The Trading Week Ahead: 18th - 22nd November 2019

Monday the 18th of November, just gone 8 o'clock here in London. Hope everyone had a good weekend after recovering from that absolute unbelievable interview on BBC by the Prince. Was pretty incredible to see how that went. Something a bit more smooth sailing. Stocks all-time highs again this morning. You can see the S&P just printing, uh, here now, 3124, pushing to that new all-time high. The NASDAQ, a decent push higher as well, getting to 8,365. And the Dow Jones, first time above 28,000. Better get those 30,000 hats back on sale because as this market is, uh, continuing to push higher. In, in summary of, of last week, before we get on to the headlines from, uh, the over the weekend that are driving price, it, it really was, was dealt with, uh, any negative comments on stocks as, uh, just brushed off, just brushed off. You can see here, this is really the, the last sort of, well, few trading sessions, and you can see whenever there's a move lower, that buy the dip is to support back, whether you want to call it FOMO, when you whether you want to believe that we are going to get this Phase 1 deal, uh, and it would be smooth sailing from, from then on or not, this market has continued to go higher. So any negative comment met with positive a bit later, and those negative comments not really doing too much to the market. Elsewhere, oil, uh, on Friday got to the top part of that range. I wouldn't, you know, be getting too carried away unless we close above this area. The headlines are very much looking at this on the positive side of things. But when you take it back to the month of November, we're pretty much bang on, completely flat, uh, in— and, uh, well, I guess at the top of the range. But a couple of positive comments from Barkindo, uh, brushed off a bearish DOE, and we also had, uh, some positive spin, uh, regarding OPEC, uh, later on, uh, as well. So we're up to the top of that range. The pound has been uh, relatively strong this morning, and that's continued from sort of bottoming out the middle, uh, well, of the 8th and the 11th of November. And we're now back above 129, uh, confirmed on Friday, and this morning up to 129.63 on the futures despite some relatively negative, uh, headline, uh, data releases last week brushed aside as expected, uh, as the Conservatives, certainly on the polls anyway, look to be in control, and that Conservative majority to be looking a bit more priced in now. We do have, of course, tomorrow the first live debate on ITV tomorrow evening, just before I'm a Celebrity gets, gets started again, which I'm sure everyone's really excited about. Having a look over as well, Euro, um, just going to highlight the 7 AM release that we saw Thursday. Germany avoiding recession. We did then make a new low just after that, but we have pushed quite nicely from almost hitting 110 on the futures. I know we hit it pretty much on the spot, and we've recovered to what's a quite an interesting level, was the breakdown on the 7th, the high then of the 8th. And we're just trying to have another go at testing this level. This area will be quite key, I feel, not just today but for the week as well, whether we can hold there today or not. Will be important. If not, and that bears start taking control again, well, we could be looking for new lows to come through. Having a look really product by product, we'll sort of have a run-through of the data calendar and, uh, obviously what's going to be important this week. You would have received, uh, or seen on Twitter, I should say, uh, the, the Canada highlights for the week ahead, uh, that, uh, Anthony Cheung would have put together. Um, and you can just see Monday on the data front, pretty quiet. Tuesday the same, not really expecting too much in the way of big market moves, uh, to, to come through here. Uh, Wednesday, uh, is where you also get the FOMC minutes. So by then, the, the RBA, FOMC, Thursday you get the, the ECB minutes, which is kind of the most exciting thing for that middle part. And beginning before we get some data points in the afternoon out of the US, uh, and morning from the UK and, and Europe. Friday, a lot better, uh, as you get those manufacturing and services PMI numbers out of Europe, uh, and the UK, which really will potentially just data-wise be the main driver of the week. Of course, that then comes at the back end of the week, but in the buildup towards that, not expecting too many fireworks. Uh, from a data front. We had a lot of Fed speak last week, didn't really do too much in the way of a, of a shock to markets. And ahead of the minutes on Wednesday for the FOMC, that kind of, in my opinion, makes that a bit of a non-event. Having a look over at the euro then, considering where we're trading now, pretty key. The dollar index itself down slightly this morning, helped by the fact that the euro has been pushing higher and obviously the pound also. So where we're trading will be important. Looking at the, the US side of things here, other than the FOMC minutes, um, I don't think it's going to be that much of a data-driven, um, product, not just on the, on the euro side against the dollar, but all dollar pairs in general. I think we've had a good couple of weeks for the dollar, maybe the, the last couple of days including today, just a bit of respite from that. Wait and see what Powell says. If it's in line and they are on this pause, well, maybe the dollar has to start to strengthen again. Uh, remains to be seen, uh, what, what Powell says on Wednesday, or what is derived from those minutes on Wednesday, uh, this week I should say. Uh, data-wise on the euro front, uh, is all about Friday. All gonna, all gonna be about the the manufacturing and services PMI numbers from France, Germany, and then the, the EU. So that morning on Friday should be a good one. If you remember last couple of times, are we going to now start to see a bit of a recovery at some point? So maybe suggesting, or, um, are we actually going to see these numbers disappoint? And then the euro could well be on the low of the week following that. So the market's expecting a marginal rebound in the manufacturing goods stemmed perhaps by trade wars or trade talks getting better. You're going to see a lot of that if trade talks do start to, to get good. You'll get global growth upgraded, you'll get central banks being more hawkish. So until then, it seems that we perhaps are going to get a more positive spin on things over the next couple of weeks. A few ECB speakers as well to be aware of this week, most notably As you can see from that calendar, Lagarde on Friday, uh, speaking. However, a lot of her focus so far has been on team building exercises, so it'd be a bit of a shock to markets to see if anything significant came through from her or anyone else that is really speaking. So in summary, for the euro, Friday will be important. You've got the ECB and FOMC minutes, which of course could move things, but not really expecting too much from that. As we know, the, the ECB minutes are very rarely a market mover, and the FOMC usually is just a spike one direction to reverse back. Having a look and moving on to the pound, you may have seen, uh, overnight a— or this morning, uh, the main talking point other than the, the polls is that Boris Johnson to woo businesses with tax breaks worth $1 billion. Sounding a bit like Dr. Evil there, but yes, Boris Johnson looking to, to soothe corporate Brexit Britain on Monday by pledging to reduce business rates and provide a series of tax breaks worth about $1 billion a year. We've also had promises over the weekend and back end of, uh, of last week of free Wi-Fi, was it, if Labour were to get in. Although speaking to a couple of people, it just turns out that certainly those that are renting, landlords will be able to increase their rent to incorporate that. So as with anything, there'll be a lot of scrutiny for all these, these pleas. And to be honest, I mean, I still personally see this as a second referendum happening right now, and I think that's how both parties should go about it. Yes, you'll get some people looking into these policies and these pledges. But really, it's a case of if Brexit— if you want Brexit that bad, Conservatives will be the more attractive, despite maybe their other policies. And if you don't, Labour and Lib Dems are maybe the way to go. Despite Jeremy Corbyn over the weekend yesterday not quite clearly giving an answer to whether he wants to leave or stay in the EU, seems more leaning to the fact that we'll just put it to a people's vote, but he doesn't maybe suggest his absolute stance. So I think that's where he could be going wrong. However, Labour have started to recover a touch in the polls here. However, Conservatives at their highest level since 2017. So really, you might have seen the comment just at the bottom there, that really since the election has been confirmed, both the main parties, the ones that have been in in power, uh, really for the last 100 years, are regaining some of that strength. So election day looking around 40% Conservative, 29% Labour, uh, you know, for that, uh, the comment here that Anthony Cheung was mentioning, that their highest level since 2017. Well, 2017 didn't go too well, as we know. So yes, the polls will shape things ahead of December, and that will price in what's expected. Um, but that's not to say it is going to be a foregone conclusion, uh, what the polls do say, uh, there as well. So we have, uh, uh, going back to, to the pound, you can see at the moment what we're pricing in is nothing to do with the bad data, but more the fact that, uh, Boris Johnson has, has had this effect where the Conservatives have a nice lead, uh, in the polls, and that's resembled by yes, a bit of a weaker dollar this morning, but overall it's, uh, that majority is, is starting to be priced in. So Tuesday, tomorrow, will be key. Uh, the Friday data points from the PMIs as well will be, uh, one to keep an eye on, looking for further manufacturing weakness there. But if last week and the previous weeks are anything to go by, uh, we're not going to see too much in the way of a reaction. You can see if I just highlight the 7th here. Let me just make sure that that is the right date I'm looking for. Yep, Thursday the 7th. That's the, uh, the Bank of England, uh, decision there. Remember, it was 7-2, bit of a shock. Uh, price came back down and did the classic 2018-2019 central bank move, reversing that whole move, uh, pretty much within 24 to 48 hours. So decent recovery there. And since we had then, we have gone on. So Data points, comments out of the, the NPC are not going to be the main drivers here. It's all going to be about the polls. It's all going to be about Brexit, uh, going forward, uh, as well. So first televised debate tomorrow between Johnson, uh, and Corbyn will be really the highlight of the week. Uh, the general perception of who comes out as the winner may affect some markets' expectations. I personally would say at the time that it's going to be on, market's going to be relatively illiquid. You get a couple of spikes either way. Long-lasting effect from that, I'm not too sure. So we'll have to see. Maybe the day after, the morning after, when you start to see some polls come through, sure, that could move the, the pound. And at the moment, Conservative majority, pound strength. If Labour start clawing back some of the ground, well, you're going to see the pound have to unwind a touch. Having a look elsewhere currency-wise, Aussie dollar You can see the employment numbers on Thursday, really poor, really poor. And we, when we drifted lower, reaching 67.80 on the futures. And that was despite being as high as a double top the 24 hours prior to that as the RBNZ kept rates on hold. So the poor employment number, what to keep an eye out for, for the Aussie this week, where you've got those minutes as mentioned that will be out overnight. So this time tomorrow we'll have those Um, whether they reiterate their sort of, uh, pause as well, much like the RBNZ and the FOMC, where they've done 3 cuts this year but are looking to hold things or not, might be slightly tricky after that poor labor data. And also we have a period, just having a look through that calendar there, where there isn't too much data on the horizon. So this one might start to linger despite, uh, if you look at the chart here, you could be forgiven for thinking there's a bit of recovery I would suggest this is more a bit of dollar weakness than Aussie strength. However, if we are to have positive trade developments, you could well see a recovery for that Aussie. So be interesting to see what they say, uh, on overnight on Tuesday, uh, or overnight Monday, Tuesday morning our time, uh, for those minutes. Um, but the latest employment data likely makes their economic assessment in the minutes outdated. So that's just something to, to bear in mind. So limited reaction expected there, limited data out as well. So maybe the dollar side of things is going to be the driver, and trade talks as well. Mentioned oil, so we will have a look over that. Um, the headline here kind of sums price up: oil price steady after last week gains. Uh, but as, as mentioned, I wouldn't be getting too carried away with it because when you're putting this back on that 60-minute. We're just at the top of that range, putting it 240. Why is this level important? Well, you can go back here to just before October, the breakdown from the middle to end of September. We then push lower on the 24th, and this is the first real time we've had a strong test at really trying to get above it. Whether we can close and get near that 58 consistently will be key here, and then you can imagine a more swift to move perhaps towards 59.14. It'll be interesting to see what you guys think on oil and Tim later on as well. But for the moment, near that top end of that range. So we had those Barkindo comments in the afternoon of the 13th pushing price high. We had a bearish DOE, and then Friday we saw some strong gains that got us up to the top there. A lot of this stemming from as well the positive trade talks as well, you know, US and China the two biggest economies and also, uh, the largest consumers, um, uh, of oil in the world. So if those talks don't go too well, oil price, global growth is going to suffer. If they go well, well, oil price can push on. So maybe a case of let the trade talks do the talking, talking. You've got OPEC meeting on the 5th and 6th of December, uh, which of course will be worth keeping an eye on. But in the short term, US-China trade talks and that OPEC meeting in the early December will be the main two events that traders will be keeping an eye on there. And that's pretty much what this article is summarizing here. It's a little change so far on Monday. It's relatively choppy up at the top, um, you can see on the, on the chart there. So trade talks, OPEC meeting, 5th and 6th of December will be what I would be focusing on there. Now we get to the stocks, all-time highs. Where is this gonna end? Well, as long as the trade talks are good and, uh, the Fed aren't turning too hawkish, well, maybe it's going to continue for quite some time. Having a look here, just this morning we did touch— let me just get this— May high into then the new what was the new all-time July high. We have just come and approached, and this trend line isn't perfect, so I just need to bring it down a touch. But it, it's something to bear in mind here, because trying to pick a, a top on this technically is going to be hard. You would have seen Friday, the RSI is at the highest level since January 2018, and we all know what happened then. Uh, so keeping a, a watch on this trend line. But last week, if anything was to go by any negative comments aren't really being run to the ground here. So while it certainly feels like there's going to be some sort of correction to, to come through, because it's not just going to grind higher and higher and higher till the election— trying to, trying to, you know, predict that is going to be tricky. So in the way of tackling this, I think the best thing to do is, is draw up your key— in this case, what was a resistance, now support level. 3100 gives it that more technical psychological edge as well. It closed below there, then we can start looking down towards 3075. But unless price really, um, has a major negative comment, you know, I'm not looking to sell that unless we can close below 3100. It has to be said also, over the weekend, Trump, uh, saying— hailing, should we say— hails cash to farmers. US aid in China trade wars, uh, here ahead, uh, of Thanksgiving as well. So to give them all a little Thanksgiving treat, uh, is the way he wants to spin it. Um, however, that money is actually part of a US government aid package. He went on to say, our government farmers will receive another major round of cash compliments of China tariffs. The smaller farms and farmers will be big beneficiaries In the meantime, as you may have noticed, China is starting to buy big again. Japan deal done, capital letters, enjoy. So as far as the Trump situation concerns, those trade talks are going well. People are buying again, China is buying again, the Japan deal is done, the, the tariffs on Europe are delayed as expected, but this is overall positive. And, uh, in the world of stocks, there are all-time highs, and it seems unless we were to have a real breakdown, long may that continue. However, there is of course hope for the bears. If we go back to May, and we mentioned this on Friday, we did have the deal almost done and Trump pulled it last minute, and then we had an 8% move back down towards what was then a double bottom from the, the low that we had on, uh, of 11th of March before rallying on as well. So if you are bearish about this, there is a bit of hope. You have RSI highest level since 2018, you have this trend line in the mix, and we have been here before where it didn't end too well. Um, remains to be seen, I guess, going forward. I mentioned earlier about if, uh, the trade talks do improve, central banks are going to turn slightly more hawkish, or more, or less dovish, shall we say. But you also start getting banks seeing economic recovery in early 2020, which is what Morgan Stanley are seeing. So they see a recovery on the cards led by obviously trade talks recovering, reversing the downtrend of the past 7 quarters as trade tension and monetary policy are easing simultaneously for the first time since the downtrend began. I personally wouldn't be getting too carried away about that. Because if trade talks are good, that easing monetary policy will not be there, um, which is why you feel maybe Trump still has that hawkish card in his pocket to use. So while stocks, yes, are going higher, and with the current stance that completely makes sense, this headline from Morgan Stanley just seems a bit backdated of a couple of weeks. I wouldn't be getting too overly excited with that as well. Wednesday, uh, as mentioned, the FOMC minutes. I, I think from the amount of Fed speak last week, we're not expecting, uh, too much from that, um, to, to be a shock, and that pause just to be, uh, you know, reiterated yet again. So we'll, we will do a bit of a run-through on Wednesday for that, but I think much was said last week and we're not going to see too much in the way of movement from that as well. Just to wrap up again on the calendar and, and to say Monday likely to be quiet, Tuesday and Wednesday pretty much the same other than the, the minutes, uh, out of the RBA and FOMC, a couple of lower tier data releases. Yes, you've got API back in its Tuesday slot, Wednesday, uh, the DOE as well, but it's really Thursday and Friday where things start to get a bit more interesting here. Quite a few numbers out on, on Thursday along with the ECB minutes, and then Friday the manufacturing and services PMI numbers out of Europe and the UK, which will probably be— if you were to choose one data release to focus on this week, it's going to be that. You've also got Lagarde speaking on Friday as well to wrap up what could be an interesting back end to the week. Um, just moving on to, to the charts just to see how we have traded in the open. You can see gold coming under a fair bit of pressure here, as safe havens are in general. So you've got T-notes as well, just going to bring this into picture, coming to its lower part of the day. Uh, obviously not a big move for T-notes, but for the morning maybe it is. The Bund as well touching, uh, the lower part of the day. And here on the 5-minute, you can see that's the 1, 2, 3, 4th time, uh, that has asked of that S1. Stocks are happy, stocks are on all-time highs, risk on in the market. And that seems to be the way it's going to continue unless Trump pulls out that hawkish card. Any questions, as usual, please do let us know. Hope you'll have a good trading day, an even better week ahead.