Trading the G-20 meeting

All right, very good morning. It is Friday, 28th of June, so happy Friday. As you can see from the photo to the side of me, of course the main event of the week is just beginning today and tomorrow. This is a picture of the, the kind of fat— they call it the family photo, but but this is a pretty unfriendly family at this particular point in time. Always quite telling, I think, this photograph, because you kind of get a good sense of the power players, the relationships. So what's interesting here is Trump, you know, very aligned with Mohammed bin Salman in this situation. Obviously a very sure relationship that the US have been trying to lock in. If you actually have been reading a lot of the news, you know, the US delegation from Bolton to Lighthizer to Trump to everyone else in between in his team, they've been in Bahrain, they've been in like Abu Dhabi, Oman, they've been everywhere to try and appease their Middle Eastern partners about the dealings with Iran, of course, with the increased tension. And at the center of that is obviously keeping a firm relationship with Saudi Arabia. So those two obviously together, you know, everyone waving, but those two too busy talking to each other. Then you got Abe and Xi, the Chinese president, of course, who's the most kind of the high-level influential person that's going to really drive from a market's point of view is over here on this side. So yeah, going to be interesting, of course. Theresa May is there, bless her soul. She's managed to catch a bit of a break the last few weeks as obviously focus has turned to Boris. So what is the schedule? This is it. I mean, we actually looked at this yesterday and it's something to just kind of overlay on your economic calendar. But remember, they're in Osaka, Japan, so time differential between London and Osaka is about 8 hours. So actually, if this agenda is still accurate, if Trump is meeting with Shinzo Abe, Abe of the Prime Minister of Japan, and that's not going to happen till 8:30, and I believe this is all local time, well, that's, that's not going to be until quite a bit later in terms of— that's local time translating to 4:30, I guess, London. And then Modi, the Prime Minister of India, that won't be until what, 5:15? So even the first conversations that could be interesting, because a lot of this has been focused on the trade dialogue between Japan and India where Trump has been quite critical, again, just posturing. He's already been talking and Japan have already been quite forthcoming about moving facilities to America and so on and so forth. Long story short, I wouldn't be looking for too much in the way of an, of a general asset class or global sentiment reaction because I think Abe and Modi are uh, aren't as significant by any means as to what's going to happen on Saturday, which of course is when— what's going to be London time, probably late afternoon, early evening— you'll start getting the headlines then about the conclusion of the meeting face-to-face between Trump and Xi. So really, if you are trading, if you have any open positions, I would encourage you to close those before the end of today. I certainly wouldn't be recommending, if you're trading short, medium term, to have an open position over the weekend because there's just too much uncertainty. As much as we could be of the belief on balance that ultimately, um, the, the conversation between these two leaders has been relatively well managed to the point where markets now I think will be comfortable with not a lot of concrete evidence to move forward, which could be deemed a disappointment. The fact is, is that anything can happen, and with these two being so critical to market sentiment right now, um, the, the size of reaction you could see if the unexpected did occur, I think, would be significant. And you don't want to get on the wrong side of that when the markets reopen. So yeah, definitely I'd be inclined to close out all positions. You have an added factor as well here because it's quarter end and it's month end, so that does tend to lead to what can be fairly erratic price movement today. So with that in mind, today I think you need to take into consideration these additional variables, as it could be quite a tricky one to trade. Um, that being, if everyone's just kind of sitting on the sidelines, you might see a lack of commitment, you might see a range market, you might see little false breakouts that could get you caught out, and then you throw in this month and quarter-end activity, which generally adds to the whipsaw price action, it could be a tricky one to navigate. So perhaps a degree of conservatism could be warranted under these conditions. I'm sure Sam will cover this more in detail. All right, I'm just going to run through the news quite quickly though and get you up to speed of what's going on. I'll leave the rest to Mr. North, but Boris Johnson This was the headline from this morning on the Brexit side: "Keeping the option of suspending Parliament for a no-deal Brexit." Now, I just really on this point wanted to share an incredibly good resource, and this is this. I'm not sure if you guys are aware of this YouTube channel. They're called TL;DR News, and basically what this is, is for For example, this one here. This is an 11-minute video via animated graphics of taking— the purpose of this channel is to take highly complex legal issues, predominantly surrounding Brexit, and to put them in very understandable, digestible, little bite-sized animated videos to explain it. And these are so expertly done that things like, let's say, May's proposed Brexit deal— but there was one I was watching yesterday which was basically Boris Johnson's deal and his 3 options and what do they all mean and so on and so forth. So I would highly recommend this channel. Obviously it's YouTube, it's free to subscribe. But things like understanding Boris Johnson's 3 options— basically he's got 3. The first being a renegotiation of the withdrawal bill, and as you'll— as we've discussed before, and as you'll find out in the videos, that's not going to happen. Then you've got his Article 24, this Gat proposal, of which he's been pushing. But again, as you'll quite quickly— and I'm sure the market will come to to understand that's not going to happen. And then you've got a third, more nuclear option, which is this pro— prorogation of Parliament. Now, that word in itself might be something new for you, but essentially this is one of those kind of antiquated laws of the old system of UK politics, of which, um, surmises the parliamentary session for this period of time. And once we go into that period, it means that no other business can be addressed by Members of Parliament. So this was kind of like what Dominic Raab was suggesting when he was talking about not having Parliament even the option to stop no deal, like what we've heard from the legal challenge from Dominic Grieve yesterday. So if you shut and let— basically dissolve Parliament, then you're basically going to run into then the fact that you're going to get to October 31st and you could then have this no deal scenario. So This is what this headline is referring to when it's saying Johnson keeping option for suspending Parliament for no-deal Brexit. So one thing when you watch these, these explainer videos though, it comes quite evidently clear, I think, that what Boris is doing is obviously managing this public sentiment around this kind of no-deal Brexit Party success. Success story of the European parliamentary election, but my feelings are still the same in the fact that this is just going to get extended again, if anything. I can't help but feel still, talking to Sam about this yesterday, that even the Brexiteers will look back with weary or misty eyes with Theresa May going, "What were we thinking? That was the best chance that we had to deliver what was somewhere near close to Brexit at the time." Yeah, what's this doing for markets this morning? Again, nothing. The point I want to make here, just to stress, is this, this particular YouTube channel, it's excellent. I would highly recommend it. Elsewhere, we've got an OPEC meeting, of course, the delayed one that's now going to be taking place at the beginning of next week. Uh, this is particularly important because it's talking about the potential or not for the rollover of the existing deal for the second half of 2019. Now, the reality is probably that this will happen, but the idea here is that Russia is a little bit more on the fence than the more committed members like Saudi Arabia and the UAE, who are all very much willing to continue policy. But remember, OPEC on its own as a group or collective of export petroleum-producing nations is quite weak because now they're being almost superseded by the two new powerhouses of America and Russia when it comes to global size of oil production. So the point being here is that OPEC on its own is not enough to really counteract the global supply and demand balance. You need OPEC Plus, and even though the Plus is a collection of other non-OPEC-related countries, we're talking predominantly Russia. Now, I do think Russia will commit to this But this is obviously going to be a key point to look out for when those meetings come. More on this, I'm sure, will be rumored in the weekend press. So keep an eye on my Twitter account over the weekend. Any whispers I hear about the outcome of that meeting, I'll be sharing over the weekend. Um, one interesting fact I saw here was, uh, this was a really good article. I did share this with you guys. I emailed it out on the distribution list this this morning. But if you scroll down, it talks about basically the price point needed for each of these OPEC nations and the share of which they represent of OPEC production. So looking at Angola here, for example, they're pretty small from a production point of view. They account for less than 5%, but they need $80 oil to basically counteract their, their outgoing and kind of have the fiscal break-even, if you like. But if you scroll down, the interesting one of course is Um, if we go down, Russia, according to the Russian Energy Ministry, of course, so that does need to be taken with a degree of a pinch of salt, they say they need $40. So this is interesting though, if Russia needs $40, the problem we have is Saudi Arabia needs $85, as we know, because of their ambitious diversification plans of their economy away from dependency on the sale of oil. Now, what was interesting though, as a statistic, was that in the month of May, given how uncompliant countries like Libya, Nigeria, and so on have been, in the month of May alone, on average, um, OPEC— well, Saudi Arabia, their OPEC+ deal as it exists today— say that they need to reduce their production by 322,000. But in the month of May, they were cutting production by 943,000. So in essence, Saudi Arabia are 293% compliant. I mean, that's the depth of which Saudi have to hit this target in order to realize this goal about the Vision 2030 policy that they have in place, and this, you know, backstopping multiple nations by a degree of close to 300%. That's quite incredible actually when you look at the numbers. All right, elsewhere, Bank of Japan, uh, not too much movement in the yen overnight, but I think that's just a fair reflection of that this type of headline is not really new. Bank of Japan policymakers debated the feasibility of ramping up stimulus at their meeting in June. This is basically a summary of their opinions from their previous policy meeting discussions, but of course this heightens speculation that potentially then in the near term, the next gathering, we could see a more dovish move by the central bank. But that pretty much fits in step with most of the other central bank maneuvering or policy forward guidance that we've had in the last week or so. Quick look at the chart though before I do hand you over on the technical side to Sam. A little touch of dollar weakness just coming through as Europe's come in, so a little bit of an uptick here Euro dollar and cable. Just looking on the headlines if anything new has come out. Let's have a look. Um, yeah, French CPI has come out 1.4% against expected 1.1%. You remember we had the French state CPIs— excuse me, the German state CPIs yesterday, and they were surprisingly strong. And so if you actually think about it, you've got the, the German French numbers bouncing back a little bit in the month of June, and that was a real contentious point of focus for the ECB about forward-looking indicators were indicative of weakening inflationary pressures. So maybe this kind of gives the euro a little bit of reason to, to rise. The Bund obviously has backed off a little bit as well on the back of those numbers. Elsewhere, gold has seen quite a, quite a decent range overnight actually. So if I just highlight it here, that's actually the Asia-Pacific session and it's not It's not really that common that we see such large movement, but again, this is a fair reflection of the fundamental risk in play, which is the G20. And of course, being in Japan and the 8-hour time differential, the G20 is in full swing obviously already as we come into the market and was overnight. So there were— Trump was speaking overnight at 1, 2 AM in the morning talking about Japan and India. Markets have come back down. We've seen a bit of a flurry here of price activity more recently. If we just broke through what was that previous resistance turned support, probably explains that extension on that wick on that breakthrough 14.15. But I'll leave it at that for the moment in terms of looking at the charts. Looking at the calendar outside of the G20, what have we got? Um, it's pretty quiet. UK GDP is coming out, but I must stress that that this is Q1 final reading. So in a similar vein to the US figures that we had yesterday, I wouldn't be really looking for too much out of this data set, expected to be unrevised at 0.5% and 1.8% quarter-on-quarter and year-on-year. Uh, the Italian CPI data coming out later, so let's see if it fits in step with what we've seen with the general, uh, increase from May to June like we have seen in France this morning, in Germany yesterday. Uh, then from the US side of things, personal income spending, core PCE data Canadian GDP. And in the afternoon, a couple of interesting things. Chicago PMI is expected to see a slight move lower from the prior month, but still remaining way above the 50 level of expansion. The Michigan sentiment reading again is final, so the last, uh, the lesser market moving of the two releases that we see for Michigan. And for any oil traders, uh, that kind of lagging indicator, if you like, of the oil production activity activity in America, you get the Baker Hughes rig count. All right, that is it from my side. I'm going to hand you over to Sam, keeping things relatively brief this morning because markets are relatively flat, just given the fact that, you know, all eyes are on the G20 at this point. Okay guys, enjoy your day and have a fantastic weekend. Thanks very much.

Hi guys, hope we're all doing well and had a good week so far. Yeah, with the, with the G20 quarter-end, month-end, whether you'd want to get too involved in this market, um, I'm not too sure. I mean, just having a look at, at gold this morning, you can see that spike higher to come lower. I think that could be indicative of, of the, the sort of trade we see, uh, in reversals when you think it might be getting away and, and whatnot. I mean, looking at the potential levels of, of interest for gold, I, I— if I was, uh, to trade and, and be interested, you can see the bottom end of this range where we started the week at 1404.1 is the level we have marked up. S1 is going to be key for the week, so I'd be looking for the bulls to, to defend that should we get down. But of course, that would be a big move from, from the top. Pivot looks to me like a good enough area. We had quite good resistance around there yesterday before breaking through and then finding support. That would be somewhere I'd half be looking at. But you can see just how far we've gone to the upside and all come back down. It doesn't look like the easiest market to be trading at the moment. Let's have a quick look at how the pivot levels responded. Not amazing, choppy around the R2. R1 is broken through a couple of times and it doesn't look too great as an opportunity to trade. However, when the market is like this, and this could be where you get those little trades once we get breaks of trends and, and stuff like that. So you can see a couple of times when it's just hovering around an area, we push higher to then break, break down, and that I guess worked for both to the upside a couple of times and to the downside. You can see here, so maybe shorter-term trades, not looking to have too much risk. That would be the way I'd be looking to go about it. And in terms of key levels for the remainder of the, the quarter and the day, we were talking yesterday about the, the S&P and the importance, uh, really of this low that we had, which was of course then the high from the 11th and low from the 19th as an area to keep an eye on into the close of the week. That is, is certainly it. And then if we were to push back above 39, which has been the high for a while, and then back above 42, well, we're suddenly now looking at pushing on back to those all-time highs, of course. So we're in this bit of a range which we expected us to, to be in for the G20 It might well be we gap higher or lower from the Monday, but unlikely to have too much movement as of yet in a sustained direction. Just looking at yesterday and the day before, uh, it was a tricky market to maybe predict what was, what was going to go on, uh, opportunity-wise. If you do want those little breaks, having a look at these trend lines from those lows, maybe. But you can see how choppy it's been from there, uh, whether you'd want to get uh, to involve. Not too sure. Having a look at the, the euro, uh, it's been stuck in this range, uh, for, for a while. We had a little break higher at the beginning of the week, uh, which marked up yesterday with the R1, which would have attracted people for a possibility to get short. Didn't quite come in. The S1, however, and the low from the 25th worked quite well, um, initially in the morning. And whether we can get above, uh, where we're trading now, which is obviously a bit of a resistance point from the high of the day, but where we can get back up to that high of the range or even down to the low, I think I'd only really want to get involved at X and X here, to be honest, and prioritizing a break rather than the range trade. And that's not going to happen today unless it really kicks on. Aussie dollar is a market where where, um, we were looking yesterday at potential longs, and eventually it did break the, the high that offered us a bit of support this morning. The key level I've got marked up just below the, uh, the R2 today, that high from the beginning of June, quite a key level. Can we get a test of that today? I wouldn't be too surprised if we do. We're not far away from that now. I would expect a bit of resistance certainly on the first test of that. With this market, probably worth having a couple of these trend lines on from the highs of each day, matches up a similar level. And then to the downside, we're just getting squeezed in a touch. Maybe the opportunity could come later on, on a break of that. But 70.39 and the R2 would, uh, would be a pretty interesting point to see some sort of resistance. Yesterday's high has acted as support for the further push to the upside, and we're just testing that R1. As the dollar just weakening a touch, the pound is similar to euro in, in that I'm not looking to get too involved in it. Range-bound trading. The S1, yesterday's low, all working quite well. The R1, I mean, it probably would have stopped a few people out, to be honest, um, but on paper looks like a good enough trade. So moving that range higher, um, towards the highs that we have back on the 25th afternoon. I think the amount of times we're hitting this low, the opportunity to sort of get short back down to the low that we had on, uh, the Friday last week, lower Friday, could be a little opportunity along with S1 there as well. But not expecting too much in the way of movement to the upside above the pivot. You've got got 2747 and 41, which we found initial support at yesterday before a breakdown, along with the R1 as well. Could be a little opportunity. You can see yesterday we broke this, this trend in the afternoon around 2:30. So possible opportunity there. As I mentioned, the, uh, with the, the yen not doing too much Uh, despite G20 going on, you wouldn't necessarily want to have positions on over the weekend for any of these markets, let alone your safe havens or riskier assets. But certainly looking at that R1 this morning, this was an area we were looking at yesterday around the pivot and the high from the 26th. It offered a good level of resistance at quarter past 3, whether you were trading that or not. But we've also had this trendline break, so this could be a useful guide for sentiment just around the markets. Now we've broken below it, can equities just push on a bit? You can see this is a little guide of sentiment. And just having a look maybe in the US after that break, where you can see US stocks similar breaking higher. So that correlation working quite well. Not necessarily— well, it's not a bad trend line, to be fair, in JPY as well. So keep an eye on that yen, that trend line, just for a guide of sentiment for your risk assets or safe havens. Um, let's have a quick look. So you've got 3 minutes until the open for the DAX. We'll just finish up on that as the euro just pushes to a high. You can see this little range that we're in here. Um, you've got to imagine with the volatility that comes, a quick break above that is certainly on the cards, or the other opportunity short term, of course, maybe a break of this trend line and the pivot to target the low. But small range to start the, the day for DAX, uh, and as Ant mentioned, not looking to get too aggressive holding positions, um, over the weekend, uh, at all. Hope you all have a good trading day, an excellent afternoon, and an even better weekend.