EU grants a 2-week extension to avoid no deal Brexit

Good morning, it is Friday the 22nd of March, so I hope you are well. In terms of the briefing this morning, I'm going to give you a bit of an update on, of course, Brexit. There's been some headlines, as you can see showing on my screen at the moment. I'm going to talk a little bit about that and then oil prices as well, and then I'll have a look at the day ahead. So it should be relatively brief from my side. Give Sam a little bit more airplay today, and rightly deserved, so he can go through the charts from a more technical perspective. So, well, let's just jump quickly straight over to the charts first and have a look how things are looking at the moment. And I guess one of the most eye-catching things are, unless you're sticking around trading the, the North American session, then this was the US equity performance. And I really just wanted to bring this up and just discuss what's happened over the last couple of days and And obviously we had the surprise from the Fed, much more dovish than anticipated given the dot plot projections and also the timings of the balance sheet runoff. And so we had that seesaw price movement. So the two rectangles here that I still had on from yesterday, the initial knee-jerk reaction, which was kind of wow. And we had that classic monetary policy play where Treasuries rallied. Stocks rallied, gold was rallying, dollar weakness on the back of this kind of dovish move, but then it quickly reversed actually. We saw out the end of the Wall Street session pretty much net neutral. However, as we got lower down, and I guess technically just looking here, this kind of area where the ellipses is marked, kind of coming into that previous area of consolidation going back probably about a week ago, and then from that point the market really just took off from the cash equity open yesterday in the States, smashed through the, the prior, uh, kind of midweek high, or early in the week on the 19th, uh, and we continue to press up. And, and looking, uh, this was the— a chart we, we— and I say Sam and I had marked up, um, that we do on a Monday in our weekly strategy report. And just kind of looking at it this morning, it's just played out so nicely responding to these longer-term levels. This kind of area here that we were, we're looking at from last summer where we had had, you know, multiple points of interest from both a resistance and support point of view. And then that leading us up really nice as the target then for where the market pretty much to the tick has responded to, and people have kind of booked the profit on those longs at these levels at 65. That was always the kind of key target that we were looking for after this period here of consolidation that we had seen, and that was kind of lining up with that area of the triple top that we had with that kind of scaling down trend line from Q4. Now we've managed to get above there, you know, 65 is what we were, uh, we're looking at. I guess the interesting thing I want to hear from Sam when he comes on is, well, let's say if we get above 65, you know, where next? I mean, for me Here comes the 2900, um, that being then the next level really of more clear, clearly defined significance, being as you can see there, that September bottom, some of the previous high on the price action. So, and of course the round figure as well. So, uh, that all contingent though, obviously 65 holding for the moment, that's going to be a decent area of resistance I would suggest for the, for the rest of the session at least. So yeah, US equities, quite a big turnaround yesterday, uh, obviously from a sector point of view, uh, as we were saying over the release of the, the actual FOMC itself, the financials kind of a bit more lackluster comparative to say semiconductors I was looking at this morning and tech stocks really loving life again, um, being the most kind of responsive to this type of development we've had out of the Fed going forward. So Um, we've got a positive start then to proceedings in European equities. DAX future, you can see on the center left, back above pivot, up about 26.5 this morning. Otherwise, things are pretty quiet. Gold minor positive. The Dixie is down about a quarter of 1%. So EURUSD and cable are on a firm footing this morning. Cable we'll get to in a second. EURUSD, you can see here I mean, that was the explosive move that was seen on the back of the spike low in the dollar on the back of the FOMC. And so now we're coming back in the futures to retest the pivot on the first challenge here at 1.1467 in the euro. Oil pretty sideways. That's basically flat. You know, if we start looking at oil, really, this is again those longer-term levels that we'd been looking at in our, in our strategy report. We've kind of hit target now. I think probably in my mind, unless there's any fundamental developments, we kind of priced in now this OPEC continuation of the pledge, particularly led by Saudi Arabia to continue cutting, probably irrespective of then the pushback that will come from the United States on the back of that. At the moment, you've got quite a nice equilibrium of US oil production moving back up to record highs earlier this week, US output back up at that 12.1 million barrels per day level, but counteracted by the fact that basically OPEC members led by Saudi are doing more than enough at the moment to be overly compliant, let's say, over and beyond to the point in order to mitigate that rise in US production. So really, I think trade wars is a big part of the, the situation here. But as we know, that's kind of again also being kicked down the road a little bit. So a little bit of consolidation around this 50% fib retracement of that big sell-off we had at the end of last year and the $60 handle, I think, might be warranted at this point. Until we get the next kind of pivot in the, in the news flow. Um, T-notes again flat, pretty much just hugging, as you can see here in the bottom right, uh, the, the price action overnight. I think really too spectacular there going on. But importantly, as you can see here, putting on a 90-minute candlestick, we've held on to that sharp move that we've had. Quite a lot of, um, the move from the Fed being so dovish prompting yields to fall is reverberated around the world globally. And we've seen similar movement in some of the yields in the Asia-Pacific region overnight as well, playing a bit of catch-up. So let's jump to, let's jump to Brexit. What is the latest? And, um, yeah, this was something exactly that we were talking about yesterday, about the idea that March 29th is basically a, a dud it's a dead date in my mind. It has been for a while given how close it is. Um, I thought exactly this. I think we actually said that yesterday in the briefing where I think a 2-week extension is probably the most likely. 2 weeks being for very specific reasons. Um, not that this is Europe giving any type of concession. Obviously they want to avert the kind of accidental running out of time, causing a no-deal scenario, economically very negative for both sides of the channel. And so a 2-week extension makes absolute sense in my mind. All this does though is just take the impending cliff edge and it's just put it to 2 weeks' time. One thing I would say though is that I do think though that now this has happened, well, for one, why have they picked that date? Well, this was the exact thing we've been talking about for a couple of days, and this is the 8th April 12th date, which is the new one, because this is the deadline for the UK to give notice for European parliamentary elections. I feel that was then— kind of suits both grounds, gives the UK and Theresa May more time to get domestically her house in order, in order to get this meaningful vote 3, possibly 4, over the line in time then. But for me, the 12th of April really is the cutoff now for as far as I think Europe will be concerned. They've shown some flexibility here, and I think that's, you know, going to be the real big date to look for. So a little bit of a positive reaction overnight in the pound. Just looking at cable this morning, and obviously that's been on its own journey of sorts. I mean, if we start looking at some of these price moves, that was— if I just talk you through, just remembering the news articles that came came out. That gap up and rally was on that Monday night when Theresa May had that last-minute dash over to Strasbourg where she managed to secure some slight end concessions. It was then over to Geoffrey Cox to give his legal ratification of that process, and he said no. That was then the response because the market had priced in this massive kind of positive development developments about May making some progress and the likelihood of her deal going through at the last minute. That got put to bed by Cox, but then we've kind of rallied back again, consolidated, and then yesterday we had positive UK retail sales that came out around here, but really is a sign of the times where no one really cares about UK economic data of a hard sense right now because that's going to shift potentially by a large margin once we have a greater clarity over the, the political outlook. And so Bank of England as well, absolutely as to be expected, a non-event. They've just got to sit on their hands and wait for whatever the decisions that come out of Westminster for them to then take the, um, the appropriate policy action. The wording they're using of course is we basically remain ready to go either way. So if there was a crash-out no-deal scenario, then the most prudent probably action that they'll need to take is a rate cut to the very low rates that already exist. Or on the other side, if we had a long extension, then there are areas of the economy would warrant the fact that they might start to talk about hiking rates towards the end of the year. So at this point, they've just got to leave all options on the table and remain flexible as to the outcomes that happen politically. Technically, what led quite a lot of the moves yesterday and also, uh, quite a distinct pullback in the strength of the US dollar in the dollar index. If you remember, the dollar index obviously gapped down aggressively on the back of the surprise dovishness of the Fed. And so a natural kind of reversion to the mean, I would say, once people have got over the kind of euphoric reaction to the Fed. That in combination with the technical break, the trend line and then you had that break of the, uh, the prior day's low, and that kind of extended the losses. And then you've had this last move, which essentially is the, uh, the extension that we've had just confirmed to the 12th of April now, meaning 29th of March is now not a deadline. So yeah, that's the kind of situation with Brexit. What's— I mean, there's nothing really else other than that to report at the moment. There's to be no real new developments between the ERG, the DUP what the more pro-European Remainers are saying that are part of her cabinet. That's all the stuff, I guess, to look out for for the weekend. But we've been here many times before. What I would suggest now with Brexit is that there's going to be a lot of movement behind the scenes. Brexit might even come off the boil a little bit because now the deadline is 3 weeks away technically, and then it will start to ramp up again because because probably there will be a lack of agreement, there'll be lots of indecision, lots of deal-making trying to go on, and then they're gonna make the last-minute deals. And I would suggest that a meaningful vote will probably happen latter rather than sooner in that respect. I guess my only advice is if you're trying to fathom the outcomes of Brexit, I think I remember me and Will in the Trading Live room were talking about before, you've just gotta think about really game theory try and put yourself in a position of all different rational party members thinking and trying to think, well, if this happens, how does it affect this party? And then what does that— how does that leverage the power against another party? And again, it's trying to— I think the only way for someone like me that I try to analyze and build a view about something like Brexit is you have to be totally objective I think the biggest problem with a lot of non-institutional traders is you tend to get a little bit, uh, emotive, bringing in your own political view to then kind of fit a narrative for then your trade strategy, which is absolutely the wrong way to look at it. It's just purely a proportional balance of probability based on all the different parties and what their wants and needs are, and how can they satisfy those, and what would the process accordingly be. That's the only way I try to look at things to make it as, as easy as possible. All right, let's look at the calendar, and I'll hand you over to Sam because, as I say, he can spend a bit more time looking at charts today. Data-wise, there's a couple of interesting things actually coming out in a short while, so hopefully we can wrap this briefing up in time. You've got the, um, PMIs. These are the flash PMIs. These will be important. Eurozone economics have been in the spotlight. But one thing I would say is that you remember we were looking earlier in the week at the Citigroup Surprise Index, and two big US banks, Goldman Sachs and Morgan Stanley, both earlier this week became bullish on Europe. And they were talking about essentially a bottoming out of this, uh, rut of bad data that we've been having. So I'd be looking for whether or not that view is validated by these data points, which have been typically quite weak. Obviously, sub-50 in a PMI is indicative of contraction. Expectations are that German manufacturing will remain in contraction at 48. However, we do have a topside range of 50, so These could be interesting cues if you were trading the euro, the DAX, kind of European instruments this morning. As I say, these are going to be littered in. So we'll get France at 8:15, Germany at 8:30, and then the eurozone figure at 9 o'clock, which is basically the sum of its parts. So I'd be looking for most reaction probably coming out of the French and German numbers. Later on this afternoon, you have Canadian data at 12:30. CPI numbers. The loonie is always very responsive to that if you're trading the currency market. Then otherwise, later on this afternoon from the US, you get their respective manufacturing service PMIs as well, alongside existing home sales. And for any energy traders, the Baker Hughes rig count, if you're looking for that kind of lagging indicator of oil production going forward. Speakers going through the day, it's only really ECB merch that will be one of relevance. However, I will share after the briefing basically the press media page for the discussions in the European Council today. However, what I would say is now that that headline has come out about Theresa May being granted another 2 weeks from Europe to avoid the no-deal scenario, I would say that takes a lot of the firepower out of today's European Council meeting. So I wouldn't be expecting any fireworks at this point, just discussions of a— that will probably lead to the continuation of the current impasse is the most likely outcome. All right, that's it. Let me hand you over to Sam. I'll wish you a good weekend. Remember, uh, as per usual now, I will be doing a Sunday session live on our YouTube channel. All you need to do is subscribe to the channel, click the notification bell and then when I go live, you'll get a notification push on your phone. You can join us on your mobile if you're out and about and you want to keep in touch with things. Otherwise, I'll be tweeting regular useful infographic stories and things I see over the weekend, as per usual. Alright guys, have a nice weekend. Thank you very much.

Hi guys, hope everyone is doing well. It's coming to Friday now, and yeah, we'll have a look at the, uh, the stocks or S&P in, in general just to see how that's going, where the next level could be. I mean, DAX this morning just pushing, pushing on. Obviously we've got the data coming out in about, well, just over 6 minutes, so we'll wrap up before then, which obviously could influence a couple of markets. But a couple of breaks here, you can see really strong retest here of this, this trend line in the DAX overnight. We continue to push on. And, and where that goes now, where you've got a bit of resistance from yesterday evening, which we're just coming to test now. So worth just keeping an eye on, on how we, we trade around this level. Breakthrough there, and this area where we found support earlier yesterday morning would be somewhere I'd be focusing on going forward. Yeah, absolutely. Yeah, definitely. The the overreaction potentially from, from Bayer and BMW on the, uh, on the, on the 20th here. Still got a way to go to sort of unwind some of that risk. But if you were to, to sort of see a close into the back end of the week anywhere really above here, that'd be pretty, pretty bullish considering where we were, uh, just a few days ago. And S&P, I mean, we did come down on S&P on the, uh, on the, the 19th as well into the, into the close. And then people again on Twitter getting excited about, is this the top that we're going to see. Is this the high for the, the rest of the month? Well, let's have a quick look at the, that daily chart because you can— you'd be a brave person to— even though we had a nice reaction to this 66, 65 level, you know, how much more really, uh, could it go? But yeah, I think we, we break through. $2,900 is a key area to keep a focus on, obviously the all-time high, also around the mix there I mean, it's pretty much on 2,900, isn't it? The high that we had back on the 9th of October. I think any close above where we are yesterday on that high, uh, we get that level quite quickly. Percentage-wise, off all-time highs on the futures, let's have a quick look exactly where we're trading now. I mean, it's under, under 3%, which is, which is crazy when you think about the NASDAQ yesterday, 1% move to the upside. I mean, listen, if it has a day like it did yesterday, well, we may even get that today. Let's have a quick look. You know, maybe not. 2.5%. So all equity markets pushing on this morning. The, the NASDAQ and S&P, uh, got some interesting levels coming up. The, the NASDAQ hitting that, uh, that high that we had sort of on the 4th of October. So some resistance points, sure, for now. About a breakthrough there, then you might get that further continuation with the pound on that longer term chart. And I'm sure Many people have still got this marked up, that high that we have back from September. We're really struggling to break through that. So if that was to happen at any time, probably positive stories would have to be the reason to get there. But, uh, you've got to imagine there'd be quite a few stops around here. So one to have marked up in your chart, maybe as a sort of alert, if you like. Trend lines from recent time going back here to the sort of the middle of Feb, Valentine's Day. You've got your free test on that. So for those that are looking for maybe a longer continuation, uh, to the downside, if this was to go later on, then yeah, a short back down to, well, those February lows where the trend line starts is not a bad option. Having a look more intraday, it's always a risky one trading, uh, cable. Uh, what looks like a quite good short yesterday morning, if we were to get down to the 12th hold quite well. You can see the reaction to that has been pretty strong as well. Looking at potential areas of resistance, I mean, the high of the day so far is a good one, but also here you can see 1.3230 in the futures, strong resistance around this point yesterday evening. And, and that's somewhere I'd be focusing on. If not, you can see also some strong levels of resistance around there. Probably worth getting a few trend lines on here as well. Should they, they match up later on. You can see if we were to come back up to that 3250, got some nice resistance all around here as well. Having a quick look at the, the general picture just before we wrap it, before that data, so you guys can trade that should there be, uh, anything worthwhile. Euro just pushing above the pivot as the dollar just coming off, uh, what's been a pretty topsy-turvy 48 hours or so. So the euro pushing higher, obviously the pound we know is on the high of the day. Gold just trying to push through some resistance, so probably worth keeping a close eye on that. But equities are higher, the DAX has a bit of resistance, uh, still to go through. And then we'll have a look at oil just after the, the numbers come out. So you've got data approaching in a couple of minutes so that you guys trade that. But if I don't speak to you Uh, throughout the day. Hope you'll have a great weekend, uh, and, uh, we'll be on the mic just after these numbers.