The Trading Week Ahead: 22nd - 26th July 2019

Okay, very good morning to everyone. Monday, 22nd of July. Hope you had a great weekend. As per usual, Monday morning, so a look ahead for the entire week, not just for the session ahead. I'm going to run through a couple of thoughts on the key data, speeches, and and earnings actually that are coming out this week. And then we're going to have a look from Sam's perspective, from technical analysis, what type of levels and setups is he looking at for the broader market movement for the week ahead. So I'm going to go straight into things and look at this calendar. And for any of those who do need preparation for the week ahead, certainly for me this starts on a Sunday night when I start basically putting this calendar together. This calendar, bit different from what you'd see, I guess, on normal, uh, kind of regular websites that you get for free where it's just economic data. Because in this calendar that I put together, I put in economic data, but I also put in major political events. So on Tuesday, we'll be looking out for the very much expected confirmation of Boris Johnson becoming new Conservative leader. I also include in there the major corporate earnings coming out. So as you can see, we've got the likes of Boeing, Facebook, Amazon, Alphabet— all the big guns are coming out, and earnings season really does heat up this week, much more busy than, than the previous week. And then also I include on there just other small points, whether there's market holidays, whether it's quadruple witching, all these types of things as well. So do keep a an eye out for that. I normally tweet it on Sunday evening for those interested. But yeah, looking at this week ahead, Monday pretty slow going. This is nearly always the case really. Generally Monday and Fridays tend to be the most quiet, particularly when earnings season is underway. Very much peaks on a Wednesday, Thursday normally. So yeah, Tuesday, won't go into everything in too much detail because we're going to talk through each, each point as I go through a selection of kind of different web pages. But you get the Tory announcement on Tuesday. With that, the Tory leadership ballot closes this evening. This is the 160,000-odd grassroots members who've been voting over the last 2 weeks and very much expected Boris to win. If he didn't, that would be a massive surprise. Reports over the weekend, of course, suggesting that he's most likely going to take Jeremy Hunt out of being the Foreign Secretary. And an easier reason now is because it's because of his poor dealing and how he could have really done a better job with this latest Iran situation. A lot of people criticizing him because he's too focused on the Tory race and not on the— on his job in that respect. And also, not my words, but Boris apparently, he said he's treated him like a wanker And so therefore he wants to get rid of him. Again, not my words, the words of your future Prime Minister. But looking further forward to Wednesday, Wednesday, very interesting actually from a European point of view. We've got the ECB interest rate decision coming up later in the week on Thursday, and all eyes are on any potential future tweaks to forward guidance. Not expecting here the ECB to take any drastic measures like cutting the deposit rate by 10 basis points. This week. But what we are looking for are a couple of data points leading up into that decision. So you get the French-German Eurozone Manufacturing Service PMIs, the preliminary readings, on Wednesday morning. You then get the German IFO Business Climate, and I actually think that's quite, quite an important figure this time around. If you think about it, the manufacturing sector, definitely evident in the, the German PMI data of late in the last several months, has been in heavy contraction. And although it seems to have bottomed out, it obviously is a very good barometer now, these soft-looking forward indicators of how do companies feel about their, uh, the economic conditions for the next 6 months ahead. That could be quite interested in— interesting in order to determine the type of potential language and how quickly the ECB might need to act. So yeah, some interesting data Eurozone coming out Wednesday and then Thursday morning as the prelude, if you like, for the actual main event, which is going to be that press conference. Because again, we're not expecting too much to happen at this meeting, but more about the forward guidance for then. Do they cut? And most Wall Street analysts are expecting September for that to, to come. And a growing chorus of Wall Street banks expecting quantitative easing to restart in the eurozone as well before the year is out. Then on Friday, from a data point of view, we get the US GDP. This would be the advanced reading for the second quarter. So again, particularly interesting. Could that be the kind of nail in the coffin for— are the Fed going to go 25 or 50? And actually, on that note, let me just transition my screen briefly so I can get up the page of the FedWatch. Let's see where we're at in terms of market pricing in the short end, in the federal funds futures. We are now only 24.5% for a 50 basis point rate hike. So you remember the briefing that we gave on Thursday, that number was pretty much 50/50. But you'll remember, as per what we were saying, you know, we still as a desk believe that the Fed will cut rates but by 25, not 50. And just given the comments that we had from Bullard, who's the most dovish He was basically saying that now is not the time for 50, 25 more appropriate. We also had the New York Fed official spokeswoman come out to correct the likes of Williams' comments, which fired up that expectation of 50 basis points, saying, well, that was actually not meant to be specifically commenting on the meeting coming up at the end of the month. So I think reality's kicking in a little bit, markets reflecting that, and I guess the US GDP figure depending on how strong or weak, could definitely influence that figure. Remember, the Fed go into their so-called blackout period in the next day or so. That doesn't mean though that if this number was to remain up at the 30-40%, I definitely think then you could have the likelihood of Fed sources come out and they'll look to clarify the situation because the Fed won't want to be cutting say 25 basis points, and then the market reacts in a hawkish way, which kind of goes against the whole essence of what they're trying to do to support the economy. So do look out for that. All right, before I get on— I'll leave earnings for the second because a couple of other things I can point out on that front. Let's go into the news flow, and this really is the dominant news theme from the weekend because overall market open I just quickly go to the broader asset class mix. Things are pretty quiet actually. The dollar is basically flat. That's mimicked in both major currency pairs, EURUSD and cable. Gold flat, T-notes and bunds pretty much the same. The real standout here, of course, is WTI crude oil up about $0.60, trading $56.37 here down at the bottom for the moment. And really, this is the main headline from the weekend. This came late Friday. So if I show you the graphic of what exactly has been happening, This, of course, is the Straits of Hormuz, or the Strait of Hormuz, I should say. And 2 weeks after the British Navy seized an Iranian tanker in Gibraltar, Iran said it had captured on Friday the Stena Imperio, a British-flagged oil tanker en route to Saudi Arabia. So you can see here, this is that very narrow passage which is the key choke point of the seaborne traffic of global crude in the world. And as it was moving in the regular direction, it then veered off course and moved into Iranian waters. And so this is the latest in obviously a long-running episode of events. This goes all the way back to, um, about 6 weeks ago when 2 oil tankers were damaged in a suspect attack near the entrance to the Persian Gulf. The US blamed Iran. Tehran denied that. No. Then we had the drone shot down. We've had tankers seized. We've had tankers escorted to safety by the Royal Navy from a BP-operated tanker about 10 days ago. So tensions definitely are still very high in this region, and obviously this is such a specific area that could have a supply shock of a very large magnitude if something, let's say, military engagement of US or Western forces with that is Iran, a miscalculation with the management of some of these situations, things can escalate rapidly. So definitely encourage you guys, as the week goes ahead, there's no real set meetings or anything like that to be on the lookout for, but just general headline market I think will be quite sensitive to developments in that region, will continue to do so. The UK for the moment seeking a more diplomatic resolution, and I, I've would foresee that being the general status quo for now, not unless Iran takes some sort of more aggressive, more military-based stance. And then of course the UK and the US, predominantly led by those two nations, would need to take a coordinated response. But you have seen those two Western countries now more looking to align themselves to deal with this situation. Elsewhere for oil, this is another headline, Libya Oil output at its lowest in 5 months. So basically, Libyan oil production has dropped to about 1 million barrels per day. What we've seen is a force majeure at the Sharara field in southwestern Libya. It's the largest in the country. It's removed 290,000 barrels per day of crude off the Libyan kind of production line, and that, that brings it down to sub-1 million, roughly the lowest in 5 months. Um, definitely need to, to keep an eye, uh, on oil this week. From— that's the supply side. From the demand side, one other thing to be aware of, we do have the not just trade war updates, and we will get on to that and then the next story, but also the IMF released, I believe, their latest world global growth outlook. And obviously that was subject to quite severe downgrades back in April, so it'd be interesting to see whether or not that, that kind of stokes any demand-side considerations. But at the moment, there's a lot of supply risk, let's say, on the table that's keeping this latest bottoming in prices. On the trade war front, this is the latest. Some Chinese companies are seeking new purchases of U.S. agricultural products, according to the official Xinhua News Agency on Sunday, citing the authorities. Basically, a lot of Chinese firms have asked with the government whether or not that they can drop tariffs so that they can buy US goods. This seen as a positive development in that China very much wants to get dialogue ongoing and wants to follow this up with the confirmation that they aren't, um, as the US would suggest, playing around with not committing as per the G20 to the purchasing of agricultural goods. So they want tariffs dropped by the government so they can be allowed to do so. And that to be followed up with further face-to-face talks. So this isn't really a groundbreaking development, but shows that there's enough political will here at the top level in Beijing in order to bring the US back to the table and get dialogue back on the way again. The rest are very much political updates, not so much market movers, but things to be aware of. As I said, we're looking out for Boris Johnson's confirmation by really tomorrow morning. We should know— there's no set time yet for that result, but hopefully by this time when I do the briefing, we should know. Very much, I mean, the bookies— I haven't looked in the last week or so, but we're up at like 96% probability that Boris would win. Probably similar amount. So if Hunt wins, stranger things have happened, of course, but that would be a massive surprise. You'd be looking for quite an aggressive short-term rally in the pound. On the back of elimination of the more hard Brexit, no deal character that is Boris Johnson. But again, I must stress that that's an incredibly low probability, but worth considering if that were to materialize. That would result in a big shock for the pound. The other thing that's been at the weekend, the Justice Minister and the Chancellor, the latter Philip Hammond, saying they would resign once Boris Johnson gets confirmed. I don't think that really comes as surprise. Hammond very much a supporter of the remain. I don't think it's really been— he's been that shy of that, him putting the economic consequence. He'll just want to go out on his own terms rather than be forced out by Johnson when he becomes prime minister. Elsewhere, Spain. You might get a couple of headlines about Spain this week. Definitely plays second fiddle, if you like, to Italy. But gone but not forgotten, and certainly due to return to the headlines this week because Spain's acting Prime Minister Pedro Sánchez goes back to parliament today seeking backing for his bid to form a government. Now, if you remember, his socialist party won the most seats in the general election, but that was 3 months ago. There still isn't actually a working government in Spain. They fell short then about a quarter ago of an absolute majority. And to win this vote this week, Sanchez needs support from Podemos, a left-wing rival, and backing from other groups. So kind of forming this, this coalition government in order for him to then govern and to continue on as we are at the moment. Failure to do so might mean then that we go back to more elections in Spain. I can't remember how many we've had now. Pretty much if we do, it would be what, 4 in 4 years, something like that. So yeah, definitely worth considering because like, if it is, you might see some yield movement in Spain over the course of this week. The actual talks, if I quickly scroll down, so Sanchez is addressing Parliament today. The first vote is not until Tuesday, but then actually there's a second vote happening on Thursday, and that's when we should look to get the results from there forward, whether or not Spain's going to need further elections to sort out some kind of political leadership or structure. Doesn't stop there. Italy, Salvini still not a happy man at the moment. This comes as Salvini and Di Maio, who were at this very interesting time at the moment in Italian politics, and whether or not this, this kind of forced coalition through the hung parliament we saw in Italy is going to stay, stay the course. We've seen Salvini obviously putting immigration right at the, the main center of his political agenda, has led to quite an increase in popularity, and therefore whether or not that this existing coalition can survive. So the two leaders here of the Five Star and the League, they're meeting on Tuesday to meet on the future of the Italian government. This comes as Salvini has had a couple of pop shots at France and Germany in regards to this very issue of immigration. So definitely worth keeping an eye there. And then finally, on the political front, just so you're aware, Japan— Shinzo Abe, the prime minister of Japan's ruling coalition, won their sixth straight national election victory overnight in Sunday's upper house election, fell short of a supermajority. And this very much as expected, though This hasn't really caused a reaction in local assets from overnight. I'd be looking for the yen to be more based in terms of an intraday movement on the back of sentiment based on the broader market rather than that sole story. One of the things here, it means that the sales tax hike is still likely to go ahead in October in Japan. And it's also— there's been some talk about Abe potentially now looking to secure a fourth term, having them already changed their political rules for him to serve in his current third third one, and he's soon to become the longest-serving prime minister in Japan. Um, final thing for the week is this: corporate earnings. Um, there are 144 S&P 500 companies reporting this week, so as you can imagine, one of the busiest weeks that we'll get. And there are 10 of the 30 Dow Jones Industrial Average components also reporting this week. So do be very mindful of these, particularly the ones pre-market when we're trading in the UK European hours. The major highlights include nothing really too much for today on Monday, but Tuesday Coca-Cola, Biogen, Visa. But really Wednesday it starts to heat up because you get the Dow's largest component Boeing report. You also got AT&T, the bellwether Caterpillar, also just given their the goods and services that they sell, for the appetite for global growth prospects going forward. You can also overlay that with the IMF report coming out the day before. Be interested to see people's overall optimism or pessimism about growth conditions going forward globally. You've also got Facebook aftermarket alongside Tesla coming on Wednesday, and then Thursday you get the big tech giants aftermarket— Amazon, Alphabet. You also got the chipmaker Intel pre-market, 3M, another big Dow component. And then Friday, more for sentiment-based, Twitter. And then you get McDonald's also reporting. So plenty of corporate earnings as well to keep on your radar. Um, whenever I'm about on the desk, I'll look to share, uh, all the timings and the expectations on the EPS, revenues, and etc. in the morning as well to let make life easier for you guys. So yeah, that is the week ahead. So yeah, there's a couple of European earnings as well. If you're trading the FTSE, don't forget you've got Glaxo reporting on Wednesday. If you're looking at, um, the CAC 40 or French and German stocks, you've got, um, Total reporting on Thursday. Deutsche Bank, obviously Deutsche, gonna report on Thursday. Um, that'd be an interesting one. Obviously it's going through this very substantial restructuring process. I think pre-baked into their price the fact that we're looking for relatively disappointing numbers. We've also got quite a lot of auto manufacturers coming out, US stateside Ford Motor, but from then Europe, Daimler, Volkswagen, companies of which have been issuing multiple profit warnings, just given as well the severity of the fallout of trade wars, not just from the US but from Brexit as well. So yeah, should be an interesting week. Okay, that's it for me. Gonna hand you over to Sam, and I wish you a very good week ahead. Thanks very much, guys.

Hi guys, and good morning. Hope you all had a good weekend. We'll have a quick look over the currencies to start with, just in a bits of dollar strength has come in over the last few moments. Uh, the, the pound in particular is coming off, uh, its higher levels which were around the pivot, and you can see that's come to the lower point of the day. Quite a bit of support around today's S1, uh, where we had a bit of a pullback on the 18th back on Thursday. Going to be a tricky one, I would say, over the next, uh, well, next couple of sessions for, for the pound, obviously with the announcement of what is most looking like to be Boris, uh, might be just a bit choppy in, in price action in the build-up to that. However, obviously would be marking up at S1 level. And also from the upside as well, you can see just the, the highs of the last 2 days, and of course today as well, getting lower as well. So just getting squeezed in from the upside. So it might be that later on today at some point, or in the week, we can get a bit of a push above that level there as well. You can see this trend line from last week, while choppy on Friday, did break and then acted as decent resistance early hours this morning. So we still had that on there starting from the low of the 17th and then from the high of Thursday, Friday. Price just getting squeezed in from the upside. So a couple key points certainly from an intraday perspective here. Let's bring in around the S1 and then up towards what currently on the futures is looking around 125.60. 1.1260, which obviously is quite a fair way away for now, but that's somewhere I'll be looking up to the upside. And then if we— if S1 was to break through, you can see a bit of a bit of an area of resistance, so it could offer a bit of support around 1.2481 where we had a high of the morning on the 18th as well. But pound is under a bit of pressure. The euro, uh, looking here, longer time frame, put this on a 240, you can just see see the importance of this support level just going back over the last few weeks, really, uh, back into the middle part of June. Really solid level support starting, you know, we could argue on the 3rd of June and then in the middle as well. So really keeping a closer eye on that. Can we get a, you know, closed— well, even a 240 candle, but the daily close below this level? And you'd imagine a drift back down towards those lows that we had on the 23rd and the 30th of June will come relatively quickly. To the upside, I know it's a fair way, uh, away now, but you can see that new range that we just made after breaking through there on the 5th around 1.1336.5, give or take a few, uh, ticks either way. You've almost got this new range. So just to be aware of that, if we were to have a push higher, you would want that side of it to break, but at the moment. The, the euro-dollar does seem that whenever it does want to push higher, there's always a decent move lower. So just keeping a close eye on that, that bottom end, and it could see a further push down. Having a look at the intraday, just have a look at some of the key levels up towards the pivot. You can imagine there'd be some decent resistance around that. However, just having a look to see what's going on this morning. Yeah, that dollar strength just coming in a touch again. And you can see from the low that we had back on Friday, whether there'd be enough volume for this. You can see we're just contained from this morning and then again just around 7:30. So worth keeping a, uh, you know, monitor what happens around this trend line. Uh, speaking of trend lines and more longer term here, the Aussie dollar, which had a bit of a break the end of— well, during last week I should say— only to close back down below. Finished above last night. So starting here, and to make this chart a bit smaller, from 2018, that high just up here top left, you can see that came through, got the, the third test back on the, on the 5th of July, and we are now back above that area. So worth again marking that up to see what happens now. We've got really a, you know, properly confirmed break. So keeping a watch on this trend line, how we finish the of course, will be important to see if we can actually get a push higher. And then to the upside, well, we didn't quite make it, but the previous low that we had on the 23rd, 20th, where, 23rd of April, just a bit higher around 7105 on the futures, uh, looks like a good resistance level. And obviously got the 70 handle just below the trend line, uh, for now. The yen, uh, I saw Reid in the chat was talking about the, uh, the, uh, the yen on the daily, and that certainly one to have marked up. As we can see, we're just starting to come back down to test some of these but lower trend lines. And certainly on the, the 240 timeframe, which I'll just put on now, you can see how well that's been respected. A couple of false breaks, if you like. I know this trend line isn't exactly perfect. Let me just get that on a bit better there. Um, but you can see the importance of this. And if that was to have a bit of a break lower then I wouldn't be too surprised to see a faster move down to some of these levels that we had back on the, the 16th, the 11th, and again the 9th. Uh, gold similar in, in that there is a nice trend line that's, uh, been forming, uh, over the last— well, I'll put this on a 15-minute so you can see here going back to the pivots on the end of last week. You see just starting to get squeezed in from the, the downside. We know how quickly gold can move on these trendline breaks. So that's something I'd have marked up. And then to the upside, really the top end of this range, uh, from Friday evening around 7 o'clock to this morning, I'd only really be looking to get involved if we were to come to these areas at $1,429 or $1,430, and then this trendline as well. To the upside, if we were to get through there, the pivot is a nice point, or just above there, uh, by 6 cents or so. You can see the breakdown from Friday. Previous low pivot looks like a quite good area. Break of the trend line obviously would be looking to target the low of Friday before it gets a bit more serious down to towards the levels that we had back on the low the 18th around 14, 15.6. Equities and the pound would be ones I'd just be cautious today, uh, and well, equities for the week as well. See, with earnings coming out before and after the cash market open. I'd just be, I'd just be on edge as such. I wouldn't be looking to hold positions for too long. You can see this morning we have pushed higher after a decent down move on Friday. The pivot has acted as resistance a couple of times, so obviously that remains an important level. The key one to the upside for the week where I feel a bit more comfortable going long, should we say, around 29.92 quite a key point where we had support, then resistance back on Friday. But for now, just fading to, to make, uh, you know, that low from the back end of this range. You can see starting at 2974, and then the lower end of that, uh, around, uh, 70, which was the low of the 10th, high of the morning of the 7th, and then where we touched late on Friday evening as well. So it was perhaps a new smaller type of range here between 70 and 92. Uh, where it might be a bit safer looking at this in the afternoon after some of the earnings have come out. You can see we are just trending higher, not the greatest trend line, but it might be opportunity-wise later for a break of that, or looking to see what happens around this pivot area. And obviously even then, lowering this down, you can see 2985.5 would be a key point as well. So just to go over that calendar one more time from today, relatively quiet just looking on that on the data front. It remains to be seen, uh, if we can get any further leaks regarding, you know, the Boris Johnson, uh, situation. But it looks like it's, it's pretty much nailed on, as Anthony was saying, in the high 90%. So we'll obviously know this, this time tomorrow. And then tomorrow onwards is where it gets slightly more interesting. Tuesday, Wednesday, Thursday, you can see quite big, it's busy on the data front. As usual, any questions, please do let us know. We'll get the the strategy report out, uh, before midday as well. So any questions even regarding that, please do let us know. If I don't speak to you soon, hope you all have a good trading day and great week ahead.