May looks to team up with Corbyn

Hi guys and good morning. As you can see by the picture next to me, we have a superhero coming to the Brexit rescue. It's Wednesday the 3rd of April, just gone 8 AM here in London, and the talks of a meeting to take place between Jeremy Corbyn and Theresa May has sparked the pound into life, and we've seen a decent push yesterday from yesterday's lows into this morning where we've had another extension higher. Let's just bring that into picture here. You can see from that low yesterday that we, we made around, well, I guess it was just sort of after midday, the percentage move to where we are now, 1.3%. You don't necessarily hear about the good moves in the, in the papers this morning. Um, it's more the, the negative that gets the headlines. I remember yesterday morning I got a text at 6:50 saying the pound has plummeted 0.5%. Uh, you don't hear too much about the pound, uh, pushing 1.3. But anyway, uh, we'll have a quick look over, uh, Brexit, how that's, um, how that's affected the markets. We'll have a quick look over yesterday, uh, how, uh, the data points shape the rest of the day and the sort of technical look as well. Just having a quick look at the bigger picture before we get into things. Stocks, as you can see, uh, here S&P on that high, that 2866-65 level in the pivot were superb yesterday as a level of support. The Dow Jones, the NASDAQ also pushing higher. Uh, S&P got one eye here. I know it probably wouldn't come in today, but on that 2900 is the next real key level to keep an eye on. Again, looking at headlines late last night or early this morning for stocks, it was, uh, S&P, uh, fades as, uh, good data starts to run out. Well, you can see how much they took note of that overnight. The, the data out of China was better than expected, as you can see here. Just having a quick look over the early hours of the morning, uh, the, the services PMI beating expectations couple of positive trade comments, and in turn you've seen stocks continue their rise higher. Uh, just got the, the bigger longer-term chart here, and you can see having broken through that 8th of October low, we've come back to retest it, as it has done at every key level. I think it's important to, to note with the S&P, just as you think maybe we're going to start coming back lower, we do come back to retest that high and break through through. Same again here a couple of times, and same again what we've just seen, all, uh, really since the late December last year. So S&P pushing higher as well. We've got some decent data coming out, uh, for the remainder of the day and the morning out of Europe, UK, and then the US numbers of course into the afternoon, and then non-farm payrolls on Friday as well. Elsewhere, yesterday oil had a decent push into the morning and then found some support after there was a bit of a pullback, only to then push higher off that low of the day. And we've continued to push on, and that of course is helping equities push, push as well. The euro, which had made a, a new low for, for quite some time into the back end of the session, pushed higher on the positive talks, or ongoing talks, we would say, or the start of talks between May and Corbyn, and has followed the pound higher today as well. So while if you would ask me Monday morning, short-term bias or medium-term bias or even longer-term bias for EUR/USD, it would have definitely been to the downside. Now, however, with this, this positive development, uh, in the Brexit camp, I'd just be a bit careful about wanting to get, uh, too aggressively short. I probably want to see a bit more of a downtick before wanting to, to get involved in that. The pound understandably elevated at the moment, and we'll come on to to that now. Uh, the, the headline again is gonna— of course it's gonna be negative, you know, this is Brexit. Uh, May inflames Tory civil war by opening door to softer Brexit. Right, but the pound's pushed higher off that. Now when I was reading this on the, on the way in this morning, it was before I had actually seen any charts or Twitter saying the pound was higher and lower, and I wrote down on my phone the, the positives of this headline and the negatives of this headline, and The positives, basically this is gonna, you know, lead to— well, could potentially lead to a longer extension, which as we know, the, the longer the extension, the less likelihood there is going to be of this no deal, which is all this panic for the pound. So the extension, yeah, okay, positive. A soft Brexit, again, this is closer to that, so this is also positive for that. And remaining in the Customs Union is also what's sort of been touted by this May and Corbyn coalition, if you like. So understandably, I think from that the pound would push, push on. However, you know, the negatives, the other side of that, I had a couple written down. The division for the Conservatives, as the headline would suggest here, is not necessarily going to be good. So probably, you know, if this doesn't go too well, increases the chances of a general election, which, as you know, a couple of A couple of weeks ago, I remember sitting with Anthony here and we were talking about different scenarios for Brexit. And one of those being, you know, what would be the short-term reaction of a general election? Initially, I think that would be a negative and then, you know, probably a positive from that. So slight negative on that. Businesses unsure, you know, a further delay to Brexit, another new twist in the tail here. However, you know, on the business front, I believe that's a bit crying over spilt milk. Remaining in the customs union union would be beneficial for many businesses. So understandably, I think that's a comment to be pushed to one side. And of course, the deal may not pass. So in terms of opportunity-wise for the pound, it's not a case of just buy at market right now and believe that it's going to be all rosy. The deal has, you know, not passed, of course. The previous history of Brexit really over the last 2 years, when left to Parliament at all, has, as we know, been pretty bad. Hardly anything is getting voted through. The division is at an all-time high. So what's to say that this is now finally going to be the one that seals the dust and we actually can, before April 11th or April 12th, have some sort of arrangement here where they agree on things? So I wouldn't be too aggressive getting long. Yes, it is a positive, but we're, you know, if we look on the chart on the pound anyway, we're only really at the, the high that we had back on the 28th. So sort of still stuck within this range. I wouldn't be, you know, looking to, to get all too aggressive like this is the complete game changer. Yes, short term is positive, I completely agree on that, but there is going to be bridges that they have to overcome. The sort of the customs union decision. You've got May who has been going on about how they are definitely leaving. You've got Corbyn and the Labour Party that want to remain in that if they were to leave. Then you've also got the decision about the second referendum. You know, Labour have been promoting this idea that they're backing the second referendum, whereas of course the Conservatives at the moment, and May, under May, are not. So those humps, those speed bumps are going to have to be talked over. And while the sort of response to this by Corbyn himself has been positive, understandably it's ruffled a few feathers. And Boris Johnson, of course, was going to have a word. Of course he wasn't going to stay silent, was he? And nor was Rees-Mogg. And DUP weren't too surprised to say negative comments as well. So yeah, let's, uh, let's see, I think, is, is the, uh, is the word of advice here before about getting too aggressively long. I completely understand the reaction, but whether it be long-term or not, I think we, we have to, to hold our breath on that. Moving on, in terms of this, this sort of plan, this, uh, a bit of a shock to the market, bringing the, the two of them together. Here, here is the sort of four parts of the that plan. The negotiations with Corbyn to agree a joint plan to ensure the UK leaves the EU with a deal. This will focus on the future relationships, so coming together, discussing those sort of speed bumps, customs union, leave or remain second referendum. These kind of points will have to be discussed. A May and Corbyn plan would be put to Parliament for approval if they have a plan, of course, if they can agree. You know, all these things are not guaranteed if we're looking back at the last few weeks anyway. And then the Premier would take it to the EU Leaders Summit on April 10th to be signed off. Of course, the elections on the 11th, April 11th, sorry, I think I might have said 12th earlier. So the EU elections, hopefully to get it done by then, and we would have to avoid that. If May and Corbyn can't agree, not sure that's a big if, they would be, put forward a number of options for the future relationship between the EU and UK for the House of Commons to vote on, similar to all the other votes. And of course, as we know, those votes have hardly really offered too much in the way of light of coming to any sort of agreement on anything. So, yeah, the speed bumps will remain, I believe. The legalization would then follow to allow the UK to leave the EU and avoid the need to take part in those European elections on the 11th. So yeah, those will be the sort of the main 4 parts. It's all gonna, you know, as I'm sure anyone that has traded the pound will get used to, there's going to be comments to this throughout the morning. Opportunities for a further extension, well, you would want to see some positive developments between May and Corbyn, comments to come out backing that. If you were looking for that retracement to get short, which, you know, all things considered, isn't a bad trade. The resistance that we've got high up on the 28th is an obvious area to keep an eye on. But negative developments, clear division between the two, these type of sentiment source comments could absolutely see a bit of a retracement lower. So would absolutely be on the ball today, um, you know, going forward for, for Brexit. Elsewhere, headlines in the market to be aware of. I mentioned stocks were, were at their highs, and you can see here, stocks advance on fresh trade hopes, yields rise. Um, again, equities, you know, denying any bears at the moment. And I've mentioned a few times that I do believe we get an all-time high, and each sort of push lower seems to be, uh, only, only short-lived. And that's remaining to be the case as well. The Chinese data overnight obviously helping things to, to push on. We've got some more data coming out of the US today with ADP and the PMIs, and even if they were bad, well, you're seeing the reaction is to the upside on the sort of Goldilocks scenario that the Fed will remain dovish. Um, and you know, I saw an argument yesterday that actually some of the US data isn't too bad. When you cherry-pick things, of course, you can you can find the positive in, in that as well. Also interestingly, overnight or last night, Trump called Powell in March. Stocks slid amid growth worries. Whenever stocks come down, there's only two reasons for that. Of course, it's growth, slowing growth, or trade comments. It seems like the journalists just need a story and those are the go-to. So in March, as stocks slid, which, you know, they didn't really, um, but, uh, we, we supposedly had a call between the two. And of course, Donald Trump was tweeting yesterday, had the Fed not mistakenly raised rates, especially since there is very little inflation, and had they not done the ridiculously timed quantitative tightening, the 3% GDP and stock market would both have been much higher and world markets would be in a better place. Can you argue with that? Well, I think the, the reaction we've seen since late December where the incredibly dovish central bank in the US and elsewhere has, has led to a serious push higher in stock. So, you know, if I just bring in the, that run again in the, in the S&P, you can just see how, uh, give me one second to bring that up, just how strong it has been. We've now got a further bullish signal of the, the golden cross Yes, we've got the RSI divergence, but of course the market is not going to focus on that right now. So short-term target, 2,900, and then I think it's a matter of time then before we get that all-time high. Can we get it this month? I think so. I do think so. Looking elsewhere, um, at the data calendar today, because it is a very interesting one, I would argue the last two days, and usually is the case, uh, on a, on a, well, has been the case on a non-farm payroll week, that It's just the anticipation waiting for that Friday. And the Monday and Tuesday yesterday felt a bit like that. It felt a bit flat. Didn't feel like you wanted to chase opportunities rather than let them come to you. Today there's going to be data points that can drive market price from the, from the get-go. So we're looking here, just gone quarter past 8, 8:55. You've got the French and German market services PMI numbers to come out. Definitely a focus as both of those— or sorry, the, the French one last time coming in contraction below 50. So the euro, if you're in a euro position, just being aware of that coming to 8:55, looking to exit those positions. And then of course at 9 o'clock you've got the, the EU, uh, as a whole. Both of those, uh, previous figures from, from February just above 50, so be focusing on those. If they were to come in negative again well, that short-term little recovery we had in euro following the positive Brexit news, well, that could be absolutely short-lived. Going through to the, the later morning, or really still early morning, you've got the market services PMI. As we know, this is the biggest, uh, sort of section for, for the UK, and this will be another one to focus on. Last number there, 50.9. If we can get below 50, while UK data at the moment of course is at the back front of people's minds. You would see a negative reaction, I'm sure, from that if we did get a contractionary number. I think the last one was actually post-Brexit, the month after Brexit, or the referendum, I should say. Moving into 10 AM, the retail sales numbers. So you can see for, for Europe already, it's going to be a busy morning. What's going to happen with the services number? What's going to happen to the retail sales? And you've got the Brexit scenario as well. So we'll be keeping an eye on, on all of those things. Probably best to, you know, to start planning that now if not already done so. Post 10 AM, that's when it starts to calm down a bit, uh, and you know, you could be in a trade for a bit longer time, not have to worry about, uh, data coming out. Of course, if it's pound, then comments are always going to be, um, you know, just lurking around the corner. Into the afternoon, 1:15 UK time, we have the ADP, the Um, the, the non-farm payroll bellwether didn't work too well last time. The previous number, 183,000. And as we know, non-farm payrolls coming in, in just double digits. So, you know, how much can be taken from this? Well, this we'll have to wait and see, but always one to keep an eye on. And then we got some further US numbers, Market Services PMI, non-manufacturing PMI at 2:45 and 3:00. And then we got the crude numbers to keep an eye on at 3:30, back in its usual 3:30 slot, having seen the, the clocks change over, uh, as well. So having a quick look over the, the charts from a sort of more technical point of view, and, and I mentioned the, the oil numbers coming out at 3:30, we can just have a look at the reaction to The API last night, pretty limited, pretty limited. I think again, this market similar to, uh, the S&P, the sentiment is to the upside. To, to want to get short this market, you know, yes, there could be a, uh, an OPEC comment that comes out. Yes, there could be an incredibly bearish DOE, uh, report that comes out later to this afternoon. But I feel with, when the market's like this, you want just a bit more confirmation. You want the the, the sort of technicals to align with that, to agree with any bias that you may have. Maybe you're looking here, if you were to get short, a break of this trend line. So this would really come in around below $60. Yes, that's $2 and a bit below, but look what's happening. Every single sort of retracement, we pushing back higher. If you're looking to sort of call the top on this, you'd have to be pretty brave, I'd imagine, because, you know, where could that be? Yes, $65 would be an area that I'd say we'd struggle to, to get through short term. But would I want to be necessarily having an order to sell right there? No, not right now. So oil, I think bias for, for this morning and today has to remain to the upside. Pound likely to, to remain elevated unless any of the, uh, the sort of the developments between May and Corbyn— the, the comments are relatively negative. But at the moment we, we are elevated, as you can see here. Um, if I just bring the, the pound in around that R1, but not the biggest move. We've definitely seen bigger, so I wouldn't be, you know, expecting, you know, a massive, massive push from a technical point of view. I talked about the high that we had back on the 28th of March. A breakthrough that opens up a, a new sort of zone back up to the mid sort of 133s. So one to keep an eye on, uh, there going forward. For the euro, with the data coming out, I wouldn't want to be looking to get too aggressive. Uh, I think if we're looking at the sort of the top end of this new trend channel that you like, if we're, we're in, you can see we did have a breakthrough of that overnight and we have just come back to retest it. It's also the previous high of yesterday, so I wouldn't be looking to get short right now. One, because you've got the data coming out, but of course decent technical push respected very well as level support both from yesterday and today. So it wouldn't all be all too surprising to see us hold here. So that any short bias, what I'd only really be looking to get short should we break through, uh, under, under there. Also having a quick look over the Aussie dollar, didn't mention it earlier, but if we just switch back to the calendar Uh, from overnight you can see we had some positive retail sales at the Aussie 130, uh, and of course with the positive Chinese data, well, you've— there, there you've got your, your bias for the morning, haven't you? For the— to the upside for the Aussie. Positive trade comments, positive China, positive Aussie data, and we get the push and we're near that R1, uh, as well, and a decent reaction, uh, looking to almost take away the, the high that we had post-RBA overnight yesterday. Looking for a possible entry here, I think unless we were to break the R1, previous high of the day would be somewhere that you'd be looking at as an area of support. Should we get any positive, or mildly positive I should say, US data and we can get a retracement back towards the pivot, I think it's a good place to get long at the moment, uh, depending how we, we come back down to it. Also the previous high, uh, of the day. Looking against, uh, looking at, looking at the, the yen versus the dollar, why have we come back down through those lows? Because equities are pushing higher. Nothing to do with the sort of strength or weakness of, of the dollar, and there was no Japanese data out overnight. So this market really reacting to what equities do. Yesterday with equities which finished pretty much flat, the yen also did as well, regardless of the US data that did come out. So the yen back down to sort of the lows of, of that sort of range, uh, to keep an eye on. You have this trend line, if I just bring this in, which we're probably not far from, uh, testing now. Actually, you can see there getting that third test of this, and this pattern looks very similar to gold, which we'll come on to shortly. Opportunity-wise here, if we get a continuation in equities positive comments that come out for— from the trade talks, or, uh, or just increased sentiment to that push higher. Looking for a break below that really then to target the low that we had back on March. Said it is similar to gold. Having a look at gold from the last, uh, sort of couple of trading weeks, let me just bring this in from 2019. More of a sort of a horizontal line, if you like. But we just found decent support yesterday near those lows, and we've had a good bounce from that. However, in terms of short-term sentiment, I do prefer this market to start to drift lower again. I think the, the highs that you're seeing at the moment are getting, uh, progressively lower. On the longer-term chart, that trend line here. You can see on the daily, this is the one I was on about. Good reaction to that, similar to the yen. I'd be waiting for a break of that, and I think we can then put— therefore test the January 24th, I believe it is, the lower 24th of January. That low is an area to take profit. How much lower do I think I can get? I think that could be a short-term low. You've also got the 2018 low to 2019 high, 0.382 Fibonacci retracement for those that are that way inclined with the, the 24th low. I think that could be a decent target should we get a break of that trend line, uh, as well. Just a quick run over the calendar just again, just to reiterate the, the times to be aware of. 8:50 coming up, 8:55, 9 for the, the PMIs, the service PMIs out of Eurozone countries and then Eurozone as a whole. 9:30 the UK. So Europe at the moment, we found support on that technical trend channel break. However, this data coming out could of course see us push higher or lower, so be aware of that. The, the services PMI out of the UK, important, but Jeremy Corbyn and May coming together is the main driver, and Brexit comments of course as well. So any reaction from that would be short-lived. Retail sales, uh, well, used to be important for the US, and as you saw on Monday, it blinked and didn't care. For, for the, uh, for the EU, that's coming out at 10 o'clock. So again, not expecting the most, uh, long-lasting reaction from that. There's bigger things going on, uh, but one to be aware of. As we then go into the afternoon, quietens down a bit. ADP, ISM non-manufacturing, DOE numbers out as well. We've got a few speakers to be aware of in the afternoon as well. Any questions, guys, please do let me know, whether it be now or later. But if I don't speak to you, we'll, we'll catch up just before each data release. And I hope you all have a good trading day.