 Right, good afternoon. Welcome to CMC Markets on Friday the 4th of June and this monthly non-farm payrolls webinar with me Michael Euston, where I will be taking you through the numbers looking at the particular areas of interest that will help influence my decision-making process when it comes to looking at what the markets are likely to do going forward. I think it's important to understand that we're coming off the back of a big miss 30 days ago and certainly I think that will impact to a certain extent an awful lot of people's reaction function when it comes to what the markets might do next. Ultimately I think whatever the numbers are likely to be it's not going to change the overall direction of equity markets per se. Let's do a quick reminder of what happened a month ago when we saw that big miss on the April payrolls report. Now this candle here I've got my Bloomberg 10-year yield chart in front of you and those of you who will have tuned in a month ago will have registered my shock at how the markets could get it so wrong with respect to the April number 266 when markets were expecting a million plus figure. The knee joke reaction was to basically buy US treasuries and yields to fall quite sharply. Now as we can see that sharp fall in yields did not last very long and actually from where yields finished on the 7th of May they are now higher. So markets are still expecting a fairly decent rate of jobs growth going forward and there's no reason to suppose that won't continue to happen. What markets miscalculated was the fact that as part of a March stimulus package what happened was that unemployment benefits and some fairly generous ones at that got extended into September. So lulled into a false sense of security by the Bumper March payrolls report which came in at $916,916,000. There was an expectation that April would be similar. What subsequently happened of course was that March was revised lower to $770,000 and April came in at $266,000. Now that requires what I would call a little bit of a readjustment of your thought processes when it comes to the level of job gains that we're likely to see between down September. Before that markets were pricing in a million a month. That is not, I think that's unlikely to happen given the fact that the unemployment benefits are likely to continue to act as a break on rehiring levels in the US labor market until they expire in September and this is at a time when vacancies are already at record levels of around $8 million. Now obviously we saw a big beat yesterday on the ADP report and obviously that's re-energized the reopening trade. It's re-energized the reflation trade, the inflation trade and US Treasury yields are now back up 10 years, back up to $162.5. Now I expect them to continue to go higher and we've got a Fed meeting on the 16th of June which is likely to be focused on the taper trade or the prospect of a taper. Now people are running scared of a taper, it shouldn't be. A taper means that the US economy is healing and if central banks are pairing back support that should be fairly supportive going forward because it sees the perception is that the jobs recovery will continue to play out albeit at a slightly slower pace than was the case two or three months ago. The biggest concern at the moment is inflation and that's where the data events come in which you've asked me about Richard. We've got US CPI next week and that's going to be a big driver of what US Treasury yields are likely to do next week rather than today's payroll numbers. Let's start with respect to what expectations are for today's payroll number. Now it's anywhere between $500,000 to a million. There's a whisper number going around that it could be $950,000. Now that could well be fairly accurate. I'm suspicious of that. I'm suspicious of that for any number of reasons. You look at the weekly jobless claims numbers yesterday and they're fairly good. Unfortunately the last two weeks aren't included in this payroll's data. The payroll's data for May only includes up to and including 14th of May. So anything after that will come in the June numbers. I think the key thing that concerns me is the ISM reports that we saw earlier this week in manufacturing and services. The employment components for both were weaker than the April numbers, which suggests to me that there's a good chance that we could come in around about $500,000 for today's payroll's numbers. What we could see is an upward revision to April from $266,000 to maybe $400,000 or $500,000 because that seems a very, very low number given the fact that the ISM employment components for April were actually a lot stronger than they are for May. And yet for May, Mark is surprising in a much higher number for May in terms of payrolls than in April. So for me, keep an eye out for a revision to the April number. Also pay particular attention to the headline number, but I think the headline number is less important than the revision to the April number, which could be revised upwards. More importantly than that, if we now move this out of the way and we now start to talk about the actual calendar items that I'm paying particular attention to is these numbers here. Now we've also got a Canadian payroll's number as well. And that's likely to be important given the recent strength of the Canadian dollar, and now that has started to weaken over the course of the last few days. Now Canadian payrolls probably aren't going to be particularly relevant to the overall picture of where the US dollar is going. The US dollar has rebounded quite strongly in the past couple of days and does appear, does appear to have found itself a short-term base. And that's borne out in terms of the price action in terms of the currencies. So in terms of my particular focus today, it's going to be the unemployment rate. We're expecting an adjustment down from 6.1 to 5.9. I'll be paying particular attention to that along with the participation rate, which actually saw a slight uptick in the numbers in April, which was positive as more US workers returned to the workforce, which suggests that they're more optimistic about finding a role. And certainly there's plenty of vacancies to go around. And what I would want to see as well is an uptick in average earnings. Now we saw a big uptick there from, we're expected to see a big uptick from 0.3 to 1.6 as more workers returned to the workforce. Now obviously if we see a big uptick in average earnings, that's likely to be positive in terms of the inflation picture because at the moment we haven't really seen any evidence of wage growth as a result of all of these jobs coming back. And let's not forget there are still 8 million fewer jobs in the US economy now than there were pre-pandemic. So while the unemployment rate may be 5.9%, the participation rate is also an awful lot lower from the 63.7% that we saw in February, March last year. It's nearly 2 percentage points lower. And that 2 percentage points accounts for around about 8 million people. So that is important I think in the overall scheme of things. So it's important to bear that in mind. So what does that mean going forward? Well let's look at the key chart points or the key levels that are of particular interest to me when it comes to today's numbers. Now we've seen an awful lot of dollar strength over the course of the past couple of days. You can see that in euro-dollar. And I think it's quite likely we will continue to see US dollar strength over the course of the next few days. I think we're probably going to see a retest of 120 and a half euro-dollar. We've got an ECB rate meeting next week as well. Let's not forget that is going to be a significant factor. And also there's the fact that an awful lot of dollar shorts are already out there and have been paired back in the past few days. But I think there's quite a few more to get paired in. So as a consequence of the reversal that we saw here, subsequent break below the lows that we saw from the 28th of May, I think any rebound in euro-dollar is likely to find resistance ground about 121.70, 121.80 for a move back towards 121.50. So as I say, I mean whatever the payrolls report is today, unless there's a really big miss, I think the US dollar is likely to head higher over the course of the next few sessions. If we look at say, for example, the dollar index here, we can see that we do appear to have found a little bit of a base here. And we do appear to be starting to trend higher just a little bit on the basis of this thrust higher through the highs here. So the market is a little bit short of dollars and we do need to be aware of that. That's certainly borne out by the fact that Dolly N has broken higher. Nonetheless, with respect to Dolly N, we could see it drift back towards 109.70, 109.80 first before ratcheting back higher. That's likely to be the key level for me on Dolly N on the downside. We've pulled back from 110.30. And generally Dolly N's support and resistance levels tend to coalesce between 20 and 30 and 70 and 80. I used to trade Dolly N, and those tended to be the key areas of support and resistance whenever I was trading it back in the day. And it hasn't really changed that much. So if we get a drift lower in Dolly N, I think 109.70.80 will probably be the extent of any dip. I'd be surprised if it dropped much below that, assuming that the dollar move higher is set to continue. It's a similar sort of thing with cable. Again, it's very much in a range. Big top at 142.40. Those of you who watch my regular weekly videos will know that I've had that 142.40 in line for quite some time. It's respected it on at least two or three occasions while I've been away. If we do come back down, at the moment there's a decent area of support in and around 140.80. Those of you who are regular listeners to my videos will know that I post regular updates on the chart forums for the major currencies, sterling dollar, euro dollar, euro sterling, and Dolly N. I post them generally on a daily basis when I'm around. Obviously when I'm not, I can't do that. But certainly I think in terms of the pound, the line of least resistance is very much towards the upside. I'm very much sterling ball looking for a move towards 140 through 142.50 towards 145. That will play out in a lower euro sterling where we've got solid resistance all the way through here. So as I say, it's very much a dollar story with respect to today's payrolls numbers. I'm not expecting anything like the missed that we saw last month. But what I would be paying particular attention to is a significant revision to the April number. Now I said I'd talk about NASDAQ just before we got to the numbers. Paying particular attention to this resistance area here, Murat, you've got big resistance at 13,800. I've drawn that line through here. It is acted as support, support, support, resistance, resistance, resistance, just basic technical analysis. When support and resistance levels break, they tend to reverse their roles. And that's important in the overall scheme of things. So while I am fairly bullish when it comes to equity markets, I'm probably more bullish for European equity markets and UK than I am for US. Now that's not to say that US markets can't continue to go higher, but given the valuations of tech, until such times as we get back above 13,800 on the NASDAQ, my bias is more to sell the rally on the NASDAQ simply because we're not getting the higher highs that I would expect to see in a strong uptrend for the NASDAQ. We're still in an uptrend, very much so. But the fact that we've been unable to get back above 13,760 to 13,800 gives me a little bit of pause. So that is an area that I've been watching for quite some time. Of course, if we look at the S&P, again, fairly sideways consolidation here, it's likely to finish the week lower, unlike European markets, which are likely to finish the week higher. There is potentially more sideways consolidation likely to go on here with support around about the 50-day moving average and this trend line here. I'm still very much by the dip on the S&P while we're above this trend line here. But as soon as this trend line breaks, you have to flip your psychology around because the mindset then completely flips around. Similar sort of mindset for the FTSE 100. It has continued to underperform, but while we're above this trend line here, we did briefly break below it here, but we closed on the highs of the day there. So I'm not counting that as a break. Why are above this trend line here? I'm of the opinion that we're very much in the case of by the dip for the FTSE 100 when it comes to this particular market here. German DAX, finish off with that before the numbers come out. Again, similar sort of story. Higher highs, higher lows, momentum is the key on any market that you look to be trading. So in this case here, I'm not looking to pick tops, I'm looking to buy dips. So at the moment, there's a decent area of support through these previous highs here and about 15,600, 15,580 for gradual move higher. Okay, so finishing off with gold because a sharp move higher in yields could potentially see gold prices to continue to move down from the peaks that we saw at the beginning of this week. I'll be surprised if we break below the 200-day moving average, but certainly a decent jobs number and a decent number in terms of inflation could see a move lower in gold and a move higher in yields. Okay, so I'm now going to be quiet in the lead up to this particular number. I don't think I've forgotten anything. Oh, yes, dollar caps very quickly before the numbers come out. A decent rally here. Potential further upside through this resistance level here. So that level is around about 121.30. 121.20, 121.30. And here we go. So that was the Canadian payrolls report numbers. They were disappointing. Minus 68. Unemployment falls to 5.8. The number for payrolls is 559. So slightly below expectations, which again is not surprising given the fact that we had the weak employment components. I'm now looking for a revision for the April number. And at the moment, I'm not seeing that. Yeah, well, it's fairly weak revision. So all in all, that's fairly underwhelming and symptomatic of a weak dollar reaction. Not particularly great payrolls report, 559 below forecasts. Average earnings, though, is coming at 2%. So that's a positive. So that could actually feed in to the positive dollar story once markets start to absorb that number. Because as I reiterated earlier, the jobs number is probably less important as we lead into September than the actual wages number. The Canadian reports slightly disappointing, minus 68,000, expecting a number of minus 20. So that's missed expectations. But it's this number here, 2%. That's quite a big jump. So we're starting to see wage inflation start to creep back. So if we're looking at the euro dollar chart now, change that to a five minute chart, we'll probably see a little bit of dollar weakness, which is not surprising. But that wages number is probably likely to feed in to the taper story. So I'm going to be particularly interested if the euro gets back to around about 60, 70, I'd certainly be looking to try and initiate a potential short position on that once markets start to manifest a once they start to absorb the fact that wages numbers are starting to push higher. And I think that more than anything is probably the key takeaway for me for that. Because I think, as I said, I said earlier, weak wages, weak jobs numbers, they're likely to remain on the on the downside, on the lower side of expectations as a consequence of the fact that the unemployment benefits are still at fairly elevated levels. So let's just do that. Remove that. So this has all the makings of a little bit of a move higher. I'm looking at this level here on 21 80. I would expect to see a move back to 70 80. And then for a little bit of an adjustment lower because this jobs number doesn't change the overall conversation, if you like, about a potential tapering of asset purchases. Yes, we've got the ECB next week. And there'll be an awful lot of discussion amongst the more hawkish eurozone members about European recovery story and the fact that they're uncomfortable with the current loose monetary policy being adopted by the ECB. But you know, the ECB aren't going to go anywhere. And it's more likely that the federal taper asset purchases before the ECB starts to even consider the prospect of withdrawing its own levels of support for the European economy. So I think the key takeaway for me any questions, by the way, keep keep keep them coming. The key takeaway for me is it's a disappointing jobs report. And we could we'll see a squeeze higher in euro euro dollar to one 21 80. But overall, it doesn't change the dynamic for me in the in terms of the concept in terms of the conversation, I can get my words out about the direction of travel when it comes to the discussion of a taper at the FOMC meeting in two weeks time or less than two weeks time, because ECB is next Thursday, the following Wednesday we've got the Fed. And I think there will be more discussions about a tapering of asset purchases as we head towards the end of this quarter. And we head in to the third quarter. Okay. So let's move away. I've just been asked about Euro CAD. So going to quickly just change this and look at your CAD. This doesn't look particularly exciting, I have to say. I mean, yeah, it's at the bottom end of its recent range, decent support on the one hour chart around about 146 70. That's a bullish reversal there. Finding it difficult to get through 147. But I would suggest that there is potential for it to move back towards these highs through here. There's a bit of carved out a little bit of a base on the hourly chart. Let's have a look at the four early charts to see if it gives us any better steer on that. Again, the four hourly chart looks fairly positive. So yeah, I would probably go along. I would probably go along with that train of thought does look as if it's you could well head back towards 147 and a half over the course of the next over the course of the next few days, if you're prepared to run it over the weekend. And I generally tend to I tend not to do that anymore. I used to run positions over the weekend an awful lot. But I've become less inclined to do that. In recent in recent years, because of the prospect of gaps higher and gaps lower, markets tend to be more tend to be more vulnerable to that sort of thing. Right, does this now mean that inflation figures on 10th of June and now more important data points? Yeah, let's talk about that. Because as I say, those average earnings numbers were fairly positive coming in at 2%. That would suggest that either wages are going up or more people are returning to the workforce, judging by those numbers that we've seen, they're not certainly returning the numbers that I would have expected them to. But let's talk about CPI may CPI. Because I think that's going to be a very key data point next week. Now, I don't think I need to remind any of you that markets got spooked a little last month, when US CPI jumped sharply to 4.2%, which was well ahead of expectations of 3.6%. And the highest level since September 2008. Now, I think it's important to remember that there are base effects that play when it comes to these inflation numbers, you've got to put in the context of where oil prices were a year ago. And that will play into the conversation when it comes to looking at the headline inflation numbers. A big component of the increase that we saw in the April numbers was a big rise in used car and truck prices, which rose 10%, as well as higher energy costs. These two factors have not gone away. They will also be in the numbers for May. In the aftermath of that number, that CPI number, we also saw a big rise in PPI prices. And there's been much debate as to how much of this will drop out the numbers and be transitory. Now, if the recent April PPI numbers are any guide, and given the fact they tend to be a forward indicator, the CPI, then I think they could give us a decent steer as to what next week's CPI numbers could be. So April PPI jumped to 6.2% April PPI, its highest annual level in over 10 years. Now, the reason for that was prices in the goods index saw an increases of 18.4%. That's 18.4%. Now, that includes dairy, meats, as well as plastics and other materials. Now, an awful lot of the headline over the course of the past four weeks has been about rising agricultural prices, which is likely to trickle down or trickle up, whichever way you want to describe it, into an awful lot in higher food prices in grocery stores. So next week, the expectation is for a US CPI to rise by 4.6%. Now, I would suggest that that is probably a little bit on the conservative side, and it could actually come in near a five. Now, if it does come in near a five, you're going to get an awful lot more people nervous about inflation. You're going to hear an awful lot more noise about transitory risks and what have you. And the flip side of that will be that you won't have any Fed policy makers on the wires trying to talk yields down. Why? Because the Fed goes into blackout next week ahead of the FOMC meeting on the 16th. So there'll be no central bank is talking inflation risks down, saying it's transitory, yada, yada, yada. There'll be no jibber jabber about that at all. None. So if you get a high inflation number next week, which I think it's undoubtedly we will do, then that will put upward pressure on US 10-year yields. Let's just have a quick look at what US 10-year yields are doing right now. Obviously, the dollar is lower. So let's look at what US 10-year yields are doing. And they're doing nothing. They're 163.35. They're 85 points. They're just slightly less than one basis point higher. So US yields haven't moved. The dollar's weaker, but US yields haven't really moved that much. And that suggests to me that any dollar weakness today is likely to be fairly temporary in nature. So expectations are safer next week are for CPI to come in at 4.6%. I think it could come in higher than that. And core CPI, which excludes food and energy expected to rise by 3.4%. Again, there will be base effects within that number. But we're also seeing supply chain considerations, upward pressure, and other prices elsewhere, which could push the headline number higher. So certainly keep an eye on that CPI number next week. I think that for me is probably the main data item that I have an interest in when it comes to looking at the when I'm looking at the inflation outlook. Right. What are my views on emerging market currencies, say dollar mechs or dollars are given taper prospects? Right. Well, let's have a look at them. That's a baby chart here. Let's clean this up and do a little bit of it. Well, certainly in terms of dollar mechs, I'm still very much a case of I'm buying the dip on the dollar on this. I mean, we saw a very strong move up yesterday. I think we'll see a little bit of weakness heading into the weekend. But if I'm going to going to force me into doing a little bit of analysis on that, I will be certainly looking to buy any weakness back to 20 for a move back towards 2040 on the next. So weaker mechs, stronger dollar. Looking at dollars are, it's going to be a fairly similar story. Though I've got to say the reaction of the dollar on this particular currency is makes me worry a little bit in terms of the overall outlook for this, because at the moment, we're still very much in a downtrend. And looking like we could well continue to do so. The only way I would revise my opinion of this, Jonathan, is if we're able to take out a series of peaks through here. Otherwise, I'm very much in sell the rally camp here on a technical basis. And for me, it's all about technicals. When it comes to looking at the markets, I sometimes think that you can look at the fundamentals. And at all intents and purposes, you can place too much store in the fundamentals rather than looking at what the money is doing. And the money is doing in the flow tells me that dollar and dollars are still very much in a downtrend. And we'll continue to be so until such times as we take out the peaks that we saw back here on the 28th of May, around about 1388. So dollar mix by dips dollars are selling rallies. Hopefully that answers your question. Gold, not surprisingly, because of the weak number that we've seen in the payrolls, we're getting a little bit of gold strength. For the here and now, we'll probably see a squeeze back towards 1892, 1895. But based on the assumption that US yields will continue to move higher on higher inflation expectations, you've got to think that the upside for gold is likely to be limited to the highs that we saw at the beginning of this week. And we'll probably see a drift back down towards 1835, 1840 over the course of the next few sessions. So in terms of gold, I'm expecting a lower gold price to sell on the rallies as yields edge up terms of equity markets still remain that numbers. Plenty positive for equity markets, not really doing an awful lot on the DAX, Zedsville, Arizona. The footsie is edging back up again. So not much to see there. Brent crude is a decent area of resistance all the way back through here from $72, which was the highs in 2020. I think it's really going to struggle to get back through there. I'm struggling to see what would cause it to punch through that very significant resistance level that we've seen through these series of peaks all the way through here. And this also feeds into my inflation narrative as well. You look at where crude oil prices are now, 3rd of June, or even in throughout May and where they were last May. So we're looking at crude oil prices at $30 a barrel a year ago, and they now over double that. So there's an inflation component in there, which is all which is helping to keep a really high floor under inflation expectations. So for me, oil looks a little bit toppy on Brent, good resistance in and around $72 a barrel. I don't expect that to change in the short to medium term. It's certainly not in OPEX plus its interests or oil to go much higher than it is right now because of concerns about demand destruction. So I think in the context of that particular discussion, I'll be surprised to see oil go much above $72, $72.50 from the train line that I put in from this chart. Okay, so any other questions? US bonds 10 year? Well, obviously, if I think yields are going to go up, then I think bonds are going to go down. So let's look at a 10 year note. Let's just draw in some lines. Got a nice little line coming in there. And if we then draw in a similar line through here, okay, so you can draw in a similar line along the highs through here, but you can also buy the same token. Price action is compressing. So we're going to get a break one way or the other. My bias would be for us to break towards $170, $180. So high yields, lower bond prices on the US 10 year. It would be my expectation if the latest inflation numbers continue to surprise to the upside. What do I think copper's adding? I think copper's adding up for just based on supply and demand dynamics that are likely to be at play in terms of renewable energy. Seen a little bit of weakness in the short to medium term, but that's a fairly decent uptrend in place there. You've got the 50 day moving average. I can quite simply draw a line in through here. And it also happens to coincide with the 50 day moving average. So I think while we're above 50 day moving average and this trend line here, then copper remains very much by the dip, given the fact that copper is used pretty much in every sector, in every renewable energy sector. See whether it be solar, whether it be wind power, whether it be car batteries or any other type of battery. Copper is a key component in all of them. And if you're going to drive a renewable energy story, then copper is going to be well bid on dips every time it gets cheap enough for people to buy back in and restock. So that's copper. So that's pretty much summarized. I think everything that I need to say, unless there are any other questions, ladies and gentlemen. I'm probably going to wrap this up now. Until the same time, same place. Next month, I do do a weekly video, which generally goes up on the website around about 4pm on a Friday. As I say, you can quickly find that under the insight section of the website. And this is basically where all the various commentaries go. That was my week ahead for last week there. But yeah, I mean, there's a repository of comment pieces that go up on a fairly regular basis. Obviously, if I'm not on holiday, they don't get written, but I've just got back. So they should be fairly up to date. And I have a colleague in Singapore who also writes periodically on what's going on in the markets as well. So enjoy the European weather freezing here in Oz. Oh gosh, that's not good. Yeah, well, hopefully it warms up a bit for you in Oz. And I've been asked if I could take a look at Neo. Right, okay. Let's have a look at Neo. Well, that's interesting. It certainly doesn't like it much above $43, does it? Failed there. Failed there. We're aligning through there. No, that's not it. Let's extend that back. Looks a bit of a range player at the moment. Alan looks a little bit toppy anywhere near 43. So we could see a little bit of a drift back down to around 30. But I mean, that's been the extent of the range for about the last three months or so. And it is looking a little bit overbought. So I think while we're below 43, there's a decent chance we could drift back down again. Just bear in mind that we're heading into the weekend. You don't really want to be left running anything over the weekend, though. So always be a bit careful. It's making it ahead of the weekend. All right. Okay, so that's it for this month. Well, yeah, this month's payrolls report. Join me again, same time, same place on the 2nd of July when we're doing the June payrolls report. And hopefully, we'll have a better idea of what the inflation picture is from the US economy by then once we've got site of yet another load of monthly economic data. Otherwise, thank you very much for listening to this payrolls webinar. I'll be posting it on YouTube later. There will be a recording of it. Otherwise, thanks very much for listening. And I hope you all have a nice weekend and see you all again next month. Thanks a lot.