Can A Brexit Deal Be Done Today?

Okay, very good morning to everyone. Hope you're well. It is Thursday the 17th of October. I'm going to go straight into things, have a look at the charts, then go through the headlines. Obviously a focus on Brexit as we get that European Council meeting happening, and there's a lot of information, journalists' tweets, and rumors and so on about the likelihood or not whether the British Prime Minister can secure a deal. And then the next obvious hurdle being, can he get it through Parliament? And so we'll have a look at that and potential reactions and timings around those events today. Also, we had the oil inventories last night, we've had a couple of earnings reports last night as well— IBM and Netflix— quite a varying response to their numbers. IBM dropping about 5%, Netflix spiking about 10% on the upside at one point. And then we'll have a look— there's a couple more earnings reports and some significant economic data as well coming out later today. So first off, looking at the general charts this morning, really it's the, the currencies and the pound that's seeing some of the, the biggest movement thus far. And you can see if I look at the center top chart, we've already had a fairly aggressive move to the downside, keeping in mind though that we're coming from a very elevated starting point. So it does need to be put into context. Cable down about 55 pips. But you can see here, about an hour and a half ago or so, the, the pound saw a quick blip lower. This came on the back of the fact that apparently the DUP, Arlene Foster, not happy with the deal. And obviously this had come with a string of positive comments about potential of a deal getting done in time before then that technical kind of legal deadline that Boris has to then formally request an extension, which would be still on the table for this Saturday. It's a bit of a pullback, but again, you can see already having spikes the best part of— we were trading around 128.33 to 127.73, so a decent kind of 65-70 pip move. The market's already bounced another 40 pips on the back of that. So really does kind of sum up the the trading conditions for sterling. I think unless you were really locking in a bit more of that longer-term positioning where, you know, here are some technical levels we had marked out before, and as people were capturing some of the long activity going back from when some of these original headlines were circulating, first target one would have been kind of around that area, what was then the near-term high seen towards the end of September. We then had those previous ellipses because this chart is really unchanged from where it was a few days ago. That was the kind of obvious next point on any breach of that level, and we've hit that, and that's where we're consolidating at the moment. Then that initial high print from yesterday amid all the, the volatility, uh, lining up with that previous low on the 25th. So logically then, just working through technically the same process, 65— that's 2965— would bring in that 11th of March low, then you've got the 130 handle, then the bigger kind of prevailing high would be up at 132. To get up to that latter point, I'd say we'd have to see some kind of deal getting done in regard to not just Europe. It looks like there's political will perhaps on both sides to get something done, but kind of a little bit reminiscent of Theresa May— getting a deal done with Europe is only half the job. You've got to bring it back home and get support in Parliament, and with that current composition, obviously incredibly difficult for Boris, uh, to get it over the line, uh, going to be mathematically quite tight to get the numbers that he needs. So we're going to run through that in a second. So let's get straight on to the headlines first, and let's just start with the fact that if we look at where we closed on Wall Street last night, the Dow was down about 22 points. So slightly negative finish. As I mentioned, there was a couple of earnings reports, but predominantly a negative day given the fact that we had some weak economic data, of course, in the US, uh, yesterday afternoon. That coming in the form of US retail sales dipping by 0.3%. You can see on this chart here of the last 12 readings of that figure, it's the first decline in retail trade in the US since February, mainly due to lower sales of motor vehicles, building materials, hobbies, and online purchases. And so Quite a lot of the reasoning that analysts are putting behind this is perhaps a little bit of reaction to increased fears over US-China tensions just seeping into then the kind of consumer psyche and what otherwise has been a relative better performing part of the economy in America comparative to the manufacturing side. However, on the same token, retail spending could be a little bit tricky to measure on the September month in particular due to seasonal factors If you think about it, you had back-to-school spending, you know, how much of that then might have, if anything, propped up the number and perhaps this could have been weaker. But on the flip side, you had an early Labor Day holiday in America this year, and maybe that brought forward some of the spending to the prior month, which meant that it was kind of— it faded out of this month because of that seasonal factor, which on a, you year-to-year basis would have been factored in the last time round. So yeah, all it means though is that in combination with something else we had last night, which was the Fed's Beige Book— if you never had or never have heard of the Beige Book before, pretty much market reaction is out as it's entitled. It is pretty beige in its impact on the markets. Yeah, I mean, I feel like I can get away with dad jokes these days, Sam, because I am a dad. But the point being is the Beige Book, if you've not heard of it before, basically there are 12 regional districts that comprise of the entire United States of America. These then would be where these Federal Reserve or FOMC board members come from. They represent their own regional district. And what happens is, is that every region in America, obviously in terms of its demographic, its composition in terms of how it creates its economic growth, is very different. You know, taking California to the kind of Chicago area, obviously they're manufacturing to technology as a very simple way of looking at it. It's very different, the population is different, and so on and so forth. So what happens with the Beige Book is that each individual area reports its own underlying conditions and it gets summarized in an overall report. So it gives us a bit of an interim update, if you like, as to general what's happening on the ground across parts of America, that does help traders formulate a little bit of a better opinion about where is the economy right now, as to better position ourselves for what this overall Federal Reserve Central Bank might do as a decision coming at the end of the month, of course. And one of the take-home points in the Beige Book was that they said the US economy expanded at a slight to modest pace in recent weeks, which does represent, as Bloomberg is suggesting here, a mild downgrade by the Federal Reserve in its latest report card on the country's economic health. Specifically, they said manufacturing activity continued to edge lower, uh, with contacts— so these would be contacts in the field, if you like— reporting that persistent trade tensions and slower global growth weighed on activity. No real surprises there, but does continue to kind of really cement what is that thinking at the moment and why then, although we've had some fluctuation in this figure, we're back to a very much almost entirely priced in probability of a 25 basis point rate cut from the Fed in a couple of weeks' time. That's priced now for October at 88.2%, and then for the end of the year, um, we're looking at a kind of one and done for the moment. Okay, moving on then, let's have a quick chat about Brexit. What is the latest? What as well. This is the latest headline, I'm sure you've read it by now: Brexit deal in doubt after Boris Johnson's Northern Irish allies reject current plan. This did come after— when I actually got on the train to come into work this morning, it was all a possibility of a last-minute deal getting over the line, but then the DUP issued a statement this morning and it's, it's thrown cold water over that potential scenario. To give you a bit of an idea of what's going on here and what the the DUP are saying. There's basically 3 points of which they've raised as concerns. One, new arrangements for dealing with customs checks on goods crossing the UK-Irish border. Two, mechanism for giving Northern Irish politicians a veto over these arrangements. And then three, a lack of clarity on how to institute sales tax in the region, which was one of the areas were said to be still being worked on at the moment as this summit gets underway in a few hours' time. So why is this important? Well, it all comes back down to— you remember when Theresa May came back with 3 attempts to try and pass her withdrawal bill through Parliament, which obviously failed quite miserably? But at the time, we were talking about the arithmetic of Parliament. Now remember, even though Boris has come in and popularity of Conservatives has increased, without a general election the actual composition of the parties and their representation of MPs remains largely the same. And so he does still face a number of challenges even if he does manage to broker a deal. And I'm going to post this link now into the Trading Live chat room. I'll put it onto the comments section on YouTube as well, but just a very quick run-through to give you an idea. So once non-voting MPs are accounted for, there's that magical number that we've heard many times before when it comes to any Brexit issue in Parliament. It's 320 MPs he needs to get on his side to win any vote in the House of Commons. Now, last time Theresa May tried to get her deal through, this would be back a few months ago, she had the support of 279 Conservatives. So obviously quite a far distance short of getting over the line, albeit it did improve incrementally each time she brought brought it forward. Now, a couple things though is that obviously Boris Johnson has expelled a large group of MPs in his party back in September after they backed legislation blocking a no-deal Brexit. So some of those numbers may have changed. But also, as a result, there are question marks against 19 former Tories who previously backed May's deal. On top of that number, one deal-backing Conservative Chris Davies lost his seat as well to Liberal Democrats in a recall election. That leaves then Boris Johnson still around 61 votes short. So then you have these other people, uh, the Gawkwood Squad, which is a reference to the justice— or former justice secretary, I should say. And the deal here is about whether or not they'd want to come back into the fold and support Boris they were very anti-No Deal, but the fact that if he can get a deal, do they then fall in line? So definitely not a guarantee, but a possibility. If they do want to come back in and have any kind of personal political relevance, then perhaps they need to start supporting the government. Um, that would be 19 as a figure. Then there's obviously— there's the, the, the working majority at the moment of the Conservative government. Backed by the DUP's 10 figures, crucially. But we've already heard from them. They've said it's a no-go for the morning. They wouldn't support his proposal in its current form. Then you've got what would be the self-entitled Spartans, which is kind of this idea of the likes of Steve Barker, a Eurosceptic senior kind of influential member within the whole idea of It's getting a bad deal with Europe, and unless we get something very strong, then we should have this no-deal threat. And the idea that it's kind of them against the world trying to save the idea of Brexit. There's been some actually pretty lukewarm comments coming out of Steve Baker, and he is really absolutely crucial to this getting over the line, because if he goes for it, being the leader of that group, which represents roughly about 28 people, so significant, then the rest would probably follow. He did say that he would tolerate basically the current construction of the deal that they're doing. And then there's Labour, and there's a potential 21 pickup. Obviously May was banking on the fact that a lot of people would have crossed the floor and voted with her, but she really struggled on that front. Would you get any that would do the same this time in order to get the deal over the line, not liking the kind of direction that Jeremy Corbyn is going in? Then you've got independents, other MPs, but as you can see, it's such a tight call and so much rests on so many different factions of how Parliament is so split at the moment. Even if you get a deal, that's only, as I said, only half the job. The idea then being, can you get it over the line, will be key. And the DUP's comment, which we had this morning, has really cast a lot of doubt, and hence why you've had a bit of a pullback. So one thing I'd say with Brexit going forward for today, and I'll leave it at this, is that really you need to be on top of Twitter. So, you know, the usual suspects, um, Pester Peston, Coonsberg, all those guys. What I would do is, you know, go through, make sure your Twitter feed is absolutely up to date with all of the major political journalists from both sides. The Irish newspaper, like Tony Connolly of RTE, that similarly, you know, don't just rely on the big guns like Peston and Coonsberg. There's lots of other political journalists you can pick up on Twitter, and they'll all be adding good value throughout today. From a timings point of view, because this is going to be a very fluid situation. So I think there is going to be more potential seesaw price movement to come. Here is the timetable for today's European Council meeting. So all of this is, uh, presumably an hour ahead. So if we're converting this to London time, it's going to be around 12:30 when we have arrivals, 2:30 then, and second arrivals. The roundtable begins at 2:30 with the press conference time to be confirmed. They then hit the ground running first thing tomorrow morning to get it underway throughout the entire day. First topic on the agenda, of course, is Brexit. So there's also going to be probably the likelihood of some rumors coming out during those meetings, but my, my kind of experience of having lived through multiples of these over recent years is that probably late, late afternoon, evening, because they'll be working all the way up to the last minute. That's when you might get this kind of latest broker deal type headline, if there is one to be had, or a concession or complete breakdown type of information. So as much as being agile throughout the day, I think you've got to be— you've got to then update then your China duration of your trade strategies, because there's a, there's a real risk risk of high degrees of the market just flipping on itself. But then late afternoon, we have seen many times before, the big headline can come when you get a much more cleaner, longer-lasting direction move. All right, moving on. Um, we did have a bit of a downtick in WTI crude oil last night. I'm sure Sam will have a look at that. We saw crude futures WTI move from around $53.29, decent 30. I mean, overall, if you take the Asia-Pacific move, decent 50-cent decrease in prices. It came after quite a whopping and surprisingly large headline crude build of 10.5 million, biggest build since February of 2017. The Street was only looking for a build of 3 million. Cushing build 1.6 million, gasoline draw of just shy of a million, distillate draw of 2.9 million. Um, analysts were expecting crude inventories, if if you remember the briefing I was doing on Monday, I was talking about expectations in the market were for the 5th consecutive week in a row of builds. And obviously that now has been snapped. And hence the— um, so analysts were expecting crude inventory to rise for the 5th week in a row, and they did. But this degree of which they rose was particularly high in that respect. That was the point I wanted to make. And so much stronger than expecting, so exerted some quite aggressive downside force on the price. So you do need to take that into consideration when we have the, the DOE later. Room— final reminder with the oil figures, with the DOE, because of the, the holiday that we had, Columbus Day, on Monday in America, it means instead of the usual 3:30 PM London time release, it'll be at 4 PM. So don't forget that, always the case when it's delayed by a day. The earnings reports, I'm just going to brush over these. As I said, IBM fell about 5% last night. There was some expectation or hope that their kind of technology acquisition and integration of Red Hat could have helped boost their results, but it was fairly lackluster. Their third quarter revenue fell again about 4% for the fifth period of decline now, so they continue really to struggle. On the flip side though, one of those FAANG names, of course, Netflix. I mean, Netflix have had such a rough time of it in recent quarters. The bar, I I think was set pretty low. They missed their forecast for subscribers for a second quarter in a row, but perhaps not quite as bad as some were fearing because of the context now of the new competition we know that they have in the form of Apple's streaming services and Disney. Outside of the US though, the company reported 6.3 million new subscribers. So outside of America, That was actually quite a bit stronger than expected, where analysts were looking for 6.05 million. So perhaps then that kind of, uh, lesser dependency and more, um, reaching out to a bigger global audience was also seen as a net positive. Their shares up about 8 to 10% last night. On the earnings front, who have we got today? Because it continues at a pace for more companies to report. So going back to the document, and I will share a snapshot of this later. Now, the biggest companies to be aware of, you got Honeywell, fairly sizable, about $127 billion market cap. They'll be at 1— or excuse me, 11:30. EPS expected at $2.08. Otherwise, Philip Morris might be worth keeping an eye on pre-market, midday. EPS expected at $1.32. But that's pretty much it. I mean, there are a few other notable names like Union Pacific, Morgan Stanley. But no, I would say ones that if you're trading the index future that are really going to initiate and spark things to life, um, apart from perhaps Honeywell and Philip Morris, is worth keeping an ear out on the squawk for. Calendar-wise, what's coming out today? Because there is quite a few different things to keep an eye on. For the UK, obviously we've had, uh, jobs updates, we've had inflation updates, now looking for retail sales updates. And the expectation is actually for an incremental improvement from the prior month, from a contraction in August to September being flat month on month. So that data is coming out in an hour's time. Uh, again, any trade on the back of retail sales, if at all, I would suggest being pretty prompt in wrapping that up, just giving yourself— that you wouldn't want to be exposed to a potential breaking news comment where the market really is much more focused not on the economic side of things but particularly with that council meeting happening and all of the relevant officials gathering. I would say, you know, Brexit is the by far more dominant force. So retail sales could be interesting. I don't think it's gonna be market moving though, given that, given those reasons. Later on into the afternoon, US housing data starts, building permits coming at 1:30 alongside the regular jobless claims. Also quite interested to see the performance of the Philly Fed Business Index. Just generally that in line, or alongside I should say, the industrial production and cap utilization out of the US at 2:15 PM. It should be particularly interesting to just get the latest, again, health check on the, on the US. And then the oil inventories at 4 PM. The council summit, as I said, will be really kicking off officially from about midday. And then you've got Fed Evans, the sole Fed speaker today, alongside Bowman, both at a conference at 7 PM later this evening, and the Deputy Governor of the RBA speaking much later at 9 PM if you're sticking around late or trading the Asia-Pacific session. Okay, that's it for me. Let me quickly hand you over to Sam, look at a few things from a technical perspective, but I wish you a good day. Thanks very much.

Yeah guys, good morning. I hope, uh, we're all, all Doing well, had a good first half of the week. And just having a look over— I'll have a look over the dollar pairs and the dollar index, just back to flat for the day after drifting to the upside this morning. The Dixie now back to pretty much where it started. And, and on the flip side, we've just seen a bit of euro strength here as we come up to what has been a pretty key level over the last couple of sessions. Just looking from yesterday's high, the Asian session high, now the European as well around 1.1130. So you've got to keep an eye on that for sure. Um, I actually had some orders waiting down around the pivot, uh, so the high of the morning. Also, I guess this Max in the, in the whale there, way there at 1.1105, didn't quite come in. And you can see the reaction really from there has been a decent push to, to the upside. I'd still keep an eye on that level because it will— of course, around here you've then got another high from yesterday around 3 o'clock. So a bit of a zone there, if you like, just before 111 on the futures. I'll be keeping a close watch on that. Now we've had the, the low of the morning as well. I probably would be looking to get a bit of a trend line on here as well, just to see, could— if we do come back down, do we get third test of that, certainly over the last few sessions. I mean, look here, it's just really decent push to the upside. Of course, not nothing to right now get our, uh, get ahead of ourselves because obviously the euro has done this before this year, only to come crashing down and make a new low for, for the year. But it has been a decent run here, and above these highs from the morning where we've been looking, just looking on the 240, now you've got quite a few highs looking back from the, the 20th of September and the days before that as well. So there's still room for it to go before I guess you would hit a really, really key resistance point, which I know people would be looking at just above today's R2, around 1.1150. Reason for that, just because you've also got the lows from here, 23rd, that looks very much like a, uh, ECB announcement, Fed maybe, um, and then these highs here as well. So you're maybe a bit more to go, um, I think for now we could easily get that level in the next couple of sessions. What happens around there will be interesting. The pound's just been on a whirlwind journey, as we know. It's now back above the pivot. It's, it's a tricky one to, to trade. I was speaking to, to someone this morning, or actually the euro yesterday They were saying save them. They got in a couple of trades on the pound and literally just getting stopped before it goes. And it's a tricky market, uh, certainly in these conditions. Uh, a bit of luck of the draw, being at the, the desk at the right time may help some trades, or a super level false breakout, uh, looking to get in that because these markets are quite choppy. Just having a look where we're trading now, obviously in this area 28.24 is going to attract people people to come into to look to go short because of what was the previous support and the breakdown area. While I would say you could expect a bit of resistance here, I'm just not convinced at the moment that a big move to the downside is going to come in without a real substantial headline. Above that, then you're looking at the Asian session lows before we did get that breakdown around 6:15. So on the futures, the, the next resistance points, 2824 and 2838, I'd be keeping a watch on As we get above there, or if we get above there, I should say, again worth having on these trend lines. And, uh, 129 hit yesterday, uh, 900 ticks since that low, uh, not too long ago. Incredible. Uh, to the downside as well, see, we just made the low, uh, from, uh, an hour or so ago, 127.73. Like with the euro, is there any trend lines that we can get on, mark those up as well. And you can see pretty well respected going here from the low of the 14th, 15th, yesterday morning, little false break through that, and then again here as well. So perhaps, you know, the opportunity to the downside from a technical point of view really kicks in if we were to break this trend. Uh, you can see 2824 just been tested to the tick almost, 2823. You'd expect obviously, like I said, a bit of resistance around that point. Moving over to gold at $1,492. Looks like it's finally stopped working. Uh, I know there's the spike higher coming off that, the poor retail sales numbers, but just going back to any previous session, you can just see the importance of that area, and it had offered really good support or resistance. That seems to be just waning a touch now, so I'd almost look to get rid of that and 40.90, I guess you could argue, with the pivot low from yesterday evening is a level to the downside. The failure here to, to get above yesterday's, uh, high could be quite key. So I'll be keeping a watch on that, and if that is to drift down, no harm in sort of dropping it down to 15-minute and sort of seeing where the previous resistance was as well. So gold, I know it's not the right time of the day, but technically looking okay from, from certain opportunities and whether we can get higher. And if we do, even then, 1,500 is a key resistance point, and a failure to close above there since, well, the 11th. So what's that, Friday morning? And we'd obviously came back down since then. So some key points above where we're trading for gold, and also below before we would get potential tests. And you can see again, 1,480, we just can't get below that over the last few sessions as well, other than the original push lower the beginning of the month. So gold set up quite nicely, and I was, you know, saying to someone this morning as well, I changed my medium-term view on gold almost daily. It's a tricky market, um, and, uh, I'm just not convinced which way I want to, want to be positioned on this, especially with stocks pushing higher. Like they are doing right now. Euro Stoxx and the DAX as well, liking this morning. Euro Stoxx above the pivot and the DAX nicely above it as well. That in turn just dragging US equities higher, hitting their pivot now in the S&P. Relatively small range yesterday, it has to be said. You can see again that what was the range yesterday working superbly, uh, now, uh, and 1, 2, 3 3, 4 tests of that. Could be a little opportunity to get short if that was to break. I'd just be aware of the original high that we had from Tuesday, uh, and then to the upside, bit of a mini range, 2992, before our 1 could come in. So again, quite technical, quite a small range. However though, for, uh, the S&P so far, uh, be keeping a watch on any potential trend that could come in around that high as well. But pivot for now holding that up the, uh, the range in the NASDAQ yesterday. We came back down to test what was Tuesday's high to the tick. Perfect opportunity to, to have got in. And obviously this reaction here is that the NASDAQ, uh, uh, report the earnings, and, uh, we then tested the top end of that range as well. So small ranges and equities, uh, can we get a push higher if the DAX was to break yesterday's high on R1? You've got to imagine the top end of these ranges have gone as well. Oil, um, you can see a decent move, to be fair, for the, the API. Usually I'd say it's a bit bigger than average, it has to be said. And we have drifted lower, although pivot worth keeping an eye on. Also 53.23, the, the breakdown area which was the high of the day before the API came out, also quite a key resistance point. You can see Let's make this chart a bit smaller. Yesterday's high, uh, the day before, and the evening before. That's really, really good price action here around 50— well, let's call it a zone, 53.64 to the top part of that 79. We're keeping a watch on that, of course, with the DOE coming out later. We are just creeping, uh, to the upside in regards to the lows at the moment. Uh, we keep having this on as well. Why 1, 2, 3 for the trend line. Break of that potentially later is a good opportunity to target those lows where the trend line had started. So for me, key point up around the 53.60 area, this trend line pivot, and 53.23 as well. As usual, any questions, please, uh, do let us know. T-notes Bund just coming under a bit of pressure as stocks like in the morning the yen following suit as well. And actually, the yen is not far away from what could potentially be a triple bottom on the hourly chart as well. But like I said, any questions, please do let us know. Things are starting to get interesting in terms of coming to technical level, so let you guys trade that. But I hope you'll have a good trading day.