that We've got the election coming up and the the difficulties that we saw over the weekend with respect to botched announcement on social care Which caused the conservative lead in the polls to slip From a double-digit lead into a single-digit leader around about nine or ten percent Has caused a little bit of sterling weakness Also combined with the fact that David Davis Brexit Secretary reiterated the possibility that the UK could leave Without a deal if they were held to a Brexit bill of around, you know Anywhere between 50 and 100 billion euros. So that's prompted a little bit of sterling weakness today I'm that failure at that 130 level. What it what is notable though Is that even though we've struggled to break above 130 40 we haven't really dipped too far. We saw a very strong move on Friday We've seen a little bit of weakness today against the dollar But ultimately my long-term target for the pound is still at this 133 20 level I published a piece on it On Wednesday or Thursday of last week, which you can find on the website In the news and analysis section This this triangle breakout that we saw That we saw In april in mid april it's still very very valid in terms of the move higher As long as we hold above this this series of lows here around about 120 840 50 130 40 is currently capping the gains at the moment But as long as we stay I think above 128 40 and more immediately 127 50 Then the upside momentum should in all likelihood take us all the way back to 130 310 now, of course Whether or not That happens before the election. I think is unlikely But I think in in the aftermath of the election Um, we could well see the the pound continues to ground to ground to grind Higher and now whether that's as a result of dollar weakness or sterling strength Is neither here nor there the thing that i'm looking for at the moment is further sterling strength against the dollar Now i've just been asked about sterling kiwi So I will cover that for you Right now while i've got some well i've got sterling on my mind We've seen some big gains and sterling kiwi today But at the moment we still remain in this sideways consolidation sterling kiwi and at the moment While we're in this sideways consolidation The likelihood is that we're likely to continue. So the key levels that i'll be looking for on sterling kiwi I'm going to highlight here for you. So 186 06 on the downside And 188 189 On the top side. So that's your trading range and sterling kiwi. If we break out of that range Then we could well see a sharp move higher or lower of around about 250 300 points That's essentially what we're looking for here now that could be a flag we've got a strong move higher If we break out of that flag formation, then we will probably get another 200 300 point move higher or lower Depending on the direction of the breakout But it's important that you don't try and pre-empt the breakout because at the moment It does appear to be a little bit of a sideways trading range And until such times as we get a significant breakout of that If you read the long of sterling kiwi your stop loss is going to be around about 185 and a half If you're if you're looking to trade higher than any stop losses on short positions around likely to be around about 189 30 189 40 50 So trade the range until we get the break is probably the wisest strategy if you're looking at trading sterling kiwi So we've covered we've covered euro dollar. We've covered cable. We've covered euro sterling Let's have a quick look at Dollar yen because again, I think that's a decent arbiter of dollar strength or dollar weakness and we saw a big big decline yesterday We rebounded from the one 110 20 area And again, that's likely to be a key support level But what we've got here is i'm paying attention to these three daily candles here Ladies and gentlemen these are on this on this particular day here here I'm going to drill down into that And we can see that's around about 111 60 111 70. So I think with respect to dollar yen As long as we stay below 111 80 Then we could well have a look another look at 110 20 30 But even if we do break above 111 80, we're going to find a little bit of resistance Around about 112 40, which is this area up here In and around this sort of level here the four hour chart starting to roll over a little bit So we could see that starts to roll over but looking looking at this particular chart here The top of this cloud resistance here should act as a bit of a cap So anywhere around 111 80 112 decent resistance on the dailies And on the downside we've got 110 20 But the bias I think still remains for a slightly lower dollar in the short to medium term Simply because people are still trying to pick the base in the dollar They still I think They still remain fundamentally bullish on it And I'm not I don't I don't totally buy into that given the given the behavior of us bond yields And the look and the look and feel of that dollar index chart And until such times as to see evidence of a reversal I'm not going to try and catch a falling knife I think the trend at the moment is for a wicked dollar And the and the and the wisest course of action with respect to that is to look to trade it in that context not try and buy Not try and look not try and pick a base on it. I think that can be that can be a particularly dangerous pastime um So so that's dolly yen So that sort brings us all together and now let's talk about commodities and the effect that they're likely to have On the Aussie dollar we've seen a little bit of a pickup in the Aussie in the past few days And that can be borne out by this particular chart here Let's have a look at the four hour chart to drill down into the detail And we're coming into a little bit of a resistance area in the short to medium term, but it's quite clear at the moment that uh The Aussie is benefiting from a slightly weaker dollar We have started to edge above the highs for the past few days And I think a large part of that is probably down to the fact that um We've seen a little bit a little bit of a rebound in iron ore prices I think that's helping to a to a greater or lesser extent But overall we were also very oversold on the Aussie dollar as well We've come down from the march peaks are around about 77 and a half And we could well retest this area around about the 74 80 74 90 area to see whether or not there's appetite to Either start to sell or take a little bit of profit on the gains that we've seen in the past week or so Certainly looking looking at the Aussie dollar on A daily or a weekly chart There is significant resistance coming in around about that 75 area So I'll be very interested to see how it reacts around that sort of level And whether or not there's a significant number of short positions starting to get built up on on a retest of those particular peaks Also on the past week or also coming up this week. We've got opec. We've talked about the fomc Minutes, but we've also seen a significant rebound in crude oil prices Now the big question. I think that most people are asking me included Is that will this opec announcement be a classic case of buy the rumour and sell the fact? I think there's an awful lot of expectation That opec will announce some form of deal on the 25th of May The big question will be will it be nine months? Or will it be some sort of fudge now Saudi Arabia have suggested today that there is support And russia have suggested that there is support For an extension of the current output cap or freeze into march 2018 Quite how they square that with rising us rig counts Is another matter because ultimately if they continue to pull back from producing oil And the demand is there all it's doing is giving us shell producers an open goal to shoot through And i'm not sure that Saudi Arabia who have been the biggest cutters When it comes to oil production Will be particularly happy With that particular outcome And there's also no I don't think there's any Any clear indication as to whether or not Iran Will sign up to a further nine months Of price freezes or price caps So we've seen some fairly decent gains over the past week or so But all within the context of the range that we've been in Over the course of the past six to nine months Yes, we did make a little bit of a multi month low A few weeks ago But ultimately we're still within the broad range that we've been in Since the beginning of the year, which is around about 45 55 in terms of oil prices And we are starting to look a little bit overboard We could extend up to 55 or even the april highs around about 56 57 a barrel But certainly in the context of where we are now I think the the oil price is being helped in no small part By a weaker dollar So that's that's been that's providing a little bit of a headwind for the oil price as well weaker dollar helping Push the oil price up Towards the previous peaks, but I think the opaque announcement will be key. I think in the context of Expectations and at the moment expectations are fairly high That will get something in the region of nine months and that obviously is also helping The footsie 100 which continues to push the up runs of its recent ranges unlike European equity markets, which have Significantly underperformed now last week. I talked about the potential for a key reversal day And We do appear to be potentially negating that the big question for me. I think is whether or not We're able to retest these two peaks here So you've got 75 34 75 35 so you're looking really at 75 40 this key reversal Will be negated if we push back above those two peaks around about 75 35 75 40 At the moment it still looks very very overpought But I still have my doubt as to whether or not it's in any way sustainable because one of the things I have noted Is that if you look at all of the key asset classes and all the key markets over the course of the past six to seven months The u.s. Dollar has given up its trump bump us yields have given up its trump bump Gold prices have recovered from their trump loss And the only markets that actually haven't been affected By all of this uncertainty about donald trump and the fiscal plans and the deliverability Of fiscal reform and what have your equity markets? So the big question is No, there's been no disappointment reflected in equity markets with respect to the deliverability Of trump's fiscal plans and I don't see that there's any way now That he'll be able to deliver deliver on any of the reforms or anywhere close To what the market is pricing in the big question is Have we seen the top? Are we going to see a bit of a sell-off? In the over the course of the next few months or are we going to trade sideways into the summer? One stat I would put out there and it is just a stat, but it's quite interesting Is that for the last 40 years? Every year that ends in a seven has seen a stock market crash 1987 1997 2007 all seen stock market crashes. Guess what we're in 2017. We haven't seen one yet But there's not that's not to say that we won't so it's certainly worth considering when you consider the volatility Is that multi-year lows with you one? The big question is when does it come? So? That suggests to me that you need to be careful when it comes to being overly long of the market We are overdue with stock market correction. Unfortunately. We just don't know when it's going to come but it's interesting to note that all of those stock market crashes Happened in the autumn between september and november 1987 1997 2007 so Worth bearing in mind as we head towards the back end of this year Right. So what else are we looking at? Let's have a quick look at gold because I think that's always a nice little That's a nice little market to have a look at and as we can see again. This was the trump slump in gold As markets started to price in the prospects of multiple us rate rises As well as the significant stimulus plan from the trump new trump administration since then we've pretty much gone one way Haven't totally recovered all of the losses that we've seen Since the beginning of november, but we're certainly heading in that direction and heading towards The 1260 1270 area so 1260. There's a little bit of resistance. We can see it through here But what is noticeable is that momentum has started to turn positive on the moving averages Which would suggest that any dips On gold prices are likely to find support around about 1240 And below that and around about this trend line support around about 1220 So we could get a little bit of a drift back lower on on gold But 1240 could well act as a nice little support level in the short to medium term Okay, just looking at my notes and let's have a quick look at the um, let's have a quick look at the dachs We haven't looked at that yet. So we'll have a look at the dachs And once again had a little bit of a sell-off but again the uptrend is still intact Seen two sharp sell-offs This month, but we've still managed to hold above this 12,380 level and that for me. I think is the line in the sand for the dachs While we're above that then we're going to get some decent rebounds but if we break below that Then we could potentially see a little bit of a double top But then again, we could also then drop back into the range that we were in Between the months of march and april and I think this has really been symptomatic of the way equity markets have been Over the course of the past few months huge amounts of optimism are priced in and they're not priced in anywhere else And I think that's the thought that's the one bit of divergence that I think worries me is a little bit as a market analyst I like to see markets correlate and at the moment We're seeing a significant amount of divergence between equity markets and bond markets And currency markets and that makes that sits a little bit uncomfortable with me So be cautious when it comes to trading Equity markets because equity markets are telling a completely different story to bond markets and currency markets Other key events later this week. We have UK first quarter GDP First revision and us first quarter GDP first revision Now with the uk GDP number, we're not expecting any revision at all not 0.3 might might see an upward revision to not 0.4 US first quarter GDP expecting a revision from 0.7 to 0.9 percent that's still A lot less than what we were originally expecting when the first quarter revision came out earlier this year That was we were expecting in the number in the region around about 1.2 1.3 In the event we only got 0.7. So we're expecting to see a slight upward revision to 0.9 But they're still well below what we were expecting at the beginning of the year Other key events later this week. We've got a number of Fed policy makers due to speak One of which is this is is the dovish mr. Neil Kashkari of the Minneapolis Fed He has voted against he voted against the march rate rise So it'll be interesting to see what he says on Tuesday night what we've also got Later this week is a Number of other key u.s. announcements durable goods on Friday. We've also got UK public finances due Later tomorrow around about 9 30 tomorrow. So the latest borrowing numbers as well as cbi retail sales so keep an eye out for them and And I think that's pretty pretty much it for this week unless anyone has any questions that they'd like they'd like to direct my way And any markets that I haven't covered already In the absence of Any feedback there will be no webinar next week incidentally ladies and gentlemen. Um, because it's the bank holiday So the webinar will return In june where I will obviously have a look at or I'll give a preview of obviously the general election But we will also we will be having non-farm payrolls obviously the first week in june So um sign up for that one, but there will be no there'll be no webinar on the bank holiday Next next next week's bank holiday, but there will be a webinar next week It'll be non-farm payrolls on friday Well, we will we will be covering that live or I will be covering that live with my colleague Collin Cezynski at 115 that starts at 115 on friday first friday in june And then obviously we'll have the monday after and the monday after will be the general election and I'll obviously cover that go through that and Talk about what to expect with respect to that otherwise I'd like to thank you all for listening and I will see you and speak to you all on the next webinar Which will be first friday in june non-farm payrolls. Thanks very much for listening and have a good week trading