The not so 'strong and stable' pound

Hi guys, welcome to Friday 16th November, just gone half 8 here in London. Uh, gonna run through the briefing. Obviously you can see from the background now, pound trading at quite an interesting level. Uh, we just got Monday's low trading is the high of the day. Worth keeping an eye on that. You've also got Theresa May speaking on LBC Radio at the moment. Draghi also has just come through a couple of comments, but not really moving the market too much. I think quite interesting, I just tweeted about it, if Monday at 10 o'clock the low, would you say the uncertainty is as bad as it is now? I mean, perhaps you know, a decent little recovery from the pound already. It'd be interesting to see what happens here. You've also got yesterday's sort of high from the afternoon, uh, as well in the mix to, uh, to, to take into consideration with the pivot. I mean, for me, I think we could actually get to the low that we had back on the 14th, on the, uh, on the Wednesday as well. And for me, that would be the sort of the main hurdle from a technical point of view. These markets, whether you can argue that they're moving technically or not, uh, with sort of the swings and roundabouts that have been happening over the last sort of 24 hours or not, is up for debate. Uh, unfortunately yesterday I was away from the office in the morning, and you can see the, uh, sort of main reaction, uh, really starting from, well, just around about sort of 7 o'clock coming through. And we had the, the RAB resignation, which really kicked things off to, to the downside. And you can see since then we have continued. I realized I didn't have the, uh, the chart, uh, changed over. So that low from Monday traded, uh, at 10 AM. Obviously the high for, for now as well. Whether we can hold here or not will be sort of key for the morning, uh, but the main sort of level I'm looking at for, you know, more of us, maybe a medium-term short, would be if we can have a slow grind up to, to Wednesday's low. So the stories from overnight, obviously we can come on to anything other than Brexit in a bit. I'm sure everyone is getting to the point where they are quite bored of it. You know, you come back and every news channel for the duration of their program is Brexit related, and rightly so. And rightly so. You know, May has come out quite bravely, I would suggest, standing outside Number 10, uh, when, you know, some people were speculating she was going to resign. And, uh, you know, stood firm. And the pound actually, you know, recovered slightly when she started speaking. I think it was, you know, just after sort of 5 o'clock, 6 o'clock. And you can see we actually did push higher, uh, into sort of the closing, have drifted higher as well today. Um, yesterday it started all all quite well. You can see we pushed higher into the morning. We had, you know, Donald Tusk come out and say November the 25th is the date for the leaders to sign off for the Brexit deal. Okay, this is good, we're going to get the ball rolling. The evening beforehand, you saw the pound go from 1.29 up to almost 1.31 in the space of a few hours, a couple of hours. But then really, once these, these resignations started, the, the pound you know, came under pressure, which you would expect. The, the pound hates the uncertainty. And I think if we look at— we're looking a moment at a couple of possible scenarios where the pound could go, whether it be sort of a general election, or if we go down perhaps a no-deal route or leadership challenge, where the pound could go. But opportunity-wise, I would expect over the coming weeks it to be, it to be quite interesting. You've got, you know, rumors floating around, and I think it's quite important as well just to take each rumour with a bit of a pinch of salt. If you remember, even 2 weeks ago you had the raw rumours that he was resigning, and then, you know, the next day the thumbs up and the pound went higher. But now it's literally the headlines are coming out, Theresa May is going to resign, then 2 minutes later, well, she's got the emblem on the, where she's speaking, and that means she's going to stay. Well, actually, David Cameron had that and he left. I think you know, you're gonna have the journalists really trying to get that tweet in first, that comment in first, that source in first, and then you get the movement. So at the same time, people are gonna be taking a bit of a gamble from that point of view to get their name out there. And generally that's how I feel, because even this morning you've had, well, at 9 o'clock you're gonna have a vote of no confidence expected, you've got someone else expected to leave throughout the day. And then 2 minutes later, it sort of comes out and actually, well, that's not the case at all. Just while we're going through the briefing, I've got the tweet deck open just in case Theresa May does continue to come out with anything, but for now it's more of a general chat, not necessarily completely the deal related. So yeah, quite a few contrasting statements. I think that's the sort of important point to take into into question. Um, so, oh yeah, let me just transition over. This, uh, this tweet I think was quite interesting from Viraj Patel at ING, um, just with a couple of scenarios in his opinion, not necessarily ING's opinion, but of where the pound could go. So we're currently trading, you know, 1.2850. Um, so this was done when the pound was, was slightly lower, albeit We were trading there again this morning, so we've got the leadership challenge but unsuccessful, so the pound would still come under pressure. I think we could go below 1.27 on that, to be honest. I think if it does come out and they get the votes in and it goes from there, then, then sure, the uncertainty that the pound hates will, I think, weigh quite heavily. No deal March 2019, yeah, absolutely. 1.20 is inevitable. And maybe if we switch back over to the pound and look at more sort of longer-term play, 120 would take us down to that multi-year low. So the low after Brexit, 35-year low, I think we can, we can get to that point quite quickly if, if by March no deal was struck. But I think, I think we're still quite far away from that point of view. I think Theresa May, like she said, is gonna stick it out. She's in quite a hard position. I think everyone can sort of appreciate that, whether they agree with the deal that's on the table or not. You know, she's doing a tough job. I think from a Brexit point of view, it would have been a lot more positive for your Brexiteer if, you know, someone who had voted Brexit was actually in charge. You know, it's no, no surprise, no, not easy when, you know, Theresa May, who was heavily sort of Remain, was then put in charge. You're gonna have this sort of contrasting view, and it's easy to sort of criticise from the sidelines. It's easy to leave when the going gets tough and then sort of criticise from there and say, this isn't the deal that I want. Well, it seems maybe this is the only deal we can get. You can't expect it to be the easiest sort of ship to sail down through Brexit, are you? You're really gonna, you know, allow it to be that easy? I don't know whether we could ever get to the situation where we have a second referendum. You know, who even knows what the outcome would be? And then if it was to then be remain, well, surely you've got to have a freebie. So, you know, the uncertainty I think is going to weigh on the pound short term. I think it just remains to be seen. I think it'll be quite interesting to see, you know, what happens with Gove today. He's declined every single comment. Yesterday and again this morning. So I'll be almost having a little, uh, sort of your TweetDeck open with, uh, GOV as the sort of, uh, the search. Let's see if you can sort of get a beat on the markets. I know Anthony did a tweet not too long ago of good people to follow for Brexit-related, um, sort of stories, the journos. I'll post that in the chat as well. That's a sort of good one to have. But obviously Laura Koonsberg from the BBC is sort of one to have up there. And I'm just on my right-hand screen as I look now, I can see she's already been tweeting quite heavily, uh, this morning. Um, so yeah, a few sort of scenarios. Let's just go back over what else they thought. Brexiteer Tory PM down to 124. Yeah, I think that makes a bit of sense. And from a technical point of view, that would be quite an interesting, uh, level to have then got through, uh, the 12th, 12th of June last year low. I mean from a technical standpoint, we go through there, I think we make the year of the low, actually the low of the year quite quickly, to be honest. Uh, elsewhere you've, uh, so we've got the leadership challenge but unsuccessful, 127. Constitutional limbo, no credible PM, 125. Well, yes, I'd say even lower as well. And if we go on to sort of the odds of the, the next PM, you've got, uh, safe's favorite man in the world, Jeremy Corbyn, the favorite coming in at— well, you've got lowest fours there. Or 9/2, 5/1 as the sort of the favourite. Dominic Raab, Javid, Boris Johnson, Michael Gove, David Davis, and Jacob Rees-Mogg making up the sort of the rest of the list. So I mean, would any of them really want the job right now? I think you've got to sort of wait and sort of see from a personal point of view. And then, you know, you've got a couple of people in there that have just left the ship. You know, leaving the leader, you know, someone you've got to support, and you leave when the going gets tough. I don't know, it's up for debate whether those were the right decisions or not, and everyone will have a personal opinion. And also, that's what, you know, trading is. I think going back to the pound, just to trade today from a technical point of view by just bringing the pivots, it's, you know, from a fundamental standpoint, you can have your opinion, but then obviously trading that when it comes into play is the, the main sort of, uh, advice I would give. Yes, I think sentiment is down, but unless we really were to break, say, this, this trend going from yesterday's low to today's low, and maybe even you could chuck in the sort of the closing high that we had, I wouldn't necessarily be looking to get too aggressively short. Yes, the Monday low right now, yeah, absolutely working very well, and the Wednesday low at 129 on the futures also looks pretty good. So technically, for me, that's how I would sort of look at it. I think just like yesterday was where it's the more unscheduled, uh, things that, that come out, I think that's going to be the, your main sort of drivers, uh, going forward. So worth, um, not necessarily holding trades too long where you haven't got it risk-free, or maybe your stop moved down to your entry, but definitely the pound-related markets It's having a quick look elsewhere. We'll come back on to sort of the calendar and whatnot. Um, you've got, uh, well, let's go through the oil figures. I think oil was actually quite an interesting market right now. So yesterday, a build of 3 million was expected, and you can see from up at the top here, it came in at 10.2. So a much bigger build than was, well, one, priced in, and two, was expected. You can see looking at the reaction of oil here. I'm just going to highlight because it came in at 4 o'clock, which obviously it's unusual to come on a Thursday, and 4 o'clock is the time it does when it, when it comes out on this day due to the bank holiday we had in the States on the Monday. So if you're, you know, if you were to say first thing yesterday morning, you know what, it's going to come in a build of 10.2, you're thinking, well, hang on, we can get down to that low again. Um, is it, is a bottom in? You know, to see a reaction like this off of sort of bullish figures is is perhaps quite telling. And I know there's a bit of chatter in the office where Piers and Will were half talking about, you know, is that a sign that we're starting to see a bit of a reversal? Perhaps, you know, and I think short term you've got maybe going into sort of the close of the week favor the upside. We've actually just reached a pretty interesting resistance level as actually all markets are trading now quite near, you know, got pound on that resistance point. I know when I was looking at US equities not long ago, they were as well. And you can see here on, on oil, uh, whether we can close above there or not end of the day will be quite significant. The pivot and this trend line, which could match up later on, will be another one to, to take into consideration. So are we— have we got the low in oil? You know, be, you'd be a brave person to, to sort of say so. But I think after a move— and let's just put this onto a daily chart— I mean, have a look at that. We, you know, this was the, the longest losing streak in, well, ever, I think. You know, broke that 1983 one technically. You know, whether you're gonna say the bottom for oil was done for technical reasons or not, you know, why didn't it stop at this level, at that level, and so on. But you can see where we did stop. Now maybe I just have to move it above the camera just to show that more clearly. You had 2017s in the sort of December and February, so 2016 December, really good support once we had broken through that then in November last year and again now. So technically working quite well. Whether it's just a bit of a reprieve or not remains to be seen, but when you have figures like that come out and the market reaction isn't heavily to the downside, I think that is quite telling. Elsewhere, a bit of, bit of positive talk, a bit of positive talk for relations between US and China, and you can see equities indices in the US just pushed higher into the close. We also had Jerome Powell come out to speak, um, I would say it was probably around 6 o'clock. So actually when we were just perhaps testing this, this trend channel, uh, and he said, well, maybe now is a good time to review the Fed's, uh, sort of, uh, you know, plan, forward guidance. And I didn't actually, you know, see the initial reaction, you know, following these comments as I was heading out the door. But you can see we also push through and a bit more positive talk on, on US and China. You know, ING, I was reading an article this morning where they were saying they imagine China is prepared to make further concessions as well. You can see the effect that the economy is having, or the reaction of the trade talks are having on, on their economy. It's suffering quite badly. So, you know, those are things to consider into the close of the week. Obviously focus is elsewhere. Um, with Brexit. And even looking at the calendar for today, if I just bring that into, uh, into picture in a moment, make sure I've got the right day. You can see, is there much going on, uh, that's really going to drive price other than, uh, you know, your Brexit headlines? We've got some eurozone inflationary numbers at 10, short-term reaction if anything. Industrial production 2:15, again, are we going to see a full-blown reaction from that. I would be very surprised if we did. Draghi came out at 8:30, nothing really happened. Theresa May, the LBC interview, uh, not really reacting too much to any of those comments. It's more, it's a bit of a general chat as mentioned. So calendar-wise, I'd almost, you know, look to bin it unless we really broke out these low and high end of the ranges and wildly out of line. So I wouldn't even be looking to really trade these numbers if I'm being completely honest. I think it's a case of sort of sitting on your hands and waiting for that opportunity to come to you rather than sort of chasing the market elsewhere. I saw something quite interesting. If I just bring up this— Bloomberg tweeted this earlier: speculators have raised bullish bets on the greenback to highest since January 2017. And if you remember, in the markets, January 2017, what did the dollar do? Well, came under pressure quite drastically, obviously helped by the fact that Donald Trump was saying it was way too expensive. And, you know, the euro, the pound, the Aussie all strengthened at the beginning of 2017, and actually kind of the beginning of this year as well, until he started saying it was then too weak. But the point being, and what Bloomberg sort of reiterated here as well, the dollar's bull run has ended and it's time time to sell. You know, this is what Morgan Stanley are recommending, and I think it's, you know, to go just purely off that headline and start to, to look to go, say, long euro or long Aussie or long anything against the dollar would perhaps be quite unwise. I think if you have, you know, fears of sort of a recession starting to come back in, people, you know, effectively will start to look to, to buy the US dollar. So I think you'd have to be careful in, in choosing the correct markets there. But I do feel that you could start to get the Fed perhaps slow down their guidance, you know, that the 3 rates that were, uh, suggested, you know, back in the sort of September meeting, uh, and, you know, probably now December, they might just, you know, change their view on that. Interestingly, in terms of rate decisions, the money markets now have completely priced out a Bank of England rate hike, which, I mean, the fact that it was even half priced in was It was a bit baffling, to be completely honest, just after when a deal would be, would be struck. But yeah, that's off the table for now. Uh, it'd be interesting to see come December, uh, what the Fed do forward guidance-wise. So a bit of dollar weakness into the back end of the year, early next year, I can, I can see that happening. Uh, if we have a look at the, the sort of the weekly charts, or well, we'll keep it on a day just in terms of where we could finish from a technical point of view, which will be quite important. The pound here, obviously a lot of the focus is going to be on this. You can see this— let me just remove that— that trend line going on from the, the low that we had back, uh, in August, uh, last August, yeah, this year. Uh, is that up to date? Let me just refresh that. Um, if we can get a close below that, obviously it'll be pretty bearish. The Monday low for now as well looks quite important, even more so on the daily chart. As you can see, we talked about that 8:30, and that's held quite well. You've had sort of a 15-tick bounce from that. I'd put it down as simple— if we can close above that, sentiment is obviously more positive, and, and then short term you might get a brief rally in the pound. Euro, you know, is this the, the market where you might see an opportunity to, to get long against the dollar? Maybe not right now, um, as well. But let's have a quick look at this sort of trend line coming through. It's not amazing, but similar sort of level. You've got 1.40 in the mix as well, but you've also got this low the 5th of November. Remember, remember, uh, when we can get a push above that again will be quite key, uh, as the dollar against the euro has weakened for 4 days in a row, which is sort of the best run that you can see the euro's been on really since sort of the middle to end of end of August. Sorry, S&P is a tricky one. I got long myself personally after the midterms, was obviously quite excited to see that push that we had on the 7th. Stop went to sort of scratch, you know, when we couldn't break through the— from a technical point of view, that sort of October low. And when I was in Dublin on Monday, I see I saw myself get stopped out at entry. I still, you know, do think I favor a push to the upside. I think the political uncertainty globally has to improve. The Italy situation has to completely go away. Brexit, um, you know, has to, to improve as well sentiment-wise. And the US-China trade talks have to become more positive, which they, they half did yesterday. I think as well, whenever you're getting these, these down moves in equities, it's almost becoming desperation, isn't it, from Donald Trump in in terms of his team are releasing these statements on trade to sort of try and boost the market. So it is in a precarious position. You can see, I mean, if we were to take a percentage from that recent highest, the October low, you probably got it bang in the middle at 50. Uh, haven't got your free test, but from a trendline point of view, you might, might be worth having this on here. Uh, whether you would want to really get in a more medium-term position, uh, to the upside unless we closed above what was the high of the 2nd November or the low of the 9th, I'd be unsure. Uh, can we get above there today? Yeah, sure, why not, why not. Yesterday was a decent day, uh, for equities on the fact that we had a bit more positive sentiment, sentiment into the back end. But obviously a lot more things could happen and unwind today. Just to sort of reiterate, uh, the sort of the morning day data and afternoon data is not really going to be the driver. It's all going to be about is there going to be any further, um, sort of comments that come out. And I've just seen a tweet here. Let me just have a look on my right-hand screen. Give me one second. Unconfirmed and from a single always reliable source. So that's, uh, the case for a lot of sources that aren't too reliable. But, uh, but here in the 48 letters are in and Downing Street are prepared for a no confidence motion in on Theresa May. I imagine that's supposed to say as Conservative leader. I mean, obviously, we, you know, going off yesterday, it doesn't necessarily mean she's going to get ousted. While the uncertainty in the market, you would expect to see pound come a bit lower. And again, opportunity-wise, maybe you have got that trend line on, and that's the, the way to sort of look at it. Whether we can get a full-blown sort of reaction from this remains to be seen. So yeah, going on this morning, obviously keeping an eye on that, whether Mark will go resigns or takes up the role that he's supposedly been offered. Again, will be opportunity-wise, he takes that role, I think you get a brief rally in pound. He doesn't or he resigns, yep, sure, further continuation of this move to the downside. Will be an interesting day. And what a week it has been as well, um, for, for pound to even have made that Monday low this morning, I think is, is quite extraordinary. Just getting a further follow-through here off those comments. Keeping an eye now on this trend line, uh, coming into 9 o'clock. I've got it written down here from a tweet I saw earlier that we are expected the no-confidence vote at 9 AM. So just, you know, a bit early, those tweets. Uh, so I'll leave the, the briefing to sort of be wrapped up now. So do, do keep an eye on that. Uh, Philip in the chat, the tweet— so they retweeted it from someone called Jonathan Isabi. The retweet was on Stuart Hampton's Twitter account, obviously, who's on the ball for Twitter-related comments. And from a trend point, trendline point of view, good to see this respected here. So I know the market half looking at it, and now let's see if we can get a breakthrough, and effectively that would act as a resistance point. Um, I hope you all have a good trading day. We'll obviously be on the mic throughout, uh, any comments that come out. As well. We'll be sure to sort of post in the chat and, you know, as we go into the back end of the day where we finish the, the week as well, we'll sort of post a few charts related for that as well. I hope you'll have a good, good trading day, good weekend. Any questions, please do let me know. And the Dancing Queen marches on for now.