Morning Briefing - 25th July 2018

Hi guys, good morning. It is just gone past half 8 on the 25th of July. Uh, morning briefing, we'll have a quick look over at what was driving the markets yesterday, overnight, and then what possibly could for the remainder of the day. Just while we're getting started, the DAX, as you can see on my middle left chart here, just make it a bit bigger, just breaking through its, its low, found a bit of support at the pivot, having pushed to a new high on the open around 8 o'clock, has now just broken through that low and continuing, uh, now just to extend those losses. The Euro Stoxx, obviously quite a positive correlation between the two that you see on the right-hand side, just holding up in the pivot. You've got to imagine if the DAX is to push down quite strongly, uh, and continue this, the Euro Stoxx should follow suit. Having a quick look over at what was, uh, driving the markets Yesterday, um, got the euro chart here. Really the morning, and almost quite similar to this morning as well, the, the dollar was slightly weaker. We had some, some data out of Europe which you can see here. The French manufacturing composite and service PMI was a bit mixed, but the manufacturing for the French, you see, better. Same for the German and Europe as a whole. It's all better than expected, and that sort of helped drive perhaps the euro a bit more than the other sort of pairs against this, the dollar. As you can see, we sort of pushed on when it came out at, at 9 o'clock. If I just get rectangle here, because it wasn't overall that good, we actually have a bit of a retracement down, and you can see pretty range-bound day for the dollar there. The pivot offering good level of resistance. before drifting down to the back end of the session. We have some data out today, uh, 9 o'clock, so just over 20-odd minutes or so. So I'll wrap it, uh, relatively, uh, soon before then. Also in the morning, uh, you can see gold, uh, having pushed higher on the sort of dollar weakness, continued to sort of drift, um, a bit higher yesterday. Quite a key technical level, uh, We had a bit of a break, um, into sort of the afternoon post-cash open, uh, in the US for equities, but only drifted down a bit lower. Now we're sort of contained within that as it speaks. Pound weaker, dollar in the morning around that sort of 8 o'clock time, similar to this morning as mentioned. We drifted higher, uh, no data out, uh, Brexit comments were limited until— and really for the week, but until the article sort of run, a headline was run, Theresa May to take personal control of Brexit talks. And we, we did push higher off of that before sort of drifting lower into sort of the end of the day. Whether that really justifies the move or not is, is obviously up for debate, but the market has taken that as, uh, as bullish for the pound. Theresa May to take personal control, uh, of that there. So you can see a bit more on that article here to take personal control of Brexit talks. Um, so yeah, interesting to, to see the reaction, I guess relatively limited on what had been a sort of a quiet afternoon and week for Brexit-related talks, but we saw that, uh, push, push a bit, uh, higher there going into the back end of the session. Uh, equities, if I just bring up the S&P You can see pushed higher into the, uh, sort of morning and then the afternoon as it came through. It wasn't until the back end of the day we started to drift a bit lower. So S&P, which did make a new high for quite some time, came off a bit. The NASDAQ similar, just sort of after that cash open. And the Dow Jones, which had some positive news out, a bit more limited in the terms of the retracement. Also, late last night, 9:30 in its usual slot, we had the API figures. So you can see, uh, for the first time in, in a while, all drawdowns. So that makes the possibility of a trade at 3:30 today just slightly easier. Crude draw just over 3, Cushing, uh, 800,000, gasoline nearly 5 million, 4.8 there, and distillate 1.3 million. The reaction that you can see, relatively limited. Usually this type of reaction is, is what you would see for an API. So you were starting of that candle 56 to the high, okay, you know, less than 30 cent up, which is usually what you get. Gasoline, we mentioned, uh, the nearly 5 million draw, and you can see that reaction was quite a bit more sustained. Having a look at oil since, uh, the API, you can see we've sort of just gone sideways really. We've had pushed above the high, uh, just another failed test though to sustain that. So be interesting to see whether we can actually push a bit lower. We'll come on to the calendar in a bit, but of course that comes out for the DOE, uh, at 3:30. Uh, will be interesting to see how that comes out just given that all were drawdown. So in terms of the actual, uh, way to trade it, it makes it a bit easier, especially if they were all the opposite. And I feel when trading, that is the easiest way to trade if it is completely different as well. Coming more overnight, you had the Australian CPI, which was weaker than expected. Um, let's have a look at that, how that came in. We can see the reaction here initially on the spike above the R1, only to sort of come down this morning. I had a bit of a retracement, um, over the last few hours, but very contained around what was the low last night and then obviously the, the high this morning. So quite a key level to be focusing on there. How the numbers came in, the, the year-on-year figure 2.1, the consensus was 2.2. For that year-on-year figure. However, you know, it is the first time that we've been back above 2% since Q1 2017. So, you know, how bad really is it? I know obviously it did miss expectations, so understandably we pushed lower, but now back on, on target for, uh, the RBA. So, you know, maybe you're going to get a bit of, uh, bit of a retracement there, especially if the dollar uh, was to continue to weaken, um, throughout the day, then you may well see a bit of a retracement cut in there. So the way I'd perhaps be looking to, to trade the Aussie dollar is sort of almost marking up the low of the day, which has been touched 3 times, this level here, and almost seeing, you know, if we get a breakout of that range that we've been in between 94 and 11 on the futures, you may well start to see a drift higher or lower depending on really what the US dollar is doing. Because just going back to that chart, it's not really all that bad. A couple of headlines overnight to, to be aware of as well, other than the sort of the Theresa May Brexit talks, which did come out yesterday. Uh, worth having a sort of look at Well, go to the chart first before coming back on. You have the, uh, dollar-yen, which over the last few days— so here we had the, the Trump comments, the first circle here, um, on Thursday around sort of 6 o'clock. So weakened the dollar. Then you had the, the Bank of Japan rumors or report from Reuters on, uh, well, their evening, uh, our afternoon here, um that was sort of suggesting a policy change. And we, you know, rightly so, uh, you know, that was— well, maybe not rightly so as we'll come on to, but at the time perceived to be a hawkish stance. First sort of change in a couple of years from this ultra-loose monetary policy that they have. And we saw the yen strengthen there. Last sort of 2 and a bit trading sessions, we've had a bit of retracement, albeit yesterday was very confined and today still within that sort of range that I've got marked up. Um, however, just overnight, and something just to keep in mind, uh, an eye on, um, Bank of Japan unlikely to tighten for October, these experts are saying. So 5 key Bank of Japan watchers believe, despite talk that, uh, growing concern over the side effects of this prolonged easing could prompt action next week, that they're very far from sort of, uh, looking to change things up there. So that meeting concluding on the 31st, so the 30th and 31st, 2-day meeting, um, obviously that could, um, that could really sort of offer an opportunity if they were to, you know, not really change anything and this ultra loose policy was to continue for quite some time. Then you could start to see, if we go back to the chart, you know, this move really sort of look to retrace, and it'd be a decent opportunity. Um, as obviously, you know, come from Thursday, uh, Friday evening, those comments have sort of now been, uh, almost priced in, if you like, and favored to a bit of yen strength. So one to, to bear in mind going into sort of the week ahead, um, as well for the Bank of Japan there. I mean, it is obviously quite interesting you know, given that they have been, you know, buying a shedload of bonds just not long ago. And so whether they are gonna, you know, make a policy change remains to be seen, but it looks like the best opportunity here may well be that they don't and we get a drift back higher in the dollar-yen as looking at it. Also worth keeping an eye on the earnings season, you know, we're fully into it now this week. 40%, as I've mentioned a couple of times, are reporting. We've got some big names coming out later today, um, obviously on your calendars it states those, but just to pick a couple: Facebook, Boeing, um, UPS, PayPal, Visa, all coming out. It's obviously Facebook the main one to sort of keep, keep an eye on, uh, and the impact that that could have on, on S&P and NASDAQ in particular. Um, but yeah, earnings coming out, and you can see— I know this is Zero Hedge, which some people would, uh, sort of frown upon reading— but, uh, yeah, Q2 earnings are off to a good, uh, good start. But quite interestingly, the sort of the, the, the expectations for Q3 are actually a bit weaker, which is almost, um, not what you would expect. So something to keep an eye on, this story developing. Any sort of idea that in Q3 that growth is going to sort of slow down a bit, that global growth is going to sort of slow down as well, may start to see these equity markets just topping out. Um, I feel if we go back to the actual charts that we're looking at here, we use the S&P or the NASDAQ in, in general here. Just looking back at where we are trading. And let me just remove the pivots to clean it up, make sure the camera's not in the way. I think we're good there. So you can see yesterday was, uh, highest close that we've had since, uh, the 1st of February. And we did actually push above, uh, that 2nd of February high that we had. Um, obviously that was quite some time ago now, but a lot of this, I feel, for the earnings has been priced in. So how much we can really push on remains to be seen based on this sort of the earnings coming out. If the dollar does start to weaken, if Trump does up the rhetoric on that talk, then sure, we can push on. But looking from where we've come over just the last sort of few weeks, it feels that maybe a lot of this earnings talk is, is going to be priced in unless it really does beat expectations by, by quite a lot. So one to bear in mind, you can see of the, the sort of the 3 main US equity markets, another all-time high yesterday in the NASDAQ. Dow Jones, which, you know, was boosted by, um, you know, 3M's earnings, for, for example, did push on and was the highest, uh, that we got to for quite some time. Still lagging behind from that all-time high that we had back in the end of January, uh, Also today, something to keep an ear out or eyes on the— this is your Tweetdex. Juncker and Trump meeting later today. We've already had Trump come out yesterday evening and tweeted, the European Union is coming to Washington tomorrow to negotiate a deal on trade. I have an idea for them. Both the US and the EU drop all tariffs. Barriers and subsidies. That would finally be called free market and free trade. Hope they do it. We are ready, but they won't. Um, yeah, he's the gift that keeps on giving, uh, comes with the punches and then offers them, you know, a little carrot at the end and perhaps makes himself look like a hero when something is sorted out. So obviously going into the back end of of the afternoon. Um, uh, be, be worth sort of looking out for the timing of that meeting. Nothing on the calendar as of yet, so if anyone does know the exact time, please do put that in the chat. Uh, any talk on or sort of deals that they come to or tariff arrangements will of course move the market. Um, just looking at the currencies as we are trading, you can see, you know, euro just coming off those highs. Mentioned the dollar was weaker this morning. We've already sort of reversed most of that. The pound following on from those comments, we did push higher, um, not too long ago, uh, only starting to just come back down again now. So worth keeping an eye, uh, on the sort of dollar movements into these meetings and then following on, uh, as well to see what that comes out as. Having a look at the calendar for the, for the day. You've probably just heard in the background there, uh, Ran giving the 10-minute rundown. So yeah, in 10 minutes we do have IFO, so sort of second, uh, reading compared to the sort of ZEW that comes out once a month as well. So we've got the July reading for the IFO business climate expected at 101.5. We'll have a look on Trading Economics in a moment just to see where that would put us. The low end and the high end of the range, 100.9, 102. 2 for that. So if we do have a look at the chart of the last few, you can see we've been coming off that high that we had in the back end of the year, sort of November time. And if it was to come in, in line, not much would change really. A break of the high end of the low and the range wouldn't do too much either. I guess the low, it would be, you know, a, um, a talk of a sort of a multi-year low, couple-year low, if that was to come in below 100, obviously we'd see quite a bit of, uh, euro weakness and weakness in the DAX as well, perhaps, uh, of a knee-jerk reaction. If we were to have a good number and, and see a prolonged market movement, you really want to see something up at sort of 104, 105. Not the most important reading, but still one to bear in mind, uh, when it comes out. Not necessarily looking to have any positions on, uh, going into that. Going into the rest of the day, we've got new home sales out at 3 o'clock. Um, again, similar to the iPhone, not expecting there to be too much in, in way of the movement, uh, from that. I guess the, uh, the release today that has the most, uh, opportunity of, of moving the markets is going to be the DOE that does come out at, uh, at 3 3:30 on its usual time slot. Here's the API figure that we talked about. We're already sort of eating our way back into that. Oil has been quite tricky the last couple of days, making new highs and lows, uh, almost simultaneously after, after one is, is made the other way around. So expected quite in line with the API of a draw of just over 3 million. So that's always going to be the headline mover but worth keeping an eye on that gasoline. So expected for gasoline today, and we'll do a rundown closer to the time of, of, uh, just under 1 million. We know that came in near 5. So for the gasoline chart, which you can see had the biggest reaction, sort of sustained that a bit more this morning, might be a good opportunity, uh, when looking to trade that release— if looking to trade that release, I should also, um, suggest there. Other than that mentioned the earnings coming out there. You see down the bottom of the calendar, let me just zoom in for you guys, um, as well. So obviously, uh, Facebook, really the big one there for sort of the S&P and the, the NASDAQ, that could really move things. I believe that does come out after close though. So for those sticking around, uh, that's gonna be the one which could really move the markets. We've seen what Amazon uh, sorry, Alphabet did after, after hours on the Monday as well. Having a quick look over at the charts from just a more technical point of view. Euro, you can see contained between the, the pivot, uh, and its highs. We've had a nice sort of double top there. Be focusing as well now on the low that we had yesterday evening and today. Pivot for me is a bit, uh, a bit chopped up better sort of leaving that alone as a key entry perhaps. S1 today marked up quite nicely with yesterday's low. Yesterday's high marked up quite nicely with yesterday's high. So decent sort of technical setups in terms of maybe a push either way there, and you've already got a couple of good targets. Or if you're only interested in the range trade, um, again, the risk reward from both of those up to the previous high or low actually does look quite appealing. Data at 9 o'clock of course could change things up, although I wouldn't expect to do so unless we do see another multi-year low or back up to, to the year sort of highs there. Pound, which has just pushed higher, first real test of that R1 level this morning on the futures. Also got some resistance found on the 17th afternoon just above there, so quite a key level. If we do come back down towards the, the pivot area, technically some decent support, uh, around those points as well. Uh, we are— have been drifting higher really since those Trump comments. You can see, um, marked up— if I get the percentage tool— so these were the comments here, you know, up 1.2% since. Gold as well, um, has been some chatter about that finding, uh, bottom soon, the whole summer rally, uh, to come into place. Is that to be the low of the summer that we saw back on Thursday? Remains to be seen. The weaker dollar would help that, that idea and sentiment to push that a bit higher. Contained for now. Technically, R1 looks like a good barrier. Got a bit of a trend forming, uh, perhaps using the highs of the day, just failing to sustain above the previous high, and we're starting to see that come down a bit more. Decent support already tested just below the pivot as well for, for gold. Equity markets would be focusing more on the afternoon to see, um, if we can have a sustained move. S&P, NASDAQ, and Dow Jones there. The DAX has already recovered that sort of technical push from the pivot. And oil very much focusing more on the afternoon around 3:30 as that comes out. Just to mention oil as well, come Thursday we do have quite a lot of big oil companies reporting their earnings as well. So, you know, busy end of the week for oil from, from sort of now on, uh, really. So just trading now just under $70 almost. Um, sort of getting above, sustaining above 69 yesterday to come back down. So keeping an eye on oil really going into the back end of the afternoon. Any questions, of course, please do get them in the chat. We have the IFO coming out in just over 3 minutes, about to be just under. Expected figure there for the month of July, 101.5. The current conditions 104.8, and the IFO expectations new 98.1. If I don't speak to you guys in the chat, hope you'll have a good trading day.