Morning Briefing - 28th September 2018

Hi guys, good morning. Just gone half 8 here in London. Happy Friday, 28th of September, last day of the week, the month, uh, or trading day I should say, and the, the quarter as well. So have a look at the, the charts to begin with on a daily continuation of, uh, of where we're standing going into the last few hours of the, of the week. And quarter, as it will be important, uh, to sort of see from a technical point of view. We'll have a look how the markets have digested the Fed on Wednesday evening. Yesterday we saw a bit of dollar strength come back into the market. I think a lot has, has been left on the table while the Fed were, um, quite clear in, in their message of sort of to expect expect more hikes next year. The market arguably has only sort of priced one of those in, so there could well be room for the dollar to strengthen. And if we have a look at the, the charts on those daily, um, pictures, if we bring the euro in here, this is what I sent out technically at the beginning of the week in that, uh, that strategy report. Quite the key area marked up for— this is, has really been unmoved in in the weekly strategy in terms of these May levels, uh, and the highs of June. You can see we tried to break through multiple times but just couldn't, couldn't extend above it. Whether you want to put that down to technicals or fundamentals is, is arguable as well. But just trading now back on the, the 100-day moving average, or maybe just a tiny bit below, uh, in what has been a clear rejection of those, those highs there. So Whether it's down to the dollar strength, whether it's down to the situation in Italy, I think going forward, and especially as we come into sort of the next 3 months, it'll be quite interesting to see where we do end up going. I think if the data at the US is good and the market actually does start to believe we are going to get more than one hike, then, you know, I, I could see us, uh, well, definitely over the next sort of month months or so start to come back down to that low that we saw in September. And obviously you'll be keeping an eye on the low of the year as well. So technically we held up quite well. Where we finish now with the 100-day moving average will be pretty interesting. Going back, you can see when we did break through in April, we then came back to test resistance and obviously hadn't then retested it going back to September. Uh, let's have a quick quick look again when we broke through here. This would be late December to then extend as well. So it has been a key indicator here, uh, the 100-day moving average. So I'll be keeping an eye on this come the close of, uh, of the day and then where we obviously open up for, for the next quarter as well. Looking over at the pound, similar sort of story, and we found resistance up there at levels, uh, sort of from the July time, not as sort of strong perhaps as the, the euro one. But we are again now below the 100-day moving average, which has been cut up quite a bit. Uh, we did obviously gap higher here on the, the change of the, the contracts, that sort of, uh, December, uh, contract coming through. Uh, be keeping an eye if we just lower this time frame down on, uh, this, this area of support that we found on the, uh, well, last Friday actually. So 131 as well. We'll have a look at the charts on a sort of a shorter timeframe as we go through the briefing as well. Equities, well, we'll just have a look straight into how the course is looking. Another up course of the S&P, another for the NASDAQ and the Dow Jones, which really is just a sea of green. I think it's 11 of the last 12 for the S&P have all finished higher. Um, not out the question that you could have a really, really bad day and we finish below the previous all-time highs in these markets, but I think, uh, it would take something quite special, uh, in order to do that. Where we're sitting now, uh, on the previous high that we made a few weeks ago, can we close above there or below there, I think will be quite key perhaps for, you know, the coming weeks. I'd also now start to get a trend line on from these lows as we're starting to sort of respect that in a channel going higher. We never quite made it up to the sort of the top end of this trend line um, in the hunt for that 3,000 mark. And can we do that before the year ends? I think we probably will, uh, and then in my opinion, uh, we'll start to sort of drift a bit lower, uh, next year. Oil, uh, we'll come on to intraday oil market from yesterday in a bit, but I think it's, it's, it's quite clear this market is in a nice trend at the moment. Yesterday you did see the price moved lower only for the dip buyers to come in. I think in the market, certainly we trade here intraday at Amplify, you've got the sort of the equities in the US, the yen, or dollar-yen I should say, and oil, which are in a nice trend. And the opportunity to sort of buy the dip, if you like, or buy on a level of support following a pullback, is, is being welcomed. Uh, we, we've broken, uh the key sort of rectangle I've got marked here from sort of beginning at 71 to just over 72. And I think if we do close above, uh, the finish of yesterday, and more importantly the, the low that we had back in July, I think that would be quite key, uh, for this oil market, which, uh, is, you know, still relatively far away from its all-time high— oh, not all-time high, yearly high. But I'd also be looking at Brent going forward there. Aussie dollar, I see a couple of people We're talking about AUD/USD this morning and a good opportunity to, to get short. Yesterday's low in the pivot acted as good resistance, uh, really key support found from a multi-year low from February 2016 to May and November also that year, December. We had a sort of a false break but never really closed below, and now we're contained within the upside. I posted this, uh, sort of in the middle of the— or in the middle of the day on Monday and was saying how just important this May level 73.25 was. We're failing to really have a go at pushing higher then as the, the strength for the dollar perhaps is starting to come back down. The, uh, dollar index and not too far away from that $95 handle which caused all sorts of traumas a couple of months ago, whether it could break above or below. And now it's just becoming, uh, quite choppy as well. That dollar strength has seen gold push lower Just as you think that, uh, gold is going to have that recovery, we had that break here with the— really, this came, you know, yesterday. You can see the further push down, and it didn't really want to stop finishing near its low. And that again will be quite interesting to see, uh, on a more intraday chart, uh, whether we can keep pushing lower or not. Interestingly, this morning we have seen a sort of a follow-through of that dollar strength we saw yesterday. Euro here, my top left chart, just breaking its, its low of the day. Uh, gold, top right, you can see this trend line that it broke. We've then come back to find resistance there. And the pound also breaking its low of the day. So the dollar, the strengthening dollar index near its highs of the day. Yesterday we did see those dip buyers, as I mentioned, in, in equity markets. The low of, uh, the, the Fed on Wednesday acted as really good support. We've we broke through that high. And then on the cash open, after that initial sort of, uh, market volatility, what was the key level around the pivot acted as a very good opportunity to, to get in on, on that classic there. Broke through, then it came back to test before pushing higher. Incidentally, we are actually a bit lower today, uh, in, uh, in the S&P. But I think, I mean, obviously you've got to take into context the end of the quarter, so it can always be a bit tricky on on the Friday here. But overall, I do believe this market continues to go higher. There's a lot of appetite to drive these markets higher. Um, yesterday with oil, mentioned it came, uh, lower as well. Let's have a quick look as it's just starting to have a go at trying to push higher here. So I'd be having a look at, uh, at the oil market. The high of the day just breaking through now by a few ticks. But again, similar sort of thing. I haven't— well, I had this level marked up Anthony Cheung admittedly didn't take it on, but it was a sort of strong area of resistance before breaking through on the, on the Wednesday. Was also the low, and then we continued to push higher. Was, um, you know, strong level of support, and now we're continuing to try and see that push higher. Quite key resistance you would expect of yesterday's high on R1 should we be able to get through. The other trending market where, you know, I still feel comfortable calling a direction each day regardless of how we open, uh, the morning session is the dollar yen. Uh, really this trade opportunity here, well, if you didn't, uh, well, if you're brave enough, I actually would say to take the, the low of, of yesterday, effectively Wednesday at that time on, uh, would have been great. But really when we broke through the pivot, the higher the day went, and then the R1, and there was a couple of good opportunities each time we broke these resistance. You can see now, uh, still continuing higher and made a new high this morning. Ideally pivot for me would be the area to get in, but I think you've got to take into consideration the previous high of yesterday and the overnight lows as well around this sort of area that we're, you know, shading. I think would be another place to keep an eye on as the dollar is still stronger, equities pushing higher. The yen was weakening after the initial sort of risk-off in the markets we saw yesterday. So continuations of that would be, would be the the theme. I would suggest, even considering sort of the, the month-end flows and, uh, and whatnot, I do believe the dollar is still going to sort of strengthen into the back end of the year. Um, headlines overnight, uh, I, I quite like this on the FT. This sort of summarizes the, the key points. Asia stocks climb on currency. So yeah, with that yen being, uh, the weakest for some time. I believe it's definitely a yearly low, maybe it might even be a couple-year low. That was definitely low for 2018. The Nikkei has made a multi-year, uh, high there. So much like that correlation you can sometimes see with the FTSE and the pound and the euro and the DAX, Eurostoxx, uh, you've seen that there in the yen. So worth keeping an eye on that correlation going forward with the Nikkei, but it's, it's helped push that equity market higher as well. Oil consolidate from their gains on Thursday, yes, perhaps, but you're starting to see obviously oil just have a go at testing that high this morning. I would be focusing on that now as well. The one point that they haven't made here on the FT would be about the situation in Italy, which of course was sort of the main driver, you would, you would say, yesterday morning. If I bring back the, the euro chart into picture, you can see the, the largest red candle that we saw yesterday was attributed to the comments out of, uh, of Italy that we saw. And really, even though we had this, uh, sort of agreement on the, the 2.4% deficit overnight, it hasn't really caught much respite. Um, you know, still, you know, below the limit of the 3%, uh, but still some worries going on, uh, there within, within Italy. And I think that's is going to be the theme for today. I wouldn't really— I know we do have actually quite a heavy data calendar today, and that could always be a reason we push higher in this market. I think the overall bias for the euro-dollar should be to look to go short for now. I mean, the data obviously could, could change things up. And I'm going to keep this relatively brief because in 10 minutes we do have the, the unemployment numbers from Germany. And then not long after that, we've got the GDP quarter 2 reading from the UK as well. We'll come on to the calendar shortly. Interestingly as well, if I just transition back to look at the odds of the, the next country to leave the EU, I was, uh, talking to, uh, Tommaso earlier. I said, you know, give me, you know, in a couple of years, what are the chances of Italy leaving? He said, not happening. Not happening, where the odds would perhaps suggest otherwise with them 2-to-1 favorites to leave. I think that's just the sentiment at the moment really coming into play there. Whether they would leave or not, I think, uh, is, is unlikely. I think 2-to-1 is, is a bad price. I don't really see much, much offer in that, uh, to be honest. But looking at the chart more intraday, I keep an eye on those previous lows that we had broken through from from yesterday and even the, uh, previous sort of low from today. Maybe worth getting a bit of a trend line back on that. Yesterday's low is obviously going to be an option, but as long as the stock I think was above the low of the morning that we had at half 5, it should be okay for sort of resistance there as well. Um, let's move that back into picture. The pound, similar sort of story in that the low has offered a good level of resistance Gold, however, just coming back to test that, that trend line. So in terms of the correlation that gold has been playing off recently for, well, for the last few months, it really is all about that dollar. So I'll be keeping an eye on gold here for these currency markets. If we are to see, uh, us, us, the market, the gold market find resistance here, I'd be a lot more confident that these euro pairs, uh, dollar pairs would continue lower. And for now, you can see just testing it, it's So keeping an eye on that, and oil as well on those highs. Equities, I'd focus more into the afternoon. However, whether for European, obviously this morning, but for the US afternoon, just seeing the DAX here have another test push of those lows. Yesterday morning we opened, uh, get one gap lower, filled the gap, and then it was a quick push to the downside. I think The push that we saw post-cash open in the US was benefited by the fact that, uh, the DAX had also already broken its highs. You had a nice, uh, trend line, uh, from the highs over the last week and a bit that had broken through around that R1. Yes, we'd already come quite far from there, but you can see this time 1:45 before the cash open, you already had T-notes come down, you'd had the yen weaken as well, so So that risk-off morning flow was in the distance, and what might have looked like a good short for the S&P at the pivot, I think it then actually now looks like the opportunity to get long. So I'll be keeping an eye on the DAX, but not reading too much into, you know, the first hour of the session for the remainder of the day, as we do know it can be quite topsy-turvy at best. For now, gold still holding on. Data calendar for today, let's have a quick look. Going into 8:55, unemployment change from Germany. The range expected to come in -9,000, -20 to -5, that range. The number 9:30, the GDP, we'll do a quick rundown for that, but you can see the, you know, the 0.4 for the quarter-on-quarter is that low in the high end of the range as well. So not expecting to see too much of a change there. of course, if there was, then you would see a bit of a market reaction given that, uh, there's no real room for, for a budge there. Coming into 10 o'clock, we have some more European data. 1:30 as well, you've got some inflationary numbers out of the US, which we do know the Fed look at and be keeping an eye on the year-on-year figure there. How close to the— that 2%, uh, are we? You know, a lot of the, the points talked about post-Wednesday were, just how good these US numbers were, how their inflationary, uh, sort of measures were above or on the 2%. If that can continue, if we can maybe hit the top end of that range on 2.1, another reason to perhaps to look for dollar strength into the back end of the week, month, quarter, and then for the rest of the year as well. So quite an interesting, uh, sort of data release come 1:30 from the US. You've also got GDP numbers for— from Canada, uh, month for month, year on year. However, it is from, uh, July. And then into the back end of the afternoon, well, here in, in Europe, you've got Chicago PMI and University of Michigan sentiment numbers. However, that Michigan number is a final reading, so not perhaps expecting too much there. Speaker-wise, if I just bring that into picture as well, uh, it's a bit of a— almost a shock not to see Draghi on there, the amount of times he's spoken these last couple of weeks. However, of course, he hasn't really moved the market too much. ECB speakers, we've got a couple there in, in Lane and Pratt. Pratt's already spoken, uh, this week on, on Tuesday, uh, spike the market a touch, but wouldn't really expect to see too much, uh, come through there as well. So that's 12:30 and 1:20. Half one, you've got, uh, Fed's Barkin, a voter, speaking, um, and then you've got Bank of England's Ramsden-Davies, 2:20 as well. And then after sort of the, the EU close into the back end of the session, Fed's Williams speaking, uh, as well. So while Monday, Tuesday, Wednesday morning might have been slightly more range-bound, Wednesday afternoon, evening with the Fed, you see markets picking up a bit. And yesterday was, was similar in those sort of circumstances. How would I play this morning? I'd be looking for sort of continuations at the moment, the dollar sort of strength. I would, I would say I'd be favoring the, the dip buying in equity still, and dollar-yen if given the opportunity Oil can be a bit tricky on Fridays anyway, but I still would prefer the upside. But it's a case of letting the markets tell you what's going on. The data could obviously change things. Comments Brexit-related have been quite thin on the ground this week, and it can always— it's always quite interesting, I would say, on, on your Twitter if you have Laura, Laura Koonsberg. Let me see if I can just bring my tweet deck into play here. I've got, yeah, on the right-hand side. So yesterday, you can see how old these tweets are, one day ago, and these are over 24 hours ago. And I feel if she's not tweeting, there's not much that's going to be happening Brexit-related. And it really is actually a theme to go on. And you see the last retweet from 17 hours ago. So I wouldn't be expecting too much Brexit-related stories to come through for the back end of the week. Got 3 minutes now until the, uh, unemployment numbers out of Germany. Keeping an eye obviously on the DAX, which is pushing lower here. Euro still under a bit of pressure. But if I don't speak to you guys throughout the, the day, I hope you all have a great weekend. The Ryder Cup is starting today, so while the markets may favor the US, may Europe have a bit of luck. And we know the odds are in our favor. So hopefully McElroy Co can do the business for us. But I hope you all have a great weekend. I'll catch you obviously Monday morning anyway, if not throughout the day as well. So take care, guys.