Morning Briefing - 7th August 2018

Hi guys, good morning. Uh, Tuesday, 7th of August, just gone half past 8. So run through what happened yesterday, first day of the week, what happened overnight, a couple stories, and then what could happen, uh, the day ahead. We'll have a look over the charts as well, uh, in what, like yesterday, is a relatively quiet day on the data front. However, just having a quick look at the markets from yesterday, uh, in the morning, probably around the time of the briefing actually, the dollar started strengthen a bit more than it had normally, uh, pushing above its high here in the dollar-yen. The dollar index pushing quite consistently higher above the $95 handle, which still remains quite important this week. Where we close on Friday will be interesting to see. And you can see we pushed higher here in the yen. The pound and the euro came under quite significant pressure in the morning, just past 8 o'clock, into really midday and a bit beyond there until 1 o'clock before we start to see a reversal in a few of the pairs. That is the lowest level since September last year for the pound. We'll come on to a couple predictions about this, this no deal following Liam Fox's comments in a moment. But yeah, lowest since September last year. You've got highlighted just on the left-hand side there the reaction to the Bank of England the 9-0 vote, but nothing really changing from the following the meeting. And yes, we have drifted lower. I was speaking to Anthony this morning about, is it, you know, is this a buy opportunity? You know, November last year when they had the rate hike, the next 6 months were all higher in what was perceived to be a much more dovish reaction, much similar to Thursday last week. And he said, not just yet. I feel you know, while yes, Brexit concerns were, you know, rife in November last year, that the timeline is running out. And that's what's really sort of weighing on the pound. His view at the moment, all things considered, is we should come a bit lower. And I'll come on to the Bloomberg article in a moment where they believe we could actually get back down to that 1.20, that multi-year low we got following Brexit. Remains to be seen. I think it is going to be Brexit-related talks, uh, until the remainder of the year that really moves this market, um, as well. So we're down, uh, below the Bank of England reaction on Thursday. We'll be with just a bit of a respite, uh, this morning. Euro pushed lower, same sort of time, that dollar index pushing above 95. Euro-dollar coming under strength and to the tick hitting the 18th of June, uh, low there. So if I just put this on a longer time frame, you'll be able to see the significance of that level. I'm just going to take the pivots off just to make it a bit clearer. So you can see here, early morning, came back down. I'll just move the text out the way as well. And you can see, hit that level to the tick. Let me just remove that there, uh, before pushing high. So 18th of June low, pushed on. Really good, uh, support level, uh, not too far away from that low of the year. Again, there's the dollar strengthens. I think if we do accelerate away from $95 on the dollar index, we will get a break of these lows, um, and soon, you know, the low of the year. But for now, holding quite strong. And again, similar to the pound this morning, just seen a bit of dollar weakness come through, and we've pushed above the sort of the high of, of yesterday afternoon as well. Oil, you had the Iran sanctions. I put dot dot dot, maybe, you know, we've seen a few times in the in the previous weeks, all these geopolitical concerns concerning oil. Sometimes you're getting reactions, sometimes you're not. As the market sort of came in early morning yesterday, uh, after sort of the London open, volume picking up a bit, you've got a bit of a push higher only to come back down. But there's a couple of half decent opportunities. I was talking to the, the new sort of interns that we've got and we— about the sort of the break higher of the high of the day and how that would then act as a pretty good support level. And you can see it did come back down, find support on the previous high before pushing on. But into the back end of the session, uh, we came back a bit lower to form quite an interesting support level, which I feel for today is definitely one to keep an eye on. It's pretty much the low of today, uh, so eyes on around 6879 on the futures to see if we can hold that. We'll come on to the data calendar later, but it's not often that you say that the API is probably the highlight of the day. I think that says a lot about what to possibly expect in the coming session as well. T-notes yesterday up to quite a significant resistance level. You can see how well this has held. So something to just to bear in mind following yesterday and what was a, you know, a quieter day data-wise. Technically, the markets reacted quite well and coming up here pushing higher bonds in general. But the 26th of June low, also the 19th of July low, and then to the tick acting as a strong resistance. If we lower that time frame down, down now, you can see the reaction that we got there last, uh, well, last session around 3 PM UK time. And we're just coming back down now to test the lower point, um, of the morning, which is also the area we broke through. So quite a significant level for T-NEX. Obviously the volume not really going to be there for now, um, but worth keeping, uh, an eye, uh, on that as well. Gold yesterday, it's, it's a tricky one for sure. You know, there, there is a lot of talk about whether we're going to get this sort of summer rally. Um, you know, what it was, the, the low that we had on Non-Farm, or before Non-Farm really, but on Non-Farm Friday, is that going to be the low We didn't get a test of that yesterday, so that is quite significant. If we can have an update today, maybe push, uh, above, uh, yesterday's high, then I think that sort of does, uh, cement that case that it could well be the low for a while. For me, I've said it a couple of times, but just to sort of reiterate, the level that I want to see break would be 1235 here on the daily continuation not just because the highs that we had recently, but was the low that we had in the back end of December. Let me just move that above the camera, uh, before we tested it again July, breaking through, and then a couple of times we found resistance there. We get a break above that, um, I am a buyer, you know, all things considered at the moment. Uh, coming on to last sort of market move of yesterday, obviously significance, you had the cash open see us come under pressure in S&P to find support on the low of the day or the pivot of Friday's high before we broke through late into the session. 3 sort of strong technical levels. So again, technical levels working quite well yesterday, uh, and we pushed on to make a new high for a while. And unbelievably, from today's high to the all-time high— and this is roughly drawn— but 0.78% away from the all-time high in the S&P. You know, just to, you know, put that in perspective, if we have a day like we did on— what's that, Friday, Thursday— you know, we would have a new all-time high today. Is that going to be the case? Probably unlikely, but 3 up days in a row, 22 points away. Um, as of about half 6 this morning, we had another push, so definitely one to keep an eye on there, uh, for the S&P. What's going to stop it in the, in the short term? Trade talks not really having a negative impact anymore. A bit like the, the, the boy who cried wolf in that respect. So yeah, stronger dollar not pulling it back, trade talks not pulling it back. Um, so it seems like the only way is up for now. Overnight stories, uh, we'll come back onto the pound in a moment, uh, in terms of looking at the chart. But here, the Bloomberg article following these, these comments from, uh, the Trade Secretary Fox over the weekend that the likelihood of a no deal is as high as 60%. Analysts believe that we could come back down to 120, which is obviously that low that we had from December 2016, trading now, you know, roughly just under 130. So quite a big move to the downside if there, you know, was that no deal scenario. Whether that is going to happen or not obviously remains to be seen. You've got some important dates coming up in, in October as well, which makes me want to sort of hold off getting into a pound long, although I do believe in the short to medium term that opportunity will arise, as maybe we do have to come a bit lower before pushing on. So if we do have a look at the pound in terms of that longer term level, where is the low? Let me just bring this into picture now and put this on a on a weekly chart. Let's remove the pivots again just to clear things up. So trading on the futures just below the 130 and that 120 level marked up in the Bloomberg there, nice sort of double bottom. The first sort of test of that coming in October, uh, late in the, the year, uh, sort of December-wise. And you can see would be quite a significant move, uh, to the downside. But we have continued to push push lower week after week. Now this is the— if this week obviously continues to finish lower, would be the 5th down week in a row, um, and quite significant support would have been broken. You can see here from the September, October levels, if we continue to push on and maybe get confirmed break below here again, and suddenly, you know, from a technical point of view, August 2017 levels, and the, the market key support, you would say around 126.30. June and March, we have significant price action around there. Can we get down to those points? I think remains to be seen. It's firmly in the balance, um, at the moment. But the sentiment of this, this no deal is definitely driving the markets following the weekend. So in terms of directional bias, I think short term has to be to the downside. Um, you know, all things can considered, uh, you know, that would be my choice of direction. We'll come on to how the markets are sort of trading, uh, today, uh, where could be a good place to get in. But the, the low that we had on, on Friday almost, uh, reached today. What was that, 967K? Yeah, so didn't quite get up there, 4 ticks away. But I suppose that's a test of that market, and that would have been a good opportunity to get short. Also from yesterday, we had the, uh, Australian— yeah, Australia holding, keeping rates on hold. The reaction was very limited. You can see here, half 5 UK time, hardly any real reaction from there at all. Low rates supporting the economy— these were just some of the comments that came out. CPI expected to be lower but GDP expected to be higher, so you've got a bit of a mix. Wage growth remains subdued and to be expected to to be so for a while. But look, hardly any reaction. We then have pushed higher this morning just on the dollar weakening a touch, as mentioned earlier, for the euro and the pound. Overall, this market— I'm not really fancying these, these comments to sort of, you know, change things. No real reaction following the, uh, the interest rate decision, but we are, you know, still just drifting higher this morning. So one thing just to keep an eye on there. Uh, the dollar index, which I'll bring up a chart up in the moment, around that 95, really key, uh, I feel, to this week's, uh, sort of price action, uh, as well. Really, that, that's, that's it news-wise overnight. The market was, was quiet, uh, in terms of news events that were driving, uh, the market yesterday and then today as well. Data-wise, there's not much coming out. I mentioned earlier the API is literally really the the highlight now for the remainder of the day coming out at 9:30. And we all know that the reaction seen from that is usually quite limited ahead of the DOE tomorrow. Speaker-wise, you've just got Bank of England's McCafferty, who is on the way out anyway, speaking on LBC around 4 o'clock, or expected to, you know, worth maybe, you know, tuning into sort of the squawk or your tweet deck around that sort of time on Twitter. But not really expecting anything here, you know, you to really move the market. You've got the Red Book out 1:55 and, and the JOLTS job openings at 3 o'clock. But yeah, not expecting to see too much in the way of sort of data driving these markets. Of course, comments, you know, worth keeping an eye out. The trade talks not really moving the market too much, but anything Brexit related and maybe, you know, a bit more on these Iran sanctions for, from the US Could that help sort of drive oil and push it higher or lower remains to be seen. Having a look at the, the markets for today, you know, what could be the potential, uh, opportunities we talked about yesterday have been quite technical. So something just to bear in mind going into today, um, starting off with the euro. Let me just bring that into the picture here. So dollar in, uh, dollar weakness is pushing us a bit higher. Also probably got a bit of a break of this trend as well, which is, I would say, quite significant. Um, let me just put that one there. So coming up from the high of the 31st, decent sort of breakthrough, uh, early this morning. We are coming off higher levels. So in terms of technical points of interest, just in the near term, you have the high of the Asian session, which I'd keep an eye on as a potential support area. We've already tested yesterday's high and found a bit of support for now. So that would be the next sort of level that I'm looking at in terms of wanting confirmation in these markets for to sort of go a bit more aggressively. If you weren't looking for dollar strength, I'd say really, you know, the sellers might look to come in around, around here underneath this level of what is support at the moment. Low of the day, I'd focus a bit more just below that on the low of yesterday evening, 115.82. 2.5 from the futures. If we can get a break below there, S1 as well could come into play. We've got those longer-term support levels from the— but from earlier in the year for the euro, seem a bit far away for now. Um, and you know, yesterday's price action was rather limited, slight down day, and I wouldn't be expecting too much. Um, and I'd be patient. You can see a couple of times yesterday up to the highs of the day, um, there's a good opportunity to get short Um, so patience would be, um, the, the main focus, I would say, especially coming into, you know, the, the main part of August where markets typically are, uh, are quieter. The pound talks about yesterday's, um, uh, level is a— or sort of Friday's low is a good level of resistance. We've had a test of that, you know, 3 ticks away. That's, you know, it's a test of that level. So I'll be focusing on that that high again if we were to come up and, and, uh, and test that decent level of support. Friday, uh, yesterday's low to sort of higher the afternoon, we broke through, found support. So again, sort of stuck within these ranges. This is where I'll be focusing on now, probably leaving the pivot alone. 72 or 96 as the next key levels in the futures. But you can see how well those levels of support and resistance have held, that would be the next points that I'd be looking to, to get involved in. From higher up, where would I be looking to go short to sort of continue this, um, recent trend to the downside? I think R1 is not too bad. I think as well, if we can push on to what was the low from yesterday's morning— we haven't really had a test back of that level. So you can see we found support 7 AM yesterday. I'd like to look at that around 1:30 as well in the futures. I I think you could get quite a good short back to maybe where is the high of the day, uh, now equity-wise. Just to sort of, you know, wrap things, things up, um, I think you've got to favor the upside if we can get down towards the pivot. Technically it looks, it looks really nice. You've got the low of yesterday afternoon, you've got the high of yesterday morning, you've got the pivot in the middle there, you've got the direction of this market, um, you know, it does look quite quite good. For those that are only interested in perhaps looking to go short, you know, they— that maybe they don't believe— you don't believe that it should be up this high, I'll definitely be looking to have this trend line on, uh, that's been respected quite well from late last night to this morning. A break of that, you could get a bit of a fast move down to perhaps the low of the day. Preferring this in the afternoon would be my advice. Dow Jones lagging behind overall in the grand scheme of things, the, the S&P and certainly the NASDAQ. Similar sort of trend line to, to have on the market that has been respected, uh, quite well. It might be that later in the afternoon you see all these markets come back to test these, uh, trend lines. And again, in the NASDAQ, you can see it there. Um, so that's what I would be focusing on if you were to look to the downside. Probably worth noting for the NASDAQ, you know, still a bit off its all-time high as well. Obviously we made a new one much more recently than the S&P. If we can get a bit of a push today, it wouldn't be all too surprising to see the all-time high that we made on the 25th of last month come into play again. We seem to have rode the earnings wave, which was, uh, you know, higher and lower almost daily with these, these big, uh, big companies. But, you know, look, we're, we're up to level seen on the day of the all-time high, so not too far away. I feel the only way is up for now, all things considering. I'd be keeping an eye on the dollar index. I'd be patiently waiting. Oil might be worth as well, just looking at more at this in the afternoon, as that's when the real sort of moves happened yesterday, uh, as well. Any questions, as usual, please do get them in the chat. Data calendars are relatively quiet, but I'll come on the, the mic as and when. Hope you all have a great trading day, and I'll catch up with you throughout.