Central Banks Pull The Trigger As Gold Hits $1,500

Okay, very good morning to everyone. Hope you are well. It's Wednesday, the 7th of August. I'm just going to have a quick recap and review of all of the major news this morning and the general sentiment for markets to get things going here in London. So first off, let's just have a A quick look at the S&P 500 from yesterday. Obviously, after seeing multiple days of selling pressure on the escalation of the trade war between the US and China, markets had decent bounce. None other than Sam North calling the bottom once again. Buying the dip was a great shout, seeing the market is generally just oversold. I know a lot of you in the chat were agreeing with him this time time yesterday, and certainly a decent recovery for the moment at least in some of the stock markets, particularly by the close on Wall Street. The S&P rebounding around 1% after the 3% downward move that we're seeing. Uh, it's quite common. That's not to say that the downward trajectory of US equities is, is over, but very rare unless there is a continuation of fundamental catalysts for a market to just go down, down, down, day after day after day. I don't think I've ever really seen that happen consistently for a longer period of time other than right in the midst of the financial crisis. And we're nowhere near that type of kind of red alert status, at least for the time being. So yeah, a bit of a recovery. And if we just have a quick switch over to the other charts, the DAX positive this morning, Eurostoxx likewise, both trading above their respective pivots in the futures market. Currencies are pretty quiet. The dollar index is essentially flat for the moment. The kind of notable movers here are a little bit reflective of, I guess, the monetary policy environment. That's because we've had more interest rate cuts. We're going to have a look in a second at the Reserve Bank of New Zealand taking quite drastic measures overnight, seeing sharp movement in their currency. India have done the same. And this all comes amid these kind of growing risks and this, this slowing of global growth, which is becoming now the baseline kind of scenario. So the asset that's been benefiting on the back of this, of course, has been— after a 6-year high, we now had a technical break on the previous test of the futures of the high that we had on the prior night at the reopening of, um, Globex on Sunday night when we printed up around $1,486.87 in gold, broke above that last night, came back to test the level, then really just pushed on. And of course now psychological levels up and around these, uh, these record high territory, $1,500 now trading gold per ounce in the futures market. So very interesting to watch that as certainly maybe not so much this morning I think it'd be too surprising to see 1500 act as a bit of a near-term cap to price action, not until the US come in. I think when the US come in, then it's going to be decision time. Do we now break that and continue to just push on to the upside, or does that continue to act as a decent psychological barrier for the price movement? As I said, not unless something new develops in a negative sense. In order to create another kind of push to the upside. But definitely one to watch today. And then likewise, talking about monetary policy, because if you look at the, the US 10-year up another 11 ticks this morning, I mean, there was a day, remember last week when we came in, it was up sharply. It's up another 11 today. It's just, you know, to see the, the US Treasury market up to that degree, it's becoming quite normal fare. And, and generally speaking, that is unusual to see that type of size of price movement happen overnight. Now that's the interesting point. When we look at, you know, often new inexperienced traders will ask me, how do I gauge intraday sentiment? What market is driving what? And typically that's been a North American focus. Obviously Trump right at the epicenter of all things that are kind of leading market direction. However, I would say right now the new cue for market sentiment intraday is definitely coming from Asia, and it's pretty much coming from just one single number. And that, of course, is this, which is the fix. The Chinese yuan weakens overnight after the PBOC set its fixing closer to 7 a dollar. Now obviously, this has been that, that talking point so far this week and what led to the, the stock market rout on Monday. Because they allowed the currency for the first time in, what, 11 years to weaken past that psychological 7 threshold, the renminbi against the dollar. However, yesterday there was a little bit of reassurance because China acted to stabilize that with their fixing. However, what happened overnight was the central bank set the daily currency reference rate marginally stronger than $7 a dollar, basically at $6.9996. So ever closer to that, that level. And I think that's made people again a little bit apprehensive. Gold very sensitive with those technical breaks, and hence he had a decent pop overnight in the upside. And then consequently, T-notes following also with some of the central bank action. Does this put pressure on some of the Western central banks to come? Markets still very much expecting easing from the ECB. Renewed QE as well is the growing consensus, uh, and is the pressure on now for Powell to deliver with more than just a mid-cycle adjustment is what people are, are asking. So yeah, definitely I would say this needs to be watched. The, the way I'd interpret this is the more they set the fix above 7— so let's see here, this is the PBOC fixing in in the black line, and the Chinese renminbi spot price above. And so you can see it's testing its extremity of the 2% trading band, which defines the, the Chinese currency. Um, and as such, the spot price is weakening to the extremity of what would be the, the maximum weakest point the currency can get. Now, the more that they allow that to happen, the more then that's probably going to stoke more trade, um, escalation, if you like, with the US in confrontation. And so that's how I'd interpret this. As long as they continue to fix it around 7, and if even if it does go above, as long as it doesn't start to shoot higher with these fixings, which I do not anticipate that it will do so, I think now that the market is used to this development I don't think it's going to carry such firepower as such like it did on Monday. I think now this is just a new normality for, for China to, to manage this situation. Of course, their economy heavily impacted by these growing tariffs, and with that additional 10% announced kicking on September 1st from Trump on that final $300 billion, this for me is just rationale in order to control that domestically. So yeah, definitely needs to be watched going forward is, is the key takeaway. The other thing that I thought was quite interesting with China was this overnight. I'll show you the picture. Obviously this is a massive explosion of targeted missile testing, unidentified location in North Korea. Now you remember how many weeks ago was it when Trump had had an historic handshake and crossed over the military zone divide between North and South Korea. It was, what, 8 weeks ago? And now Kim Jong-un is test-firing tactical guided missiles again. So, such is the world of politics. My view here is that North Korea— there's a distinct pattern between breakdowns in the Chinese-US trade dialogue and military activity in North Korea. Whenever the trade breaks down, North Korea starts to become more active again. Now, for me, this is a direct correlation of China and its relationship with North Korea and how Donald Trump cannot be seen— now he's brokered this peace agreement and he's made such a big deal out of it What I think would be an interesting extra dimension from China's negotiation stance is to create more tensions in the Korean Peninsula. Now, what I'm thinking here is then that China is the only country that can effectively manage North Korea. The Americans just cannot do it. It'd be too disruptive in what is one of the most highly tense areas in the East China Sea in the globe. So for me, this is China's work. This is not North Korea. And this is, this is China saying, well, as much as we might retaliate in tariffs, as much as we might stop buying your agricultural goods, as much as we might start, you know, all these different facets of on the trade, more, more visible front, we also could jeopardize your ability to appear like you're controlling this situation. And Trump's not gonna want that to happen. So I think this is ABC political gamesmanship going on here between China and the US. Is this anything to be apprehensive about from a North Korean perspective? Absolutely not. I know it seems strange, North Korea test-flying tactical guided missiles is business as usual as far as markets are concerned, and I think market participants quite clearly, as I've explained, see through this as a political strategy rather than it is anything that could heighten confrontation, say, North Korea, Japan, and so on. So markets aren't going to react to this, but it's an interesting dilemma and pressure point that China can push beyond the obvious when it comes to managing Trump having been termed a currency manipulator just 2 days ago. All right, Other things, this was the big one overnight, um, quite a shock to markets. The Reserve Bank of New Zealand, the RBNZ, cut their cash rate by half a percentage point, 50 basis points. Remember the Fed, there was a bit of a talk a few weeks ago about 50-25, and we were, you know, we were quite firm of the belief, and the Fed did deliver that 25 basis point rate cut. The overarching strategy being that you don't want to run down your ammunition of subsequent cuts thereafter if needed. But New Zealand have gone, you know, the full monty because they cut their rate by more than expected. Markets were primed for 25, they went for 50. They lowered their economic growth forecasts. They projected it would take longer for inflation to reach the midpoint of its 1 to 3% target range. And importantly, the governor Asked if today's cut— no more— or does the cut mean no more to come, the governor of the RBNZ replied, no, today's decision does not rule out any future action. The RBNZ is well advanced on developing a suite of tools for unconventional policy such as negative interest rates, asset purchases, forward guidance, and other forms of intervention. So the RBNZ have really gone to town overnight. Interestingly, with those unconventional measures, these antipodean central banks— the RBA, the RBNZ— did not have to deploy things like QE. Their rates were higher. They've managed to manage their economies appropriately by using the blunt instrument of just manipulating the the rate of interest. But RBNZ getting to the point of, well, you know what, we're going to have to start— it'd be prudent and necessary to start planning that we could go further. And I even think they even mentioned about taking rates negative, such as what we see of course in Eurozone with deposit rate. So this was the Kiwi overnight. If you look at the Aussie as well, done the same thing. And the Aussie is just coming up in the future space. I can see it quite an interesting level, so I'm sure Sam will go into that in more detail. But this kind of drastic action and commitment for more, with— it's almost seeming— I don't know, I don't want to use the word inevitable, but there's so much pressure on the US. I do think that they're going to not just ease once, but further beyond that. Whether that happens in 2019 or 2020, I think Trump's gonna have to get his way to keep the stock stock market up by the end of 2020, that does require more cuts. And so, you know, the one trade that does look good is still that gold trade. You know, if that does— if we get a synchronized global monetary policy easing, kind of harking back to a few years ago, there's no reason why gold can't go $1,600, $1,750. And I know there's a guy sat not far from me that would be getting wet at the whistle with me saying those kinds of numbers. Here he is. When it comes to, when it comes to gold prices.

Yeah, I mean, to be fair, a stopped clock is right twice a day. I have been going on about this for about 18 months. It's finally happening. And well, for now, yeah, it's just good to see it on this trend. I mean, if you look at the trend really for the last 2 months, it's So it's quite phenomenal, but not surprising to see when you've got easing, global easing, and global tension at the same time.

Cool. Thanks, Will. So yeah, Will definitely being committed to that trade. So good to see that paying off. Okay, final things. Just have a quick look. WTI crude futures really didn't move too much on the API data overnight. This was what happened last night. We had a drawdown in the crude figure. Of 3.43 million. And this does mark the, the stocks falling for the 8th week in a row. I think at the moment though, the downward pressure on oil is not so much an infantry situation, but more this kind of latest adaptation of concerns about demand given the, the recent trade war rhetoric. And the headline figure not too far removed from market consensus. Drawdown of 3.43 was against expectation of 2.8. Cushing, a draw of 1.6 million. Gasoline, pretty much in line, a draw of 1.1 million. Distillates, a build of 1.2 million. So no real movement overnight or too much in WTI crude. And then as far as Brexit goes, I can see the pound seeing a little bit of movement. Let me just quickly check on my charts if there's anything. I'm sure Sam can fill you in if there was anything fundamental. I can't see anything on the feeds. Looks like it's just a technical break above its pivot level, which was restricting some of the price action late in the Asia-Pacific session more than anything. But I just wanted a quick word. Brexit, not a great deal going on at the moment, uh, to be honest. I don't think there's a particularly large degree of any headline risk when it comes to trading the pound right now, but that will come in due course, of course, in the coming weeks. Um, the headlines: opponents of no-deal Brexit hardening their plans to block Johnson's threat. For the moment, obviously, the official line, as much as you might not believe it, is that Boris Johnson is saying he's not going to call a general election. But Corbyn has signaled early no-confidence vote in the House of Commons. Some believe that that could happen as soon as early September. This, of course, could be quite interesting given the majority of Boris is at 1, given that Welsh by-election we had last week. The government then has 14 days to to try and see if it can sort something out. If that doesn't happen, then that can lead to the, the snap election scenario. And then Dominic Grieve, as well as a lot of the Remainers from the Conservative Party that were given the chop when the cabinet reshuffle happened when Boris came in, have all said that they could potentially form their own slight alliance. So yeah, interesting times to come. Right now, I wouldn't say any of this is particularly new. And as far as I would say trading the pound, I would be looking more on the technical setup and movement of the dollar on the back of the trade stuff rather than anything shocking to, to come out of Brexit so much today. All right, from a Canada perspective, you can see here IN, India. India also did cut rates, that happened overnight. Their repo rate now 5.4%. Expectations were for 5.5, which would have been technically a 25 basis point rate cut, but they actually executed a 35 basis point rate cut. Quite unusual comparative to the Western model, but yet a deeper rate cut than expected once again from another major global central bank. Going further forward, the morning very quiet, in fact. And so again, not too much in the immediate aftermath for of fundamental catalyst, I'd say, to really trade this morning. Very much so, very interested to watch that gold market at around this, this $1,500 level. And then really for the US to come in when COMEX gets underway and the volume picks up in the gold market, that definitely will be one to watch. You got the oil inventories later, of course, and then potentially just any further response out of US President Donald Trump after what's been the weakest fixing level that we've seen out of this recent development from the Chinese central bank, with the PBOC fixing basically bang on 7 overnight. So I'm sure Trump will have something to say about that. But interestingly, Trump himself has been relatively passive. He knows now that he does need to control this to a certain degree, kind of expecting that to continue for the moment. Okay, let's Let me hand you over to Sam. He can look over the charts, and I will catch you guys later on. Thanks very much.

Hi guys, good morning. Let's have a quick look over. We'll start with the Kiwi today and then bring in the Aussie. After last night's, or overnight's decision, you can see a big push to the downside and And what's interesting here, and I tweeted this yesterday, just seeing what, what people were potentially thinking about the Kiwi. And I'm just going to put this onto a weekly chart. So here, the first point of this trend line going back to 2015, and, and you can see that broke overnight. Uh, so obviously the, the fundamental reason behind it, but also the technically that bottom part of that, that trend really, really breaking to the downside. We were for well, it seems like 4 years getting squeezed either way, and a decent push lower. Obviously now, certainly on the futures, the lowest we've been since January 2016. So be interesting to see what happens here for the Kiwi if you are trading or still have some part of a position on here. Obviously the, the next really key point market-related level is, uh, is still a fair way down that 19th or the week of the 19th of January 2016 before we do get that 2015 low. So price is breaking out there, and that follow-through to, to the Aussie, as you would expect, weakening that as well. And that again, for the Aussie, is now the, the, the weakest we've actually been for— let me just bring this into picture to the left-hand side— since 2009 for the Aussie against the dollar there. So massive move. We beginning of the year. Obviously made that low, came back not too long ago to find support, uh, around December time. Was it December time? Yeah, December, pushed higher. And, uh, yeah, you can see since then it's just been drifting down. And so quite low for the Aussie, more intraday, I guess, for both the Kiwi and the Aussie. If you can get any type of retracement, it would be, you know, good to, to get short. Again, we're keeping an eye on the the previous lows of this week for the Aussie at any point, if you could get up there for a short. As we just testing the S2 again, was a previous low, so not the worst place in the world for a short as well. Perhaps as Ant mentioned not long ago, the pound just pushing above that pivot. You can see certainly since we made that yearly low, we've got the market just drifting higher. While we've had a couple of goes at trying to break this trend. You can see there on the 5th, the beginning of the week, a little false break. And but you can still see relatively well-respected, um, opportunity may come on a break of that to the downside. Certainly the resistance points, uh, slightly more choppy, but you can almost say 122.13, and we've had a fair bit of resistance at that point. So price getting squeezed either way. I think at the moment you would probably favorite to the downside as a better opportunity, but each time we've come to that area, we failed to really go. So, uh, treat with caution. It might be that you want a further headline or more negative sentiment to drift back into the market, or even a bit of dollar strength before taking this trade on. Uh, Euro, uh, we, we had, uh, obviously a big push overnight yesterday and then drifted lower. The pivot acted as a good level support, and that pivot level is also, uh, just below there with the highs that we had back on the 31st. So understandably found support, drifted on, and we're now into this new range, if you like, 1.1253, and then of course that lower point that we had yesterday just above 1.12. So that would be somewhere I'd be focusing on. Just below where we're trading now was also the initial low of the morning, then the evening. So 1.12 25. I think you've got your 3 key levels and points of interest, you know, there. Let's have a quick look, see if we can get any kind of trend lines from those lows. It doesn't necessarily look all too good. So yeah, I'd keep it to, to those levels, to the high of the day, to yesterday evening's low, and then the low of yesterday. And that 112 handle will remain to be pretty key as well. S&P Let's get it on that daily chart because that 200-day moving average is back, and back with a bang. You can see, you know, I'm just gonna remove the pivots here, put that 200 on, and you can see just how good yet again that was. The failure to close below, uh, the 200-day moving average, and we're back above, uh, key levels to the upside. And this is looking on that daily chart is really anywhere around here, 2880. Not just because, uh, you know, it's all over Twitter as well, so people looking at it, but just from a price action point, you can see just how important that whole area was back in June and into July. Uh, you want a line in the sand, that's it there. So whether we can close above or below today will be key. Um, I think that's, you know, as, as big a level as we've seen in recent times for the S&P around here. So really keeping an eye— first retested that yesterday, where you can see a strong one to the downside, and we did actually bounce, testing my maps here, 26 points off that. So really key level, keeping a close eye on that. If that wasn't to hold, then sure, we can start to drift down. And, you know, I know people will be looking around 2730 as well. So almost a case of this has to hold this week or we could drift low. If we get back above, I think you get a faster move to 2911. Out the corner of my eye, I've just seen Safe Ali wearing the MAGA hat, which is a first, believe me. Um, let's get this on camera actually, just to see. It suits you down a bit. Yeah, where's the S&P? S&P trading just under 2880.

Don't let them win, Sam.

Don't let them win. Don't let them win. We got a, a longtime bear in the office who will tell you it's going lower. Um, looking elsewhere, gold of course up to those highs and it just doesn't want to stop. It does not want to stop. 1,500 trading. Uh, I was just looking at a chart this morning from when Gordon Brown sold, uh, gold at 288, which just seems incredible now. But this market going higher and, and for, for the time being you don't necessarily want to get in the way of it. Yes, there'll be opportunities intraday too get short, but this, uh, very much a case of looking to follow the trend. Speaking of trends, from the low of the 1st, you can see just how well we respected that all yesterday. If you want to stay long and, you know, as long as it's above this trend, it's not a bad option to perhaps to go with. We are knocking on the door around the high 1, 2, 3 times on the hour, so that's something to perhaps keep a close watch on, uh, is Oil, to wrap things up, we have a quick look at the DAX. And another draw, but oil still drifting lower. Small range this morning, got a fair bit of support that we just can't break through there. It's gonna put this on to 240 chart and just zoom to the left-hand side and look at levels below where we're trading. And let me just get this trend line on from that low of June. Drag that to here. That's something that I would have on just because that third test could well come in around 53, a break of that, and obviously we could start pushing to the downside. Also quite an interesting, uh, trend here that starts on the low of the second. Where was the low of today? Well, you get that, that third test there. So quite a big area. You do have some previous lows in the mix, but these trend lines certainly worth having marked up on the chart. To the upside, if we were to, to drift, you can see those highs from today just getting squeezed in. So again, worth having a trend line on there. But the pivot certainly looks pretty important— $54, the pivot, the low of yesterday. So as your technical levels of interest, just below where we're trading and around the pivot, uh, will be ones to keep an eye on. The DAX on the open, relatively quiet, but pushing above the pivot, not too long ago, trying to sustain that. Got some resistance, and again, this would be more of a zone for me rather than an individual level, uh, that I would have marked up there. Can we get back above there? And stocks, 2880 in the US for the S&P, may well be the focus. If that was to hold and we drift back lower and almost below the pivot, those lows from today and yesterday evening could of course come into play. As usual, any questions, please, uh, do let us know. Stocks at a key turning point. The pound's still getting squeezed. Is the euro going to start drifting lower? That 1.12 handle, certainly one to, to focus on. Kiwi and Aussie not looking good, and oil, of course, with that data out later, remains important. But yeah, any questions, please let us know, and I hope you have a great trading day.