Pound Hits 28 Month Low Against The Dollar

Okay, very good morning to you. Hope you are well. Tuesday, 30th of July, getting straight into the briefing. And as you can see, probably the main topic is some further downside in the British pound seen overnight. Cable has briefly touched in the futures space around 1.2150. 50 as Boris Johnson issues his ultimatum to the EU over Brexit talks as pound slumps. Very much a coordinated approach, of course, that we saw yesterday from Dominic Raab to Michael Gove, Sajid Javid and his planning as well for the amount of money they're going to be spending in preparation for a no deal. And so really, that's the main story of the morning. If we quickly flick over to the chart overnight during the Asia-Pacific session. You know, the cable pair really has broke down further after what had been a pretty sizable downward move as Europe came into the market yesterday. This was the price activity from yesterday, and then we kind of consolidated here, but you could see the, the shallowness of those pullbacks on the retest of around that support level. And when that gave way, which was during the really the beginning of the Asian session then we had another push down quite aggressively to the downside. And if we look at the daily continuation chart, you know, this is exactly the levels that Sam and I were looking at yesterday. We're kind of talking that now we were through that quite critical point of technical support, given the fundamental view that, you know, Boris really is just doing exactly what we had thought, which is really talking up this aggressive stance on the real credible threat on do or die, no deal. And so therefore, with the, the fact that there's not a lot of technical support there, we've run all the way down to test pretty much where we were saying at 34, which would be those previous lows that we had printed back in March of 2017. Downside then, the real— this is that kind of support area with the lower bound being that double bottom that we had Initially right after the EU referendum itself, in the months thereafter. This is when, if you remember, the catalyst for that run lower here was when Theresa May first uttered the words hard Brexit in the Conservative Party conference at the beginning of October. That initiated that breach then of that previous post-referendum low, and we had that retest in the beginning of 2017. So right back there at the moment, and I think personally, unsurprisingly so, irrespective of the fact that I still don't think no deal is going to happen. Again, just to explain my thoughts behind that, I do think this is purely political posturing by Boris, all gearing up for a sending a bit of a signal to Europe, sure, but more really trying to resonate with the growing dissatisfaction of the broader national public about the state of this Brexit negotiation under May's leadership. I think he's talking to farmers in Wales today, but he's been doing definitely the tour of the, the more Leave-minded areas, and as such then lining up this general election. The one thing I would say is that if the strategy is for power, and Boris Johnson does call a general election and gets a better composition, a larger majority in Parliament, don't forget the last thing he wants then, if he seals in that premiership under a new mandate, is a no deal. He definitely wouldn't want that because then he is the Prime Minister for the next 5 years, and God forbid he'd have to deal with a no deal situation. So again, a lot of this is all politics. Rather than, I think, actual credible idea that we're gonna have this no deal. I still think that's not gonna happen. But regardless of that, in the short term though, the market has to respond to the idea that no deal— if you like, I guess I'm talking more in my explanation of the medium-term political kind of path that we're going down. But in the interim period, obviously the pound has to reprice for the risks on the table. And given the technical breaches of key levels, hence the reason why you get such a quick run to the downside. I mean, we've basically gone a good 3 points in the, in the case of a day. This would really be the telling area though. Again, this 120 to 121 handle, if that breaks, well, I I mean, I'll let Sam go over that in a bit more detail, but then certainly that would be significant. And whether or not we could, you know, given the status now that we repriced essentially on two different occasions, really, this was the, the Boris coming in on the nomination, on the fact that really he had no credible opposition in that Tory leadership race. And now down to where we are at the moment. So if you think about it, Boris Johnson priced in, we've now basically moved from about a 134 handle from around here, 132 handle, all the way down to 120. So he's taken a good 12 points out of the pound, uh, with his posturing at the moment. Perhaps that's fair value for the moment. We shall see. But yeah, other than that, really the market is fairly, fairly tame. Just seeing the NASDAQ future here printing a fresh low, just testing close to its pivot level. Likewise in the S&P, as the DAX has come under a little bit of downside pressure. It's been a couple of earnings reports this morning, um, just to give you a bit of a flavor of some of the percentage movers. Lufthansa in Germany down about 2.8%. However, seeing BP are up 3.2%. Reckitt Benckiser, on the other hand, are down 6. 4%, and Centrica in the FTSE down 8.6%. So pretty hefty losses there for the latter. So pretty mixed with the earnings perspective this morning. Otherwise, elsewhere, um, looking at WTI crude oil moving a little higher this morning. Nothing really new to report on the Iranian front or anything in the Persian Gulf in that regard. And fixed income markets are essentially flat this morning, and a slight bid seen in gold prices having just retested the overnight, uh, or getting up to testing the overnight Asia-Pacific high level that we printed in the futures here around the 38 mark. Um, just going back then, really, uh, as I said, not much in the way of new breaking news that's really going to shift things this morning. Overall then, probably be more inclined to be looking at the technical setup of the charts And with the pound, definitely some of those downside levels that need watching for the rest of today. But I think given the size of yesterday's move and the one seen overnight, maybe a little bit of a pullback before then the next push down to retest those lower bound levels could, could be on the cards. The other thing that happened overnight, and the Japanese yen if anything actually strengthened rather than weakened because because there obviously was a few outside bets that potentially the Bank of Japan could have done something more, more with easing. But essentially they stood pat. The Bank of Japan kept its monetary policy unchanged while trimming its inflation forecast, taking a bit of a wait-and-see approach given the fact that we've got the Federal Reserve coming on Wednesday to see what they have to say. Perhaps given how, as we said before, how dovishly priced the market is if the Fed don't really commit. Of course, they'll cut rates. If they cut 25, though, and aren't so explicit with further easing to come, if that strengthens the dollar, then by default that will weaken the yen. And so it kind of plays into the BOJ's hands. So perhaps they're, they're taking the option of just waiting and seeing what they have to say, because they've obviously got the flexibility that they could always come out through their central bankers and, and rearm market participants with new forward guidance if necessary through speeches. The quarterly outlook report from the BOJ, they said risk to inflation and economic activity are both skewed to the downside, with the latter due particularly to developments seen overseas, and of course that including protectionism coming out of the United States of America. So no real, uh, great movement seen on the back of that. As I said, if anything Maybe a little bit unwinding of those who are potentially looking at outside bets of easing action at the BOJ were slightly disappointed by the fact that nothing happened. Otherwise, calendar, just going back to the weekly snapshot, US Trade Representative Lighthizer and Treasury Secretary Mnuchin obviously commenced their first of two days of talks face to face with their Chinese counterparts. Over trying to move this idea of the trade negotiation forward. However, state media again repeating overnight, trying to dampen expectations here and lower the bar, suggesting that really there's going to be very little concrete outcome out of these talks, which has been our baseline scenario as discussed in the briefing on Monday. Really what the Chinese want, the Americans are not going to give. And so I'd very much expect then potentially a little bit of a downside risk factor to this, i.e., there's complete loggerheads. But I would say that really what we're lining up here is just the commitment to keep on talking, to keep the dialogue going, would be my expectation. So given the fact that they're in China, in Shanghai, the time difference being what, 8 hours or so, meaning that really we need to start looking out for comments as we're getting towards the late morning. I suggest for any potential updates, the usual, keep an eye on Trump Twitter feed and also that Chinese journalist of the, the state media as well for any breaking developments there. Otherwise, on the earnings front, um, a few things to look out for pre-market: Procter Gamble, Merck, Pfizer, probably the biggest of the pre-market names. And of course you've got the tech tech giant Apple aftermarket. Uh, their earnings per share expected at $2.10, revenues at $53.36 billion. That's the expectations. Analysts of course will look at the iPhone sales for revenue as well as their services division. It's going to be the two key things. Obviously they're pivoting away from such reliance, being one-dimensional from the iPhone. Remember as well, they've stopped listing their specific iPhone unit sale number. So we've got to derive that out of the actual revenue figure itself going forward now. Um, but again, the company trying to move away from that into services, which includes the App Store, Apple Music, iCloud, AppleCare, and the Apple News+ subscription service, which is just coming on to the market. We've also got things like their streaming services, uh, as competitors for like Netflix and Disney and so on. So yeah, probably Apple aftermarket will be quite interesting. China, of course, will also be a major focus for investors as growth there has been, has been difficult just given the aforementioned trade war situation. So slowdown potentially in the Asia-Pacific region, predominantly out of China. The performance of the service industry and does that, the service products, I should say. And does that continue to grow, taking away the emphasis from the iPhone? And how does that latter product also stand up on the revenue figure is what I'd be looking for from Apple today. Calendar-wise, what have we got? Well, we've already had the first of German state CPIs. Saxony came in at 0.4% against previous 0.5%, the year-on-year 1.6% against 1.8%. So as you can see, no real reaction, and quite rightly so, in the likes of European assets. Those data points not surprising really in any way. We'll get the, the rest of the German state CPIs littered through the morning, uh, Brandenburg, Baden-Württemberg, Bavaria, and the rest. The pan-German figure not due until, uh, 1 o'clock, but we'd be expecting that if it follows suit from Saxony to be a bit of a non-market mover. Uh, 10 o'clock, some eurozone data. Um, these are the various business climate and sentiment figures. Very rarely do they move the markets. So I wouldn't really factor that in as much a consideration for, for a catalyst for price movement. So really it's not until we get into the US afternoon. So aside from any trade updates from those talks going on in, in Shanghai, from a US data perspective, you've got the core PCE numbers, personal income figure to look out for. These were coming up 1:30. US consumer confidence at 3 PM London, and then the API, all of the trees, and until the evening as per usual. Um, and that's pretty much it, not really too much more for me to mention. So without further ado, I'll hand you over to Mr. North and he can look over the charts from a technical perspective. Thanks very much, guys.

Thank you, Mr. Cheung. What better place again to start with than the pound? They're not looking too good this morning. We'll start more intraday and just have a look back at yesterday. You can see pretty much all down from the morning. I guess the S1 or the previous low of the day, it was coming in around 91 of the futures, would be a place people would potentially potentially look to go short. The risk-reward of that, I guess, if you're looking at the low of the day, isn't the worst trade in the world. But I do agree with that, we, you know, wouldn't be too surprised to see a bit of a recovery before we then maybe did push higher. So while I think it's not the worst trade in the world, uh, going short on previous low, if we could get any retracement higher, that would be more favorable. And looking just where we are and putting this now onto the weekly chart. Let's get rid of the pivots just to clear it up. And you can see, uh, just how low price is now. And that trend line that we broke through the beginning of the week, that never really came back to get retested. And that would be some move for, for that to happen anytime from now. Just below where we're trading, or the low of the day, 21.31 on the futures, you're looking at the, the low from the 6th of March. So that's something that you know, people, uh, I'm sure will have marked up. You can see just how close we got to that point, uh, 16 ticks or so. So, you know, going back to that weekly, that would be the, the next level people would, would focus on. And then if that doesn't hold, then suddenly you're looking at the, the post-Brexit low at pretty much bang on 120 on the futures there. So for the pound, I would prioritize, you know, previous levels of what acted as a bit support from yesterday to get in. So maybe looking more to around 122.39. That does seem relatively far away for now, but we're just trading on that previous low of the day. So probably worth a little go on here, but I think if we can get it higher, that will be the, uh, the priority there. Having a look over euro, uh, relatively choppy this morning. We, uh, confined in that range we were talking about in the briefing yesterday with S1 and, uh, and what would have been yesterday's or Friday's highs and lows. You can see the S1 and Friday's low were pretty much bang on. And, you know, whether you could have taken this on at 8:15 or not with Friday's high on the R1, because it was quite late, but you can see just how well that had worked. And those, those ranges still obviously well intact today. The pivot chopped through, uh, quite a bit. I know we've got some data, probably worth having one of these trend lines on from the top. You can see we're getting a level of support from the morning, but the key level here is going to be to the upside yesterday's high, 1.1194.5, and to the downside around 1.1156. A relatively small range, but those are the key levels that people will certainly be looking at. Having a look over at uh, well, stocks, because we can just see here on the open, uh, a further push down in the DAX. And we had just before the open— I was just looking at this before coming on— that we had broken through, uh, this trend line, uh, retested it already. So just before 8 o'clock, you can see 15 minutes before, we did break down. And we're just having another test of that low of the day, which is key. We've got all this support point from from yesterday afternoon. And, and in turn, if that was to go, then maybe, uh, you're going to get a further breakdown in S&P, which you can see is starting to happen here. We had some support on the pivot from this trend line starting at a similar time to the DAX, and that's just trying to drift lower here. A bit of support on the futures, uh, 3019, but just below we're trading. But we're keeping an eye on the DAX to really lead the way here. Uh, gold And oil to wrap things, uh, you can see relatively range-bound as well for, for oil. You can see we didn't quite get down in the morning session to the S1 and overnight broke through that R1 and Friday's high. Um, we still haven't got a test of that longer-term trend line to come back, and that looks like it will be coming in around the R1, which is also that key point, uh, 1440, uh, and I guess really depends where you look at it. 1444, those previous highs from the last few sessions. So that would be somewhere to have marked up for sure around the R1. For afternoon's high is this morning's low, so that's a key point as well. You can see we're just relatively choppy around where we're trading now. We did try to make a new high, or we briefly did make a new high for the day, but the first few test of that holding quite well. So mini range in gold, worth probably waiting for, for the break either way in that. Oil pushed higher end of the session yesterday. We, we had a decent break early, uh, in the session. If I just draw this trend line on— it wasn't, I suppose it was quite choppy really, the trend line, but once that had broken through, retest and went higher and even acted as some support later on post 3 o'clock, and we have drifted on since then. Obviously, levels to be aware of to the upside around 57.64 yesterday— of last week's high, I should say. And then there's a lot of support which held price from yesterday, Thursday, and Friday a long way down, but 55.79 area, 80 area, somewhere I'll be focusing. A bit closer to home, looking at the resistance from the 25th, which did break through yesterday and retest around $56. Uh, going shorter term, I mean, we have just had this, this breakthrough. I'll be keeping an eye on what happens on the retest again of this trend line. And all the first retests after breaking acted really well, but keep an eye out here, $57.20 for oil on how that reacts. Quick look over at the DAX again just to see if we are getting a follow-through in, in US equities. You can see trying to now break and confirming that break of yesterday's low. Next sort of level for the DAX where you've got some from Thursday and, uh, and Wednesday as well. So a fair bit of support to go, but in early morning trade, equities just coming under a bit of pressure. Would prioritize a move higher in the pound to then get short if we can, given just the, the extent of the move lower yesterday. Any questions, as usual, please do let us know. But if not, I hope you all have a great trading day.