This Week In Markets: 8th - 12th March 2021

Okay, very good morning. It is Monday the 8th of March, and happy International Women's Day to any of our female followers in our community. And also as well, we're just around 26 subscribers away from our next meaningful milestone on YouTube, which is 20,000 subscribers. So if hit that subscribe button, help us get over the line, take us to 20K. It'd be much appreciated. Uh, just quite amazing really how that community has grown, and long may it continue. We really love delivering the content that we do on the channel. So yeah, it'd be great if we could get to that 20K level. But look, the briefing for this morning, normal rules apply. I'm going to update you a little bit about some of the major weekend news flow. We're also going to have a look at what's in store for the week ahead. There's definitely some interesting things to talk about here at the open, which I'll go into, from the oil market, um, to also the US 10-year, the continued focus on yields. And then, as I said, some interesting things this week with the likes of the ECB policy meeting as well. So look, let's get straight into things and look at the cross-asset class mix this morning. And the dollar is firmer once again. Albeit relatively marginal. It's about 0.14%, but it is exerting some initial downside weight in both these major currency pairs here. Looking at EURUSD first, we did go through 1.19 very early in European trade, and you can see now that providing a bit of a degree of near-term resistance, having broken through on the failed break that we saw during some of the initial payroll dollar fluctuation on Friday. So worth keeping an eye here because last week we closed beneath the technically important area, which was that 1.1961 level, which was the previous low that we had at the beginning of February. And then we are at the moment trading our lowest levels in the euro since going back to late November. But here you can see is quite a key level test already being seen. Um, at 118.89. And you can see that encapsulates some of those relative highs that we were seeing in sep— October of 2020. Really was restricting some of the upside price action until we broke out of that in late November. So any breakdown of here in price, the next clearer target is quite some way off technically. Um, looking on the higher time frame on the daily chart here would be around the 118 handle, or 0.045 as I've got marked. Which is that low that we had on the 23rd of November. So this all coming, of course, as we continue to see generally higher yields this morning, stock rotations. So tech stocks weak overnight in Asia, a continuation of that play of the higher yield environment, and that has been more favorable for the dollar for the time being, which might put further downside weight on that euro currency pair. Likewise then, if you were looking at cable, it's a similar type of story. So it's definitely the greenback in focus rather than anything Sterling specific, and was just looking here on a 60-minute chart of cable. And we've obviously seen quite a, a decent pullback over the last 2 weeks or so in Sterling, and quite an interesting range to, to keep an eye on here in some of the near-term price action in the intraday market. We've already had resistance found at the pivot level very early as Europe's come back in, but really for the session and near-term price action I'd be keeping an eye at these two areas, which was that momentary low that we had around payrolls, again with dollar movement that we saw. And then that brings in that low that we were trading going back to the 12th of February. You've also got the S1 residing just below there, so 137.76 in the futures as the lower level of that, that current range that we're in. And then on the upside, 138.63 which was the highs that we were seeing on Friday, back on the 2nd, and then also back in early and mid-February as well. So cable, I'd be quite interested to see how we perform around these levels. Any breakdown on the downside then is this kind of area here, which was the, the resistance kind of range high that we were trading during late January, early February. That would be a key area of downside support for the week as a whole to keep an eye on. That would be around 137.50, uh, should we get down, uh, that low at any point. Okay, um, otherwise elsewhere, uh, gold has had a little bit of a bounce overnight, but it's failed to sustain that amid generally the dollar strength and dollar strength higher yield. This, this environment that we've been used to seeing the last 2 weeks We're seeing moderate signs of that restarting again this morning, and with a light calendar, it could well be that those trends really, um, are the most definitive factor of the session ahead without any kind of scheduled, um, economic kind of releases due for today. So the dollar picking up a little bit as Europe's come in has just reversed that overnight bid in gold and moving back down again, uh, through 1,700. So on the downside, obviously we'll be keeping an eye these lower levels which we, we flirted with last week, which was around that 1683 level, having on the dailies broken down significantly last week in a continuation of that ongoing trend. Otherwise, in the equity indices, yeah, it's quite clearly evident already at the moment that the NASDAQ is an underperformer, and that was the case overnight in the Asia-Pacific session. China and Hong Kong led the regional retreat tech stocks were the hardest hit. And just looking here on the NASDAQ, it's just touching session lows as I speak. And I want to flip it on the daily and just want to have a look at a couple of different things here. So this chart that I'm sharing here now encapsulates the entire pandemic picture. So the onset of the pandemic, the, the March rout that we had in 2020, the phenomenal recovery that we've had up up to these all-time highs that were printed, uh, only back on the 16th of Feb, which was up at these levels at 13,900. So we've pulled back, and this morning we're trading a little heavy again. The NASDAQ 100 futures already down close to 200 points this morning. We did see an about-turn on Friday after equity markets had a little bit of an indecisive reaction to payrolls, eventually moving higher. And but we've— we're reversing a lot of that at this present point in time. So here then, what I've just marked up are a couple of rectangles. That Friday low, um, down at 12,234, I think is quite key. Any breakdown of that would then be looking to eye up the kind of mid-November, late November area, which was around here, which was 12,086. Anything below there would then be that same time period on the low end of that range at 11,808. And then below there would be down here at 11,500. Basically, the bigger move of course would be if we did get down to around these sort of levels at 11,000. And what percentage-wise, what would that be? So from current price down to those, those lows, that would be about a 12% move. Down to around that 11,500 would be about a 7.5% move from where we are at the moment. I guess the point I wanted to make is, and the reason why I'm talking about these downside levels is even if we got down that far, um, looking at where we were pre-pandemic, we were here, we were down sub, obviously, $10,000. So when we start talking about pullback to $11,000 being a really deep move, it doesn't seem that deep when you look at it in context then of where we were. So that being said, I do think this NASDAQ is susceptible for some some further downside in these current conditions at the moment, which seemingly don't seem to be going away. And I think that rotational play will likely be ongoing for the time period ahead. And if that is the case, then as we take out some of these key levels, there could be some days when we continue to see this, this underperformance in the NASDAQ. And technically speaking, you could see some quite quick runs in price action lower down before you start to be met with some strong dip buying then, which, which will happen at one point because I think at the moment the market is in a readjustment mode for this new yield environment. That doesn't detract from the point that in the end I do still think that with policy remaining low and with fiscal stimulus coming, there might be a rotational effect, but generally I think once we get lower down, it's a positive narrative for equities all round. It's just that valuations are quite high and particularly punchy on the tech space, which have got to be shifted from, you know, potentially into value from growth at this point. Um, all right, oil is the, the one I want to kick off with then. This is just a quick look at WTI crude. We gapped up overnight, we briefly ran up in the front month futures up to $68. If you look on the daily, this is going back all the way to 2018 when we initially hit a peak just over $75. And as you can see, we've got over the April 2019 high now. So we're not now trading at the highest levels in crude that we have done since going back to kind of Q3, Q4 of 2018. Uh, next stop you got to think is $70 now, psychologically on the upside. And why have we continued this, this move up? I mean, underpinned of course by the rollovers from Saudi, predominantly the decision to not move on that 1.5 million, a little bit of a gimme to the Russians and Kazakhstan to just get them to agree to that. But overall, that helped oil prices last week, comes in the context of that improving kind of growth perspective in the period ahead with stimulus and vaccination improvements and so on and so forth. And now you've got continued renewed tensions in a very sensitive geographic region. And that takes us into our first story then, which is, um, Yemen's Houthi forces on Sunday fired drones and missiles at a Saudi Aramco oil company facility in Ras Tanura and military targets in the Saudi cities of, uh, Dammam, Asir, and Jassan, according to Iran's aligned group's military spokesman. Now, if I flip over to here, this is a look at the, the Ras Tanura terminal. It's the world's largest oil export port, so it's particularly important, and the then therefore potentially for causing supply shocks in immediacy in this— the price of WTI that we trade. Um, here then, the export facility is the so-called Sea Island. It's actually 3 interconnected offshore platforms, as you can see, where supertankers dock. And there are 2 large oil tank farms, which you can see here on, on this kind of, uh, this backside here of this island outpost, if you like, with the north and south piers. Now I think one important thing that's, that's happened here is the tensions here have been ongoing for a while actually. More recently, on March 4th, Saudi Arabia was subject to several missile attacks, with Houthis claiming that they'd managed to hit Aramco oil facilities in Jeddah. And so this doesn't come as a new thing, but the frequency of these attacks is definitely rising, even if the the impact on energy infrastructure appears limited, which is the case actually from the weekend. The capacity though is cause for serious damage does exist. And so what basically people are looking at is that the boost to risk premium for oil has got to increase given that there's always the risk of a significant disruption. And as I said, given that this is the world's biggest offshore oil loading facility, facility. So definitely one to watch. These things tend to kind of pick up in this way because then it's met with aggressive kind of posturing politically as any potential responses. And so this is definitely one to watch as we go through the rest of the, um, rest of the week. But in, in the picture of everything else that's going on at the moment, from OPEC supply deal to the general growth outlook in the pandemic recovery, and now you sprinkle in some geopolitical unrest in this highly sensitive area, it's kind of the perfect cocktail for, for potential upside in oil at the moment. And so yeah, $70, um, still remain quite bullish there that that will be achieved at some point in the near future. Moving on then, in the Senate we had over the weekend the $1.9 trillion plan was approved in the Senate on Saturday, and this means then that the House is scheduled to vote on Tuesday on the Senate's version, which then must happen and approved before then it goes to Biden for being signed in— for signature into law. Democrats are seeking to enact the legislation before unemployment benefits expire on the 14th of March, the 14th of March being this week on Sunday. So time of the essence there. From a Federal Reserve point of view, worth noting that this week as we go into the coming sessions that the Fed go into their blackout period because we do have the next week, the mid-March FOMC next meeting. And so there will be no speeches then from Fed officials. So interesting then that the recent comments that we have had from Powell multiple times, but from also from his colleagues, which is no real explicit comment to try and push back against the whole yield increase that we've had of late. There's, there's no other opportunity now into the blackout period for them to comment on that. But that doesn't mean that we couldn't get source comments come out from the likes of Bloomberg or the Wall Street Journal and so forth if this yield movement was continued to be particularly impactful on markets. That doesn't go to say that they, they can't find a way back door to communicate. So something to be aware of. The ECB then is quite a big thing this week, and it isn't so much actually the ECB meeting on Thursday, which although will be looked at, I'm not expecting a great deal from the policy meeting in itself. Christine Lagarde, of course, is going to be asked about this recent rise in yields and its impact on just general financial conditions and whether or not what would be the threshold for them to respond to anything of that nature. So her skills on the presser are definitely going to be put to the test. The other thing is analysts at ING note for the ECB itself, they're expecting a modest downward revision to the 2021 GDP growth forecast and the upward revision to CPI forecasts, but neither of which that they're anticipating to make too much of an impact on the euro. Downgrading growth, I think, has— comes as absolutely no surprise, just given the relative slow vaccination program rollout that we're observing in Europe, and so consequently a more protracted, longer lockdown and slower reopening. So the downward revisions become more pessimistic on growth but more, um, kind of more bullish on inflation. Again, very much expected just given the continued resurgence in energy prices, and, and, and that's going to really lift things on that side of of the projections. So what is it that we're looking for? Well, actually, it's today. Today is a particularly quiet calendar for global markets. However, as you will see from here, one of the main things that's highlighted is the ECB PEP. So the ECB weekly update on their pandemic emergency purchase program, and data on the bank's purchases due today will cover the week through March 5th, and this has drawn considerable attention if you're reading any of the press over the weekend. And given the movement we've had in yields over the period of which this data would have measured, although I, I don't see a huge surprise on the back of it today, I think you certainly need to keep an eye out for it because it's more than likely that there will be a temporary increase in the pace of purchases that the ECB were doing in order to counteract some of the sharp yield rise that we've been observing of late. Analysts expect the ECB to step up the pace of its bond purchases in that week after they fell to €12 billion in the final week of February, down from more than €17 billion the year— or the week earlier. These are— these numbers are important because it's going to give you a reference point from when that announcement comes out later on this afternoon. I think it's around 2:45 PM London, as to what to look for. As a reference, then, the ECB watcher Pictet du Crozet says he sees a number above 20 billion as a number to base any subsequent reaction around. So yeah, that, that, that would be quite key today for euro. And euro is on the back foot at the moment. And generally speaking, what we're seeing across asset classes this morning, just to iterate, with a quiet calendar ahead, it tends to draw focus back to the predominant top-level themes, and that is continuation of higher yields, firmer dollar. So equities weaker, T-notes lower, gold lower, currency pairs down. And then as a side point, almost separately to this, in its own dynamic. Oil is generally quite elevated at the moment, but upside could well be capped by— if we get further strong increases in the, in the dollar. Then the other thing then is over the weekend, just to be aware of, China February exports posted a record surge from COVID-19 depressed levels. But that in its sense does discount then, I think, the fact that in dollar terms exports were up 155% in February compared to a year earlier. So I wouldn't get too excited about that. It did provide a little bit of a positive start to Chinese trade. However, generally sentiment there deteriorated as the, as the overnight session went on. Well, then the final thing I wanted to have a quick comment on was, was COVID-19 on a global level and really looking at the US, UK, and European situation. So here looking at daily new confirmed COVID-19 cases per million. And as you can see, Italy continues to be heading in the, in the wrong direction at the moment. Quite a rapid acceleration and by far the highest level of COVID rates that we've seen since the year got underway. France remains kind of doggedly high without really going anywhere in terms of the downside. And obviously this has come after they made that choice a few weeks about not going into a full national lockdown. And then Germany as well has been seeing levels not just plateauing but very marginally increasing. And this of course goes to the opposite of the UK— case rates thankfully continue to head south, as too is the same case in the US, albeit a slightly slower fashion. And then overlaid that with the current vaccination situation, things are improving in Europe. They're starting to pick up and heading in the right direction, albeit there's still quite a significant divergence between what it looks like in the rate of administering these vaccines compared to the UK and the US. Interestingly, in the UK, things have slowed a little bit after that real key government push and acceleration that we had to hit that mid-February target. Since hitting that target, things have actually— when we hit the target, we were basically peaked And since then it has dropped off a little bit and the US has now superseded the UK in terms of doses administered per 100 people. An interesting thing that one of our guys on Amplify Live was looking at this morning was looking at the latest figures on vaccine hesitancy rates. And you can see here the UK has probably the least amount of hesitancy And also, obviously, a very high amount of adults who have already been vaccinated. So we're up here at 85%. The point being here is that somewhere like in the US, it's more like 50/50. In France, even lower at 47%. And there was kind of 3 things to watch that one of our guys was giving us a kind of briefing on this morning very early. And that was one, premature opening up of certain predominantly Republican states. And the reason why he's brought that to our attention is that as we looked at some of those case rates, um, particularly COVID declining in the US as we've seen here, and now with the rate of, uh, of vaccination program rollout being at its fastest pace it has been and expected to continue in that direction, particularly given the recent, uh, coordinated manufacturing deal between Merck and J&J as well. With some of the latter drugs still to come online. So premature opening up in certain predominantly Republican states could be something to look out for. Remember, in America it's not a nationwide blanket coordinated strategy, it's very much fractured onto a federal and state level, so there will be differences within the nation in itself. Two, the reluctance of younger groups to take up the, uh, the vaccine, I guess, generally as well. Transmission rates between those where mobility is very high. Then in 3, the spread of escape COVID strains like the Brazilian P.1 that may have ability to overwhelm already acquired immunity. So kind of 3 factors there to have a look at. So markets definitely looking generally through that at the moment, but there's still potentially a bumpy road ahead was the point that our guy was making. So the main thing being that that's US-specific, and the reason why the UK doesn't fall so much into that, that categorization is the fact that most UK people do have in mind they want to be vaccinated, one of the most highest in the entire planet at the moment with all nations being measured. All right, a quick look at the calendar then for, for the rest of this week, there's a few things to be aware of. So Monday, very quiet, looking out for the ECB PEP announcement later on this afternoon. Tuesday then, you get eurozone GDP and employment numbers, but these are final Q4 readings, so shouldn't be too much of a market mover, if any at all. You do have the German trade balance first thing at the European Open on Tuesday. Wednesday then, things start to get a little bit more interesting, definitely for the US, and I can incorporate then that with Friday with the US where you do get PPI and also University of Michigan sentiment, the March preliminary figure. So last week the 5-year breakeven rate in the US had hit 2.5%, and that was the first time since 2008. And with US yields climbing at the moment, um, it has led to the fact that expectations for the year-on-year, um, US CPI has actually risen now to what 1.7%. Although the Fed have made clear that they're willing to look through this kind of temporary push in inflation in the short term, markets are definitely sensitive to inflation metrics in, in the context of movement. So I definitely would be keeping an eye out for that. I don't think ultimately it's going to move the Fed's hand, but it could well provide a catalyst for subsequent price movement when we get to Wednesday session. The other things then is, is jobs claims usually on Thursday, Michigan on Friday alongside PPI. So Michigan expectations of a slight month-to-month improvement given the declining COVID case rates and, and speeding up the vaccination rollout in America. And then you've got the ECB on Thursday, of course, which concludes really the, the main order of play, with UK GDP also coming out on Friday morning. And that is it. So quite a lot to digest there. Remember to check out Amplify Live in the community. Sam did share his technical look ahead across the trade setups on Sunday, as he will normally be doing now going forward. So it's definitely worth having a look at that as well. All right guys, have a good week ahead, and any questions just let me know in the Discord room. Thanks very much.