Theresa May survives!

Hi guys, good morning. It's Tuesday 13th of December, just gone half 8 here in London, and as you can see, I'm joined by a very, very special guest.

Still strong and stable, still standing. Can't have many of your lives left, can you, Theresa?

After surviving the no-confidence vote, she has won 202 117. As you guys are saying in the chat, Safe is not going to be happy that I'm doing this briefing with his missus.

Secret Santa last night, uh, very good, uh, sort of office party that we had. So we'll keep this as sort of brief as possible. But looking at the market from, uh, well, obviously starting with cable, uh, here this morning, we're actually pushing up towards near the high of the day and high of yesterday. Just before sort of the close of the day yesterday. You can see following the vote, pound came back down towards to test the R1. And while yes, it was a win, over half of the sort of the independent Tory MPs voted against her.

So that was a bit of a negative.

And yesterday started obviously with the no confidence vote to be triggered. The 48 letters had been received. And really since then, if I just come to circle that for the pound, we have actually pushed higher.

A lot of sort of public backing, public support for Theresa May via Twitter, a lot of MPs tweeting their support. We had then pushed higher for the pound.

You can see really from, well, just as we were getting into the office yesterday, sort of 8 o'clock, 8:30, when this was coming out, to last night.

So we were trading at that time on quite incredibly a technical double bottom there at 1.2480, and we're now trading 1.2680. So 200 ticks higher, uh, all is well for now. Um, if we look at the pound over the last few days, you can see a lot of the, the sort of, uh, the price action that would have, um, for that no confidence vote would have already been priced in. So I think it was more, uh, a case of sort of buy the rumor, sell the fact on the, on the sort of the headline that she had won.

But the sort of relief rally, if you like, that it's not the worst-case scenario. Whether she can, you know, go Europe and change anything obviously remains to be seen. I think if we look as well at the pound, how we're trading longer term, it's, it's, it's not great still.

That trend line that had broke—

a trend channel, I should say— that broke during the week, we're now back trading into that.

And key level-wise, we're now trading— or we were a couple of seconds ago—

right on what was the, the low of the summer, the August low.

So quite a key place sentiment-wise, I would suggest, where we, we closed the week here. You can see the first test of this that we had back, uh, the very beginning of December 4th, so just over a week ago. We tested that high last night before coming down around 9 o'clock post-vote, and now we're testing it again this morning.

So can we close above or below, um, will be very, very key.

Um, if we also have a look at yesterday, well, how we're sort of trading this morning, uh, the euro has continued to push on as the dollar, uh, slightly— oh well, a touch weaker, uh, across the, the board.

You've got equities that are just coming under a bit of pressure now. The DAX, for bottom in the open is, is coming back down to sort of test its lower part of the day. And if we can sort of confirm a break here, I wouldn't be too surprised to see this filter through to, uh, US stocks as well. So just testing that trend line now, uh, worth keeping an eye on that along with the sort of the, the low that we had not too, uh, too long ago as well.

So be worth keeping an eye on how equities trade around here.

Positive talk out of China and US which helped boost equities into the sort of the afternoon. However, again, these trend lines have been really, really useful across markets, and once we had broken that— if I just draw this on— you can see the, the real move to the downside continued, and on the break of that, the retest worked very well.

So possibly looking to see a similar thing here in the DAX where we're just testing that now.

It'll be worth, uh, sort of looking for that correlation to come through, both in Eurostoxx testing the trend and also S&P here. Now if I just bring up the trend line for those that are looking at these markets, if we were to get a breakthrough, which we have, a retest of that, also the, um, sort of the morning support from 7 AM could be an opportunity to get short down towards the pivot. Also yesterday we had the, uh, oil data out which, uh, did not back up the, the API in terms of the, uh, the size of the, the drawdown, uh, only a 1 million rather than the 10 for the API, which you can see circled here. And I was, to be honest, pretty shocked that we didn't get the initial break below the pivot, the pivot level. Also the, the low just before the API acting as incredible support, and it wasn't really till late last night where the, the sort of the energy complex in general came under a bit of pressure. But also you can see oil here moving quite sharply down from at the time $52 to $51, so $1 move there in oil.

Got this trend line marked up on the, the chart here for oil going back from the, the low of the year.

And you can see if I was just to extend that, this was obviously drawn yesterday, won't be too far away from where we're currently trading. And Throughout the, the briefings this week, it has been, uh, sort of our view that oil may well, uh, look to break lower and come down to test, uh, $50. And this trend line, uh, I would still look to have on the chart.

You've got your two tests already, so you're looking for the third one here. The, uh, low that we had back on, uh, not yesterday, uh, Tuesday early morning would be a key level of support. If that was to go, I think opportunity-wise you're looking down here now at the low that we had back on the 10th and the 6th as well. So oil supported at the moment from $51, quite a sharp bounce there, but the, the DOE numbers eventually weighing on oil. And a great example there of, you know, letting the, the market tell you what's going on. You could have absolutely been forgiven for wanting to go short, um, at the DOE. Uh, didn't break the pivot, uh, at all, uh, snapped back. And, and you've got to imagine people that got in quite aggressively there would have been stopped out only to see later on it moved down. So selling at the right time is, is key. And that takes me back to the, the equity markets. And you can see the DAX now actually breaking that trend line. So a bit of a risk, uh, off tone here. In equities early morning just coming through with that break. And you'd look to see gold and T-NEX perhaps catch a bid. And you can see, yes, over the last sort of 15 minutes or so, gold is pushing on. And, and that high of the, the day isn't too far away now as we're back above the pivot. Yesterday for, for gold, quite a choppy day. Didn't really know what to, to do as equities were moving higher, but also the dollar was weak and it it was a bit confused which sort of correlation to, to go off. And you can see now quite a strong level of resistance from today's highs and yesterday's highs. I think looking to get into gold might be rather tricky.

Even when we had broken into early morning today, this trend line from yesterday, you can see, was a—

was pretty, pretty choppy to the upside and I think if we can break that high of the day and perhaps equities do continue to come under pressure, uh, obviously the obvious, obvious target would be back to towards, uh, sort of the R1 and the highs of the, the week as well, uh, for that. T-notes also catching a bid, as mentioned, as equities do to sort of test those, those lower levels, uh, coming up to its high of the day. And incredibly, and mentioned in the, um I think it was the briefing, one of the ones last week, just the recovery that, that T-notes have had and bonds in general from those, those yearly lows back up to levels that we were trading in, in early February. So while technically we couldn't break and close above the sort of the, the summer highs, you can see now we're just coming under a bit of pressure. Looking at the, the calendar for today in terms of sort of trying to plan the best times to, to get into a trade. You've also, uh, other than obviously the unscheduled, uh, Brexit comments that we know will come out, um, regularly, uh, from now on, we have the ECB, uh, which we'll do a bit more of an in-depth rundown closer to the time.

But that will be the main event of the morning, 12:45, uh, the, the sort of the, the rate decision. Obviously not expecting any change, uh, whatsoever. But you also have the, uh, as usual, the ECB press conference from Draghi 45 minutes later. So not expecting too much in the way of movement before 1:30 really, as everything expected to obviously keep the same. Press conference might give a bit more in the way of opportunity, and quite a few markets are actually sitting, uh, well, euro market I should say, are sitting quite nicely. If we go back to look at the Bund before going back to the calendar, you can see on the the sort of the longer time frame, looking over a period of days. We have now just this morning broken out this, this range that we've been in for the last sort of few trading days. And technically, obviously, pretty key whether we close back above into that range or below. Obviously, depending on, on how hawkish or dovish the ECB are will determine that. Obviously, the risk-off tone sort of helping bonds move a bit higher. Just to confirm that, you have, uh, the Dow Jones also having broken that trend line. And I talked about yesterday the, um, the use of trend lines, and I'll do it again today. And I think they really are a very useful tool to sort of determining, um, sort of sentiment for the day. So now we are below the, those trends. I think, yeah, you wouldn't necessarily want to be looking to, to get long equities unless we can, uh, sort of get above that. For, for oil as well, uh, while we are sort of mid-range for the day now, only down— well, we're literally pretty much flat for where we opened. That trend line as well would be a really key break below that from a sort of sentiment point of view. Also looking at the calendar, you've got your, your weekly jobless claims numbers that are coming out at the same time, but obviously with Draghi speaking, focus is, is definitely going to be elsewhere other than the US data. And then into the sort of the back end of the night, it sort of dries up a bit. So focus this morning, I would expect a range-bound sort of lower volume trade for European assets. I think with the, with the pound, uh, with Theresa May having somehow used another one of her 9 lives and survived the pound, I would imagine, will continue to push to the upside. I think you, you've got to favor, uh, that move to continue. Obviously, the, uh, the low that we had from the summer being tested now, and, uh, the, the sort of early December low, uh, as well. Let's bring this into picture on a 60-minute chart. If we can confirm a push above that, I don't see any reason why we can't come back into the range that we had in the first sort of few days of the month. But yes, the sort of negativity was priced in over the last few days, and it's sort of a case of that unwind of risk, I would say. By no means is Brexit all done and sorted, and obviously there's a lot of negative sentiment still around, but the reason we're sort of pushing higher is the fact that sort of an unwind of the risk that she in fact would have lost the vote and you know, the pound could be really trading down. I would say, uh, sort of 122, 121, uh, if that had, uh, if that had happened. Um, looking elsewhere from a technical setup, I mentioned euro. You want to be looking more for this for 130 onwards, but you can see, uh, into last night, uh, the R1 did eventually get broken. Was a good opportunity yesterday to have got short on that. You can see, uh, the support that we had, uh, what obviously would have been, uh, Tuesday sort of afternoon and the R1. Good level to have, have got short. But the trend line, which, uh, I know a couple of people did actually get long on the initial break, acted as fantastic, uh, support for that push higher. So another use of, of those trend lines there, the sort of the 3 tests and, uh, 4 just before it broke and offered a great place to sort of get in. So sentiment-wise, while we're above that, I actually do prefer the, the euro to the upside. But of course Draghi can change that very quickly. From a technical point of view, 114 on the futures and R1 looks a very solid level. And to the downside, I think unless we were to really break this trend from yesterday's morning low, afternoon low, and today's low as well I wouldn't really be looking to get short. So nice sort of setups already in euro progressing through there. You can see the DAX has continued lower. The Bund, um, which I'll just bring into picture here, we mentioned about that, um, that range that had been in is, is just coming, uh, well, still pushing up as equities, uh, push lower. But with the area support for the pivot, lower the day in the DAX, uh, NASDAQ's, uh, just not too far from its sort of psychological round number as well. So we might see a bit of profit taking at these points. Elsewhere, if we have a look at the other currency pairs, just to sort of finish things up, we have a look at the Aussie dollar, also a decent market from a technical point of view. Yesterday, once we had broken out the, uh, the sort of the trend of the, uh, the morning, you can see we're stuck in this pennant and I remember tweeting at the time and speaking to the guys in-house about how I wanted to get short if we had broken through, and it just acted as such great support coming into the, the US CPI numbers, which were bang in line. Uh, it was right at that period, and I was thinking, oh, typical, what comes to sort of the, the, the entry for the trade just on the data. And I was expecting, you know, good numbers to come in and break through, but that wasn't to be the case. And actually, the opportunity was on a break, uh, of the trend line the opposite way. You've got again 1, 2, 3, the test there, the retest, and was a great, uh, sort of opportunity to get long. So I would really look to incorporate these trends just from a gauge of sentiment while there's this sort of air of uncertainty around, uh, at the moment as well. Euro pound just testing yesterday's low, and I can see Michael in the chat just talking about the pound retesting that high of the day here. From a technical point of view, just looking at the last couple of days— and sorry to bore you with trend lines— but again, you can see just how well this has been respected from the original high we had before the, the vote yesterday, then that high of the day, and today. Very, uh, well tested each time. So if we were to get a break of that, I, I can see a strong push towards 127, uh, very quickly. So worth keeping an eye on that from a an opportunity, uh, point of view. Speaker-wise, uh, obviously Draghi's, uh, conference at 1:30 is going to be the main thing. You've got a couple of other speakers to be aware of. Bank of England's Cunliffe, uh, at 2:30. But in terms of movement for the pound, you've got to imagine that's going to come elsewhere, uh, today. So any questions, obviously please do, do get them in, in the chat. I'll be keeping an eye on the pound here at this high. Also equities which are coming under a bit of pressure this morning following a decent rally again yesterday. Sentiment just seems to have changed. Oil as well now recovering very well from $51. That trend line that we talked about all week, if that's to go, I imagine the move down to $50 would come, uh, quite quickly. But yeah, any questions, please do let me know. We'll do a further rundown into the ECB at 12:45 and 1:30. But if I don't speak to you before then, hope you all have a good trading day, uh, and I'll catch you in the chat.