Morning Briefing - 10th Oct 2018

Just gone half 8 here in London. Have a quick look over the markets, how we're trading currently, what has been moving markets overnight following the back end of yesterday's session, what could drive price today and throughout until we go into Thursday tomorrow in the back end of the week. Just having a quick look at how we're sort of situated now. You've got my bottom left chart where the mouse is now, the, uh FBTPs just near their lows of the day. You've also got the DAX just pushing down a bit. Obviously Eurostoxx following through as well, uh, on that correlation. The Bund relatively, uh, unchanged for the day, but sort of mid-range between its high and low, uh, would sort of suggest that, uh, perhaps the Italy situation is worsening a bit. And I would say from yesterday it is slightly more sort of negative sentiment around the market. If we have a look at how we did trade yesterday, well, in— we'll start off with, with the, the euro dollar. We can see similar to what has been the case for the last sort of few days, we've have been drifting down in the morning only to sort of get to sort of midday, and then we're getting a bit of a reversal. Getting the same sort of situations today, and those headlines sort of digested overnight. You can see the euro pushed, uh, through the lower. And I see a couple Anthony Cheung in that trade. We just lower it down to 50 minutes again. Today we are starting to push lower, but I would just bear in mind each afternoon, uh, we have started to sort of retrace that move. And the dollar itself yesterday having a bit of a mixed day, uh, on hold if you like, as the, um, as the yield situation sort of relaxed a bit. If we have a look over to the pound, you can see if we put this on a 60-minute, uh, decent sort of correlation with the euro in the morning. And similar to, to Monday, get to 12 o'clock and then you get that reversal. Albeit yesterday the pound did push on, we had a sort of Brexit-related comment that came out. If I just transition my screen, uh, the divorce terms could be settled by Monday. Obviously positive news here for both camps, and the pound rallied off that. Whether, you know, this will be true or sustained, and, you know, come Monday we'll soon start to see. We're starting to price that in, and you can see we pushed on and made a new high for the week, and actually a 2-week high was reached this morning. Leading EU Brexit lawmaker Hubner says smaller probability now for no deal with Britain than for some time. I would suggest this morning, if we're looking at the charts, you you've got more positive tone surrounding Brexit, while in Europe, if we have a look over at the EURUSD for that example, you can see that Italy situation perhaps just leading a bit more negative. So you've got that divergence in usually what are quite correlated assets. Mentioned the dollar was a bit weaker into the afternoon yesterday. Yes, in the morning you had that similar correlation here for the Aussie dollar before breaking down, and we can see we, we continued to push higher into the back end of the session, although we are starting to see a bit of, uh, dollar strength come in this morning, looking to sort of pare back those losses from last night and then over into this morning as well. Just technically speaking, for Aussie dollar, not far from yesterday's high as we're trading now. So just be keeping an eye on those, those dollar pairs. One market which, while the dollar had been strengthening in the mornings, uh, it hadn't really been doing against the yen, uh, obviously with equity sort of taking more of the focus here on the risk-on, risk-off sort of correlation. Quite a mixed day for the dollar-yen, you can see here. So I wouldn't really be looking for a dollar play off of this. I'll be focusing more on, on, uh, on what equities are doing. Um, just gonna repost the video, uh, in the chat. Uh, so yeah, I wouldn't really focusing too much other than what he's doing here for the dollar yen. You can put a couple of trend lines on and, and maybe look for breaks of those levels, uh, or not. Moving over to equities, and you can see just how strong that resistance level was. Really, really good, um, area of support, turned resistance once, twice, and again last night. Really, really good level in S&P. We talked about it in the briefing how significant that it would be, and it held superbly yesterday. If we go over to the NASDAQ, didn't quite make the level, uh, um, a bit higher up on the Monday, but the Friday's low was yesterday's high. It's a very key level technically. Can we get there today? Well, I would suggest, you know, similar in, in looking for those lows to join up as a trend line, which we're almost testing now If that gets a break, then yeah, maybe it wouldn't be until the afternoon. But I would suggest, you know, the yield situation just calmed down a bit. Yes, we've got a bit of negative sentiment in Italy and European equities again, um, so maybe this morning favor the downside. But I'd wait for cash open. This is when we're really getting that, that recovery. The lows are getting higher for now, uh, so we'll, we'll look for a bit of a push on, uh, hopefully into the afternoon. The Dow Jones, very similar. You can see here coming to that resistance point, holding very well, uh, once, twice, three times, uh, on that test yesterday. Um, I believe the feed is down, uh, obviously once the recording is out I'll get it sent out for those that, that don't have it. Moving over to T-notes, you can see we actually did push higher, hence the, the yield came off its lower levels, uh, and today relatively unchanged, hence why I do believe into the afternoon, we might see a continuation higher of, of, uh, of US equities for now as well. Oil, yesterday we had a bit of a breakdown into the afternoon following 2 o'clock when the volume does start to pick up, but yet again the, the dip buyers did come in. And you can see again today still elevated, uh, above that sort of low of the week that we had. For those that are looking at the calendar, uh, let me just drag that into picture. Uh, for now, if you can see it here, Monday was the bank holiday, Columbus Day, hence why we only have the API today at 9:30 and not the, the DOE in its usual slot. So that will be tomorrow, um, tomorrow at 4 o'clock. Otherwise, on the, on the data calendar, quite an important morning ahead. You've got GDP numbers out of the UK, you can see at 9:30, and and the services number as well. Uh, we go into the afternoon and you've got inflationary numbers out of the US for September. So quite a data-heavy week. The Monday, Tuesday, typically after non-farm payrolls are quiet, and, and again was the case, obviously not helped by the fact that the US were on a holiday. But today, data really starting to pick up. And you can see down here, if I just zoom in, bring that into picture, you've got the speakers as well. You've got Fed's Williams, uh, speaking— oh, already has spoken, actually, I should say. Uh, ECB's Mersch this morning, then Haldane, one to bear in mind, uh, just after the data as well. So you might get that move following the announcements of the releases at 9:30, but then obviously just keep an eye on Haldane coming back at 10 past 10. Fed's Evans and Bostic to sort of wrap up the speaker front. However, worth noting that yesterday you know, the main sort of move in, in the currency, uh, was obviously the pound of an unscheduled release. We're starting to get a build-up of that sort of talk. While the sentiment today is positive, uh, we'll just sort of, you know, bear that in mind. Just being a bit careful as usual. And I've seen in the, in the chat the last few days and speaking to sort of traders who aren't really too keen on, on trading the pound at the moment in terms of these sort of pre-planned trade ideas. And I think that's, you know, not a bad way to go about it. The, the market is, is certainly choppy and reactive to these headlines. Uh, the continuation this morning, uh, would suggest that we're starting to price in, you know, this positive news. So, uh, obviously the, the reversal of that would be something to, to listen to, uh, just should we, we go in. Just having a look at the, the sort of the FT Wrap Dollar Index, shy of 96, so we are starting to push back up to 95. 50 or not too far away. So I'll be keeping an eye on the dollar here as it's starting to just, uh, just push on a bit. European stocks set to inch lower, which, yep, you can see, uh, if I just bring up the, the charts as well, the DAX now back onto the pivot or just a little reversal from that, uh, while the Bund still uncertain what to do. I'll just be keeping an eye on these European equities here. If we do get that follow-through, then I'll be looking at the S&P and the NASDAQ. You can see those trend lines are really, uh, well respected for now. If we can get a, you know, a push through— let me just escape that there— if we can get a push through that pivot, the opportunity may have come that for, uh, a short of this breaker trend line, really targeting down towards, uh, the lows, uh, of the day. Um, elsewhere, let's have a quick look over the— I mentioned yesterday, if I just bring this into picture, uh, possibly I was thinking into sort of the next year we might start to see that divergence between US equities and, well, Europe, but really here you've got the sort of everything else except America come back together. Uh, HSBC, I believe it was, the bank sort of looking at that. However, you've got here this sort of caught my eye. Giant funds bet on America First to win again in 2019 markets. You know, while I, you know, do expect into sort of the beginning of the year, uh, equities in the US still to be pushing on, I think, you know, growth will start to stall. You know, questions on, on rate hikes, if they, you know, there's still a few that aren't priced in, this will obviously be negative for, for stocks out there as well. I think, you know, that we might start to see that divergence yesterday, and I think If we go back to the DAX in terms of the longer chart, I think there could be a couple of opportunities as we go next year. I wouldn't be focusing too much on getting into that trade now, but technically, if I just bring this in, we're not too far from a very key area, the lows of the year from that we've had back in March and then to the sort of the end of March. I'll be keeping an eye on that as well, but it might be as well worth having a look at this more technically point of view You can see this sort of trend line there, maybe waiting down the line for a break of that. So it's just sort of when the bulls could come back into, uh, to the picture. But yeah, worth keeping an eye, you know, as we go into next year, how equities in the US and then in Europe are performing, uh, because obviously that divergence is still, uh, there. And you can see quite clearly really from, like we said yesterday, May-June time, that's when it really started to, to change up as well. Um, be keeping an eye today. Some— in summary, um, obviously Brexit talk, be listening out for that. You've got the, the UK data, so very much a focus this morning on, on pound-related assets. The positive talk obviously could, uh, could be backed up like we saw this morning from, from Hubner, or it could be those reversal comments that we've been known to see over the last sort of months and weeks. I'd, you know, definitely uh, one to, to bear in mind. Italy talk, I would say if anything is negative this morning and sort of weigh in on European markets, the euro under a bit of pressure, albeit the dollar strengthening a touch, and the DAX also moving down as well. Stocks, because the yield has sort of recovered a bit in the US, I do favor a push higher today. However, you know, if Europe does weigh on that, I've got those trend lines marked up where I would be taking advantage of of the sort of the move lower. And that is something that could sort of come into mind, uh, into, into play in the next sort of few minutes, uh, or so. Data, just to reiterate, if we have a quick look over, uh, 9:30, time to be aware of. Then 1:30 into the afternoon, 3 o'clock, you've got wholesale inventory. Uh, not really expecting too much from that. Speakers-wise, 10 past 10 for, for Haldane. You've got, uh, Mersch-Hawkins from the ECB speaking in about 17 minutes. And then we've got some Fed speakers sort of after the, the sort of EU close as well to be aware of. Oil out tonight, 9:30 rather than, uh, the 3:30 release for the DOE. So that'll be API for any sort of crude oil traders. For those that are still listening, obviously I'll catch you in the chat and I'll upload the, the video shortly. Uh, we'll get on the mic again ahead of the, the UK data. And we'll sort of run through what is expected, uh, what the highs and lows and the ranges to, to be aware of as we do approach those numbers, uh, in about 45 minutes. I hope you have a good trading day, uh, and I'll catch you, uh, later at some point.