Brexit amendments: Round 2

Very good morning, Thursday, 14th of February. Let's get straight into the briefing. I'm going to have a quick review of the charts as they reside at the moment. You can see there's a little bit of prevailing dollar strength in the currency market. So, uh, despite a bit of a pullback we had in the greenback, um, 2 days ago after it had that consecutive 8-day run, it's kind of recommenced that upward trend Obviously, from a fundamental perspective, we've had that— the version of the government shutdown looking most likely, and some positive steps on the trade front, which we're going to discuss in a second. And so the dollar has continued. US equity markets last night continue to eke out as well some further gains. So a continuation of kind of holding that break earlier above that 200 DMA, importantly in the S&P. So the DXY this morning up about 0.1%, and consequently both major currency pairs You can see here in the top left, under a little bit of pressure, a bit of added weight into cable. Obviously, risk event coming up later today, but we'll get into that in a second. But technically as well, just breaching what had been the lower bound of the weekly price kind of range, and that's helping accentuate some of the downside. EURUSD just coming in close proximity to that at the moment, so worth just keeping an eye on as I go through the, the news over the next few minutes. Otherwise, from a European perspective, as I said, I think it's more dollar strength than it is euro weakness. The pound also, as I said, moving lower, but European equities are slightly higher. I'll give you a quick summary of some of the earnings reports, but predominantly have been positive this morning. And then also some data out of Germany first thing this morning, um, in regards to growth. The point being, you've got softer euro, slightly higher European equities, and higher bunds. So if you were kind of looking at that from a monetary policy ECB read across, well then this is kind of going to shackle their inability to be able to tighten policy anytime soon. This being then whether or not they're going to need targeted long-term refinancing operations, delaying of an interest rate or deposit rate hike, and so on and so forth. This being, as we're going to see You've got kind of weak economic data further coming through in mainland Europe. You've also had some, you know, you think that the China-US trade war is just about being resolved, and then you get headlines this morning that the EU is reportedly mulling potential retaliatory tariffs for US products, including Tesla's cars. So it's quite easy to forget sometimes that the trade war, which is talking about obviously the one that's most important arguably, But beyond that, later on, I think in Q2, the US do also have an equal important trade situation coming up with both the EU and Japan. So the point being then, you've kind of got that simultaneous move where bunds and European equities are both moving in sync with one another. This would be quite classic of a kind of dovish pricing in that sense from a policy point of view. Otherwise, oil continues to remain. So we brushed aside that, that headline build that we had in the DOE yesterday. As I was saying at the time, really, I think those inventory numbers are just a bit of a flash in the pan because there's a much bigger narrative happening, and that is about the global growth considerations on the outcome of the trade talks. And so consequently, oil, as much as, as long as that's, that side stays positive, well then that's a positive force for oil in combination with Saudi hinting at the kind of likelihood of doing more cuts and so on keeps that bias to the upside. And we're just having a retest here a couple times this morning at R1, which as you can see was the high print that we had yesterday late afternoon. All right, so let's get into some headlines, and then as per usual, I'll hand you over to Sam and he can look at these charts in a lot greater detail from a technical perspective. But this is the latest Trump is considering a 60-day extension for China tariff deadline. So, you know, I think we've been talking about this for a while. This is exactly what we thought would happen. You know, the stakes are just getting to a point where they're just too high at this point. And I'm sure Trump is liking the fact that the equity market has recovered so substantially. And for his own political agenda, he wants to keep that, keep that kind of move alive. Because it very much plays into his favor in terms of his, his popularity that he can spin then to the, the broader public in the US. So Trump was quoted as saying that talks are going, you know, very well. The ministerial level talks obviously happening today and tomorrow. So one thing that I would suggest is that certainly as we get into the latter part of Friday, if you think about this quite as a logical sequence. So any type of end statement, or do they definitively say they're going to just continue as they are, delay the tariff hike and do another 60 days? Start thinking now ahead of time if you're operating in intraday markets of, well, when's the most likely time that you're going to get that confirmation or not, and a complete breakdown and maybe a return to complete risk-off trade. Now if you think about it, these meetings are happening in Beijing, which means that, let's say, there's an 8-hour rough time differential between London and Shanghai. So Friday morning, if you think about, let's say, 10 AM London time, so you're looking at then 6 PM in Beijing. I think it's actually Beijing where they're meeting, not Shanghai. But then that means that you've pretty much come to the end of their day. So you can almost try to anticipate then that when the likelihood is of that type of news coming out, which you know is quite critical for then the overall intraday sentiment and direction of assets, uh, over the short term. So I think really, um, when it comes to tomorrow late morning, uh, it's going to be very interesting to see how that plays out. But again, you can obviously think about these things in advance to better prepare yourself as to when the best opportunities may arise, or to avert potential dangers in that respect. Some data overnight, and we have had Chinese trade data. You've probably read about this already. The main kind of thing that a lot of people are looking at is twofold. One, you can see here on this chart, this summarizes the, the import and export numbers over the last couple of years. And you can see here quite a significant jump. I think it was 9.1%, the export number printed overnight. And I think expectations were for actually a negative number. So way better exports than expected. Now, has the market just gone, you know, China crisis over? Absolutely not, because yes, this is kind of a short-term reprieve, if you like. But it's completely explainable down to the seasonal impact of what typically happens, which is a lot of companies front-loading their business in order to get ahead of the Lunar New Year holiday, which was last week. And so typically you do see a January spike to facilitate the fact that, you know, China's on shutdown, so everything gets front-loaded. And so it does skew the numbers slightly. So You know, is this signs that the problems in China are over? Absolutely not at this point, but it's something to just be aware of. One thing that was quite interesting, obviously we're in the midst of trade talks between the US and China, and actually if you're looking at imports and exports to the US, actually both have declined. So China becoming a little less dependent on the US in a shrinking portion of its overall total, which I thought was was quite interesting just given the context at the moment. Otherwise, elsewhere you've got German— this is what I was referring to when I was talking about that European economic situation, and this is German GDP that you're looking at. Now the reason why I'm looking at this is because there was German GDP this morning. This was the flash reading for Q4 and it came in at flat. So as you can see here, there's no actual bar because there isn't any growth. There's no contraction or growth at all. Now that means then that they've avoided a technical recession, which would be 2 consecutive quarters of negative growth. So Germany right on the cusp at the moment, um, but comes obviously after a slew of negative data we've had on the industrial and kind of factory side of things. Earnings, uh, quite a few, you know, it's, it's difficult to obviously not forget that we are in the middle as well of European and UK earnings season. A couple of the guys were talking about FTSE this morning. You've had AstraZeneca been up in excess of 3%, um, Schneider Electric up 5, Commerzbank up 5, Airbus up 5, Renault up 3, Credit Suisse up 2. So a couple of earnings reports as well, just to be aware of from a single stock basis, but obviously does also fit into the, the kind of narrative that US and predominantly China did trade a little higher overnight. Before I jump on to Brexit, just a quick move back to the charts because I am mindful of, as I'm talking, the dollar is continuing to extend on that move. and euro has now tested and gone through that near-term support point. You can see cable remaining quite heavy, and an immediate on the breach here of some of the weekly lows, quite a quick rundown to the, the logical kind of target being that in the futures at least, that's the S1 level 128.28 with the dollar strength, maybe lend a little bit of a feed through into the commodity and commodity-linked currencies. Again, dollar such a dominant kind of force. Gold also just edging a little lower and obviously close proximity now to the low from last night that would come in just about $1 away from the current price. So keep an eye on gold. Oil also as well, just edging ever lower off that R1 and yesterday's high with the dollar prevailing strength just weighing a little bit, uh, as a consequence. Then keep an eye on the Aussie and the CAD. So both of those currencies also just taking a bit of a move lower in the futures. Aussie just moving back below its pivot for the moment, uh, with some of that strength in the greenback. All right, quick look at Brexit then, and then I'll hand you over to Sam. So let me just cover a few things here, and that is that what are we looking out for? Because Theresa May obviously returns to Parliament, there was no meaningful vote. It looks most likely that then that could be pushed back to another 2 weeks' time if indeed she does have something to bring back to vote upon. So what we have today is basically a repeat of exactly what we had about 2 weeks ago. A series of amendments designed to change the direction of Brexit will be considered and debated, and then it will go to the Speaker to choose which ones actually get voted upon. Now, a couple of things I just want to make you aware of. Some Tory Brexiteers are refusing to back the government. That's a lot of the talk at the moment. We'll have a quick look at why. Labour has accused the PM of running down the clock, and obviously this is a counteraction to the fact that you've had Ollie Robbins yesterday being caught in the pub talking about Theresa's gonna run down the clock and then force MPs into a kind of do-or-die situation. It's either my deal or the no deal situation. So a few things here. Influential Brexiteers, so those being then the ERG, kind of Jacob Rees-Mogg crew, are angry at being asked to support the PM's motion. This is because it combines the view backed by a majority of MPs last month that the government should see seek an alternative to the backstop with a separate move to stop Brexit happening without a formal deal. Now what this means for the ERG and the Brexiteers then, their, their deputy chairman said last night that they cannot vote for this as it's currently configured because it rules out a no deal and removes our negotiating leverage in Brussels. So what they're saying, and this is part of that Yvette Cooper one from before, is that they definitely don't want to, at least yet, remove the threat of a no deal because they feel that that's a pretty strong stick to waggle in Brussels in order to get a concession out of them. Well, what happens next then? So the Prime Minister, she has already really said that she's promised to return to the Commons on the 26th of February with a further statement triggering another debate and votes the following day if there is no vote at that time. So basically, we've had the 2 weeks, nothing's really happened, we go back to Parliament. Could well be the case we have another 2 weeks, we go back to Parliament. Obviously, the difference here is that— and the one major difference is the timeline is quickly diminishing because obviously we're only about 6 weeks away from kind of Brexit D-Day in that respect. So that's the current state of play. Overall, I think most people are not expecting as much drama or kind of build-up and anticipation as we had last time. It's been fairly telegraphed that she's going to just request and, and likelihood get a further 2 weeks. A little bit of murmuring though about potentially some difficulties getting some of the Brexiteers over the line, but the whips are kind of in full action to try and get them onboard at the moment. So yeah, usual routine. It's probably going to be late afternoon, early evening when you're going to be looking at that type of thing. So if you're in the FX market looking at sterling, for example, possibly worth sticking around for to watch just in case something unusual was to occur, and whatever the case that might be. All right. That's it for me. I'm gonna hand you over to Sam and let him look at some of the charts because I understand the FX market is still moving. I'm sure you want to know what key levels he's looking at. Okay guys, have a good day.

Thanks, Anthony. Yeah, dollar strongest it's been for quite some time. So we have a quick look over the, the pairs and how they're trading currently right now. The, the pound, we've been talked last few briefings about the 128.60 area, and we're coming to the low of the day. But also, more importantly, I just put this maybe on that daily chart and just to show you guys again, you've got the area around here, 128.60, where it's been such strong support and resistance on numerous days. So while we have a couple of times tested below, depending where you put that line. This looks as if it would be, if we continue to have this dollar strength come into the market, the first close below since, well, for quite some time actually. So yeah, keep an eye on that for the pound, where we finish the day, and obviously weak, and sentiment can get pretty bad from here. The euro as well, see the, the 2019 low and You've got some levels from last year to be aware of, especially on the continuation, not too far from where we're trading. I think when you, you have moves like this in the morning— might just, uh, a bit of a hit there— it's important not to go chasing though. If we have a look back at, um, what day would that be, Wednesday, Tuesday as an example, maybe even Monday morning, you get that push down in the morning and you don't want to be too aggressive been trying to get back on every single low that there is. So if we have a look back at today's price action, we've come down from the pivot. I've just seen in the chat Alex was short from, from around that pivot area, which is, you know, fantastic trade. But just having a look, you know, you don't necessarily want to be getting short from, say, the low of the day. The move hasn't started there. So it'd be a case of really trying to identify a place a bit higher up to get in, especially if Tuesday's price action is to, you know, to go by. You can see we, you know, took out all of these lows where my mouse is, but, you know, retraced higher up. So I wouldn't be looking to get too aggressive on this, a bit of a dollar, dollar sort of run early morning. And same for the pound, it might be that you're just waiting for a bit higher up to get involved if you're looking to get that short and continue continuation. Gold is still quite interesting, both directions. Yesterday was a bit of a seesaw kind of day, broke lower to then break higher to come back and obviously close down for the day. I still think $1,300 is, is obviously quite a key level, and, uh, you know, we are a fair bit away, but I don't see how— oh, I don't see why we can't, I should say, perhaps get a test of that in the not so distant future. Worth having a bit of a trendline on those lows just to see how we get respected with the low that we had yesterday as well. And maybe a break of that gives you a further push down. To the upside for gold, and certainly this morning anyway, I was liking the look of a short should we come back up to around 1314. Was the bit of support that we had late last night before a further push down. So that area for me looks quite quite good. The euro unfortunately, um, didn't quite get up as high as I wanted. I was looking around, uh, 13.24. I didn't quite make it there. S&P, obviously we could put this on a daily chart. As, as Ant mentioned, we had another update yesterday and that's continuing to just sort of grind higher now. You've, you've had a breakthrough, the 200-day moving average, really I, I, there's not much in the way of getting a test of perhaps this trendline, 2800. I know you've got a level not far away at 72.5, the low that we had on the 3rd of December, and that's similar for the Dow as well. So I would be keeping a bit of an eye on that, but I think it's going to take something quite drastic to have us come back down and perhaps test that low end of the range. Range around the 12th of December high, around 2680 as well. So yeah, while the dollar is strong, you know, be looking to go short, but probably a bit higher up rather than being too aggressive. If you are looking to get short around these areas, you know, just be prepared to, you know, have a look back further, you know, into the past about where the next key support is, or go smaller smaller size. Just looking back at the last few sort of trading sessions, whenever we have that push down in the morning, you are getting a retracement to a better level before it maybe wants to go. So just, uh, there's a word of warning there to have a look at. Let's have a quick look at oil. Another day to the upside yesterday following the, the DOE. We did, you know, drift a bit lower down, but ever since really breaking that 53, which was, you know, such a key level that we talked about the first briefing of the week, it has, you know, pushed on around the highs of the day. Quite important. You can see the first real test back of the, the sort of 3 PM high on the, on the 5th of Feb as well. So quite a key level. And, you know, get through that and suddenly we're back up to 55, which, you know, considering where we were just on Monday afternoon would be quite a decent push higher. I think for anyone looking to get the short, as we've always worth trying to see if there any sort of trend line to keep an eye on. I think I like the long from around, well, just below the pivot, where the pivot area is at 94. I think, you know, could be a decent opportunity around 53.90, where you can see we had the previous high of the day tested back post, uh, DOE and the numbers and the pivot. I think it's not a bad, bad idea to look at a long from around there. But we'll let you guys obviously get on with the trading. Aussie dollar just coming to the pivot. As I have a look around, um, the yen, just to finish on— or dollar yen— let's have a quick look to see how close we are to some of those levels. And you can see after yesterday's date, we're now broken through. So quite a key break of that, and we're actually not far away from testing the low that we had back on the 26th of October. So really pushing higher there at the end ever since that flash crash on the 2nd of January. Any questions, please do get them in the chat. I've already seen a few of you guys, your trades that you've done have been fantastic. So obviously things are moving out there. Data out this morning as well, so, and this afternoon, so a couple opportunities. But yeah, any questions, please do let me know. And if not, I hope you all have a great day.