RBA Cuts Rates, USD on 2-Year High & US Stocks Finish Quarter Up

Hi guys and good morning. Tuesday the 1st of October, just gone 8 o'clock here in London, and just like that the, uh, third quarter is done, the month is done, and we are into the final stretch, the home straight, uh, of what has been, uh, an interesting year so far, but also just an interesting month just gone through. And we'll have a look over the charts from yesterday but also the month, uh, having a look at the potential outlook for the remaining 3 months of the year as well. We'll have a look at some of the stories from overnight and what's been a relatively quiet, uh, news-driven evening, I would say, in the build-up to today's session. Of course, China away on holiday as well, so that's going to add to that a bit. So we'll go through some of the headlines. As you can see on my right-hand side, the, uh, the main one, if you like, for certainly for currency markets, you would say at the moment would be the RBA cutting rates to a record low of 0.75. That happened overnight as expected. However, the Aussie did, uh, continue to weaken into early morning trade. So we'll have a quick look over the charts from, from yesterday. If you remember during the briefing yesterday, we were talking about, well, certainly oil and gold as they were coming to some quite interesting levels. I'm just gonna bring oil into picture here and we're talking about the, the importance of, see, the resistance up around sort of mid-57s, but also this potential trend line at the time that started from the beginning of August, uh, and then we had that, that breakthrough yesterday. So certainly going into this month and more really for the rest of the week, I would say just the break of that trend line is, is pretty key, uh, bearish below and bullish, uh, to an extent above, I would say. And you can see yesterday I was putting this on to even a 60-minute time frame. The first real test we had of it again coming around 2 o'clock, the breakthrough into yesterday evening, and we had a strong move lower, quick dollar push to the downside. Since then we have recovered a touch, but commodities yesterday getting, uh, getting a bit of a kick. I actually did receive a text from my, my friend, the one that was in silver. I'm sure if you listen to the briefing you'll know, and Anthony was saying it's not looking good, how silver needs to stay above 17 or his trade's not looking too good. Another commodity that came under pressure, uh, was gold. And it seemed that the whole, uh, Twitter sphere— financial anyway— was looking at gold, and if it breaks this level, go short. And it broke the level, came back to retest, and you can see the move to the downside was, was, uh, was pretty big. And we're now trading down at 1469. 1492 was the level we were talking about. You can just see, and this is just a 60-minute, but you can see just how important that whole area was, putting it onto that 240. And you can see even more so a break of that, and we were saying you could get, uh, get a move down towards 66. I still don't think that's off the cards, obviously not too far. Well, there we go, we touched it in, uh, in early morning trade, so Perfect, uh, technicals there working, uh, in correlation with a bit of a stronger dollar reaching a 2-year high yesterday, obviously weighing on things as well. I think it's worth saying, uh, with, with gold and, and other commodities as well that have been pricing in obviously a much weaker US dollar and more dovish Fed, an unwind of that means that we do have to have a bit of repricing. And of course gold which had pushed higher due to trade concerns over the weekend. Well, uh, it does seem that that situation, for now anyway, is slightly better. And just having a look at stocks, you can see my headline to the downside of the screen, just making sure— oh well, on the other side anyway. You can see stocks recover from obviously the shaky August that we did have to have the, uh, the biggest year-to-date gain in more than 20 years, obviously, that third quarter. So, uh, big push higher in stocks now, again, not far from that all-time high that we, uh, we had back in, uh, well, the 13th. And just putting this on the 60-minute, you know, a decent end to the week and we could almost be there, uh, as well. So keeping a close eye on that level around 3025. Obviously 3000 to the upside remains a key level. We can see just the breakdown area that we had back on the 24th as well. Just seeing a couple comments in the chat regarding cable. Let's have a quick look over to see what is going on there with the pound. Just having a little push to the upside there. And let me look if there's any stories that come through. It doesn't seem so. What we, um, well anyway, yeah, I'll keep an eye out for that. And guys, let me know if there is any comments, um, for the pound before we, we go over to the the main headlines from Australia. May as well talk about the, the pound now, just as it is moving. In terms of new headlines, and certainly actually if we go through the chart, yesterday we had a bit of a push to the upside in the afternoon. And a couple of the guys, I was with the Stage 1 guys of the, the program yesterday, and they were saying, what's happening, what's happening? And there wasn't really anything on, on the wires for this push above, so it seemed to be more technical. And since then we have snap back. Um, however, uh, just, uh, at the time there's a couple comments saying that, uh, from ITV's Peston saying that Boris Johnson is gonna put together this, uh, new proposal on Wednesday and he is expecting good news. However, overnight, uh, Ireland have quickly downplayed that. Uh, however, a couple of, uh, comments look like they're just coming through now. Let me just click On there, PM tells Radio 4 that there will absolutely not be a hard border away from the Northern Ireland border. That's not what we are proposing at all. He says UK post-Brexit must have a single, single customs territory. So yeah, it seems like the, the markets are liking that. But as with ever for the pound, you've got to be careful. Just as you think it may be going one way, a comment can come back the other. Other comments from overnight regarding the pound. And I was just having a look at these just before coming on. Obviously there's a decent little read on, uh, on the BBC just talking about, uh, the detailed plan, or supposedly, uh, that he's going to be releasing, uh, on Wednesday, uh, obviously after the, the Tory, uh, party, uh, the conference. And it's, uh, yeah, these— this is the comment here, but Ireland's Deputy Prime Minister Simon Coveney said the plans were a non-starter. And that's really, you know, no, no real surprise there. Uh, the pound, yes, you have a bit of a spike there, but it's a case of it's really gonna have to wait through the important dates. Obviously, we're into October now, and, uh, of course, the 31st remains key, uh, not just for Mario Draghi, but of course the, uh, the 31st of October, the Brexit deadline, Halloween. But before that, a couple of dates to be aware of. You've got the crucial EU summit on 17th of October, so that's one to put in the diary. Of course, Wednesday and Thursday this week, we're expected to maybe get more in the way of what this new deal proposal could be. And I was speaking with, with Ant yesterday, and he was saying, of course, how Boris Johnson said actually, if, if they don't have a deal or leave on a no deal on the 31st of October, he is gonna continue as PM. I don't think there was many people that thought he wouldn't, but it's obviously quite funny when he said, you know, he'd rather be dead, it was a million to one, and look where we are now. Kicking the can down the road, as such. So yeah, I mean, comments from overnight, nothing really too new. The Telegraph reporting that the final Brexit plan— well, we'll see if it's the final Brexit plan— to EU leaders to be given in 24 hours, to be based on the creation of an all-island economic zone which would allow agricultural and food products between— to move between Ulster Republic without checks at the border. Further reports stated that Britain is set to present the EU on Thursday, the text to EU on Thursday, whilst the Telegraph also noting that the formal text will be delivered after the Tory Party conference on Wednesday. So really, post-Wednesday, Thursday, we should be able to start to get a few more headlines in regards to Brexit. So really, today we'll come on to the data calendar. We do have some UK data out, the manufacturing across the board today, and the morning out of Europe and UK, and then the US in the afternoon. Uh, but really I would say for the pound anyway, a case of just sort of waiting for the remainder of the week to really get, uh, the, the main moves, uh, perhaps, uh, overnight. The— if we bring in the Aussie dollar chart, you can see here, uh, the classic really central bank move of the last couple of years. Basically whenever you almost want to look at the, the 1-minute candle and then do the opposite. And here you can see we spiked higher to come back lower, and now obviously trading down at— on the futures anyway— at 67.23. Lowering rates, uh, the RBA, as expected, it must be said, but now to, to the record low of 0.75. Usual, uh, story of, of blaming the global slowdown in growth. Even a couple of Brexit comments have been, uh, floated around by economist yesterday, which I find quite funny that they want to put that in the mix. But, uh, yeah, that's, uh, the unemployment situation which has risen recently. And of course they're saying that they may need to do another cut, this being at the beginning of next year. So again, we're gonna have to start pricing that in. But this was really as expected, I would say. But of course, you know, if we have a look back, not just necessarily the quarter but September as a whole, um, you know, some of the headlines that were coming through— where's the mouse gone? Um, you know, the US dollar was, you know, now the strongest in 2 years, but also you had other central banks cutting. So the ECB finally, uh, cut. Obviously the Fed did as well. The pound, fine, we're gonna have to wait and see what happens with Brexit, uh, and now the, the RBA following suit after a previous cut. in the, uh, the beginning of the, the summer. Uh, so as expected, and, and I think with, with this market we can expect more downside. I think anyone that is betting against the dollar now is probably still quite unwise. I know we're on a 2-year, uh, high, but we just have to look at EUR/USD over the last year. Whenever you get a push higher, what a good opportunity is to sell. Uh, and, uh, with the Aussie dollar, uh, we are obviously under pressure. Of course, a really good situation and trade could help. Other sort of hindrances listed were due to obviously the trade war and the China-Hong Kong situation as well, and some commodities as well that perhaps struggling a bit. But yeah, Aussie dollar come under pressure overnight and we saw that, that push lower. Just to go over the, the S&P, so as I said ended quarter 3 with the biggest year-to-date gain since 1997, which I'm sure Donald Trump will be happy about, and he'll be tweeting about that today, finishing the quarter up just. However, and we of course near those all-time highs. European shares followed suit. And you know, actually, I was looking at this and I wasn't bringing the euro stocks here and looking at on a quarter-to-quarter basis. And one, uh, longer-term trade that I am really interested in at some point is Euro Stoxx to eventually— and I'm talking real long term here— is, is to get us up to those highs that we had, well, at least here looking around 2007. I mean, you know, super long term, uh, on the millennium, the beginning of the millennium, why not? But we are just starting to come up to the top end of the last few years. You can see it's probably worth getting a bit of a trend line on this now. And this is looking on the quarter-by-quarter basis. And, and, you know, maybe it's not going to be for quite some time, a real breakout of this area. And it's got to play catch-up. Um, and then, you know, looking to towards this area anyway, you know, maybe go into a bit more detail about this in, in, uh, in due course. But, you know, while you've got US stocks on obviously all-time highs and you know, even the DAX is not really looking like this. We're just bringing the DAX here now. You can see obviously up near it— well, give or take a few quarters back to 2008 in January on its all-time high. You can see the Euro Stoxx is completely different situation. So at some point I do believe that's going to be a good opportunity. And really for me, uh, technically I'll just be waiting for that confirmation of a bit of a breakout of this whole zone And obviously remains to be seen whether that can happen, but third quarter in a row, uh, for Eurostoxx to the upside. Just bringing in that S&P chart here, you can see obviously near that all-time high, and that's the, the third quarter to the upside. You can see just how many little red candles there are. NASDAQ, which was on the, uh, the brink yesterday, just about finishing to the upside. If you remember, literally this time yesterday we were talking about the NASDAQ being red for the quarter. Well, good day yesterday and it finished up. And obviously the Dow Jones likewise, all near their all-time highs as well. So really, in summary of certainly September, we had the, the repo rate situation which seemed to panic markets for a week. We had the Saudi and Iran situation, uh, you obviously had rate cuts, global slowdown, trade wars which led to trade recessions and a strong dollar, but US stocks are near all-time highs. Don't bet against stocks at the moment. And of course, with election year next year, we said yesterday, October, historically the year before election is a very good month for stocks. Are we about to see another push to all-time highs? I'd be interested to see what you guys think. Uh, of course, as you all know, this time next year I do believe US stocks are going to be on the all-time highs. Anyway, other headlines from overnight, relatively limited, it has to be said. Um, you know, just having a read over the, uh, the EU morning call, and, and really it's, uh, obviously with the holiday and the slow starts the week, bigger things that come later on, that's not all too surprising. Obviously equities recovered overnight. You had the RBA cut, as we mentioned, a couple of Brexit headlines, but it's going to be choppy really until Wednesday, Thursday. Uh, and it's worth looking, and you know, you can see looking ahead, the calendar actually is, is not a bad one. So while maybe new headlines aren't going to be the immediate driver, the calendar today absolutely could, uh, be that. If we have a quick run through, obviously we've had the, the rate cut already, uh, 8:55 we've got German manufacturing, which has obviously been poor for quite some time, uh, as EU and the UK has as well, all under 50 even the high end of the ranges for all of those are below that magic 50 number. Uh, so, you know, if we were to get anywhere near those 50s, what a good reaction you would see. But at the moment, the situation is not good, uh, this side of the pond. As we go into the afternoon, we've got Canadian GDP expected month-on-month 0.1. We've then got the US manufacturing numbers, which for once looking to come in above 50. 49.1, obviously that was the lowest figure we had for quite some time, uh, last month. So September's reading looking to be a, uh, a beat month on month, uh, and looking to come in at 50.4. I mean, it just confirms the situation that the US is in a better place than, than other markets, uh, other, you know, currencies and countries at the moment. And I, I think you've got to expect the the US dollar to, to continue to strengthen. You know, I said we'll have a look at the chart, certainly on, on that sort of monthly outlook. And if we have a look at, you know, the euro dollar, I'm just going to put this on the daily chart, and you can see obviously we're at that year, year low at the moment. You know, what's going to stop us now? If I just drag this really longer term, and, you know, I'm going to put this on a weekly chart now. Now, what's really going to stop us getting down to you know, some of these levels, you know, from 2017. Look at, you know, this is, you know, whenever we have that, those euro pushes, and, you know, I like to talk about those trend lines that break and we get a further move to the downside. I think I'm— I feel pretty confident that the euro is, is going to continue to, to move to the downside. There's been a couple of stories over the last couple of days how Lagarde is against what Mario Draghi's just done, but you know, I mean, look at the reaction to, to the market. Still euro weakness, the dollar expected to strengthen again. Yes, there'll be little pullbacks in this case to the upside, but I think we'll, we'll get a decent push continued anyway for, for the, um, for, for the euro. So, you know, continued here, certainly from opportunity-wise, be looking, uh, you know, over the next couple of days at these previous lows that we had back in September. Um, we've already had a retracement to there and it's worked, but that's really a ceiling I think going forward. The pound, it's a tricky one because Brexit is, is going to drive things here. Last few days you can see we have been drifting down. Again, an interesting market that I'm sort of waiting for is the euro pound, and this is here looking on that daily chart. We didn't, uh, quite get up to— I had the orders waiting for, for a short. You can see just the importance of this level, didn't quite come in. I wasn't obviously in the office last week, so I wasn't actively looking at it. Um, you could argue I probably should have got in there, but, uh, now the idea being just waiting to see, can we get a confirmed break below this? It's not the greatest trend line, but the idea being that we can just get continuation below this trend here and look for that real breakdown to the upside. Of course, with Brexit, we could have a day below and then one spike and we're back above above that area, but certainly remains quite an interesting market for me anyway, looking for the pound to strengthen and the euro to weaken there. S&P got a favor, I think, you know, push to the upside, but trade will be the main story. I still think there's going to be a good buy the dip opportunity for stocks. Um, I do think, you know, this time next year we're going to be at all-time highs, but I don't think it's gonna be a slow grind to the upside. Speaking of slow grinds, obviously with the, uh, the Chinese holiday, uh, what stocks love the most is a low volume day where it can just grind and grind higher. Finishing up 0.5% yesterday, uh, if we can clear this area around 3,000, I think, uh, all-time highs become a bit of a formality. However, is a key resistance point, um, to, to bear in mind. Oil, obviously with that trendline break now you know, I would be looking for, uh, that to, uh, continue to the downside. I don't quite know what's going on here. The oil chart looking quite funky. Uh, oh yeah, there we go. I was wondering what that gap was and completely forgot about the Saudi situation. So yeah, break of this trend line, I, I think we can continue to come lower. Overall, I do see oil improving into the back end of the year, but just from a sentiment point of view, the break of this trend line is key to Just like the break of this whole area for gold is massive as well. We've already hit that, uh, that target, if you like, that you would have had in mind, and we're actually just testing it again now. Gold obviously coming under significant pressure. Dollar again near that, uh, a 2-year high, uh, as well. So overall headlines from overnight: Australia cut rates, stocks recover, gold and oil under pressure technically as well because of this strength. Chinese holidays, some manufacturing data out in the morning, and then a couple of Brexit headlines. But I would kind of just wait and see for the pound really for the rest of the week. As usual, any questions, obviously please do let us know. Be on the mic throughout the day. You know, things are starting to move a bit, but I think that the main moves are gonna come Wednesday, Thursday, and Friday.