Powell Warns On Virus But Says Economy In A Good Place

Okay, very good morning. Wednesday the 12th of February. Um, having a look at what we've got on the agenda for this morning. A little bit of a catch-up on Jerome Powell, a look at a pop in the Kiwi dollar overnight and the reasons behind that. We've got oil inventories which came out from the API yesterday evening. Update on the coronavirus and also the primaries ongoing in the US at the moment. But before I get into Jerome Powell, what he said yesterday, and the process for today in front of the Senate, let's just have a look at the charts at the open. And things are relatively quiet. I don't think it's going to take me a great deal of time to really get through my side of things, so I'll hand over swiftly to Sam. But a fairly muted open, uh, despite the oil inventory data last night, which we're going to look at. Oil prices, uh, just continuing to edge higher, just above the high of yesterday's session. It's up about 83 cents down here at the bottom, trading at $50.77 a barrel. Uh, gold and T-notes a little bit negative. Uh, gold down about $3, the 10-year down 10 ticks. And it does come with, uh, US stock futures in moderate positive territory. The DAX up about 16. The Euro Stoxx also trading a little higher this morning. A couple of European earnings reports. Heineken up about 2.5%, Kering up 2.5%. Generally smaller type stocks, nothing from a top table index weighting point of view for the respective indices. Sanofi just down a touch, about 0.6%. So otherwise, yeah, pretty quiet. So let's just get straight into the, the headlines. And I guess to start with, what did Jerome Powell say yesterday? And nothing surprising, as we were kind of discussing in the briefing yesterday. We weren't expecting much. That was pretty much the case. He told Congress, so the House yesterday, that the US economy is in a good place, even as citing the potential threat from the virus in China and concerns about the economy's long-term health. So you can pretty much expect a repeat of this in the Senate. The questions as well, I don't know if you did tune in or not, but the questioning from politicians goes on for several hours and it is quite a tedious thing to watch as a trader. And from a risk point of view, it's fairly minimal. Someone of Powell's experience now, unlikely that he's going to make too many mistakes if any at all. So I wouldn't be looking for his speech this afternoon to be a real catalyst in that respect. But certainly when the initial comments come out, the way it normally works is Bloomberg will snap the comments and say the comments are a repeat of the speech that was delivered yesterday. As long as that remains the case, then it will be largely a non-event. The one thing that did move markets overnight was the New Zealand central bank, the RBNZ. They left rates unchanged and signaled it won't need to cut them further unless the coronavirus outbreak has a bigger than expected impact on their economy. And let me just quickly switch over then my chart to the Kiwi, and you can see here, uh, quite an aggressive pop seen in the, the currency overnight. Uh, usually in sympathy, the Aussie would take a bit of a bid, uh, but that move far more tame, but nonetheless Aussie also trading in positive territory. But the outperformance seen in the Kiwi overnight, you can see here from a technical point of view, finding a bit of resistance around the highs that we're seeing going back to around the 6th of this month. And that was the kind of top side of the range as well that we were holding towards the back end of Jan and the beginning of February. So a hawkish outcome to that causing a sharp appreciation in the local currency overnight, which I'm sure Sam will talk about more technically in a moment. From an oil inventory point of view, well, before I get into the numbers, let's just have a quick look at the charts. This is WTI crude here at the moment. So half past 9, that data comes out. And just looking at where we were, you can see really quite minimal initial reaction. But thereafter, we started to just grind up during the Asia-Pacific session. Now, one thing I would like to say, with oil ticking up and with the asset class mix showing relatively stable kind of sentiment at the moment, Shanghai and Hong Kong did outperform in the local stock markets overnight. China's Hubei province, which is the main focal point of the epicenter of the outbreak of the virus in China, actually reported the lowest number of new virus cases this month. And obviously that gets a lot of people a little bit more positive about potentially if we hit peak virus. Trying to ascertain that date though is almost impossible, but nonetheless the local indices did outperform in the overnight session. That's probably explaining why— what's helped this moderate risk appetite in the morning, because from the oil perspective, the actual numbers that came out last night are pretty bearish actually. The headline build in the API last night was 6 million. That was double expectations. Cushing was a build of 1.3 million, slightly smaller build than anticipated, but gasoline larger, 1.1 million. Distillates, a draw of 2.3 million. But overall, this inventory situation is not having too much of a lasting impact on prices beyond the initial kind of flutter on the release. And, you know, just switching this oil chart over to the longer one that we've been looking at for a while, It's just interesting to see this consolidation at the moment. It's almost like oil traders are a bit undecided themselves, weighing up and balancing act between our OPEC. Serious, are they going to act? And if they do so, is that going to be enough to counteract then this ongoing impact on the global economy and particularly demand and consumption from China, the world's biggest importer? And so you would think then the way that this is going, that at some point it's going to have to make its mind up. The actual kind of price movement on these daily candlesticks is getting somewhat progressively smaller, so it's definitely still something to watch. And that subject matter I was talking about beginning the week on Libya, nothing really too much there materializing at this point in time, but obviously another key thing to look out for if you are trading the oil market. So all of this comes ahead of the DOE's. We'll get those usual time, 3:30 London time, so 9:30 in the morning in Chicago. One of the other headlines people have looked at is another one of the caucuses. So Bernie Sanders' narrow win in New Hampshire makes him the undisputed leader of the Democrats' left kind of division of that political party, if you like. The more moderate Pete Buttigieg finished second and Klobuchar vaults to third. Above. Then Warren and Biden is just trailing at the moment, pretty much out of the picture. So again, not that this has an immediate reaction in, in short-term prices that we're looking at, but it's something which is generating quite a lot of media interest at the moment. So just keeping you up to, up to speed. A quick look at the calendar. What have we got today? Uh, it is pretty quiet. Now that that Kiwi decision is out of the way for this morning, we're looking out for the industrial production numbers coming out of the eurozone at 10 o'clock. And then that's pretty much it in terms of data is concerned, because in the afternoon it's just oil inventories. They do have here on the calendar with no set time the monthly OPEC oil report. Definitely something to keep an eye on if you are trading WTI crude futures. Usually that will come out around the midday, but keep an ear out on the walk, they will clarify the timings as and when they have more detail. The speakers' side of things, as I said, Jerome Powell, who will start speaking, testifying before the Senate Banking Committee at 3 o'clock, is likely to be a pretty dull affair. Not expecting any real reaction on the back of that. So perhaps usual state of play, barring anything unexpected, perhaps a fairly quiet morning. People still kind of factoring in whether or not the virus, um, is still contained at this point. Obviously a fairly, as I mentioned, positive reaction seen overnight given the, the fairly stable numbers reported in that province in China specifically. All right, that is it from me. As I said, short and sweet this time. So let me hand you over to Sam and he can talk over the charts. And what he's looking at this morning. Thanks, guys.

Yeah, good morning, guys. We'll have a quick look over the markets just to begin. Obviously, 17 minutes into European trade on that open, seeing the Bund just print a new low. Worth keeping a watch on that, I guess, as we're just coming into levels that we were trading at back on the 6th there. So just worth keeping a watch on that. A couple of opportunities this morning for those that traded it on the S1, worked very well as a level of resistance, and we have since then pushed down. You've got gold just moving lower, not, uh, catastrophically of course, but a couple of safe havens just on the lows. And while the DAX has been pushing higher in early trade, it's just perhaps starting to continue that now. Worth keeping a watch on all of that as it goes on. Uh, but let's have a quick look at the, the DAX there because we were talking literally this time yesterday in the briefing. I was going to take off the pivots about what happens, but if it hits that, uh, all-time high, are we going to get a continuation through or is it going to break down? And if I just put this now onto the 15-minute, you can see we actually didn't quite make it, uh, initially, uh, when we were talking. Then we did break through got a bit of a classic nice push for 20 or so points, and then actually that previous all-time high offered a level as resistance. Once it broke back through, we are now above it. Of course, now keep a watch on that other double top that we've had on the all-time highs for the DAX. Yesterday for the S&P, and it's gonna put the pivots on here, you know, it's worth, I guess, just looking back at yesterday with Jerome Powell speaking. Of course, Donald Trump came out and and had a go at him. He said when, um, Jerome Powell started speaking, the Dow was up 125, and then when he finished, it was down 15, then started having a go at Europe and all of this kind of stuff, as we would expect. But just worth maybe thinking about that as Powell starts speaking later on. Are we going to see something similar where we just drift down and it's into the, uh, Europe end of the US trade that we start to push higher? Uh, you can see 30 33.53, i.e., the previous high that we had on Monday evening, offered a good level of support, and we've pushed higher since then. Uh, was that 12 or so points? Um, opportunity-wise, you know, I can go through this later on as we get closer to the time, but there's still a fair few levels just below those lows where I would be looking at. Is that going to be the, the low of the— of— well, obviously we haven't reached that today, but 33.53, is that enough of a base to be confident about pushing higher. I think if Jerome Powell wasn't speaking, I'd say yes, to be honest. Just have a quick look at maybe a trend line on that, and we can see that's been nicely respected. So there's your line in the sand, albeit diagonally, uh, that you want to have on. Break of that, fine, we can just drift down lower and maybe wait for Jerome Powell to finish speaking and look to, to get long again to the upside. Continuations say we're getting squeezed in a touch. No amazing trend lines in play as of yet. It might be when the volume comes back in, you're looking for a break of that, and then, uh, 3368, that kind of area for, for a further push. Dow just lagging behind it a bit. You know, I was looking at this yesterday, although we did come back down to that similar area. You can see what was the, the high that we had, uh, back on Monday. We then obviously found support Monday evening, and that was the low last night as well. However, trendline-wise bit choppier, a bit more choppy on the down. That's actually the other side of it now. Um, not expecting fireworks in the morning, but all things considered, maybe the back end of the day is when I would favor to look to get long. Let's have a look at the currencies. Euro, nice little bounce this morning. We're almost at the, the high, uh, of the day, which is basically where we open. So actually still lower on the day, but quite nice to see The bulls just having a little go at defending this. Uh, be interesting to see if we can form a trend line on here. It's got 15, 10 minutes to see where this closes, but if we can maybe get that false break of all these highs and this trend line, that could well be the point where, um, we find a bit of resistance and drift lower. However, that breaks through, and certainly with the reaction you saw yesterday, could be an opportunity for those bulls to get in. I know a few people Certainly on Twitter that I follow, we're looking at opportunities to get long this euro. Let's just put it on that weekly chart and just remove those pivots because of course, you know, we're talking about if we can break through all of this. You can see false break of this week so far, but if we can confirm that, Macron's gap looks like it's a formality back down at the 1.08 area. So definitely keep a watch on that. But saying that, if we can have a bounce here, uh, it could be that, uh, you know, you're talking a decent recovery. The, uh, we started to potentially see that yesterday, uh, in the pound. We obviously came down to these lows, little false break, and now from that area where we're quite significantly above, almost 100 pips above there for the pound. So looking at this more intraday, where levels that you want to be aware of, let's get those pivots on for a bit of a sense of, uh, of days. And, and those— the high— well, I mean, this area here, call it, you know, 130 if you want a bit of a zone. But for me, it's all about these lows that we had previously back in January. You can see every time we came here, the bulls just decided to, to, you know, continue their recovery even when we got closes below. It's a very strong level. Once we, you know, finally did move low, it's act as resistance. So keep a watch on this, the R1, the 130, the 129.91, give or take a couple of pips either way. That's for me is a pretty key level. And if you're bullish on the pound, yes, you'd be late to the party, but better to be late than early, as they say. And getting in above here, I might see a further recovery for the pound. And it liked the data overall yesterday. I don't necessarily think, you know, it means too much in the grand scheme of things, but we continue to push higher. Albeit with a, you know, nice bit of dollar weakness after the euro recovered from that multi-month low. But certainly keep a watch on this level for, for the pound. It looks quite interesting. Aussie got a nice little boost in early trade from the Kiwis. Keep a watch on that. That's right on the, the high that we had from overnight and yesterday. Key level. I know people, uh, again talk about this market recovering quite nicely, and if risk and oil, etc., push on, well, the Aussie's got to do so as well. Let's have a quick look over at the yen. As I did mention, safe havens were just drifting lower, and that's confirmed here by, uh, the yen just on, uh, the low of yesterday, basically the S1 low of today. Quite a key level, you have to say. We have a lot of support around here. I know we're not got a trend line in play as of yet, but that low that we had from the end, uh, January, the beginning of the year— keep a watch on that because if that goes in, you might get a further continuation lower for that, and then obviously be targeting these low levels from May last year. Even probably worth getting a trend line on that as well. But for that to happen, you would want stocks to continue pushing on. In Europe at the moment, let's have a look at the last sort of few minutes. It's not going just yet, although on the DAX potentially just getting squeezed both ways. So keep her— keep an eye to see how we, we go there. But safe havens just drifting lower. Whether that continues or not into the morning. We have to wait and see. Oil, last one to go through with gold. Yes, did this push higher in early trade. You're gonna have a, you know, a big battle really, aren't we, for this market? I guess if you're bullish, you're happy that the move lower hasn't happened yet. It looks awfully like the pound there, doesn't it, with the amount of lows that come in and we actually keep pushing higher and higher. Um, let's have a look to see if we've got anything trendline-wise that you really want to see broken. It doesn't, you know, is this— it's going to be choppy. DOE later as well, so if, you know, time will tell whether that can break through. I, I'm— I would say right now I'm more confident that we've seen the low for a bit, uh, than not. But if DOE comes in and it's a lot more bearish, well, there's only one way this goes. And, and as we've said before, OPEC will be the the main party at play for the direction of this move. Gold, talked early on, is just drifting lower, so keep a watch on that. Sorry, um, perhaps just developing a bit of a trend line there from that low, from the 5th that we have had, squeezing from the top. And you know, I don't think it's the worst thing in the world just to wait and see what happens for gold, because of course it's still early doors. But that trend line nicely respected 1, 2, 3 times today. So the way gold can move if the volume comes in, break of that trend, yesterday's low, low of the 7th as targets to consider. Really bit of a line in the sand for the bulls and the bears at 1569.4, low of the morning, then the high once we broke through that as well. Hope you all have good trading days. For the moment, I think stocks look like they just want to have a bit of a push, but keep an eye on those soap hammers which are approaching. A bit of support. Relatively quiet. Keep an eye out for, for Powell, uh, and his testimony on the impact that he had yesterday on stocks. And once he finished, we pushed higher. And of course crude as well, 3:30 could be quite interesting. Hope you all have good trading days, and I'll catch you all in the chat later on.