Amplify Trading Morning Briefing - 19th July 2018

Hi guys, good morning. Just gone half 8, Thursday the 19th of July. This is the morning briefing. Before we get on to what happened yesterday overnight and the possibilities of what could happen today, I just think I'd like to speak on behalf of everyone where we say good luck and hopefully very soon congratulations to director here at Amplify8, Anthony Cheung, who is currently, as of about 6 hours ago, in the hospital with his wife. So everyone here. To you, Anthony, I know you'll be watching. Good luck, and I'm sure it's just a matter of time before your soon-to-be daughter has her own Twitter handle, and I very much eagerly await her first ever tweet. But congratulations as soon as it arrives. Moving on to less important news, we'll start with what happened yesterday. In the markets. Um, if I just drag this chart into picture, one second. So started the day yesterday with the news, uh, coming out of the UK that the, uh, the inflation numbers were worse than expected. As if it can't really get any worse for the situation in the UK at the moment. You can see here, uh, the inflation rate year on year 2.4, been the same for the last 3 months, but still as you can see, uh, from the chart here, uh, the lowest it has been for, well, exactly a year. So it's, uh, not getting too rosy. And the core inflation slipping below 2% for the first time, uh, in a while, 1.9%. So if we have a look at the reaction that came through on the charts at 9:30, you can see sharp down, uh, tick there through yesterday's low, broke the S1. Uh, it was, it was a trade where you had to sort of be in from the, the, the get-go, the the pullback that you can see to almost the low of, um, of Tuesday worked quite well in the continuation. But that number weaker than expected, and the market, uh, duly sold the pound here against the dollar and other, other pairs as well. Elsewhere, we also had some data out of the US. Now usually it's not really a a market mover as such, uh, the housing starts or building permits. But both came in much, uh, well, weaker than expected. Housing starts in particular, -12%, usually, uh, doesn't really grab my attention. You can see just from looking at the chart of the last, well, sort of 4 years, a very volatile reading, sometimes better, sometimes worse, much like retail sales, which we actually have coming out of the UK in, well, just over— just under an hour. But the worst reading for, for a couple of years. And if we have a quick look over at the reaction over in the US, you can see, uh, just at that 1:30, the dollar did weaken, not just in, in the euro dollar that we got here, but against all other pairs. And we saw that retracement continue into the back end of the session, uh, last night. So that housing starts and building permits permits data worse than expected, US dollar weakening and breaking through the S1 for both the euro and the pound that you can see here following inflation numbers. Uh, didn't quite, uh, eaten back into all of the move down, but just something to bear in mind, those numbers, for the next reading that does come out. Also yesterday we had the, the oil numbers. You can see here, if I just move the screen. Uh, off first glance, you've got to imagine, uh, that it would have been a bearish report. You can see there's the, the reaction from, uh, the DOE release. So starting around sort of 66, uh, 60 on the futures, ending up at 68, uh, late last night. Uh, but if we just go back, you can see, uh, while crude was, uh, a big build of 5.8, what really stood out was the gasoline draw. And if I switch over to, uh, well, the gasoline chart, you can see straight away from that, that half 3, we just pushed on and on, and it helped to drag crude oil higher as well. The first red candle you see at half 3 on the, uh, on the bigger build than expected, and then you see gasoline driving price higher there. So one to bear in mind later this afternoon. We'll run through the the charts for the day later on towards the back end of the briefing about where price could go or not. I think in general crude oil is a tricky one at the moment. You've got technical analysts believing we're on our way back down to low 60s and other people focusing on a matter of time before we get back up to those highs and then potentially test $80 as well. So those are the, uh, the moves last night off data. We had a couple of earnings out of the US which were better than expected, uh, NASDAQ in particular, um, the, the focus of many people at the moment, making new all-time high after new all-time high. And we did yesterday, but really early on in the session. So come cash open, a bit of a negative, uh, 2:30 UK time cash open here where we moved down in not just the NASDAQ but S&P and Dow Jones, only to find finding support at. In this case, the pivot was quite an interesting level from previous, uh, as well. And the NASDAQ, the S&P, just before the pivot, but again, quite an interesting area of support just below that pivot. And the Dow Jones, very similar as well. So those markets working in, in excellent correlation, uh, finding support there before pushing higher into the close. Uh, equities this morning, uh, we'll run through the, the sort of stories that are driving the the markets, uh, for now are just coming under a bit of pressure. So if I just switch over to the chart as we are trading now, you can see we're just near enough the, the lows of the day, uh, here in the Dow Jones. S&P sort of following suit, and the DAX having actually pushed higher, uh, initially making a new high for the day, also under a bit of pressure as trade war talks come back into, uh, into play. Uh, Ludlow— sorry, uh, I'm not a big fan of tariffs, and we can't allow China to steal our technology, told CNBC. Worth having a little listen of this video. I'll post it in the chat, uh, in time. But he, uh, told CNBC that President Xi Jinping does not want to make a deal. So talks stalling, and again, it doesn't take much of the sentiment of these trade talks to reignite. And understandably, just on the sort of the market psychology, equity is coming under a bit of pressure. My personal view is it is a load of rubbish and it's, uh, just a short-term, uh, potential downside before we then push a bit higher. Just actually recently, probably about 10 minutes ago, um, comments coming out from China that the Kudlow accusations were shocking and outrageous. So a bit of tit-for-tat as you would expect. It's just going to continue and continue. Uh, they're sort of the headlines in the market this morning. I always like coming in, um, on my way to work just having a quick look over, um, Twitter. Uh, there's another shout out for you there, Anthony, um, Mr. Twitter himself. Having a look over at what the headlines are saying, and it was very much sort of stocks losing momentum. The Asian session just, uh, seeing stocks just come towards their lower level. So sentiment this morning, very much so on the trade war talk. So comments, listening out for that going forward will be, uh, the sort of the main driver stock-wise. Uh, we also usually see, and if we have a quick look over at, well, the euro-dollar, we'll have a quick look over the, the pairs, um, this morning. Usually when we have these trade talks, you do get a bit of dollar strength come to, comes into the market. EUR/USD down to the lows, GBP/USD towards the lows, gold as well finally coming back with a bit of a correlation, uh, down to those lows as well. So the dollar strengthening, it is, uh, it's definitely worth, um, and I'm just going to bring up the dollar index chart, um, because obviously as you'd expect that would be on the highs as we speak. But it's worth keeping an eye on, on the dollar index throughout the day, perhaps more so now, uh, than, than recent times, just because of the 95 level. So we're just currently above that now, having pushed through in the last sort of 30 minutes or so. Um, but quite an important level, as you can see if I just drag this chart, uh, back to 2017. Had some resistance here and actually, you know, previously been quite good either support or resistance in previous times. So can we get a, an extended push above the 95? I think that if that is the case the dollar across the board is going to strengthen. Also overnight, worth mentioning about the renminbi, uh, making a new low for the year. And actually I've got this level, uh, marked up. And at the time, or this morning, 6.78 was the, was the low. Oh, let's talk that, uh, the PBOC are looking to possibly defend 6.8, uh, 6.80. So worth having a look at this market when that comes into, into play. If it does, are they going to defend it, or are they just going to, to sort of step back? And where this market could go is anyone's guess. So the dollar strengthening from overnight, um, always tricky if you're just sort of coming into the market to sort of go with, um, go with the flow when it's all near the lows of the day. But sentiment-wise, trade war talks, if anything, you've got to have a sort of negative bias for equities for now, unless the market tells you otherwise. And looking at, uh, dollar strength, either that be on a retracement for it to go higher or looking at a bit momentum in pushing through the lows. Another market worth talking about from last night, I'm just going to bring it into the picture, is the Aussie dollar. So overnight we had some jobs numbers out which were, were better than expected over in Australia. So switch over again to the calendar, you can see employment change there, uh, quite a bit more than the sort of 17,000 expected. Consensus 50.9,000 come in. Unemployment stayed the same. And you can see around that, uh, 2:30 AM, big push higher, making new high for the week for the Aussie dollar. But with the, um, the sort of the talks coming through about the trade war, dollar strengthening back above 95. Is now hit a low for the day. So for those that possibly are interested in seeing a bit of reversal with some positive news out of Australia, it might be that this is the market that offers a chance for that reversal to take place. S1 on the futures and the spot market look quite good with the high, uh, that we had from 10:30, sort of the pullback in S1 yesterday, albeit the dollar just slowing down a bit having pushed through its pivot. Just one to bear in mind, uh, going forward. So Aussie jobs number, uh, better than expected. Uh, trade war talks to sort of stalled, meaning that sentiment, uh, to be to the downside for now. So just having a quick look over the markets as we stand, having mentioned that dollar strength, you've got commodities coming under a bit of pressure. Oil looking to perhaps erase some of those gains yesterday, really driven from the gasoline. So When trading oil, always a good idea to have the gasoline chart up in correlation. But we're just coming under a bit of pressure here around that pivot. Gold extending, uh, its losses of recent time, not far away from, uh, the S2. I do feel there will be a long, longer term, uh, long coming up, but for now, uh, sentiment definitely to the downside for that pair. Euro dollar with the S1 in, in touching distance, same as the pound. Worth keeping an eye on. And the DAX and US equities relatively near their lows for now. Other sort of headlines in the markets, you can see if I just transition the chart. So here on Bloomberg, May set to catch a summer break after months of Brexit crisis. So almost a half positive story for once coming through. But then you just look down And you can see it doesn't last too long. Pound may relive June 2016 nightmare if no Brexit deal is clinched. So it won't be long until those negative stories do come back, and the dollar helping— not helping, uh, uh, the, the sort of the, the FX rate there at all, as it has continued to make new low after new low, uh, for now as well. Having a look over at the calendar for today day. Let me just zoom in. We do, as mentioned, have some retail sales data coming out at 9:30. I talked about the housing starts and building permits being quite volatile numbers. Retail sales, very much the same. Um, so you've got the month-for-month, year-on-year figures for both, um, just the flat retail sales and ex-fuel. So that would be something to focus on. If we have a quick look over at those figures here on Trading Economics, the month for month number just— oh, it doesn't have a chart for that one, so we'll go retail sales month. You can just see how volatile that reading can be, but with the, the sort of, uh, the decent, uh, weather, you may see perhaps a beat of expectations. As usual, worth having a look at the pound in the build-up, uh, to 9:30 to sort of get an indication whether it is going to be better, uh, or worse. than expected. But the sort of the move down now, very much dollar-related, so I wouldn't really read too much into it for now. Much more so the first sort of, uh, 10 minutes in the build-up to 9:30. Going out into the late latter part of the day, 1:30, initial jobless claims. It's not going to move the market unless wildly out of line. Having a look at there at the low end of the high end of the range, 214 to 230, quite small range, but really you want to be looking more at a multi-year high or low to get any sort of reaction from that. Philly Fed Index, business index, at the same time. So that's going to take prevalence over the, the jobless claims number, um, along with the sort of the, the opens and cash open to sort of drive the market before having a few speakers out in the afternoon. And we've got a couple of earnings. So earnings out this week Obviously leading on from yesterday, Morgan Stanley's ones were better than expected. Help. By the end of the day, you know, the, the journos can say this is the reason why equity markets continue to go higher. Whether that really is the case or not remains to be seen, but worth having a look at this, uh, this chart here. So most S&P 500 stocks report results in the 4 weeks starting the 13th of July. So they that being this Monday, but only 4% this week. So in terms of earnings to drive the market— oh, let me just transition that chart— in terms of earnings to, to drive the market, it's not gonna, uh, really be from this week or really next week, just the 18%. But the, the week beginning the 27th, so what's that, not next week, the week after, 40% So by August 3rd, 87% of the S&P 500 equity cap will be reported. So earnings-wise, to drive the market, that's more 2 weeks away. Obviously you want to be aware of what is coming out today, uh, and each day, but that's really going to be the week to be aware of. Another chart which I found quite interesting just on Twitter today, here you've got the, the market cap of the top 5 S&P 500 companies, and it is just incredible, isn't it? Apple, Amazon, Alphabet, Microsoft, and Facebook just, you know, taking the mick really. So while of course you can see if you were to zoom in very quickly, uh, the— all the other companies, it's all about those, and it's all about the FANGs. They're moving the market. Uh, you know, I was speaking to, to someone yesterday about their view on equities. They think that we obviously shouldn't be anywhere near where we are, but it's all about these, these stocks, you know. If they start to come down, you know, it could well be that we, we look to get back towards those sort of February lows. But for now, these stocks making new all-time highs after new all-time highs. Anthony Cheung mentioned it yesterday about the, the buy the dippers in, um, in Netflix, uh, and I'm sure given an opportunity for a dip again in any of these markets on the screen now, you will get a lot of, a lot of appetite to continue driving these, these markets higher. Every now and again we are going to have the trade war talks come into play. That's, you know, been the case really since the beginning of the year, and of course that can sort of have a drag down on, on equities in general as well. But it just seems for now that these markets do want to go a bit higher. Will be interesting again just going back to that earnings release on, on the, on the 27th that week to see how that sort of goes down. But very much focus to see what equities do in the afternoon, I think, following these, these sort of trade war talks that are stalling. Having a quick look over at the charts for the day, where would we stand, what could be the possible opportunities. Having a look over to start with EUR/USD. Uh, that S1. You can also say yesterday's low is a sort of an area, has held quite well. I would favor this to continue. You know, last week we had dollar strength in the morning, recovery in the afternoon. You could half say that happened yesterday, albeit helped by a bit of the weaker, uh, dollar, uh, data releases at half one. If we have a look at potential resistance points You know, the pivot looks really nice. You have a bit of support, uh, that we broke through from yesterday evening as well. In, in the sort of meantime, that could act as resistance, shorter-term resistance here that we did push down over the last sort of half an hour. If we do push to make a new low, you're gonna have to put those charts on a longer time frame, and you really are going back to levels from last year. To see where we could perhaps find support or look for profit targets. So favoring the downside for the dollar pairs unless comments were to come out. With the pound, obviously you've got to be, uh, be attentive to any comments that do come out Brexit-related as well. Boris Johnson didn't really do much yesterday in terms of moving the market, uh, and in correlation with the euro, it drifted higher into the back end of the session. What was the level I was waiting for all day on the futures here? You can see 1.3113, basically the low before we broke down at half 9, has acted as a very good resistance. I wasn't in the office at 8:45 unfortunately to take advantage of this, but has acted as a strong, strong level for that push lower. If we do continue the, the trend um, and sentiment of the downside. I would prefer to see a bit of a retracement. I'm looking, uh, at these levels in particular. And similar for euro, the pivot I think looks quite nice, uh, if we were to make our way back, back up there. But very much expecting that to be, uh, later in the day. I have a quick look over at equities as well. The lows of yesterday will be, be interesting if we can get back down there. Sentiment, as mentioned, to the downside. Whether it should be continue or not is up for debate. But the market taking a negative turn for now on those comments as well. Might be worth having a bit of a trendline using those highs. I'm gonna roughly draw it here. If we do get a break of the pivot and that trendline, that could be the market sort of saying, you know what, trade war fears, put it to one side again, and we look to push to the upside. Any questions, of course, about the charts, please don't hesitate to to put them in the chat. As mentioned this morning, Anthony will not be in for the day, uh, and just another congratulations to you and good luck, uh, guys. Have a good trading day if I don't catch up with you, uh, and I'll come on just before the retail sales data out in just over half an hour.