Morning Briefing - 19th September 2018

Good morning, it's Wednesday, 19th September, just gone half 8 here in London. We'll have a quick look over the markets from yesterday, how we're positioned into this morning, uh, stories that are sort of driving, uh, the market, uh, going into sort of the rest of the, the session, uh, as well. If I just bring into picture the DAX from yesterday, importantly, well, not just from yesterday but still today, we're still trading that September contract. With oil, we had the rollover, uh, from yesterday. Yesterday was the last, uh, day trading the October contract. We're still in September. I mentioned in the briefing yesterday, you have this possibility for these unusual moves coming in only to sort of reverse as well. We saw it Monday, nowhere near as big as the area highlighted here, but we had that push on the, on the open yesterday to, to a new high. We then broke through and did a complete reversal before you would probably say getting dragged higher by equities in general, uh, in the US having a good day overall. Uh, oil, we had a bit of movement early, uh, in the, the sort of session for oil as we came into sort of 10 AM. We had the comment, uh, come through the wires where Saudi Arabia is said to be comfortable with Brent oil, uh, above $80. We pushed higher, broke yesterday's high before sort of going sideways for a bit. And you can see that R1 offered very good, um, support once, twice, three times going into the API, which we'll come on to a bit later. So a decent sort of move there for oil. And we'll have a look at the bigger picture for these, these markets as well as the dollar. Yes, they had quite a mixed day, but worth keeping an eye on the dollar as we're talking now. I'll come on to these charts as we're trading in a moment. But just out the corner, I've seen euro continuing to push on the pound as well. Keep an eye on gold near those highs, and oil, considering we're just talking about it, just benefiting from that weaker dollar over the last 30 minutes or so. Equities were really the, the main focus of the briefing yesterday and, and over the weekend. Monday's cash open, you can see highlighted here, really started the selling on the sort of expectations of this, this trade talk, um, and war if you like. And that really was priced in, and you can see the, the reaction pretty much from the open on, on the futures here, uh, and we continue to push higher. Broke the sort of cash open area on, on Monday, and then we continue to, to go higher. NASDAQ as well, you can see finding resistance pretty much on the, the high before Monday's cash open, uh, sell-off there. So decent sort of push, push, uh, higher recovery in S&P, NASDAQ, and of course Dow Jones as well, which was less involved in the sell-off that we saw on, on Monday, uh, and sort of proved that by, you know, pushing higher, uh, the most out of those three, uh, as well. Mentioned the dollar was a, was a bit topsy-turvy yesterday. You can see this with the euro, really strong resistance uh, here just on the December contract. We'll have a look on the daily continuation as well. We are, uh, coming up to some very key areas. I've seen Alex has just put in there the 100-day moving average as well, which is massively important. So I'll come on to that in a moment. Pound, similar sort of situation with key resistance up from, uh, sort of Friday afternoon into yesterday morning and afternoon as well. And we can see this morning the R1 coming coming to that sort of area, resistance area if you like, and we're not too far away from, from reaching that now. So definitely be keeping an eye on there. We've got some UK data out at 9:30, got Hal Daines speaking at 9 o'clock as well. Wouldn't say that this is a sort of a leak of any of that data. I'd say this is just more the dollar weakening rather than any sort of indication that the data may be better or worse, which we have of course seen in in time gone by. Uh, as well, overnight we had the, the API. Let me just drag the actual figures into the picture in just a moment. You can see highlighted there is the API up and down, almost finishing exactly back where we were. A bit of a surprise build, um, first one in, in 5 weeks, or first, uh, sort of build we've had in a while. Cushing, uh, draw, gasoline draw. But this looks the build. It's always tricky when you have that sort of mixed reaction. So while oil had pushed higher yesterday following those Saudi comments, it sort of slowed it down. However, with the, the weaker dollar, um, this morning you're seeing a bit of a continuation of that trend from yesterday. Of course, DOE coming out half 3 today, something to look forward to on the calendar which we'll run through in a moment. But really, the API not giving too much away, and it'd be course focus primarily going to be on these, these numbers at half 3 as well. Overnight in terms of market-related moves, or actually if you want to say a move at all, would be probably an over-exaggeration. We had the, the Bank of Japan meeting highlighted there. Uh, I think if it didn't have the rectangle around, you'd struggle to just sort of see where it was. 4 AM UK time, and you can see very little reaction. They kept things unchanged and, uh, sort of the wait-and-see approach. And really, that's, you know, ECB done, Bank of England done, Bank of Japan done, the Fed next week. Hopefully we'll have a sort of a clearer move from that in, in terms of what to expect going forward. Those longer-term charts— let me just drag this into picture here— starts on, on the Dow, which I mentioned really benefited the most. You've got to imagine really that all-time highs is the next sort of challenge in. Is this a great place to, to look to, to get in long, medium term? I think if we can clear that level that we had at the back end of January, the last day of January, which was pretty much trading on now, I think it's not a bad little trade. Stock can almost go below this recent high that we had that we have now broken through at the back end of August. Risk-reward-wise, not bad. Of course, trade talks may well get in the way, a couple of speed bumps But what we've seen is, you know, this has been priced in. The market was expecting what we got delivered, um, on Monday, and we've only seen price go higher and higher. You know, this has been priced in. Long may this continue, it seems, for, for a while. Uh, back to the, the currency pairs here. I've got the— where's the euro? Here it is. The 100-day moving average sort of been broken through, but really key area. Let me just remove those moving averages to clean this up. The highs from mid-July going to the back end, really strong area. 1.18 as well, uh, so you can see that on the, the lower time frame that we had a look at. But where we close the week will be massively important here for the euro. Whether we get a continuation of that dollar weakness or not remains to be seen, but I think favoring a move higher short term may well be the way to go. Pound here just got a trend line going from 7th to the 9th of July, and then we're pretty much testing that now. Also, probably more importantly on this continuation, at 26th of July level, 132.40, definitely an area I would be looking to consider. And if we go back, what's the 19th of July? If we first draw an arrow to that there, the comments from Trump to, uh, the reporters about wanting a weaker dollar. He was questioning Jerome Powell about raising rates. We're now above those levels. Yes, the dollar did continue to strengthen, but whether that be just purely down to the dollar or not— obviously got the pound in the mix there, Brexit talks were, you know, negative comment after negative comment. But, you know, Trump might actually be rather happy to see the dollar weakening a touch here, um, which of course is helping US equity push on as well. Recently for the pound, we'll come on to some, um, sort of overnight stories and things to look forward to this week. But just over the last couple of weeks, you can see some really strong pushes higher, uh, for cable here. Really, um, more attractive to the good news than the bad news, I would say, as we sort of approach October slash November where it's about to get a bit more interesting. Would presume. Oil as well. I've got the, uh, let me just remove this trend line here. Really key resistance just above where we're trading. Can we get to the 71s on the continuation, uh, and above between 72? Could of course do that today coming out at half 3 with the, the numbers. Wouldn't be the biggest shock in the world to see quite a big push there. Um, but where's the 12? So yeah, that would have been 7 days ago. So yeah, a week ago we were, we're up there there following the, the DOE. So can we get there again would be something I'd be focusing on, just because how important it is. Every time we've come there, the sort of sellers have taken over. You've also got that trend line. So if we were to get a clean break, you know, it could be that the high of the year is, is not too far out the question. So things to look forward to, we'll come on to the data calendar in a moment, but definitely for oil, I'll be keeping an eye on the strength or weakness of the dollar, and then the DOE numbers as well. Things to be aware of overnight, let's have a quick look at the sort of, the sort of stories, if you like, driving the market. What the headlines— October is moment of truth for Brexit, or is it November? I mean, that's up for debate. I think it's sort of, uh, privately— well, it's not so private anymore— that maybe we are pushing it back to November. So much like ECB saying, what is summer? Maybe Brexit related is what is October, November, what is autumn. Um, but you've got a bit of a timeline here. They're meeting in Salzburg today for a couple of, uh, days, so the 19th, 20th of September. We'll come on to the timeline there of which day might be more important for pound or euro related assets, or Brexit related assets I should say. You know, focus perhaps more so on tomorrow Uh, got a bit of the— quite a key— let me just zoom in on this just quickly just to give it a bit clearer for you guys at home. Uh, the sort of key Brexit dates ahead. Obviously we've got that summit I just mentioned today and tomorrow. They've got then an EU summit in Brussels, uh, sort of middle of October. And then you've got the new deadline for one— for a deal possible one-off summit in November. So over the course of today and tomorrow, they're talking about the possibility of having another summit in November looks like it's gonna, gonna happen. So that might well be the more important date to sort of look at. And then you can see as we go through to 2019 and '20 and '21, you know, those dates may well sort of change, other than the March 29th one, of course. The two-day meeting talks about here— I'll post this link in the chat. I've just seen Anthony Cheung has sort of tweeted out the sort of timetable of events of the program, this meeting in, in Salzburg, um, covering internal security, migration, and of course the B-word, the big Brexit, uh, that's going to be driving markets probably the remainder of the year, uh, but definitely for the pound anyway. So you've got rival today, sort of going into the afternoon, informal dinner but then really kicking off tomorrow. And the one to be aware of, maybe just putting a note in the calendars— we'll go over it again tomorrow, I'm sure— but that working lunch on Brexit at 1 o'clock, and then you've got the press conference a couple hours after that. So talk on that will be what will drive the markets in that sort of period. Obviously going to have more data out of the UK tomorrow at 9:30. It's each day today, tomorrow, and Friday will be the case. But this might well be the, the main focus point, uh, going on. Might as well cover China, seeing as the, you know, that's what drove probably the best move yesterday, was the unwind of everything sort of being priced in in equities. Quite a clear push higher. It was a case of sort of wait for the resistance to break and, and get in. Of course, a lot easier in hindsight, but it did really feel like, you know, this story was priced in the markets in the morning, pushing higher, retracing quite a lot of that move. Um, you know, something just to bear in mind going forward, that, uh, it's really going to be the main driver from here might be, well, what is the sort of retaliation, um, you know, over the next, uh, well, over the coming weeks, uh, if you like. So China, uh, deep as Beijing announced retaliatory tariffs on $60 billion. This was expected, this was priced in. I remember putting a graphic in yesterday of sort of the, uh, amount of goods that they were going to tariff and the number. And it was exactly that was expected, so that 10% priced into the market. And we're not just in the US, but overnight we saw Asian equity markets also push on. The Nikkei was up just over a percent, Shanghai comp 1% as well, and the ASX, uh, just over half a percent. So sentiment in, uh, global equity markets certainly the ones we're sort of focusing on, is to the upside. I think you've got to go with that. The, the DAX, I would just be slightly more careful of due to the, that contract rollover going to happen anytime soon. Um, but you know, I think overall, well, my view anyway is, is, is higher for now unless it was to really escalate. And that could be, you know, if we were just to go back to the charts quickly and, and we'll use— well, you can see I've got NASDAQ up here. Let's have a quick look. It might well be that favoring the upside. Let's just lower that time frame down. But if we were to, you know, really get a close down below the low of the day and pivot, it might be that that's the indication, uh, you get to look to go short. And maybe the sentiment is starting to change again because we did have a good, you know, a positive push higher yesterday. We had found some resistance last night. You know, these markets can and still will move technically along with the fundamentals in place. So I'll come, uh, and have a look at the sort of markets more intraday at the back end of, of the briefing. But definitely could be advisable to, yes, have your bias, but also let the markets tell you when your bias is right, or maybe you have to sort of change it up a bit as well. Other stories, you've got the— if I just push this into a bigger picture, there you go— um, US or the— or China cutting their Treasury holdings for 6-month low going back to January. So at the beginning of the year, we, we can see just how low that was. We're coming back to those sort of levels. Um, however, you know, this did affect the Treasury market early on and then helped in, in turn sort of push that yield up to 3%, caused panic. But you know what happened since then? I think it's just another thing to sort of be aware of, um, maybe in the bigger picture, the, you know, T-notes. If we would just have a quick look on the continuation, the lowest levels they've been, uh, since— well, let's bring this into picture, really going back to sort of May time, um, here. Obviously we had the contract rollover short, uh, not too long ago as well. Let's remove that. There you go. You can see we're sort of broken through, uh, the low of August, so quite a key technical break as well, um. But yeah, just something to bear in mind going forward as well. Bank of Japan talked about what we showed you, the chart keeps policy unchanged, which all 51 economists surveyed by Bloomberg expected, was expected. Wait-and-see approach. It's always a good, good sort of indication to look at the charts at the time of these sort of data points or meetings that happen overnight, i.e., China, Australia, Japan. And, and see, well, did the market react? If not, it's almost sort of forget about it and move on. Central bank meetings of recent, when the last couple of weeks I'm going on, have been pretty much that— non-events. And in terms of bigger things are to come, you know, sort of wait and see, uh, rather than, you know, where I would suggest next Wednesday's Fed meeting might have a bit more to it and actually probably a bit more exciting in terms of price action. Other sort of stories, you know, to the back end of importance here. Um, May seeks goodwill from EU to avoid sort of Brexit. Of course she's going to say that, but, uh, it is worth noting the, the stories I would suggest say coming out last couple of weeks, the market's buying into the positive ones more than, than the negatives. Yes, tomorrow is a key day in terms of the comments that come out from, from that, that working lunch and then the press conference. But just something to bear in mind, you've got a bit of a weaker dollar. The pound is, is sort of moving higher on these source comments to when they've even reversed. Just feels like these markets just want to go higher for the short term anyway. Um, having a look at the calendar for today, let me just bring that into picture here. I've mentioned, uh, you've got the, the UK inflationary numbers, uh, coming out at half 9, so you can see that there, uh, 0.5 expected for the month-on-month of August and 2.4 for the year-on-year. So we'll do a bit of a rundown closer to the time there. As always, always worth having a look at the, the low and high end of the range and really, you know, sort of looking to see the early price action in the sort of minutes leading up to that, if that could give you a clue whether it is better or, uh, worse as well. So quite a few numbers coming out at half 9 from the UK. Always a bit more tricky when there's more than one thing to focus on. Also at 9 o'clock, so in 12 minutes, you've got Haldane, uh, speaking, uh, lecturing at the Bank of Estonia. Any comments that come out of there, he's quite neutral, so, uh, hawkish, dovish comments may well move the market short term. But understandably, focus is on 9:30, and then more importantly, probably tomorrow as well. Draghi speaking at 2. He spoke yesterday and the market didn't even blink, so Is he going to say too much? Obviously worth noting down 2 o'clock, but time will tell. Before that, 1:30, you've got some, uh, US numbers, and then 3:30 we've got the oil data. All things will sort of COVID as time, uh, comes closer. Having a quick look at the sort of the market reaction over the last, um, sort of 20 minutes or so. Let me just get my charts in order before Switching over, I mentioned the dollar was just weakening from the beginning of the briefing. Let's have a quick look at those pairs top left and right. The euro coming up to, uh, quite that key area. You can see we, we went over it on the, the longer time frame, and you can see just how important it is yesterday and then Thursday as well. Near that R1 118 area would be of high importance, um, going forward. The pound benefiting from that weaker dollar as well, just pushing higher. And again, the resistance around that area holding strong, um, as well. Probably worth getting a bit of a trend line on this as well. As you can see, we gradually keep breaking those highs, albeit very, very slightly, seeking that liquidity that you've got up there. Uh, if we do get a break above that R1, I would be, uh, expecting a quite a big push. Whether the data does that or not you know, we could end up near the low of the day if those numbers are really bad. Definitely an area you've got to be aware of. Gold, which after that sort of, uh, long-term slide to the down, uh, direction, we have recovered slightly. Same sort of time as the, uh, the dollar pairs have been benefiting from that weaker dollar. Quite a key level that we just reached as well in, in, uh, in gold. You've got the low here that we sort saw on Wednesday to Friday, high of Monday, then high of today as well. Be looking at that in terms of, you know, can we get a push higher and then really targeting the sort of the high of— what day is that? Yeah, Friday as well, which was quite a good, um, you know, double top if you like, removing the price action we saw Thursday. So these markets set up quite nicely, I, I think, in terms of, of price action. While yesterday equities were, you know, a great trade to sort of sit in for, for a while and, um, and sort of continue that move. I feel today, tomorrow, um, and Friday is going to be slightly better and easier to trade. Busier calendar, uh, is what I would mainly focus on there. Any questions, as usual, please do get them in the chat. I'll do a quick run through for the UK numbers before half 9. Any comments from Howard Dane as well, I'll go over. And then obviously we've got those US numbers and the oil data into the afternoon where it can start to get a bit more exciting. Worth keeping an ear open for the Salzburg meeting, but really is a case of sort of— yes, tomorrow is going to be a bit more interesting then. So if I don't speak to you guys in the chat shortly, I hope you'll have a good morning and I'll catch up with you all throughout the day.