Can Boris Survive Trump Meeting Unscathed?

Very good morning, Friday 29th of November. Hope everyone is doing well. A quick overview of the subjects I'll cover on my side. Gonna look at these two guys, uh, Boris Johnson and President Trump. They are meeting in the UK on Monday. Not specifically just the two of them, but a NATO leaders meeting. And there's a couple things to, to just think about that a couple of the reports this morning are talking about. So a quick look at that and a look at the UK election status as it stands at the moment. There's been some disappointing Japanese data overnight as well to have a look at. There's also some commentary from Saudi Arabia going into the OPEC meeting that's due to happen next week. And so some things to be aware of there as well. But overall, looking at the charts this morning, uh, very slight risk-off. As you can see, the DAX on the center left, uh, down about 50 points this morning. Euro Stoxx down about 11, uh, this following a generally negative session overnight in the Asia-Pacific region. Hong Kong leading the losses. Still a lot of focus obviously ongoing with the protests and people awaiting the eventual details and outcome of the Phase 1 trade talks as well. Just kind of a cloud of uncertainty somewhat hanging over the end of the week's kind of sentiment. The US markets, of course, very quiet. Electronic trade is open and there's going to be reduced trading hours, market closures today. So the NYSE is open but basically it's only open for a couple of hours. There's an early closure on the actual floor at 6 o'clock London time. In terms of the CME pit, that closes basically FX interest rates at the same time, so early closures there. And then Globex, CME Globex equity interest rates, FX early closes at 6:15 London. So again, it normally means that US participants remain out of the market having a longer extended weekend for Thanksgiving holiday, of course. But US index futures, I would say, barring anything unexpected, probably a bit of consolidation. Perhaps you can create that center right chart already, really see this between the pivot level and, and really this level around 4200 in the S&P 500 future at the moment holding. But with slightly sour note in the equity space Uh, just globally going to the European Open, gold up a touch, uh, at around $3 gain, just coming up to around the highs that we had on Wednesday, uh, session. You can see here just sitting above there or threatening that level at the moment, albeit still relatively quiet. Oil markets flat, and in the currency markets, that's pretty much reflective of the same thing. One thing is though, after the outperformance in the British pound a few days ago after the YouGov MRP poll, or this time yesterday. We've now got the opposite case, just some mild underperformance in cable against EURUSD. So any of that gain— you can see this is where we had the pop on the back of the poll that we had yesterday. So if you actually look at where that opening bar is when that came out, we're pretty much about 5 pips away from just being completely neutral in position from where we were. So As I was kind of saying at the time, I did think that people were getting a little bit ahead of themselves thinking that that was the kind of silver bullet, that's it, election done, because there's still a lot of uncertainty about how that's going to play out. And on that note, let's talk about first thing I just wanted to show you, then a few other thoughts about the election news from this morning. And that this is a graphic of basically looking at the cable option volatility over a 1-month period, which now of course does encapsulate the, the general election itself. And short-dated volatility in pound-dollar rate shows a degree of caution. Obviously traders have been caught the wrong side of the EU referendum somewhat as well, with Trump winning the race to the White House back in the end of 2016. And a fortnight before the election, a 2-week tenor climbed above 8.5% yesterday, about 1 percentage point higher than it was at the same point in 2017. So basically people taking some degree of caution and protection amid potential large volatility that could ensue, banking on the fact that a large majority for Boris is by far not a complete done deal. So a little bit more, I guess, lessons learned in the rearview mirror of how political events, even though all the signs were pointing to one particular outcome, have disappointed on many times before. And, and largely goes to show as well in the, the kind of more clean price on the chart why I think we've had an uncommitted add to the move that we saw yesterday. So polls, obviously there's going to be lots more polls coming out over the weekend, so just keep an eye on my, my Twitter account. I'll be covering them as and when they come out. And the other thing I wanted to mention on the election side are these two chaps, of course. And so, as I mentioned, Trump is visiting Hertfordshire on Monday. There's basically— the UK is hosting a NATO leaders meeting, and of course, Jeremy Corbyn and the Labour Party will be trying to leverage this as much in their favor as possible. So I can already tell you what the headlines are going to be. It's going to be pictures of these two, like here, looking absolutely having a great old time. So if I just transition my screen, this would be the perfect kind of cannon fodder for Corbyn, trying to align the two as if they're best buddies. They're going to cut a deal. And the main thing is, is that Boris is going to sell the NHS, which of course is the kind of main area of which Corbyn's trying to push from the, the kind of strategic angle, uh, trying to resonate with the UK electorate. Now, a couple of things to be aware of here. What's quite interesting in this article on Bloomberg, they're talking to a couple of Tory insiders, and apparently there's a little bit of nervousness around this potential meeting between Boris and Trump, because what they see is, if you go back to the summer, I don't know if you remember, I think it was Where is it in the UK that do the sparkling water? Blenheim House. Blenheim House, that really, you know, fantastic-looking grand old house in kind of— very much a place where the Americans obviously loving it. But that was where Trump, you remember, in June met Theresa May. If you remember at the time, Trump's never really got on particularly well with May. And from a political point of view for Boris, now, if you remember, Trump made a bit of a gaffe by saying to May expressly that access to the NHS for US companies would be one of the things on the table in trade talks after Brexit. He later then went on to also, just a few weeks ago, receive, well, Basically say that a surprise interview of Nigel Farage— obviously someone of his position politically should carry in normal terms political neutrality in foreign elections where basically they don't make any comment— but he warmly endorsed the, quote, fantastic Johnson, saying that Jeremy Corbyn was so bad. So bad. Obviously repeating it twice as he does. Now, the problem you have here is that as far as UK polling is concerned, Trump is not particularly popular for UK people. Wherever else, you know, domestically in the US, it's very different. In the UK, people generally don't like Trump regardless of where they sit on the political divide. And so obviously the more that it's viewed that Boris is cuddling up to Trump and also that the NHS is at risk, obviously the more ammunition that that gives the Labour Party. And that's what the Tory insiders are fearful of. So something to just think about. One note, let's flip this the other way, um, because of course I am impartial. And one thing that I did see that I thought was, was interesting, and I hadn't really thought about too much, is another Conservative politician said that if the polls showed a bit of narrowing, as we have been seeing other than the, the YouGov MRP one, then he actually said that would be helpful. Not too much, of course, but just enough to make people worry. And I think that is one of the things that you remember, we looked at the letter or the blog post by Dominic Cummings and he was talking about, "It still could be a hung Parliament, don't be complacent." What Cummings is trying to do directly there is counteract potential Conservative complacency that absolutely annihilated the chances of Theresa May in the 2017 government. So I think it was quite interesting what that politician said, and I do agree that you kind of want the polls to narrow a little bit. So that your, um, your Conservative voters remain motivated to vote. The last thing that you'd want is that they think that this is in the bag. They don't show Labour galvanize as they did before the youth demographic, which as we've seen have had an incredibly high amount comparative to 2017 of new registrations of under 34-year-olds. And all of a sudden you've got a hung parliament, not a 68 seat majority as per the poll yesterday would indicate. So a couple things to, to have a think about. Okay, away from that, I mean, obviously as right now is concerned, the pound not really moving. Nothing I've covered is, is, is more things to be aware of rather than things to articulate into the fundamental part of your strategy as far as the intraday is concerned. The thing really looking at this morning from my point of view is keeping an eye on the equities, which have started on the back foot and some slight deterioration that I've been seeing as I've been speaking. As I said, overnight Asia-Pacific session generally was negative. We did, away from Hong Kong and China, have some Japanese data, and Japan's output dropped raises the risk of steeper economic slide. So let me just show you this graphic here. This is looking at Japanese— Japan indices of industrial production So factory production dropping sharply, uh, -4.2% as output slid in the overnight numbers. Now it dropped more than expected in October, and as the article suggesting, signaling the possibility of steeper contraction and economic growth, uh, potentially ahead on the horizon and boosting the case for more and larger-scale government stimulus package. A sales tax hike and a super typhoon contributed to the 4.2% slide in factory output from a month earlier, matching the worst drop in the last 5.5 years in this measurement for Japan. Some would say then, well, if it's a super typhoon, well, surely that's just a one-off anomaly because you're not going to have that persistent over every month's data. But weak production forecasts for the rest of the quarter suggest more of a weaker underlying trend following October's 2 percentage point tax increase in the sales tax. And so most are anticipating this is going to continue. So as I said, it's likely to call for a bigger government stimulus package. And what we had also overnight was this chap. This is the head of the— sorry, let me just transition my screens again. So this was the Japanese graphic that I was just looking at. So this to give you some sort of visual representation about how weak the number was from overnight. You can see here on this right bar on the bar chart. And then this chap here, uh, Kuroda, head of the BOJ, he basically said overnight following the data that they would not hesitate— the central bank— to ease policy further if the momentum towards its price stability target is lost, saying that there is ample room for more easing. So certainly it's a case of, you know, all of the global central banks at the moment feeling a little bit of pressure. And the one interesting thing I think that is developing, if anything, is the US starting to outperform a little bit. And there's been a lot of reports about that this morning, about how, if anything, the US economy is, is outperforming China specifically putting more and more pressure on the Chinese to want to cut a deal to get this Phase 1 and the removal of the threat of additional tariffs on December 15th removed. But I guess as well, going back to a few days ago, it continues to fit then with that kind of broader expectation that I have of continued— for the pound at least, in terms of cable, I think fundamentally, politically, economically, I see more downside risk in comparison to more stabilization, uh, in the US economy. And as a net response, on-hold Fed and a more robust dollar, uh, in comparative terms. Final thing I was going to mention on the news front, uh, Saudi Arabia. We do have an OPEC meeting happening officially next week. Um, one of the things that was quite interesting is obviously there's a— there has been a recent months of change at the helm of the oil ministry, the oil minister of Saudi Arabia, and it's been a little bit vocal. I don't think— I think, I think it's being a little bit sensationalized, but something to be aware of, saying that Saudi Arabia is to signal it's had enough of OPEC+ cheating on their quotas. Now, their headline's not wrong. As I said, it's a little bit sensationalized. Basically, Iraq, probably the worst culprit of sticking to any predefined quota as part of the OPEC deal, Nigeria, Kazakhstan, Russia, of course, second largest producer in the world among OPEC+, who are seen as, you know, Saudi Arabia obviously had that Iran-linked drone attack on their facilities a couple of weeks ago. So they've obviously felt the loss of output, albeit have got it back onto sustainable levels again quite quickly. But everyone else has been making hay while the sun is shining, where Saudi has been kind of picking up the tab, so to speak. And that's always been the case ever since these, these cuts have been initiated. But they've kind of put their foot down a little bit, and I'd say this is, you know, very tactical again, just going into the meeting of all of the heads of, of the oil-producing states next week in Vienna. Okay, calendar-wise for today, likely to remain pretty quiet overall. It is month end, of course, and given the fact that we've had such a supreme run-up in the equity space, could we be due for a bit of a pullback? Again, as I said, the S&P, other indices testing quite interesting lower bound support points of some of the incremental rise we've had throughout the course of the week. So it could be quite interesting. Perhaps the, the thinner volumes, liquidity could exacerbate some price movement if we were to see a little bit of weight coming in just before Europe heads away. Obviously, as I said, US participation will be light given that holiday and reduced trading hours. For the European morning overall, it's pretty quiet. There's not really too much major going on. There's some German unemployment rate and change coming just ahead of 9 AM to be aware of. Probably the main feature of the day from a data point of view is the flash CPI reading coming out of the eurozone. Expectations there are for a year-on-year pickup to 0.9% from 0.7%. I got a range of 0.7% to 1% on the lower and upper bound for that, that figure. That'll be at 10 AM London. And then into the, into the kind of North American session, there is some Canadian jobs growth data, obviously nothing out of the US though. And then from a speaker's point of view, all ECB related. De Guindos de Cos speaking later on this afternoon. All right, that is it from me. So once again, if you haven't already done so and you're watching this on YouTube, just remember to like and subscribe to the channel. More updates to come. To give you an early heads up as well, Sam and I will be covering the UK general election live on the YouTube channel throughout the entire night. So hopefully that's going to be a good one. So remember to subscribe to the channel and you'll be able to watch us as we go through that. All right guys, have a good weekend. I hand you over to Sam.

Hi guys, happy Friday. Uh, for the technical analysis, you might as well just watch yesterday's video really. Not much has happened, the move to, to change the key levels. Especially in the S&P. You can see it did go up to that area we were looking at to the upside around the pivot. That's come back down, but we're right on the, the lower part of the range we were talking about on around 3142 to the downside 40 as a really key level of support. And unless that was to go, you've got to favor that the bulls are still in control, certainly in the, in the shorter term. But if we were to break that a move down, maybe, you know, here we'd be looking down to 31.30. I know that would be a pretty big move considering, um, then it would be a, you know, a win for, for the bears. You would decide, uh, you know, two failed tests of pushing above 31.50, uh, and then to come back down 20 points from that would be, uh, pretty significant. But at the moment holding. You can see the importance of this from today, uh, yesterday the day before that, and of course then just early on the 26th. So important level, uh, trading there on the S&P 3142. Of course, if you are using CQG, you may notice that the pivots are exactly the same as yesterday. That is due to the bank holiday in the States, obviously for Thanksgiving. So it's just something to, to bear in mind. Having a look over the DAX, which which actually is moving a bit, and that has come down this morning and broken through its key level of support. So where we gapped higher on the weekend, you can see here, while that was filled on the Tuesday, we're now below that, and that will be pretty significant if that was to close and continue. That might well bring a bit of added pressure for the S&P and the NASDAQ and the Dow to the bottom of their ranges. In terms of Key levels to the downside for the DAX, I'd just be looking at from a market point of view, level-wise, horizontally. On the 20 seconds, you've got just a bit below where we're trading here, 13,151 would be a point of interest that I would have marked up on there. The currencies, euro and the pound, they are limited in price action. Yesterday, you can see we did spike higher, didn't quite get to the that R1 that I was interested in, uh, might as well now have, uh, this trend line on, uh, from, uh, the, the 25th, 27th. You see that's not too far away on both occasions now, so keeping a watch on that. And also, as we had on yesterday, the trend line from the downside, and perhaps waiting for a break either way might be the, the better option here to, to go on. You can see for now I'm just going to zoom in, make it the candle's a bit bigger, not much going on. So this is really from midday yesterday, we came to, to test that lower point from the previous evening, and then we've drifted back up. And what was yesterday's— and okay, today's pivot is acting as some sort of support. I think looking at this from an opportunity perspective, with those trends on, uh, with along with the high of yesterday and the trend line to the downside, I'd only really be interested in those points The pound, let's move that in. You can see, yes, gapping higher yesterday. We filled that in, in quick fashion. Uh, we've had quite a decent level of support around 2906. 29 on the dot was pretty much the pivot yesterday, and that was a key point. Didn't quite get down to test that. That was the previous high from yesterday, from 2 days ago, and then the retest in the, uh, the midst of the, uh, the poll being released at 10. So that's still an area I would keep a watch on, but the amount of times we've hit that support at 0.06 just makes you think if we were to get below there, it could be a bigger move to come even on today. Below that, 28.76 would be the point I'd be keeping an eye on. And then of course, just above where we're trading, we're in this mini range, aren't we? You can see here it's not big, 29.06 to 27. And really, if you want to be precise, I would have this area here at 29.32 as the point where if we get above, fine, you know, we could maybe see a bit of a finish into the end of the week and attack that double top that we had from the early hours yesterday at 53. If that holds, well, we can come down to this triple top— triple bottom, should you say— at 129.06. So certainly some interesting levels. It's just whether we're going to have that volume to really push us out of that range. Uh, the Aussie has, uh, you know, not done too much, uh, you know, from yesterday. And you can see we've just broken out of that mini range. So for the Euro and the Pound, you might see some sort of similar reaction. And probably best to wait for those breaks to really come in. Just incidentally, on the, uh, the Aussie, I do like the look of the pivot as a whole, uh, along with, uh, some of the resistance we saw 2 days ago. Gold, uh, not much really to report from movement, but we did come back in the early hours of trade to hit that point we were talking about in yesterday's morning briefing around 1464.65. That's been key, uh, this morning, and also an area I would still have marked up despite those couple of spikes we got through. The R1 remains significant, and like we said yesterday, we with the euro, worth having on any of these trend lines. You can see it's still nicely respected even though we've had those spikes. I would still have that on because if we do get a breakthrough, then you're looking to target those previous lows from, uh, well, yesterday and the previous days of the week. So price just getting squeezed in, uh, from the downside for, for gold, probably waiting for that trend line to really break, uh, and then the highs around 35. While, you know, the amount of tests may probably don't make you want that short, I still think the overall direction here should favor a move to the downside, and maybe that R1 could be that opportunity. Oil, uh, did have a bit of movement into the back end of the European session, spiking higher, uh, didn't quite get above what was the previous low before the DOE, and that was significant enough to bring us back down, but that was it for the movement. So 58.23, they still had that marked up along with the high of yesterday, 7 ticks above that. R1, as it was yesterday, is a key point, key zone that we're still in, uh, as oil is now. You can see in this, uh, let's just call it 58.70s to the top and then 57.54 to the bottom. S1, yes, and 2 days ago is low. R1 and 2 days ago is high, uh, points to to keep a watch on, along with the, the high of yesterday. And any trend lines, if we start to see prices drifting higher, just make sure you get those trends on for a move lower, which could be slightly more aggressive on that break. You can see just here, let's have a look what we've got. I mean, it's not amazing, but maybe this one here, you know, starting from, uh, what day we talking here, Wednesday Thursday double bottom, uh, on the trend line. Keeping a watch on that, that should be enough to give a move if it was to, to break through. So the DAX is finding a bit of support, the S&P, uh, still hovering on that support, uh, around 3142, and you've had a 2-point bounce on that. The pound hovering on those lows, the euro not doing too much, but for both those currencies, probably better waiting for the range to actually give way, or those trend lines from the lows, to give that opportunity for a bigger move. Hope you all have a good, good trading day and an even better weekend. So any questions you have, please do let us know.