The Trading Week Ahead: 23rd - 27th September 2019

And welcome to the start of the final week, the final, well, full week I should say, I guess, of Q3. Obviously at the end of this week, well, we've got one day, haven't we? 30th of September will be Monday next week to wrap up the quarter. And we'll talk about this as we go through this week, but definitely looking forward to the week ahead. And following the French We've had some, we've had some French data that's just hit the wires. That's just bringing a little bit of risk off to the vibe this morning. So we've just seen the DAX break and move below Friday's low point and heading down. I mean, the next level would be down here, which actually is quite a nice one. That's Wednesday and Thursday's low down at 12,333. So the DAX and European equities more broadly under a bit of pressure. And I'll talk about this in a second in terms of looking at the numbers. We've got German PMI figures coming, uh, they're due to be reported in about 5 minutes' time, so I'll cover those live. But the EUR/USD, EUR weakness just slipping down to have a little tester of, uh, Friday's low, which was a key double bottom from back at the start of last week. That's a really key area if you're looking at the EUR/USD this morning. Then 1.1065 Very important and having a tester of that. And just to give you that sense of the risk-off vibe, whilst you got the euro under pressure, stocks under pressure, check out the Bund here that was scaling lower but actually flipped and managed to rally back up to test the pivot level now. So a bit of safe haven flow as that French data just disappointed. But before we kind of get into the nitty-gritty of the French figures. Let's have a look at the week ahead. Definitely another interesting week coming our way, and certainly lots of, as always, Brexit-related situations to be thinking about. We've got the ongoing aftermath of those attacks on the Saudi oil production facilities, and, you know, scanning and keeping an eye on how quickly Saudi can get oil back online. I've got news directly from Saudi Arabia, actually. I was there last week, so I can give you a bit of an update because as far as I see it, the way the West are reporting this is not quite how things are being discussed over in Saudi. So I've got a little bit of an interesting insight on that, so I'll cover that as well. But then, as always, packed data data calendar here. What's, what's interesting today, tomorrow, and Wednesday? You can see the, the lead global leaders meet at UN General Assembly. So this is important for a few factors. Firstly, Brexit for sure. So Boris is going to be having meetings on the sidelines today with Merkel, with Macron. He's meeting Donald Trump tomorrow, and that'll probably be discussing mainly Iran, I would have thought. So you've definitely got Brexit and the Saudi and Iran situation, very much hot topics over in New York. So Boris got on the plane yesterday and is over there, so expect news flow. This is US time, of course, so it'll be more afternoon when you start to get little snippets of information that could well move markets on any of these topics. So definitely the UN General Assembly is a key headline risk for the next 3 days, but particularly today, I would suggest. Um, outside of that, definitely some really important numbers coming our way this morning. Um, we get the preliminary, uh, September Purchasing Managers' Index figures. So that's both for manufacturing and services. And so this is like the fresh update, the, the kind of most up-to-date figures from an economic perspective that we get each month. About two-thirds of the way through the month, we get these European PMI readings. The French figures have just hit the wires and have disappointed. I mean, here's the chart looking at the French manufacturing PMI, and it came in at 51— no, it didn't, came in at 50.3, but we had expected 51.2. You can see that July was disappointing, we dipped below 50 again. I mean, it's been pretty erratic, I have to say. Look here, this chart over the last 12 months, you don't normally see such volatility month to month here in this kind of reading. So that's one thing to note. But secondly, you know, the August reading, we lifted back to 51. It was like, wow, okay, all right, maybe, maybe things in Europe aren't as desperate as we thought. But we were looking for, uh, uh, you know, a figure in September to match August's reading. So as I said, expected at 51.2, and it's just dropped back. I mean, at least I guess The silver lining, maybe if there is one, is that at least it's above 50, but still certainly disappointing. Uh, the services sector also delivered a worse-than-expected number. If I have a look at the chart for that, then— one second, here we go— services PMI was at 51.6, and what we had hoped was 53.2 would be in the offing, and, you know, pretty much matching what had been actually a nice solid improving trend through 2019. We were expecting that improving trend to still be the situation, but unfortunately we've dropped off here, so that's definitely concerning. We generally speaking have a, what you might call, a recession fear in Europe. As we've, as we reach the end of Q3, are we in technical recessions? Of course, you have the likes of Germany printing a negative GDP figure for Q2. Are we going to see negative GDP, GDP prints for quarter 3? I mean, that's when you get a technical recession. You need 2 quarters in a row of negative GDP figures. So yeah, certainly these French figures were not quite what the doctor ordered. But if I just quickly, um, flick back, because we're about to get some German figures, which, you know, certainly the grand scheme of things from Europe's point of view would be more important given that Germany's the largest economy, um, certainly on the manufacturing side. And seconds, we're going to get these German figures hit the wires now, so I'm just going to let these come down the microphone straight to you. Remember, the DAX has been under pressure. It's testing Thursday's low, right?

41.4, 41.4 below the expected 44. Services, big miss on—

big miss on German manufacturing here. Let's just flick and have a look at the charts.

49.1 below the expected 51.5. Such, Eurodollar has seen a break below 110.

Yeah, I mean, that's definitely—

wow, and seen further downside in the DAX. So we've just taken out that double bottom here on the DAX 320 from around—

let me just turn that down. So, you know, really disappointing again on the German manufacturing side, and it's such a core engine of their economic system, of course. Um, so that figure came in at 41.4 We had expected 44. That's, I mean, flick back to the chart very briefly, another new low on what's been a pretty spectacular fallout. I mean, honestly, I've been trading for 18 years. I can't ever remember German manufacturing PMIs anywhere near 40, but quite shocking and really, you know, hammers home this point that Germany looks like they're in recession and We're probably going to see confirmation of that when we do end up getting the Q3 GDP prints. But 41— I mean, wow, 41.4. Now on the services side, it was worse than expected, but at least above 50. So on services, they were 52.5, we'd expected 54.3. Let me quickly show you the chart for their services PMI. So it's quite a big drop-off again. So look, Bad numbers from France, exacerbated by, you would say, even worse numbers from Germany here. The DAX was already on the downside anyway because of those French readings, but you would say that targeting that low point that we have back on the 17th now is probably the situation. Now we've pulled back, we broke Wednesday-Thursday double bottom. It's also S2, we broke that, and that's now key resistance. What might be a nice sort of classic short entry and looking for a target, at least I would say, of that low point that we had from last week. On the flip side, if you've got stocks moving lower, well, bonds moving higher. So you've just seen the Bund break up above Friday's top. So on the, on German bonds here, that was at 173.84. And if we just pull out a longer term period here, that, that kind of area on Friday really was perhaps the more important level which we've, we've moved on upwards here off this data was at 173.65, and that was that key bottom that we had back mid-September. But on the upside now, um, the standout kind of level is, is this one roughly here, which is that high point we had on the 12th of September. Before then, where we're testing almost now, is that low that we have back on the 5th. Okay, so certainly Bund's had a steady, slow drift north throughout last week. But now that's powering on off the back of these really bad PMI figures out of Germany. Look, you can see the Bund stepping up again there, another little surge up through the top as we aim at testing that 5th of September low. Nice. Let me just get back to that DAX chart because that looked like a nail-on, nailed-on classic short off that Wednesday, Thursday double bottom. And S2. And we'll see how that plays out. But certainly the euro is going south, as you'd expect. I told you about that level here from start of last week that had tests. We'd been testing that on Friday. That's gone now. That's, that's gone in style here, actually. Uh, we're 20 pips down through that already, down through S1. Let's have a check further back to see the last time we were at these kind of levels. And really, you're looking, um, back now at these uh, this, this point from back at the very start of September, as well as that sort of flash, um, spike to the downside we had on the 12th. So these are down at 110, uh, 30— well, 110.03, 110.13. So really the 110 handle more broadly. And when you look at a daily chart, um, you know, we obviously got below that a few weeks back. But when you're looking at the continuation, I should say, here, but certainly on the, um, the December contract, uh, that the almost like a double bottom down, down around the 110 handle. So we've got room further to go on the downside here. Definitely, definitely some disappointing figures here from two of Europe's powerhouses on the PMI front. Um, all right, so Good active start to, uh, the briefing, uh, some live data coming through. Let's have a look at the calendar again now, just looking more broadly out of the week. I mentioned the G— the UN General Assembly, that's definitely important. Um, you got some Fed speak, Evans and George and Kaplan talking out of the Fed on Wednesday. You've got Draghi making some comments on Thursday along with Carney. More Fed speakers. So, and then more Fed speakers on Friday. You've got a lot of Fed speak, um, through this week. Um, certainly the most important economic data, arguably you could say we've already just had it. We'll get the EU as a whole printing their PMI figures at 9 AM. Okay, um, German IFO data tomorrow is going to be closely watched, especially now after that really disappointing, uh, PMI figures. You've got to be expecting some further bad news on German data tomorrow morning, you would have thought. In terms of US data, quite a week. Normally the case, you know, as we get to the final week of the month, but we'll be looking for some inflation-related figures that are due out on Friday with core PCE. But, you know, definitely I would say a negative tone set here for the week with regards data, but also, you know, that I'd pick out that UN General Assembly as the kind of big headline risk. So let's have a look. We'll get back to the charts in a second and have a look at some of the other markets. I know I only really focused on the European stuff there with the DAX, the euro, and the Bund, but we'll look at oil, we'll look at US stocks, we'll have a look at gold and so on, and cable in a minute. But if we just have a quick look at the headlines that have kind of been hitting the wires What are you waking up to this morning? Johnson takes bid for Brexit deal to New York as clock runs down. So as I already mentioned, Boris is going to be having meetings on the sidelines with Macron and Merkel today. Tusk is also in town over in New York, so Donald Tusk will be getting in on the action. You'll remember that we had some Well, a bit of a throwaway positive comment from Juncker last week. Juncker back to it, you know. Juncker does love a headline, mind, so you've got to take his comments with a little bit of pinch of salt. But certainly he suggested that there may well be room to remove the backstop and maybe there's a deal. I mean, Boris has been— his official line is is he's cautiously optimistic that he can make further progress in New York this week towards a deal. He also said that don't expect a deal to be done in New York, no way. But you would say that probably, well, Boris is pretending at least that things are moving closer towards the idea of some kind of deal. I mean, I'm looking at cable here because we've had powerful moves to the upside at the back end of last week as we got these, certainly Juncker's comments on Friday, on up to the, you know, up through the 126 handle, which had been such a key barrier on the Thursday. So we broke up through there on the Friday, but it all kind of came sharply back lower. And this morning, you know, that double bottom that we had back here on Wednesday and Thursday has just been taken out. This is a little bit of a sympathy move, I would say, right now with regards to you know, it's the euro-dollar that's, that's the, that's the driver here off the back of this bad European data. And you're just getting a bit of a correlation move. But technically, this is important for cable as we break through that double bottom. And S1 is next up in terms of support. But ultimately, I guess, you know, you got that low from back here, the start of last week, and we had the low back at 1.2437. So the other obviously key thing today, probably we'll get the ruling from the Supreme Court whether prorogation has been— is it legal, is it not legal? I would say certainly at the start of last week, the government were pretty confident that the Supreme Court— remember what happened here, you had the English Supreme Court sit and rule that it was legal, you had then had Scottish Supreme Court saying the opposite, that it was illegal. So now it's gone to the kind of UK-wide Supreme Court, and at the start of last week, the government were confident that that court would say, look, this is not a legal matter, this is a political situation, it's not— nothing to do with us. But I'd say as the week went on last week, probably the government's confidence waned, and by the time we got to the end of last week, I you know, perhaps they weren't quite as confident, and that the Supreme Court— and we'll find out today. I mean, the timings of this, I'll have to— not quite entirely sure. But you get— there's two schools of thought here. If they do rule that it is illegal, so then Parliament would, would reconvene. But then you've had news that maybe Boris will just prorogue Parliament again. But if you could argue, it could be pound positive if the Supreme Court announces It's illegal, of course, because that allows Parliament back into session, which you could say then opens the door for the Remain MPs to have more time to try and disrupt Boris's sort of no-deal strategy. But then you could argue the no-deal threat is starting to work. Is it? I don't know. But is it starting to work with regards to the EU softening a little bit? I guess we'll find out properly today when Macron and Merkel have had a chat with Boris. And is there any chance? And obviously we've got the situation where Ireland— once I flick over, I'll talk about Ireland and then the headline that I'm showing now. If I go and show you my other screenshot, but, you know, talk that Ireland may well become this sort of economic unit where firstly you might have, um, um, agricultural, um, alignment between Northern Ireland and the Republic of Ireland. And maybe there's talk that, well, why can't you introduce, uh, sort of manufactured goods into that equation? And Boris said over the weekend, well, yeah, maybe. Um, so I don't know, maybe there's— maybe Boris is moving towards the idea that we can have some kind of Irish alignment, but then what do you do about border checks, and is there border checks in the Irish Sea? And so obviously we're still a long way off, and that's the point to make, I would suggest. And so even though we've had some small movement towards the idea that maybe a deal could be on the cards, they're a long way off and there ain't much time to go. One thing on Europe's side, you've had a little bit of pressure being put onto the European politicians positions from some of the giant European car manufacturers who are saying, you know, they would be very negatively hit by a no deal. Certainly the German car manufacturers are very reliant on the UK as an export market. So, um, you know, that's kind of one of the headlines rearing its head this morning as well. Um, so with regards to cable, yeah, let's see, we've got the Supreme Court hearing, one. But then separately, very much separately, you've got Boris meeting Macron and Merkel. And so you could well see some headline risk today, and maybe more this afternoon, I would suggest. And we'll see how this plays out. But for now, you've got cable breaking that double bottom from Wednesday and Thursday. Keep your eye on that Monday low from last week, um, as we track sideways. Now let's, let's I'm just conscious of time here, so let's move on a little bit. Um, what else is happening? So, um, obviously we've still got this oil-related situation, and I'm just going to flick down and show you these bullet points just talking about the progress. And, you know, are Saudi going to get oil back online quickly? Um, yeah, I was just saying I was in Saudi Arabia last week, and I was just going to mention that I do feel the Western press are reporting this in a very different way. Firstly, the Western press love a bit of sensationalization, of course. So I'd say it's been sensationalized a little bit. What most of us here in the West don't realize is that there's drone attacks on Saudi oil facilities literally all the time. They have so many drone attacks. It's just that almost all of them have failed. They're a little bit kind of botched jobs and not particularly well organized and therefore fairly inaccurate and fail to inflict much damage. Now for sure, this drone attack— well, what is it, 10 days ago now— definitely hit the mark. So even though there are lots of drone attacks, this one definitely stands out as being uber successful if you're thinking from the point of view of the, the people behind the attacks. And who are behind the attacks? Well, you've got actually one thing on Boris now is meeting Trump tomorrow, and Boris certainly happy to step up the rhetoric in blaming Iran and also step up the offer for the UK to help the US in kind of some kind of joint mission to protect Saudi oil. And whether that's troops on the ground, I'd probably doubt it at this point, but it's certainly the use of British surveillance and intelligence situations. So Boris and Donald Trump will be talking tomorrow, and certainly Iran and oil and Saudi will be on the agenda. If we flick and have a look at the oil chart— so my point being that actually they get these drone attacks all the time. Obviously Saudi are trying to have an Aramco IPO, so this, this news of attacks doesn't really get out. They like to keep this under wraps. For obvious reasons. But, um, the frequency of these attacks are quite high, so it's not particularly unusual there was an attack. It's just the damage that was inflicted. Certainly the energy minister has been confident that they'd get oil back online pretty quickly. I'd say that confidence hasn't quite, um, come into evidence, um, in that it's taking a bit longer than their very confident estimate of getting oil back online, which is why oil is still up around the top end of the sort of $50 spectrum. We're not above $60. I mean, $60 is obviously a key price point here when we're thinking about this week. And certainly the last few days of last week, we spent in a fairly tight range. We've been up to test the top of that. So the tight range, I'd say, of the consolidation phase, would be between these two rectangles. So $57.58 on the downside, that was the 18th of September low, and then the 19th of September high was at $59.50. So you've got this $1 range here, 50— $57, sorry, $2 range, $57.50 to $59.50, and we tested that overnight. We're kind of just drifting back into the middle of that range right now. So this is your consolidation range. Yes, oil is still a lot higher than it was pre-attacks, but then it's actually nowhere near as high as the, let's say, the attack spike high. And if you put a kind of fib series on this, the problem you've got as a trader here is that we're kind of in the middle, um, the 50% fib of the really the, the, the range pre-drone attack to, to drone attack spike high. The 50 fib is just above the 59 handle. So we've got this— the consolidation point back in the last week is around this 50% area. It just remains to be seen, A, what might the US and the UK say about helping protect Saudi oil reserves, and obviously, B, probably more importantly, you know, what's the progress with Saudi getting things back online. You know, I'd say Uh, well, we'll have to wait and see from Saudi, but certainly in my view, you're probably going to see things get back online. We might drift. I'd say what's really important would be $57.58. Any test of that, any break of that, you've got a pretty big gap here that still needs to get filled. You know, I'd say any break of $57.58, probably going to see a move down towards the $56 handle reasonably quickly. But obviously listening out for more news flow as we go through the week. Um, okay, other stuff, um, on the headlines, um, we've got stuff like— well, if we just go to, uh, well, actually, let's talk about Labour. There's the Labour Party conference. You've got party conference season, of course. Labour in Brighton. You've got the Conservatives next week. And Labour, nothing short of a shambolic, disastrous beginning. I love this picture in the FT here. I'm supporting unity over division is the one of the kind of unite sort of slogans here. But unity is the last word you would use to describe the beginning of the Labour Party conference. Massive divisions internally on the Labour Party's stance on Brexit, and this is just causing havoc. You had the deputy leader almost trying to get— being ousted over the weekend. That, that coup failed, and it's just been a shambolic disaster. So just as you know, I— you could say in terms of the general election idea and when an election comes, obviously we're not quite sure, but you would have thought it's nailed on for 2019 at some point. Whether it's after the 31st of October or not, we shall see, but most likely in November. But this is just a disastrous period of time for Labour, and not only are they in danger of handing the Conservatives a much increased majority. I mean, it's got so bad they need to be looking over their shoulder now at the Lib Dems, and dare I say they're at risk of becoming only the third party when the election results come in. So certainly shambolic, but Corbyn digging in his heels for sure. He says he's fresh and energized for the general election campaign. But yeah, that, that, that kind of party conference has been a disaster. Other stuff, I don't know, UK-related stuff. Thomas Cook has gone under, probably the least surprising headline of the morning. But let me finish by looking at the charts. I remember we've got EU data hitting the wires in 10 minutes, but we've already had the German and the French manufacturing figures that were bad news. So you're gonna see the same when European figures hit the wires. But let's just check in, I guess. I haven't talked about gold. Let's have a quick look at gold. Whilst we had this risk-off vibe this morning, gold has been up there actually since the European data. Gold has not added to its upside, but this morning we did break up above Friday's high. Let me get my— sorry, So Friday's high was here, up at 1524.60. So we did move up above there in the early hours overnight, then we drifted back lower, tested support. I saw Michael made a really good call at 8:06 AM. Gold low of the day and pivot. Michael, I hope you took on that trade. Definitely really nice setup. And you've obviously— the German figures played into your hands there. I'd say the high of the day being first target, as you know, now that we kind of negotiate— well, I guess we stalled a little bit by Friday's high, but high of the day probably first target. What was good about the low of, of, of today was also the fact that it was that key top that we had back on Wednesday, just adding more support in around that sort of $1,519 area. So certainly gold on the front foot. This morning off the back of those data. And I definitely think the key support is that Wednesday high. And as a platform, it's worked really well so far. But if we look further out for gold and look back over the last few weeks and look at September as a whole, then definitely more room to move higher as well, depending on headline flow, of course, as we go through the week. But mark up these kind of key levels, certainly on the downside. I mentioned that Wednesday high, and the key thing about that, it was also the high on the 13th of September. So 1519, really important. Um, big double bottom down at 1492 area. Um, that was the 10th and the 18th of September. It's the double bottom for the month. Um, so we've been quite sideways over the last few weeks, you would say. Um, you know, obviously through the summer we had Nice, you know, huge movement to the upside as we had the likes of the US-China trade situation deteriorating. Obviously that's turned maybe slightly more to the positive, you could argue, but again, it's been a bit quiet on that. We'll see if we get any commentary and developments on that as we go through this week. Obviously then Boris being quite aggressive as he entered Parliament, but then again that's kind of softened a little bit as in the last few days it's been been more about Boris making progress on actually doing a deal rather than Boris, you know, trying to chop the legs out of Parliament in order to try and force a no-deal Brexit on Halloween. So certainly gold is up at the top end of the trend that we've seen through the summer, but certainly more shorter term, looking to try and push on again this morning off the back of this worse-than-expected European data. Okay, so I'm gonna leave it there. That's it for the briefing this morning, and I'll leave you by just kind of flashing up the highlights for the week ahead. Definitely a busy one, but certainly that EU— sorry, UN General Assembly is going to be the key headline risk. So as we kind of get towards midday and beyond and into this afternoon when the, the US side of things wake up, I you need to be on your— on the ball, listening out for any kind of headlines. All right, so that's it for today. Enjoy today, enjoy the weekend. Thanks very much.