Dust Settles On Fed Cut, What Next?

Okay, very good morning. Hope everyone is well. Thursday, 19th of September. Uh, thank you very much for anyone who joined us live for the FOMC meeting and announcement last night. You can access the full recording of that session on our YouTube channel, so do check that out if you, if you did miss it. Otherwise, it's, I guess, a case of the morning after the night before and digestion of the Federal Reserve. And certainly when we left the office, some of the guys here, Charlie in particular, had two great trades, one on the euro and one on gold, which I'm sure Sam can talk a little bit about from how to have approached that in a kind of execution or a technical setup sense. But certainly that gold move was, was pretty prevalent at the time. And all of this was kind of underlying the idea of what was classified, if you like, in a simple sense, as a hawkish cut. So cutting the federal funds rates by 25 basis points as expected to the new range of 1.75 to 2. But then sounding relatively upbeat some things obviously still to be monitored in the economy they're looking at. There was no express mention of the repo rate issue, the tightening of liquidity we've seen in the money markets. There was no dramatic dovish shift in the dot plot matrix for their future trajectory of rates. And so ultimately you had what really is, I guess, a bit of a three-phased move, if anything, because, you know, equities dipped, gold dipped, Yields spiked, so hence the reason why you had this kind of, uh, not really hawkish, but if anything disappointment for the doves, if you like, and as a net consequence, a hawkish result. So equities and bond prices lower, dollar firmer, and gold lower. Gold as well exacerbated by a lot of the technical levels that were getting breached on both trend lines and support levels as well. Then we recovered. I mean, going into the closing bell, I mean, just as we left the office, Sam actually left about, I guess it would have been about 7:45, something like that, quarter to 8, and he said, he whispered, buy the dip, because it's the sort of guy he is. He's a big believer and has been. I think he's dwelling too much on, when was it, 2018? When he was buying the dip at every opportunity and definitely served him well. But he was right again. And, you know, it went down and a really powerful rally we actually had. You can see in the center charts here, these are the US indices and raging back into the close overnight. In Asia, though, kind of drifted south. We just had a little run down again. So I'm still quite interested to see how today pans out. On further reflection, particularly in the North American crossover when the US come back in. Because if you actually look at the charts, equity index futures are lower, um, that goes for Europe as well as the US. Gold is down $13, still sitting around a $1,500 mark, although it's recovered some of the sell-off from yesterday, it's still down. T-notes are down 3.5 ticks. So it's still mildly reflecting this idea or notion that perhaps the market was a little overextended in how dovishly positioned it was in its expectations for yesterday's event. Um, let's just have a quick roundup then and a few charts to have a look at in respect to the Federal Reserve. So for one, the Federal Reserve makers, yeah, as I said, they lowered the interest rate. Powell said that moderate policy moves should be sufficient to sustain the US expansion. Fed officials maintain that very key pledge that to, quote, act as appropriate to sustain the expansion. So that remained. Obviously, there's optionality, although we're talking about here potentially a hawkish interpretation. The fact is that they've said as they continue to monitor incoming events, whether that's data or external headwinds, then they would act as appropriate to sustain the expansion. So that optionality that they could cut further if they needed to. Um, interest rate on excess reserves cut after the repo rate crunch. I mean, yeah, okay, so that's more a reflection of, um, that kind of sits in step with the fact that they lowered the Fed funds rate. There wasn't really any explicit nature of a constant, um, stability kind of inaction of a more regular fixed repo rate activity, and that may have dissipated disappointed some. This was the dot plot though, and I think this is what was maybe mildly surprising. As you remember, the dot plot used to look almost identical apart from the 2019 part of this green line. So 2020, '21, '22, longer run, it's remained relatively unchanged. What it used to look like was almost like a, a drop and then up. And now, as we know, we've had 2 rate cuts So the 2019 end's got to come down, but the rest remains relatively unaltered. So comparative to what we were looking at yesterday with the ING forecast of what would have been a dovish one, which would have been a significant move to the downside of a more shallow trajectory of rates over time, that definitely didn't happen. And so again, adds to that notion of a more hawkish outcome. What's now the market pricing going forward? Well, we've got two more interest rate decisions for the Fed for the rest of the year. The next one happens on the 30th of October, the day before the risk of no-deal Brexit, the day before Mario Draghi leaves. So perfect timing, all seems to be coming at once at the end of October. And at the moment, the markets are priced as of the— as of right now, 57.2% that interest rates are not cut again and they remain where they are by October, although it's a pretty close call. If we go to the end of the year, what are markets expecting? Well, a pretty tight call again between rates either remaining where they are or another 25 basis point cut. So market's kind of right on the edge of, or not, whether we have one more to go. So that's the kind of Fed situation. Not going to dwell on that too much. As I said though, what I am interested in is when the US come in later on. Now they've slept on it. What do they think about the next course of action going forward? Do we get a rerun of what we had last night, another bit of pressure into the equities, and that frustrates Trump and he starts tweeting as he did several minutes before he delivered the press conference yesterday for Jerome Powell? Moving on, I'm going to go in chronological order, um, starting with the BOJ. Believe it or not, they actually did have their interest rate decision overnight. I know it's hard to, to kind of keep on top of these things. And the Bank of Japan haven't made any immediate move. They've not followed the likes of the ECB or the Fed, although it looks more likely or not that they will do. It's just a matter of timing, and perhaps that will come next month. The BOJ said it needed to pay closer attention to the possibility of losing momentum toward its 2% inflation target as overseas economies continue to decelerate. So they're definitely setting the scene for potential policy easing to come in future. And remember, we have had the likes of senior ranking policy officials there of late talking over the last couple of weeks about taking rates further into negative territory. So most economists, as the second bullet would suggest, think that the next move will be more stimulus. Just a matter of the fact that it didn't happen right now. We have had a little bit of yen strength overnight. Perhaps the fact that they didn't act right now has fueled a little bit of that move, but also again with some of the generalized risk-off as well, perhaps in the marketplace, just helping some of that overnight currency movement. Overnight you might have seen the Australian dollar has come under some significant pressure. Aussie dollar trading lower. If you get the Aussie future, it's already down at its S2 this morning, finding a bit of support support there from overnight on the initial reaction. And that's because expectations are growing that the RBA are going to have to take more policy easing action after what we had was Australian jobless rate unexpectedly climbed in August as the labor force swelled to a fresh record, essentially. So additional labor market slack that sets the scene for further easing from the RBA to come in near term. And as such, repricing of those expectations has led to some selling pressure into the Aussie currency. This, of course, coming after— although the dollar index is down on the session about 1/10, it's still having gapped up from the movement we had last night. So kind of divergence of fundamentals in that sense between the Aussie and the dollar, the US dollar. Moving elsewhere, our trade talks, what's going on? Well, actually, just so you're aware, because we're likely to get some, some comments on Twitter and from various news agencies and so on today and tomorrow, there is meetings happening in Washington. These are, I think it's with the Trade Secretary, perhaps the Treasury Secretary is involved as well on the US side, and some of the finance ministry officials from China heading to the States. To lay the groundwork then for high-level talks, which are set to happen in October. This is usually what happens. They send the envoys in, contingency of 20, 30 people come over from China to the US. They talk about some of the top-level stuff. So at the moment, the topics for discussions over two negotiating sessions are said to be upon China's commitment to purchase agricultural goods. So things like soybeans in particular will be in focus, given how how pressure— pressurized that particular sector has been to the detriment of Trump recently, which we know is very important for him politically to manage those types of farmland areas. There is lesser focus on the more contentious issues, which is strengthening China's intellectual property protections and the rules around that. This is much more going to be about, okay, let's have some sort of commitment from China that they'll continue to buy these, these soft agricultural goods ahead of their more top-level detailed talks that will be hosted in October. So just like to be aware of in case we see any headlines hit the tape. Another thing I thought I'd mention, this actually came I believe after market yesterday, perhaps could be something when cash markets open in the States later on the NYSE at 2:30. Microsoft have unveiled a $40 billion stock buyback They've also boosted their dividend as well. I think their dividend increase, uh, was by 5 cents to 51 cents a share. So I think they've conducted one of these similar size scale buybacks before, but certainly given they are the biggest company in the world, largest company listed in the S&P and the NASDAQ, I definitely would be interested to see how they perform pre-market ahead of the open later. Coming back then to the session ahead, um, you will be well aware that there's been a 3-day hearing happening in the Supreme Court in the UK in regards to a number of different factors. There's been 3 legal cases, one brought about a kind of antiquated Scottish law by 70 MPs. There's been a Gina Miller repeal that's being heard and one other. These all in regards to contesting the government's ability to have an inaction. Prorogation of Parliament is the main kind of theme. This has been going on for a couple of days. The main takeaway here that I want to stress to you, you guys, is that the 3-day Supreme Court hearing ends today with justices retiring to consider their verdict. The PM could be forced, if he loses, to recall Parliament, giving opponents of no-deal Brexit more room to try to basically disrupt his plan to leave the EU with or without a deal on October 31st. The main way to interpret this would be if the PM loses and i.e., he has found he's used inappropriately his powers to prorogue Parliament unnecessarily, not for the right reasons, and that leads then to a reopening of Parliament if his hand is forced, that would be an immediate pound positive, and I would expect the pound at least in the intraday short term to spike fairly aggressively. Now this doesn't mean that Brexit is solved and it's a holding of a medium-term position, It just means then that the threat of this no deal would diminish as Parliament comes back into work and has more time to try and disrupt the process of the PM's plans to kind of leave, do or die in that situation. So I don't at this point have any set time on when that verdict will be heard, but when it is heard, again, if it goes against the PM, I'd see that as a pound positive. If you do hear of any any rumors circulate or in fact the news headline breaks while we are here. This does lead us on then into today's session. Earlier this morning at 9:30, we will get UK retail sales, so do keep an eye out for that. But as per the case really with CPI, not looking for massive movement. And we do have the Bank of England of course coming at midday. Um, Bank of England, I really am not going to spend much time in this briefing talking about because all in all they are going to hold policy steady. There's really no way that they can make any real change in policy at this point, not given the very close proximity of this at, at this point in time at least, the looming deadline of this Brexit uncertainty. Will that deadline hold or will we get an extension to January 2020 or January 31st, it's 2020. So there's no press conference. This isn't a quarterly inflation report month. It's going to be a one-and-done. We're going to get the announcement. The likelihood here, unchanged, 9-nil, unanimous. But we will get the line-by-line details of the minutes, and that's probably where there could potentially be some interesting things where they might talk about some of the external things like the trade war, things like that. But obviously Brexit at the center of any interest and how they classify those developments and to impacting UK economy might have some influence on the, on the pound. One thing also that came out last night, I did say this before, we talked about this about a week ago, there is no smoke without fire, and apparently Arlene Foster is softening once again about potentially being open to some kind of Northern Ireland-specific Brexit solution. What has been talked about is that, you know, perhaps then we could have UK having its own ability to be isolated, but Northern Ireland, given its geographic connection to the Republic, would need to keep some kind of EU-related regulatory alignment. That, of course, was absolutely contested by Arlene Foster originally, because that means Northern Ireland would be treated differently from the United Kingdom in the sense of Great Britain or England. And so that would mean that that's against what the, you know, a distinctly Protestant party would want— disruption and having a different relationship from that of the rest of Britain. But needs must, and political relevance is on the, on the, on the table, whether or not the DUP will have any type of say in anything going forward. And so, as I've said before, I think Arlene Foster, now you could potentially see some movement because she will not want to have the fact that if we go into a general election, her party and their relevance is diminished by the fact that Boris, if he did come out with a majority, is no longer needed to have a working relationship relationship with the DUP. So yeah, as I think this is just continuation of that same mantra. Um, quick look then at the calendar for today. I mentioned retail sales, then you've got the Bank of England. For the US session, weekly jobless claims as per usual on a Thursday. Philly Fed is coming out. Um, I guess if you were looking at the EM currencies, you've got the South African rate decision, uh, unless expecting a hold decision there. US existing home sales 3 o'clock. And that's about it for the calendar ahead. Just finally, from my side, this is the Amplify YouTube channel. I know for— I'm only going to point this out to those who are not aware of this, but if you go on the actual homepage on our YouTube channel, if you scroll down, we have— these are all videos categorized, so you can see the morning briefings here, the weekly strategy strategies here, and then the live sessions here, of which you can locate last night's live session hosted by me and Sam. If you click on that, and if you click on then the show more in the description part of the video, you can see here the full kind of chapters of everything that we discussed. So if I just zoom out for a second, and you can jump to each one of these timestamps to watch session. So if you did miss it and you're fairly, fairly new to navigating news-driven fundamental kind of market events, if you jump to that second one, that's when I gave a full kind of 20-minute preview of how to tackle last night event, and it might be quite interesting for you to see how we went about that. So I'll leave that with you. Okay, that's it from me. Hand you to Sam, and I wish you a good day ahead. Thanks very much, guys.

Yeah, hi guys, I hope, uh, we're doing well this morning. Have a quick look over the, the general theme for, for the markets now, and as well, and obviously talk over some of those moves from yesterday. You can see, uh, on gold that, that level we were talking about seems like every day this week, and And rightly so, the importance of this area is not to be underestimated for this week. We can get a close below there, could be buy, buy for now, but it's held so well. And, and why wouldn't it? Yesterday on the sort of first retest of, of, uh, that low that we made from the 13th, Friday the 13th, and a decent bounce to push higher, and we then sort of found resistance on what else has been a pretty good level. You can still see— I'm going to put this onto a 5-minute from last night. We were saying, so if we put it in, it would have been about— the chart would have looked like this, like that basically. And we were saying if, uh, if we can get back above this key level of resistance, that this market could be an opportunity to go long. We sent S&P, if it gets above that trend line could be an opportunity to get long. And obviously, you know, at this point, um, you know, this was, you know, very early into the session. What a resistance level it was. And also the opportunity to then get in short, retest low of the day. And I know obviously Charlie got in that, and, uh, I'm sure he had a good evening. However, we have recovered, uh, a touch since making that, uh, that low. And just putting this back onto the 60-minute to the downside, it's all about that level. It's all about that level. How could we get there? Well, I'd start drawing, you know, these trend lines from the lows, but you can see it's already quite choppy, um, you know, to, to, for a move to the downside. So I'll just be keeping a watch to see if anything presents itself and gives that opportunity that there could be a decent trend in play, and then obviously waiting for maybe a break of that. We're literally trading right on 1500 To the upside, obviously you've got those key points from, from yesterday. Previous lows of, of yesterday would be coming in around 1507. That's an important point before really getting back up to a retest of this trend line. And just so happens that maybe by the time it would get reached is also that really key 1512.7 level. So gold, a good mover and, uh, well nicely set up for today. Stocks, uh, you know, a push lower to what was the low of the week, failed breakout, failed test to push lower. We get that reversal just like euro low of the year, pound low of the year. Wait to see where that, that market closes, um, as well. Just, uh, following, uh, a push lower, we are just starting to see a bit of a rewind. We'll come into European stocks in a moment, but they're certainly the last hour, Euro Stoxx and DAX have done a nice full reversal, and this is helping bring the, bring the S&P back into play. And just when I was talking a couple of moments ago about gold, we get above there, fine, let's go long. We were saying the same about that trendline in the S&P, didn't get above. However, we did then around 9 o'clock, and you can see we were saying, if you watch the video back, or I mean, you guys would have imagine as well. The target would be the high of the yesterday, that gap fill, and you get it. And then obviously the next one up to what, again, you can see is marked up as a key level at 30.14, or just a bit below with the R1, would have been a good trade. So it's, you know, with events like that, you don't have to be in, in the first, uh, first couple of minutes. Just have your ideas, wait for those, and if they come in, fine. You know, loss of opportunity better than loss capital, as I'm sure we've all heard before. This trend line, now all I would do is right-click, remove trend, and, and get on with the, the day. And even probably removing this rectangle from the bottom. And obviously it's now about 2983. The pivot today has already been chopped through a fair bit. I probably would look to see, you know, if we can get any kind of trend on from there. Doesn't look too good. So, you know, this market here, I'd rather wait and see actually what happens, uh, because we're pretty much— if we draw a line exactly where we're trading now, we are about 3 points away from exactly where we were at 659. So this classic central bank move reversed within 24 hours. But some important levels there, as mentioned, for the S&P. And most notably to the downside, and obviously that high that we made from yesterday. So definitely have those marks up on the, uh, on the chart. As expected, the pound didn't really do much. That wasn't going to be the focus for yesterday. Even if you didn't have the Bank of England today, I would say it's still just going to be Brexit dominated. However, from the, uh, the downside from the last couple of sessions, including today, that is You can see we're just starting to, to respect a trend here from, well, all of yesterday. So around 125 today on the futures, I'd have that, uh, just on a, on a note along with that low of the day, key level to, to have marked up on, on there. And you know, the— obviously the Bank of England could well dictate price and, and whatnot, but a technical push lower to there and obviously be looking at lows yesterday and then those key levels from before. If we were to have an ultra dovish, uh, Bank of England— remember we were talking about the trendline break. I mean, that's getting far away now, um, you know, the further we go. But still, you know, just have— be— have that, you know, on there just in case. They're looking to come in around that sort of low of, of the week and just below S2. As well for the pound. Above the, the high of the day, perhaps stretch its legs a bit around this kind of area as a whole, around 1.2535. We'll do a rundown obviously before, uh, the Bank of England. But, uh, yeah, some interesting levels, uh, there to have on. Just bringing into picture the DAX, as I mentioned, it had reversed that, that push lower, you know, again here the failed push at pushing lower than yesterday's low. The advantage of waiting for that 5-minute close, you can see we get through it and then the reaction above is pretty incredible actually. Uh, sharp retracement higher and the DAX is still elevated. You know, these lows which I'll just highlight here looks very much like gold in the way of that support. So end of the week, can we get a close below? And, uh, you know, the failure then to make another high is quite key. So this is that real key now zone to keep an eye on the DAX. Below here, coming in around 12,300, um, yeah, could get, uh, could get ugly below there, should we say. But at the moment, it's not interested in doing so. As usual, any, any questions, obviously do, do let us know, uh, on any of these markets. Let's have a quick look at, uh, oil to start wrapping it up. And you can see oil not really interested in having a go at really completing that gap fill. I still think that's a trade to, to keep an eye on. Obviously volume, you know, into the afternoon may, uh, provide a better opportunity. The original low from the Monday, which was obviously the high that we had back on the temp, held well. We didn't really get a close below there until yesterday afternoon.

Noon.

The retest of that before the DOE was solid and came lower. And you know, you're not going to be upset that you've just made 110 ticks. Obviously it doesn't look that much on the screen, but that's because of the moves we've had over the week so far. So that's a key level, 58.62. I do actually quite like the idea of seeing a push to the downside to try and attack some of these levels on the left-hand side. Obviously Obviously time will tell, and really it could be changed by one comment as well. Also worth having a look for those that do trade it, it literally just caught my eye now from before, Bitcoin now below 10,000 again there, breaking some key support, big spike. And you can see just, you know, if we talk percentages of this move, where is it, current I mean, this is at 4 AM and you're getting a 5% move. Yeah, I'll take, uh, I'll take a few points on the S&P over that at the moment. As usual, any questions, do let us know. European stocks are rebounding nicely, that's dragging US equities higher. Bank of England, the main one to focus on around midday. Gold, just have a look at this trend line to see if we can start getting everything respected. 1492. For the day and the week is vital. As usual, any questions, please, uh, do let us know. But I hope you'll have a great trading day.