The Importance of USD Movement In Today's Session

Okay, very good morning to everyone. Hope you're doing well. It's Friday, 25th of September, um, back by popular demand after last week's guest appearance.

I have Sam North.

Hi guys, thank you for having me.

Yeah, it was a, it was a pleasure, Sam. Um, I think people really appreciated your look through of the charts, um, last Friday. So what we'll do is stick to the same kind of game plan as normal. I'll go through some of the, the close on Wall Street, what's happened overnight in Asia, and then generally some of the news stories in play, what we're looking out for for the day ahead, and then I'll hand it over to you. But please do interject at any point if you want to add your view or anything like that. I'm going to throw in a little bit of Trump holding a campaign rally, lots of social distancing being adhered to last night, so Good to get your thoughts on that. But, um, let's have a look, a quick look at the charts as usual. I guess that gives you a good sense of general sentiment at the open. And as you can see, the Dixie's flat, and that's largely reflected in the major currency pairs in the top left, in euro and sterling. Gold down a touch but fairly sideways overnight, down $5 at $1,871. Equity index futures, US pretty flat. DAX up but has been drifting lower just as we go through the European open. Crude also just drifting a little bit back towards $40 down here at the bottom, but only a loss of 13 cents. And T-notes really are not doing anything and haven't done for the last couple of days at all. Super tight ranges there. And to give you a bit of a flavor, we obviously had a positive close on Wall Street, saw a really decent bounce actually yesterday. We were looking at those levels And this is that daily continuation chart where we had marked up on that rectangle a decent area of support around the 3,200, 3,192 actually marking the area of support that was seen in mid and late July. And the market really responding to that quite nicely yesterday as we were talking about in the briefing. And in terms of the US close, the S&P and the cash finished up 0.3%. The NASDAQ as well seeing a pretty decent bounce This is the, the chart again that we were looking at.

It didn't get as far down as to really coming to the more interesting or solid levels of 100 DMA respectively in this index and the late July lows because we were just respected and bounced off that low that we saw on Monday on that initial volatility at the beginning of the week. So that's still holding and remains a key line of support on the downside, as too does the rectangle still. On the intraday session if things start to sour in sentiment. But overall, we had a higher close on Wall Street across the three indices. As I said, the S&P's up 0.3, NASDAQ up usual kind of minor outperformance, up 0.6, Dow up about 0.2%. Now, you know, why the bounce? Well, a couple things. And the House Democrats— so let me just switch over to some slides, uh, just transition. So the House Democrats now have started drafting a stimulus proposal of roughly $2.4 trillion that could take into possible negotiations with the White House and Senate Republicans, according to House Democratic officials. And remember, one of the main talking points, of course, of what had been seen as a contributing factor to some of the downside inequities of late has been the lack of willingness and forthcoming stimulus coming out of the US, particularly with the sidetracking of now the Supreme Court nomination with the death of Ginsburg being such a key point of contention now for the ultimate outcome and post-US election environment. That's kind of detracted then from getting a deal done, which is more fiscal stimulus. Obviously, one person who's been banging the drum for more certainly aside from politicians, has been Jerome Powell. He's kind of had a busy week speaking to various different political groups, and he continues to call on the need and necessity for fiscal stimulus. So this is quite a positive development overall, certainly probably helps stabilize things yesterday and contributed to some of the rise. House Speaker Nancy Pelosi reiterated she is ready to negotiate it with the White House on that proposal. However, the bill could get passed in the House next week, but Trump has indicated he's willing to go only as high as $1.5 trillion at this point. But I guess what the people are taking some positive out of is the fact that they've gone from basically around $500 to $600 billion to $3.5 trillion. Now we're arriving at a number that's a little bit closer into the territory of potential deal-making. I guess is what the general perception is. Also separately, another thing that contributed to a little bit of risk-off in the last 48 hours or so had been the fact that Trump basically said he wouldn't go quietly and hand over a smooth transition of power if he lost the election. But Republican lawmakers yesterday also vowed that the president's transition after the November election will occur without disruption, basically rebuking what Trump said yesterday about his refusal to commit to that peaceful transfer of power. So a couple things there, um, just to be aware of. But otherwise, the other kind of stories that I'm looking at this morning are from a dollar perspective in the FX markets. I know, um, Sam will probably talk about this a lot more, but really nice chart that was shared by Alex and the team this morning and he's been talking to the guys already very early about the, the dollar index. And technically the dollar index is a really, uh, quite interesting level. And the dollar has actually put in its best week this week since April. And you remember what was happening in late March, April? That was obviously when the world was in full fear, global pandemic kind of meltdown, and obviously everyone was flocking to the dollar at that initial phase. And we've seen the best gain in the last couple of sessions since that point. Now, where we're at, at the moment, though, is interesting, starting to look a little bit overbought. And technically, you've got that initial low that was seen here going all the way back to when the pandemic volatility was really kicking in. And then that goes all the way back to really 2018 price action. So it'd be interesting to see how it responds here. Definitely will be quite key, of course, for the major currency pairs. But also, I think it's going to be quite key for the prospects of precious metals. You know, one of the main reasons why I think precious metals have come under such aggressive selling pressure of late— and I'm going to switch it over to, to gold here. Gold's gone from basically an area of quite extreme range, but ultimately I'd say consolidation after the big shakeout we had in the beginning of August, but it's quietly just continued to move lower amid certainly some of this dollar strength. And this week is no different. At the beginning of the week, we were trading around 1920, and now we're trading down at around 1872, having printed as low as sub-1850, uh, this week. And so a turnabout in the dollar will be quite important for supporting, um, these precious metals, which have been under pressure. Now technically These are charts I was sharing yesterday. You've got this area going back to really July of consolidation. That would be a key area of support here on the downside. But if we're looking at silver, also from a technical perspective, the 100 DMA has provided quite a nice area alongside this trend line I've been keeping an eye on from the March activity when precious metals started to really get fired up. Post initially the pandemic sell-off that we were seeing. And after the initial flurry that was seen on Thursday session, we're respecting back onto that trend line. So we're interested to see where things close out the week. The reason why as well to talk about the precious metals is that Commerzbank, the German bank, they came out, they've had a research note released overnight and they've said silver and gold have been oversold and the positive environment for the metals has not changed. It'll be hard for the dollar to sustain its gains given the fact that the Federal Reserve has pledged to stick to its expansionary monetary policy. And again, you know, I do agree. I mean, timing of course is important when these banks put out these notes. They're not talking so much about the intraday session, they're talking about just generally over the kind of medium term. But I, I kind of agree. I mean, and interestingly, technically the Dixie here is at quite a key level of resistance now, having shot broke out of this area of consolidation over the last couple of weeks and months. So it will be interesting to see if this provides a bit of a footing, if that does hold for these precious metals, which have been ultimately under quite a bit of pressure in recent sessions. Other things I wanted to talk about, sticking with the US theme, there was a note out of Goldman Sachs. There's a lot of people talking about the fact that— and this has been reflected somewhat in market positioning, particularly in options, for example, about the type of volatility that we could see, not so much on the election night itself, but the period thereafter, given the mail-in ballot system is likely to result in a lot of uncertainties around getting the actual formality of who's won the election. But Goldman's have come out in their latest note, and it's kind of a little bit against the general consensus. They're saying that traders need to reduce their expectation that a delayed US election result would upend markets. They said that, uh, delayed outcome is a tail risk, um, but a combination of early results, voter turnout, county-level data, and high correlation of polling errors across states suggest investors will have enough information on election night to determine the likely victor. So that's quite different from what others have said. I mean, I hope it's like that. I love a little 24-hour all-night session doing these big events, because it was looking a little bit likely that a lot of that general overnight activity might have been diminished by the fact that it's going to be a quite protracted event that will unfold over several weeks. But GS saying, for those aforementioned reasons, that we might have enough information on hand though to draw some conclusions. I guess it depends how the actual votes and information we have at hand at that point suggest. So yeah, just like to note on the Brexit side of things. Brexit, I guess, has been— it's so interesting, isn't it? Two weeks ago, everyone was talking about Brexit. Coronavirus spikes, and it's like, what? There's Brexit? What's that thing? It's amazing how blinkered the market becomes. You have obviously the chancellor unveils more formally all of the things that we were already kind of aware of yesterday in terms of his plan for jobs and so on and the economy going forward. But the Brexit headlines probably likely to come back to the forefront next week. Michel Barnier and David Frost are scheduled to resume negotiations on Tuesday. Just as a heads up, Barnier told EU diplomats this week that Johnson's move, this rewriting of the withdrawal agreement, had left some bad feeling, but the atmosphere between negotiators remained constructive. So they're continuing to push on irrespective of some of the initial threats about what Johnson was doing by breaking international law and so on. Seemingly there's enough will on both sides to continue these talks to try and broker a deal, which obviously It's not just about penalizing Britain. This is in the best interest of both countries or areas to strike a deal here. The one thing though, we've only got around 2 weeks now until the self-imposed UK PM's own October 15th deadline to reach a deal. Now I would say that's not going to happen. So that doesn't mean though that that's instantly going to start seeing the pound coming under immediate pressure, several officials have already warned the negotiation could now stretch into November or even December. Now that does put an incredibly tight turnaround on trying to— what had been a mid-October commitment to then get it ratified across Europe and elsewhere in time for the end of transition at year-end. But, you know, I'm pretty confident that I think that these talks will go into November for sure, and it could even go even later. Does that mean that there's a cliff-edge type end of, end of year scenario? Well, look, the goalposts have moved with this multiple times and they will move again. So at the end of the day, um, I'm not expecting any amazing movement at the last moment here. To actually get an actual deal confirmed in October. I do think it is going to drag on a little bit longer, but I don't think that necessarily means that, right, that's it, there's no— there's going to be no deal. I think they'll just make a deal later on. I still think base case, they do secure a deal in the end. Um, just wanted a quick word on the COVID situation. As far as COVID is concerned, The UK reported its highest number of new cases in a single day since the start of the pandemic. However, as I was kind of suggesting yesterday, I think you've got to look a little bit beyond that because the first wave case numbers of kind of peaking at 6,000 in April time are not really reflective of probably the underlying situation was ultimately way higher than that. So I think it's a bit of a media spin to start talking about it. I wouldn't overstress that. The more important thing is, though, UK rates are accelerating very quickly and are likely to continue to do so going forward. France, new infections have jumped to a record. One of the questions I had, I did what we call like a masterclass on our platform last night, yesterday evening, with with a group of traders, and part of the conversation was about COVID And they were asking me, like, you know, things are obviously getting worse. You know, at what point, what would you look for as a trigger then for markets to start becoming a bit apprehensive again about COVID And for me, even though mainland Europe and UK is deteriorating at the moment, and this definitely is having an impact on expectations about the kind of shape and speed of the recovery, it's the US which ultimately is the most important. But at the moment, the US generally has not been following the trend that's been materializing this side of the pond. Now, one thing, though, to be aware of is that US new cases did actually rise last week after falling for 2 months straight. So in America, the reason why the markets generally have been OK— yes, we've seen some downside, people getting a little bit worried about a lack of forthcoming stimulus. Generally, COVID numbers have been going down, and this is a net positive for general markets. However, last week and more recently, there's been a few signs that US numbers are starting to pick up ever so slightly. Not enough yet, I think, to spook people. But what I'm saying is, will COVID become a new dominant theme to really weigh on market sentiment? For me, only if US numbers start to rise meaningfully and consistently, and we're not seeing that yet. But it definitely now is starting to come up on my radar a little bit more. Health experts believe that the recent spike was coinciding with the reopening of schools and universities, as well as the parties that were happening over Labor Day, of course. If you think about the incubation period, um, that was a big worry for some people about people adhering obviously to social distancing and various restrictions was probably unlikely to happen on what otherwise is a a public holiday in America. The one particular region, if we look at the US, is the mid-states. So all Midwest states except Ohio have reported more cases in the past 4 weeks than the prior 4 weeks. Now, a lot of this, again, is to do with social distancing. The reason for that is because there's an annual motorcycle rally in South Dakota. Of which attracts annually hundreds of thousands of visitors, and that is said to have caused some of that latest movement. So yeah, I just wanted to explain what's going on on that side of things. The US CDC director has said that COVID-19 vaccine will likely not be widely available until summer or the fall of 2021. So I'm not putting a great deal of weight just in this one person. Obviously we have to layer in what authorities and bodies are saying with what pharmaceuticals are trialing and how that's progressing at this point in time. But it's quite interesting because a summer or fall of 2021 for a vaccine, according to the director of the CDC in the US, is way later than generally where market consensus lays, which is more like Q1, Q2 of '21. So that's the other quite important thing to be aware of. I just wanted to show as well, when it comes to US and social distancing. I have to just—

Sorry to interrupt, just need to share the screen.

Yeah, I just want to show this. Thank you, Florida. Make America great again. These are all genuine photos from last night. And this was at an airport hangar in Florida. I can see everyone's got their face masks on. Quite obviously. But it's just, I mean, it is quite, quite unbelievable when you think about we are in the middle of a global pandemic at the moment to see this type of activity. However, you know, I think you've got to cut between the kind of the noise. I mean, this isn't like propaganda. This is shared by Donald Trump himself. So it's not like it's the left liberal left trying to catch him out. The important thing here is the area. This is Florida, right? And Florida is ultimately one of the most important battlegrounds in terms of the college, um, the, the college votes that it counts for, which is where really the balance of power is, not the popular vote. Florida, obviously, given its large population, is one of the highest in terms of its, um, college votes. So it's intrinsic. This always ends up being a definitive key battleground. And at the moment it is pretty close. And so Trump is really going out there and doing everything he can to try and, uh, to try and get this back in his favor, because at the moment Biden is just leading it ever so slightly in recent polling. So for me, this is all, you know, he does this on purpose, of course. This is to really kind of galvanize the base. Also as well, he's increased the frequency of tweeting about law and order. You've probably seen there's been lots of social unrest across America with more— the same repeat of white police killing, I guess inappropriate use of power against Black individuals has happened multiple times again. So the law and order mantra is becoming ever more prevalent, just given what's happening. And so, yeah, I wouldn't— as much as I think that this is probably not particularly useful for controlling a pandemic, which is showing some fairly suspect signs of increasing in certain areas in the US, and Florida was one of the Sunbelt states that was hit quite bad, I would definitely be interested to keep an eye on the numbers that start coming out in the coming weeks. But you've got to understand the amount of political importance this area takes, and obviously he wants to make a real statement piece out of this. But yeah, quick look at the calendar just to wrap things up, and I'll hand you over to Sam. Today is actually, from a schedule, super quiet. UK public finance data, Europe M3 annual growth, none of that's gonna move markets. Quarterly Bulletin out of the UK as well is a non-market mover. The only real thing you've got is drillable goods coming out of the States for the month of August. Baker Hughes rig count for any oil traders. Couple of Fed speakers. Fed's Williams is a voter, speaking twice in the afternoon and then in the evening if you're UK-based. So maybe worth just keeping an eye on. But a lot of Fed speak this week. I wouldn't say anyone's particularly changed the needle or moved the needle too much. So with that, That's my piece done. I'll hand you over to Sam to go over the charts.

Thank you very much, and I think it's interesting, one, the quiet calendar, which I'll come on to, but also the— if I can just have post for sharing— but also the equity markets recently. I've had a lot of mates, which is always the case whenever the markets come under pressure, I always get my mates saying, what's going on in the markets? What's the reason we're coming down? Is it, is it due to, you know, numbers spiking up in Europe? And, you know, it's— it might have a tiny bit, uh, in the way of a reason behind it, but for me it's all about the, the US dollar. And absolutely, if the US numbers, you know, really do start to pick up, that is going to weigh on things. Whether the US do anything about it or not is another question. But for me, yeah, the US dollar is really having an impact across all markets.

You talked about gold and silver, uh, and how they had a little bite, uh, lower to then, you know, recover yesterday.

And euro-dollar is the same. And it's almost like the Fed meeting was, was that what sent markets lower, the prompt, the, you know, the reluctance to do anything more just yet. And I think there's still a bit more to go, to be honest. I'm not sure markets are low enough for Jerome Powell to come out and deliver another bazooka.

So how do we look at that from a technical point of view?

Well, look, it's the last day of the week, so therefore we're going to be looking at weekly closes. And as long as the euro— for, you know, looking here at dollar bulls— as long as the euro finishes below, you know, this highlighted area, this trend line, I think the bears are going to be really happy, you know.

To finish— what day was that? The 22nd— below there was key. We then had some continued selling the next day. Okay, a little bit of pause, bit of profit taking for those that are, you know, happy enough with this push through. And as long as it stays back below sort of 1.175, I think that the, you know, this market can continue to go lower. It just might be that, you know, with a quiet calendar, with, you know, a bit of profit taking into the end of the week, we do have a bit of recovery, which is going to aid all the other dollar-related pairs, which just so happens to be a lot of the markets at the moment. As they're sort of moving off that. So yeah, EURUSD looks good. I mean, look, 115 is, is sort of talked about as the, the next area that we come to, and we might well look back and, and say, well, look, when the market was at the high, there's one person that's moved everything, and that's ECB's Lane with one comment, and we're now all the way back down here. We'll have to see how that pans out, of course, over the coming weeks. The euro then on that 60-minute And this is this bringing in the pivot points. Now you can see it's got a fair bit of room to go to the upside, uh, to retest that whole area, that level resistance. We'll have a look at the pound in the mo— in a moment, but that did exactly the same, broke a massively key level of support, ground higher for about 4, possibly even 5 days before then really pushing lower again. So yeah, for the euro, it wouldn't surprise me to see, you know, today and Monday grind higher. Like Alex has been talking about in our, in our Amplify Live trading room, the dollar index is, um, you know, it's over, overbought for each, uh, for example. So it has, uh, you know, on the short term, so it can have a little bit of a pullback potentially. Um, but yeah, let's have a look at the pound then on that longer time frame going into the end of the week. Obviously it's going to be key. And this is what I was talking about in that, that support level breaks and then 1, 2, 3 for, you know, you could argue the 5th morning there as well. It did push higher only to then come back lower, break the low of the month, and now we're just trying to find a bit of, bit of support, uh, on this market. You can see it's a significant level here for, for the pound. Decision time for sure has got to take place. And I was posting this on, on Twitter yesterday, just the significance of this whole area. You can see why, uh, it is, uh, we found support there. You can see the resistance triple top from 9th of July to the 2 days that followed turns into support. Then we hit it again for a close of the week perspective. You know, the, the— if there are any, uh, pound bulls, they want price above that. But that may well see, uh, other, you know, pairs against the pound, uh, other crosses actually push higher as we see a bit of pound strength on this support and a bit of dollar weakness potentially today. That's how I see see things, uh, falling out for the remainder of the pound here. You can see that sort of comes to fruition if we do break above today's R1, yesterday's high, Thursday's high, the low that we had on the 21st. You want a great level, great line in the sand, that is it there. There's nothing to say that we don't find resistance here, start drifting lower, the euro does the same, and then we see dollar strength into the close of the week and it gets ugly elsewhere. But if we start to see a push above here, I think we can get a quicker move towards that, that R2. By no means does that mean that the dollar is now gonna weaken for a period of time, it just means I think that we can have a little bit of a break. Gold, you can see yesterday found support and is, well, at the moment slightly up, but this looks okay for those people that potentially wanted to go long. I don't necessarily think waiting for 1828, the highs that we had back from April, is a bad bad move. I think we could still get there. Uh, you can also see silver, like you mentioned, uh, just pushing lower. And, you know, this was, was something that I was looking at, uh, when I did the masterclass 2 weeks ago in the false break of $2,600 and the false break for gold on, uh, $1,900. Both never really took place. Uh, and, you know, dollar weakness would obviously help that come through. But yeah, silver finding a bit of support if it can finish above $23.77, you know, that would be, you know, minor win for, for silver, and then we could potentially start to see a push higher. But at the moment, if, uh, if I was a dollar bull, I'm happy regardless of a move higher. Let's have a then a flick over to, to look at the S&P. Like you mentioned, 100-day moving averages across the board weren't too far away, and we found some good support, um, yesterday. Decent pop higher It's not out of the woods, of course. Let's just get the moving averages on as well, the 50, 21, and 200. The 50-day moving average has, has been key for, for this market, so I would keep a watch on that. More importantly, and I'll come back to the S&P, the Dow Jones, you can see the 50-day a couple of days ago was the top, and it's been incredibly well respected. So you're trading the Dow on your longer time frame, keep a watch on that. And and obviously the NASDAQ, you can see exactly the same. So yeah, they're looking at 50 days, so we're gonna look at it. So keep a watch on that, keep it marked up on your longer timeframes, going into then the close of the week. And I think, you know, there is a bit more downside in this market. And, you know, it's not panic stations at all. I think it's healthy. I think we still finished the year on the highs. A bit of that, you know, does depend on Trump winning the election for me. But is it panic stations if we're only 9.4% off a high? I don't think so. I think the dollar, you know, was, you know, under pressure for quite some time, strengthened. This is obviously going to bring all markets lower, and it's healthy enough. I think, you know, from a support point of view And I get a tiny bit long yesterday on the 100-day moving average on the S&P, but I have got this area marked up here, 3175. You can see a nice area of support around here. Turns out to be, you know, another area where prices reacted quite strongly to. So that's something I'd be looking at. To the flip side, if we do get above the 50-day moving average, you know, then you're going to come to the 21. You know, if you remember when we did the, the live FOMC on— was it the 16th of September? It must be. Yeah, 16th, basically when all markets turned. I was saying if we finish above 34, uh, well, this— these, uh, recent highs, we go into all-time highs. That didn't happen, and you can see we pushed lower. So that's another one, you know, just area to be aware of as we go into the shorter time frame now on the, the S&P and start marking up some of these levels. Let me just bring in the pivot points. You can see there is another key point today that from a bullish point of view that might support yesterday being a short-term low. We would need to get above today's R1, the support point from Wednesday, almost turned to the high yesterday. That really for me is, is a key line in the sand where if we can get above there, the bulls feel a bit more confident. But as mentioned elsewhere, I think the test is going to come if the dollar weakens over the next couple of days. When it comes into very key resistance, or say euro dollar, what that is then going to lead to for the rest of the market. It's going to be really, really interesting. Another market just to wrap up for you, and I've got obviously oil here, and you can see this on—

let's just put—

let me remove some of these studies. We'll have a look at this on, on the, uh, on the daily chart and bring that in. Obviously, like you said, it was just flirting around that sort of $40 this is how we finished last week, you know, on these previous highs that we had, turns into be, you know, really nice resistance. I think anyone sort of bearish oil at the moment can still be happy enough, and, and stops will be above there for sure. So, you know, this is almost how I potentially see EURUSD panning out. I know it's a completely different market, but the dollar has got some sort of weight on commodity pricing here. So the breakthrough comes back to find resistance, and we can then start to maybe push lower as we go into the close of the week. Let's put this onto this, the 60-minute, uh, bring in the pivots just for a bit more context. You can see, like the S&P, like euro, like pound, just above where we're trading there is a massive resistance where any bulls are going to want price to get above. So we've got the S&P, the R1, uh, oil, the R1, obviously similar for NASDAQ and Dow, and also the pound where we're just trading almost now as well. You can see just above, uh, this point here. This would be a minor victory for anyone that wants to go along these markets. On the flip side, for continued downside today, I think those levels have to hold. Thank you, uh, and for inviting me on. Always a pleasure, never a chore.

Good stuff, good stuff. Well, um, yeah, if anyone's got any comments for us at all, if you're watching this on, on YouTube, don't forget to subscribe to the channel. I know Sam always puts out a video on a Sunday as well where he'll go over similar to what he's just done there for the week ahead. You know, that in combination, and I guess with the briefing I do on a Monday, it's kind of a great way to start the week, we hope, for you guys. But any comments on this video, just drop a comment and we'll reply throughout the day. But otherwise, thank you, Sam, and have a great weekend.

Okay, guys.