As Markets Pause For US Thanksgiving The Brexit Saga Drags On

Hi there, I'm Anthony Cheung and I'm the Head of Market Analysis here at Amplify Trading. Every weekday morning I'll deliver a fundamental rundown ahead of the European Open, but if you subscribe to the channel you'll also get content from the rest of the team. So let's begin. Okay, very good morning to everyone, hope you're doing well. It is Thursday 26th of November and of course for any of our US Listeners, happy Thanksgiving. Do take care and enjoy what I'm sure will be an extended weekend for you. Um, otherwise, thanks very much for everyone who joined us last night on Amplify Live for the masterclass with Nick Baker. Uh, if you did miss it, I did record it and I'm gonna upload it later on this morning so you can all access and review that, uh, if you need to go over it again. But otherwise, let's just get straight into what's going on in the overnight session. And obviously when it is Thanksgiving, things are notoriously quiet. US markets are closed, so no trade on things like the NYSE or the CME floor, things of that nature. There is electronic trade which sees an early close at 6 PM London time. So right now you can still trade US index futures, for example, but the idea being is that this is where you need to recalibrate slightly your approach to the day because a major continent is out of the market. So that's a really meaningful point, I think, for the, for the briefing today is if you are fairly new to the day trading environment, you have got to be adaptable to the market conditions. And if you think about generally markets and how they've been operating of late, it varies very much so, is US-centric. And so the fact that the US participants are out of the market today then means that it's likely to be particularly quiet barring anything unexpected. Expected that develops. And that's also reflected on the economic calendar. Everything was really squeezed into yesterday's session. We had that kind of data deluge, if you like, that came out. But now that that's passed, there's really not a great deal going on both today, but also just going through the news from my perspective this morning, there's not a lot going on either, just given the fact that, again, a lot of those people even on that side of the table are also away. So having a look at things as they reside at the moment, there was a A bit of a divergence between the close on the US indices, albeit fairly moderate. The NASDAQ has continued to outperform, and I guess let's just have a look at the NASDAQ and the S&P just as an example. And I want to look at the NASDAQ on a daily continuation because I just think it gives a nice kind of narrative to where we are and where we've come from. And certainly the US election, that idea then of Biden coming in, but not having a blue wave scenario, meaning that a lesser tighter or stringent regulatory environment for some of these, particularly these mega-cap tech names. And then, of course, we've had the pandemic kind of rage on in North America, and that has created then still some appetite, at least at this point, for those tech-related kind of pandemic plays on a sector level. And so the tech sector continues to outperform, uh, on that, on that side of things. And after we had that breakout, which really came earlier in the week above what was the area of around 12,021, that coinciding with a horizontal resistance, but with that trend line coming in from the initial September high, the October retest, the failed kind of sustained move that we saw in the early part of November. It's just continued to just edge higher, and where we are at the moment, coming up to close proximity back to that high we printed on the 13th of October, that would be up around $249, and then the inevitable push back up to the all-time high, of course, which was seen at $12,465.2. So the tech side of things continues to to see a pretty decent performance. Obviously we continue to be vigilant, obviously, for updates on the, the COVID side, the vaccine side of things. And there is a little side point I want to make about the COVID situation when we get to it in a moment. Otherwise, this morning, continuation of the dollar trend. And I just want to quickly switch over my charts. This is a look at the, the dollar index. And we had that push down what was that really key 92 level. This would have been right back at the beginning of the week, and that was met with some really strong buying that came in, and we kind of bounced up quite aggressively. But we've kind of held the view that the dollar is on a weakening trend at the moment. That's been pretty evident ever since the onset of the pandemic, really. If you start going back on a a longer time frame chart here. I mean, here we are up at around the dollar peak that we saw momentarily on a flight to quality move that came initially, which saw us test up at around that high of 2017, and then therefore the highest that the dollar had been trading since pretty much 20 years. However, the realization then of the, the kind of domino effect of what that means for ultimate monetary easing on an unprecedented scale, just saw the dollar get hammered. And here we are, and we still remain of that mindset. The whole reason with the Dow push to 30K just the other day, it's kind of based on a lot of these elements. The Fed undoubtedly going to stay in ultra-accommodative mode, and that's even more assured now with the likelihood of Janet Yellen coming in to steer the ship on the government side as the Treasury Secretary, the confirmation on those other things that we had, of course, on, on the Biden side. But the idea that this lower for longer mentality, uh, and also the pivoting of any of the funds coming out of those underutilized Fed programs means that it puts more pressure on the Fed really to support the market, particularly in a situation where economically, as we saw with jobless claims yesterday, things are going to get materially worse in America as restrictions take hold to try and counteract this recent wave we've had of COVID cases. So the dollar still sits at this really key kind of area. Again, we're looking at a very longer timeframe chart here going back to the last 25 years or so. And you can see the relevance as we've pointed to before in 2016, the kind of resistance that we had in '04 and '05. And so there's still, I think, some room to go for this, this dollar move playing out under the same scenarios that we've mentioned. And, you know, if a vaccine does come out, I don't think we're anywhere near the point where people will start panicking about, you know, rising inflation expectations and ultimate Fed tightening. I think if anything, it's just lesser need to be holding US dollars in that respect. And particularly as well, a lot of people have talked about the pivoting out of the US, given the divergence of COVID timing. If the rest of the world starts to recover, i.e., like in mainland Europe, for example, well, is the euro just a more favorable trade anyway on that dynamic, given that the US COVID situation is almost a lagged effect of multiple weeks behind what the situation is in Europe, which adds to that, that directional bias for negative if you're looking at the dollar, supportive obviously if euro-dollar And on that note, just having a look at EURUSD, we have managed to push above what was that initial Pfizer peak high. You can see if I just move my chart over a little bit, that was that initial Pfizer pop that we had. So we're above there now. Uh, did encounter a little bit of resistance yesterday on multiple occasions, but just going into the late Asia European open here, we've just seen a bit of a breakout with the dollar just easing once again. The Dixie's down about just over 1/10 of a percent. And looking on the euro on the daily, then we're getting above what is really a key, uh, rather large but consolidation range that we have had, and we're starting to see a bit of a breakout onto the upside. And so 1.1941 here on the daily continuation in the futures, just looking to see a bit more of a substantial move above the peak of of where we were in mid-Sept and on that Pfizer top that we saw on the 9th of November. So here, technically on the upside, then does put an obvious target up at around 1.20, which was that area, if you remember, is when the ECB started to voice concerns, uh, in early September and try to counteract and push the euro back down. So be interested to see how that plays out over the coming sessions. Uh, Similarly then, not so much because of Brexit headlines, but I would say more— well, it's partly due to the overall top-level view that ultimately a deal is going to get done with Brexit. But also in the backdrop of this weakening dollar, Cable continues to just grind it out on, onto the upside. And yeah, on the intraday, I guess there's a couple of interesting levels. We've got this kind of range here we're looking at on the upside, the 134. On the downside, you've got this range kind of high and low that was in play for this week. So if I was looking at the price bands at the moment for cable, this is what I'd be looking at in the short term, and then we'll have a look at the long term in a second. So let me just color this up so it's as clear as possible. So we're just trading here after getting above it yesterday afternoon. It's really just in a phase consolidation. So a break on the downside, be looking for down to a push back down to around those initial lows that were seen at 74, and then back down potentially towards pivot. On the upside, we've had 3 attempts now up and around the 134 handle, that being that high on Monday session as well as yesterday, and any breakout then might continue that trend. So look, keeping an eye on the dollar really for a trigger point if if that was to materialize. On a daily continuation, obviously cable just keeps going, and that 134 obviously quite key because we were just looking at a more zoomed in 30-minute chart, and we can see that was the high that we printed back on Monday. But that 134, not only psychological for the handle, but that was also the highs that we were printing on the 31st of August and the 2nd of Sep. So it is a meaningful level. A breakup above that then does open up the prospect of potentially just a further continuation of the, the upside trend of what has been a pretty phenomenal month really for sterling over the course of November, given the kind of doom and gloom over will they, won't they on Brexit. I mean, sterling's gone from pretty much a 1.29 handle up to a 1.34 handle. So I think that says it all really about the general market's feeling about the idea now on the— all the probability being relatively contained for a no-deal Brexit type scenario. On that front, just talking of Brexit while we're there, this was the latest obviously from yesterday. The European Commission President von der Leyen said the coming days will be decisive for trade negotiations with the UK, and crucial differences between the two sides still remaining. Negotiations are continuing virtually. The This comes after one of the European members was positive for coronavirus. But face-to-face contact is expected to resume in London before the end of the week. Officials on both sides have expressed optimism that agreement is possible and could be reached by the end of next week. I thought they said it was gonna be the end of this week. So, you know, here it is again with Brexit. If the penny hasn't dropped yet, just what politicians say and how I think you can strategically think about how a negotiation develops. I don't think it's rocket science. Every week we've been told that a Brexit deal is going to happen, and every week the can gets kicked down the road. I think it's completely unsurprising and in fitting with one of the calls that we've been saying, which is that we foresee a deal happening in mid-dec to potentially even right at the 11th hour at the end of December. The idea of it being ratified in Parliament across the various different European nations and that formality kind of procedural process to take place. You know, I wouldn't worry about that. That's what I've always said, is that that can always be that kind of transitional period coming out of transition into the formal free trade agreement can always take place. And that's been ratified from overnight. The EU is reportedly weighing now holding extra plenary sessions on December 22nd and December 23rd, or just after Christmas, the 27th and the 28th, to debate and vote on an EU-UK deal if one materializes. This is according to an informed source being reported by an FT Brussels correspondent. So Europe are already now talking about holding these potential sessions bookending, literally either side of Christmas which for me again means that a deal, if it's going to come, is going to be pretty late in the day. But I don't think that's any room to panic necessarily. I think the market price— let that be a reflection of market's general sensitivity to this. That does not mean that if a headline breaks here or there, it might not have a meaningful reaction on the pound. And the way I'd interpret that is that if the market is expecting a deal and cable is relatively high at the moment, particularly given how aggressive it's rallied in November, well then the bigger reactionary effect would be to the downside if talks were to materially deteriorate. Could that happen? Well, remember, I don't think deterioration in talks means that there's going to be no deal, but deterioration could take the form of looking to leverage and posture to get a better deal. And so the political kind of jousting that goes on undoubtedly in a day trading environment can have some turbulent waters, let's say, for sterling if you're trading it. So you do still need to be aware of it. It depends whether you're trading the very short term. You know, if you were trading today, I think this goes for all assets, you've got to be pragmatic and pretty patient and disciplined likely to be a day of which technicals are respected, perhaps range-bound, more conservative plays are a more prudent play because of the fact that the US is out of the market. And then just being vigilant, you know, if there is any Brexit comments come out, you know, just making sure that you're aware of what's going on. That's all. So quick look at some other things. On the news side, we had the FOMC minutes last night and As you can see in prices, absolute non-event, uh, as we were expecting. A couple things to take away: the Federal Reserve officials discussed at their early November meeting about providing more guidance on their bond buying strategy fairly soon, though they did not see a need for immediate adjustments. The Fed's next scheduled meeting, of course, comes in mid-December, 15th and 16th. Now, I actually think that that's quite interesting as a time frame because by then we probably would have seen if there's any, any meaningful pickup in COVID cases after the back of this kind of potential super spreader event, which is Thanksgiving. Given the incubation period, it could be then that end of the first week, going second week, which is just then going to the Fed meeting in mid-month, that we could then see if there is a meaningful pickup, uh, giving Thanksgiving. And then also as well I think a lot of this market momentum, particularly in the equity space, is being derived from kind of a sequence of positive, generally vaccine news. The only problem with that that I could foresee is the market's almost hungry now for continuous positive little catalysts. And we might well— that might well start to run a little dry. And if that does happen, then again, I'm definitely not bearish. I just think it just lacks then that momentum to just keep pushing higher. Overall, I still remain fairly, fairly bullish even at these levels in equities. But as we were saying yesterday, and something that we were talking about in the Amplify Live room, was, you know, the S&P really was a case in point, which was, well, look, if the market soared the prior day, just almost the kind of animal spirits being unleashed breaking out over key levels, the Dow 30K and so on. And so the other US indices followed suit. But ultimately what you tend to see in a day behaviorally after that is a, is a bit of a pullback, and if anything, a pause for breath, a period of consolidation. And this was that rectangle we were looking at yesterday, which was that double top that we had from 17th, 18th, and that coincided with the pivot from yesterday. So it was quite a nice entry point then, given the scope of the pullback that we had, retracing almost 50% of the move that we had in the prior session, to then just get in back long again. Um, and you know, the— some of the best trades that we've, we've had this week have been those where they have required a lot of discipline. I know Tim had a fantastic trade on oil, uh, where, uh, being long but just waiting multiple hours for that eventual breakout. And when it came, you know, it shifted a decent dollar, dollar and a half in move. And similar sort of thing here with the S&P. I know there was one or two that did take that, and they have— they've had to sit in it for quite a period of time up until the close. But, you know, eventually it has got up there. And, you know, we're talking, you know, 15 points in the, in the S&P. I know that seems small in the context of 2020, but for a trade, obviously, that's good stuff. So yeah, it's this next session or two, I think, just given the fact that Friday as well typically numbers in terms of volume in the market does remain particularly low because most people in America just take it off to make use of that extended kind of period of the weekend to really enjoy Thanksgiving with their friends friends and family. So yeah, just got to be mindful of that as we go through the session. The other thing then, I did talk about the importance of still tracking the vaccine use. I'm actually going to be filming the video that I promised on Monday, if you are following me on Twitter, which was in regards to doing a 101— what have you got to know about vaccines, the timeline, all these other types of things. So I'm shooting that today with one of the chaps on the team, and we're going to look to put that out hopefully tomorrow morning. But in the meantime, just in case, Moderna shares were up another 10%, hitting a record yesterday. Investors awaiting the final analysis of its COVID-19 shots. If you remember, we had Pfizer 9th of November part 1, and then we had the secondary follow-up of the kind of the next level of the same testing that came out. To ratify the first results, which showed the efficacy rates were even higher than the first time. So it's not like a one-and-done result process. They continue to obviously test and bring out latest numbers. And so one of the things here is the final look at Moderna data is expected within days. So something to be aware of. This comes after 151 volunteers in the 30,000-person study developed symptoms of the virus. And so therefore they can calculate then the effectiveness and so on. It would be the final step before filing for emergency use authorization. Um, one of the things I wanted to point out here though was that Moderna, if you remember, their shot was found to be 94.5% effective in the preliminary assessment. So for me, the upside potential, um, is limited because the effectiveness was so good the first time around. I mean, what is it going to come out at 95%? 96%, 97%. I think that doesn't really make a great deal of difference if I'm thinking with my, uh, news impact hat on. The risk is to the downside. What if for some reason it drops to even an excellent, otherwise 85%? Our reference point now is 94.5%. So I would say upside, uh, on their latest update as and when it comes. Is going to be relatively, um, small. Potential downside could be very large. So that's something to be aware of as and when that news does, does eventually come out. And then just looking at the calendar for today, I mean, it is super quiet, um, as you can imagine. There's nothing really going on from a data perspective. You've got the ECB minutes at 12:30. Again, not really expecting that to be market moving, and then nothing coming out this States. Finally, from a COVID update, a few things to be aware of just so you're totally up to speed. In the US, California is obviously one that we watch quite closely just given the, the size of its economy for overall national kind of output. They reported more than 18,000 new coronavirus cases yesterday. That was a new and largest one-day record that we've seen in that state during the pandemic. President-elect Biden has urged Americans to basically forego Thanksgiving. Obviously, whether that gets adhered to or not, we'll find out. And as I was discussing a moment ago, in the coming weeks elsewhere in mainland Europe, in UK, Merkel and the leaders of Germany's 16 states have decided to extend the partial shutdown imposed for the month of November until basically just before Christmas. So December 20th. And in the UK, not that I think it's particularly meaningful for markets right now, but something to be aware of. Whitehall sources have told the Telegraph that London will be in tier 2 after the lockdown, despite signs that infection rates have started to fall. And remember, the tiering system is generally much more stringent than it was in the previous tiering system. So tier 2 under the new system is pretty much similar, I would say, to what we're, we're experiencing right now through most of the month of November. The PM, as per what they outlined on Monday, due to give the kind of geographic tiering update at some point later today. And just as I finish talking of Sterling, just a little breakout here of that, that area of range that we were talking about. So here you can see breaking out of that range. I can't see anything on the tape that's particularly new that's come out, um, related to anything sterling. But from a technical perspective, having that range break, markets have come down. And again, we already have these levels marked up, that pivot level 65, um, kind of 64 in the futures. And so yeah, this is the kind of day that I think that you can expect And so that's why the technical framework of the charts is really important today. And, you know, as well keeping an eye on things like gold, it's had a bit of a run-up and rejection so far around the R1, which is close proximity to, to yesterday's high. So here again, if we did break above here, where next? 25, good area here from the, the low on the bounce on the overnight on the 24th. Big, bigger level I'd say at 34.5, which was that low on Monday, the recovery high then that saw the following day. On the downside, got this trend line in play on 3 tests that we've had over the last 24 hours. A breakdown through here, we're looking down to the, the double bottom from earlier in the week on Tuesday going into Wednesday night, which is just above that psychological, psychological 1800 handle, which we know on the higher time frame is just sitting above that 200 DMA, which of course of course, is key, um, for the rest of this week to hold as an area of support for price to consolidate or recover. All right, that is it, guys. Gonna let you get on. Have a good day, and I'll see you in the Amplify Live chat room.