Trump to impose tariffs on Mexico

All right, very good morning. It is Friday, 31st of May. Hope you're doing well. Quick overview then, what we're going to cover. We're going to look at obviously the latest news about Trump and Mexico, and that's created risk-off market movement overnight, and certainly it's going to be the focal point as we go into full UK and European market open. So we'll review that. We're also going to look at some Chinese data that came out overnight. Of course, it was the PMI data, manufacturing and services, and, and more broadly speaking, still remaining heavily in contraction for China, in particular on their employment sub-constituent number. So we'll have a look at a couple of graphics to, to make sense of that. And then also a look at oil, some comments out of Clarida, who's the vice chair at the Fed which I think were, were quite important as well. So that's what's on the agenda, and then we'll hand over to Sam and he can look at the, the charts. So quick look at the general sentiment. As you can see here, we've got quite clear risk-off tone to proceedings. Um, the Bund in fixed income markets has gapped up and is up about 33 ticks. You can see here the US 10-year in the bottom right-hand corner is up 13.5 ticks with the, with the pop, if you like, coming overnight session. If I bring up the S&P here and I start putting the S&P on a slightly shorter time frame, you can see this is when the news came out last night and the S&P sold off immediately on the back of it. And again, we'll go into the headlines in more detail. In kind then, gold elevated and European stock futures particularly the DAX, will be an interesting one to watch. You can see here the futures gap down, broke through yesterday's low, and just coming up to the cash open in about 20 minutes. That will definitely be one to keep an eye on, just given the direct implications for the automakers. I believe I heard a stat this morning that there's 8 EU manufacturers that operate with facilities within Mexico, and that does include VW being one. So definitely you'd expect that to weigh on the DAX given the sector kind of profiling of that particular industry. Currency-wise though, not too much reaction, tends to be fairly isolated at the moment at least. Not really seeing much dollar reaction to the latest news. So the Dixie's flat, and that is broadly reflected in both major pairs in EURUSD uh, in cable. Um, but otherwise, generally risk-off start to proceedings, overnight reaction if you like, to the, to the headline of which came out, which was this. Uh, so let me read you through a couple of points here to, uh, surmise what's happened. President Trump vowed to impose a 5% tariff on Mexican goods until the country stops immigrants from entering the US illegally. The tariff would take effect on June 10th. Quote, "Until such time illegal migrants coming through Mexico and into our country, uppercase STOP," was what he tweeted yesterday. So yeah, definitely something which, you know, reading between the lines here, Of course, if you watched the rerun of his speech, I actually found it quite interesting. If you step away from markets for a second and you think about the political angle, one of the things that's been, and it's absolutely backfired for established political parties, in particular those of a more center ground trying to appease both sides of the argument. And taking Theresa May as an example, sitting on the fence trying to compromise just is not cutting it at the moment with the general electorate. And listening to Trump, you know, he is a good salesman in that sense. The way he was talking it up, making America great again, obviously stopping full illegal migrants coming into Mexico by next week or so That absolutely is never gonna happen, but that doesn't matter at all. I mean, if you listen to him and the way he delivers it, I almost want to put on the manga hat because, you know, that's how well he spins it. But that's the point, you know. The point is all of this is a political ploy to try and garner, um, you know, kind of sentiment around the key issues. And remember, the two key issues for 2020 for Trump and a second term is trade and immigration. And it's those two things that are right at the epicenter of the main factors and forces moving markets at the moment. You've got trade with China, and don't forget, we were looking at the stats yesterday in the briefing with Mexico. Mexico, an absolute key. That's the second biggest country of which the US import goods from. You know, so, and then immigration, of course, it's kind of gone a bit quiet on that, but obviously it's, uh, one of the focal points of, of his policies. And as much as that went quiet after the government shut down on the border wall funding, you can very much expect that issue to return to the table very quickly as he starts to kind of ramp things up. So yeah, definitely this move, it dampens sentiment The tariff man strikes again and again. In a week where we've had concerns about the elevation and potential retaliation from China, who really have kind of changed their tone given what's been happening with the breakdown in the trade situation with the targeting of tech firms. This is just another, you know, kind of element on the global scale that's kind of dented sentiment. And so having a look here, the S&P 500— I know Sam will look at this in more detail, but there's obviously— this is the longer daily continuation chart. This is the thing that we were looking at where you've got the 200 daily moving average on the red line, and then you've got that trend line as well. And we briefly, right at the beginning of the week, had a real test of that, broke below it but closed back above. Yesterday held above the level, but obviously this latest development has helped buy pump things back down again. So technically speaking, um, does open up potentially a bit of clean airspace now for a push back down. And technically, you know, 1237.75, you've kind of got these previous levels here. A little choppy though, really. That zone, 37 to 22, I think looks like an area of stronger support. But don't forget, that means we've got to move a decent 30, 40 points lower from where we are at the moment. Whether that happens today or not, I guess, need yet to be seen. One thing I would say is that Americans would have been, um, you know, it was late in the day. The move didn't come until, you know, gone midnight, uh, London time. So by that, what I mean is when Americans come in, they still probably need to price this in to some degree. So, you know, I definitely would be mindful of that. So Keeping an eye on gold as well, of course. Gold here, we're just, you know, we're coming back to the $1,300 handle again. I had a test at the R1, which is about $1.50 shy of the figure. And so definitely, you know, this kind of risk-off trade on these latest fundamental developments likely to fire things up a little bit in the gold market. And again, I'm sure Sam will be looking at this a bit more closely, just looking at that kind of trend line from the high of the year that was printed back in Feb, retested on the 14th of May, and that's coming in as kind of maybe a potential area to have a look at as we come up to the $1,300 psychological level. A few other things then, let's just have a look. Obviously Mexican peso reacting immediately on the back of the latest news. The timestamp at the bottom is not London, presumably this is, um, well, I'm not sure what actual time frame that is, but potentially local time. But moving 2.4%, I think the peso weakened on the back of this. I think this was after about a week ago that he had dropped the steel tariffs, but certainly right back into the mix now. Now. And so local assets are going to suffer. The other thing that's obviously not helping the situation for the open, uh, is the fact that this is a graphic of the Chinese manufacturing PMI data. So if you remember, um, one thing is here what you have, these various different colored lines, is the orange line here is the, um, the actual headline kind of composite PMI number. You can see we moved into quite deep contraction at one point, sub-46 level, before coming ramping back post the Lunar New Year holiday. But then we've fallen again, uh, to where we are kind of at the moment. So, well, actually, this is this area here what I'm looking at, the slightly lighter orange line. So again, dipped, contraction. So excuse me, that is this line, contraction just below 50. We got back above it, flirted right on the level, but we've moved back into contraction is the point. The orange line at the bottom, uh, this is new export orders. And one of the other ones that people are looking at quite closely is this is the factory employment gauge, which fell to its lowest since basically the financial crisis, printing at 47. So definitely, um, the Chinese economy still very much feeling the bite of this continuation from what really has been impacting their local economy through the last several months. So despite the recovery that we've had in Q1 in general global market sentiment and some stabilization in, you know, a few of the asset prices, one thing we have been seeing certainly over the last week or so is the yuan has continued its weakening kind of pattern, getting closer to that key threshold 7 level. And these kind of forward-looking PMI indicators are tipping negative again, and to points of which, when looking at the subcomponents like employment, as we've seen here, something that we haven't seen at levels in about 10 years. So what does that mean for, for general Global growth concerns, well, they have to be pared back again, and this certainly has ramifications for the price of crude oil. Now, it's been May— the month of May, it being the 31st, looks set to be the worst month for WTI crude since November. So just having a look here, you can see really the market, when it came raging back and you know, the Fed came in to save the day, altered their communication to become dovish. The various different, you know, fiscal intervention on behalf of China at both government and central bank level created that really strong about-turn, and we had decent 4 months of persistent gains in crude. But yeah, you can see here the, the WTI monthly price change down heavily from what we've printed over the last couple of months. And looking at the, the crude chart on a daily continuation, you know, crude acts really nicely when it starts breaking some of these longer-standing technical points of significance. On the way up, it was exactly the same, playing round figures, the fib retracement of the sell-off in Q4, and also some the previous price action. And you can see here when the market really plummeted back on the 23rd of May, consolidated exactly where we did before the breach of the technical levels. I mean, these levels are here, are not put on this morning, they've remained the case. And you can see how the market kind of quick-fire falls back down to the next point of significance. And certainly we're in that test of that zone at the moment. Moment around that 5575. That was the initial, you can see here, resistance. The 38% fib of that Q4 sell-off acted as the support and platform then for the push that we saw in February, March, and now consequently turns to a key area of support here where we're trading at the moment. But as you can see, going through May, you know, quite a sharp depreciation appreciation that we've had as the, the whole global growth concerns return and the trade war globally starts to sour as Trump starts to kind of up the, up the ante as he goes into kind of full political kind of run into the, the election phase. One thing that I think is important is this. This was a comment out of of this chap, Richard Clarida, who's the vice chair at the Fed. And he said that the Federal Reserve could cut rates if the outlook takes an unexpected turn for the worse, as he vowed to be nimble in ensuring the US expansion continues. Now, you know, if I was Donald Trump, this is absolute music to my ears because it means then that basically I'm getting what I want. Want, which is I can play hardball, and if the markets do respond negatively enough, well, the Fed are here quite clearly committing that they're going to step in and do what's necessary to continue the expansion of the economy, i.e., not just hold interest rates as the current dot plot would suggest, they're going to cut. And that's definitely what the markets are pricing towards the end of the year. And certainly that gives, I think, Trump wiggle room to be quite aggressive in his tone on this trade side because he's got the ultimate get-out-of-jail-free card, which would be the Fed to help prop the market up. And let's not forget, Trump can then change the tone, cut a deal not aggressive as complete, complete stop on illegal immigration, but he gets a little bit more border wall funding perhaps to appease then Congress to stop what he's doing. And then net-net, he gains a concession and it's a political win, and the markets then respond as he comes off the gas, so to speak. So yeah, I still, you know, I don't think more broadly speaking that although everything I've talked about in this briefing is quite negative, Um, even though I feel like the market does need to come back a little further, particularly in the equity space, I don't think this is the beginning of the end. I actually think this is just part of the phase of a, of a correction, of which undoubtedly will turn. Obviously, it's the timing which is key, and I think Sam's going to look at some longer time frames on, say, the equity markets of where could be quite interesting. Those pullbacks. But the point being is that from a fundamental narrative, the powers that be, let's say, i.e., Trump, he knows what he's doing and he knows what he needs to achieve on a specific timeframe of which we as market participants are fully aware of, is the point. All right, quickly, the calendar. What have we got now? We've had the Chinese data of course come out. So I wouldn't worry about German retail sales numbers, that's really insignificant on a regular basis. These German state CPIs will be coming out momentarily. Obviously, as per usual, these are littered throughout the morning. Could be quite interesting to keep an eye on. I think, remember last month, I think they did jump up from their prior month, and that did lead to some slight short-term appreciation appreciation of the euro at the time. Italian GDP, uh, final readings, so, uh, not to be— I mean, Italy in focus, yes, both politically, yes, has been in technical recession. So GDP, quite interesting, but these are final readings, so it shouldn't be anything too surprising. Going further forward, mortgage approvals, again, not really a market move for sterling, so I wouldn't worry about that. And as far as I'd say sterling risk around political developments on Brexit. I'd kind of classify those as very relatively limited at this point because where we're at at the moment is that really there's a bigger, much more dominating macro theme, which is the trade developments that we've discussed, but also the fact that the timeline's kind of been drawn out now for this leadership process to take place. Going into the afternoon, we get US personal income. We've got core PCE data, Canadian GDP, Chicago PMI, which is always quite interesting coming out to states, University of Michigan, but that's a final reading, and then Baker Hughes rig count for any of the oil traders. Speaker-wise, Fed's Bostic and Fed's Williams, the latter of which is a voter, and there will be prepared text, it looks like, and is speaking on monetary policy theories. It could be quite an interesting one to look at, typically Williams having a more hawkish stance on policy. So yeah, overall, again, I think it would be European morning largely derived from the fallout of what's happened from overnight. Nothing too much here from a scheduled point of view on that basis. It's definitely more of a probably US-centric recession once again with data, but also how does the US stock market react to what we've had, particularly with some of these levels that we looked at in the SPOOs being taken out already. How does the US react when they come in, I think, will be important for how the week finishes. All right, that is it for me. I'll wish you a good day ahead, uh, and a good weekend. Thanks very much.

Morning guys, hope everyone is doing well and had a good week so far. Coming into the last day of the month and week, be interested to see where some of these charts end up, of course, on the longer time frames. I think worth talking at starting, I should say, with the, with the S&P. Let's put this on longer time frame. I mean, you can see the move from last night, uh, keeping an eye on those lows just now, especially the DAX about to kick on in 5 minutes. Be interesting to keep an eye on exactly what happens around there. On the, uh, the longer time frame, you can see here, and it's got the, the trend line and the 200-day moving average. Absolutely would be looking at that, uh, as well and seeing where we close the week and the month. As mentioned. You've also got the, you know, the 2722 area, 37 as well, that 15-point zone. I think it's a pretty key one from a technical point of view. I like the look of it as a, as a place to get long. I mean, I do think Trump knows exactly what he's doing, so the safest bet here may well be to just wait for, you know, a game-changing comment, technical push higher, and and, and get in and hold your breath. But looking here, you've also got the, the fib from last year's low to this year's high, uh, comes in around there, the 0.382, just below 2722. Uh, as well, you've got trend line from the previous all-time high that goes through, uh, that sort of, uh, area. You can see here, second, third test, breakthrough was in March, and then that will come in in the mix there as well. So 8th of March low, 0.382 fib trend line from previous all-time high, not a bad level technically to get in. But of course, if there's, you know, further developments like there were last night, the technical levels aren't gonna hold too firm. But it's certainly something to keep an eye on, uh, maybe like Anthony Cheung was saying, not today but over the coming days or weeks, uh, as well. But with the with the equities on their lows at the moment. We'll be keeping an eye on the DAX, of course, to see how that does react. Looking at the euro, relatively quiet all week, to be honest. I mean, the ranges of these moves have been very small, especially from sort of the London trading hours. From a range perspective, R1 and those highs looks okay. I'll just be always slightly careful in these ones just to see how it gets 2 R1. So right now, as it stands, yesterday's high on R1, really good resistance level. Risk reward looks good. I'll just be keeping an eye how we react to this potential trend line. If it finds, uh, resistance, comes back down, but then really pushes on very quickly, well, that would be the key that I don't necessarily want to get in this trade. Also, above where we're trading around the R2, you've got some nice highs as well previously. Quite a lot of resistance, nice resistance above where we're trading. Of course, this market, we just zoom to the left-hand side and you can see this is last Thursday's reaction on that multi-year low. We're keeping an eye on that obviously into the close of the week. If we were to have some strong, uh, dollar— a strong dollar, I should say, today and break below that and close, would be pretty key Something to focus on again as we go into the back end of the session. The pound, having a look here, it's all about, for me anyway, the, the longer term, the longer term picture here. If we just remove the pivots just to clean things up a bit, you can see that 1.26 handle on the futures that we've, we've been talking about, the trend line from 2017 low that we had back in January. And that's just hiding behind my camera at the moment. So let's put that on. You can see that's just been tested, little false breakout of that. You've also got the low that we had back on the 11th of December. It's a key level, key area where we close the week will be important. But like with equities, a fundamental development— and that could be, uh, who's getting there in the hot seat at Number 10— we could be absolutely key for deciding where this market goes rather than a technical level. So support. But all things considered, it's a good one right now that I would, uh, would have marked up. The yen yesterday, uh, well, yesterday morning we had that break, didn't we, of the, the trend line, which was a really good opportunity if you were trading at those hours. Of course, uh, with everything that happened yesterday, equities, while they recovered in the morning and into the back end of the session, you can see the exact same, uh, well, the opposite here move. We then pushed back above and we're now trading on the highest we've been for quite some time. Uh, but just be aware of, of these— this area. This is now 480 chart and you can see not far from the high that we had back on the 13th. And you also got a potential trend line from starting on the 24th of March just above there. So quite a key level to keep an eye on, just above love where we're trading here again on the yen against the dollar. Another safe haven market to focus on, obviously the yen being one of those. But gold really did push, push on as well. Quite, uh, again, a bit of resistance above where we're trading, you know, noticeably just above where— here you've got the 1300 handle, 1301. There's some decent, uh, resistance. We've just gone through what was the low of the 15th, uh, as well. So Along with those trend lines that Ant mentioned from the, the previous highs, do any of those come in around this area? Yes, you can see you've got a potential one here that starts on the 25th to the 13th of this month. Uh, we're keeping a close eye on that, definitely into the back end of the week. I've said it all week as well with, with gold, it is a tricky market at the moment to really call the direction. Every time you think it's coming down, you get that failed test And, you know, is it— are we now trying to extend through? I think maybe a break of this trend line could be that key to get us going in the right direction if you're a gold bull, of course. But as mentioned, if equities do find support, we could see a bit of a push higher. And of course, with Clarida's comments overnight, a bit of dollar weakness may have well impacted that move as well. Well on gold late yesterday. Having a look at, uh, at oil, obviously a decent move yesterday, uh, to the downside, and that's continued to an extent this morning. Already down 78 ticks from the open. Be keeping an eye on, uh, starting on the— you have to wait for me to find the exact— there we go, lower the fifth. I've got written down a trend line from that— not an ellipse, just keeping an eye on this trend line that you can see we broke through. If I get it right, there you go. We broke through yesterday evening. You want a line in the sand for, you know, what point can this market maybe turn intraday. Well, you've got one there. Keeping an eye, you can see that second test just above my camera now, just above it there on the, uh, the 23rd. Really good support yesterday before that overnight break we came back to retest it. Really nice level. You got $56 on the futures just above there as well. But keeping an eye, that could be your, your cue to maybe get out short if you're still really holding the position. But really nice line in the sand for traders to keep an eye on. And of course, those longer-term levels that Ant talked about, you know, if we can, you know, keep pushing down, you know, where could be the, the level where we start to find support. I mean, just purely from a support resistance point, you have 55.12, which would, I know, be interesting to some people. The 52.59, you can see all these lows from here that are certainly, you know, be a place where people might attempt to get in. But, you know, things probably do have to change, certainly with the equity markets, for there to be a full-on recovery. Of course, these markets very correlated at the moment as well. As usual, any, uh, questions, do, do let us know. Um, we'll have a quick look over at the DAX before, uh, just wrapping up, just to see how it's opening with that increase in volume. We can see just over the last few minutes it's breaking that low there. So keeping an eye then on US equities as well around those lows, the NASDAQ, the down. The S&P looking very identical. If they were to break, we see, you know, the idea of a big push lower to 2722, 40-point move. You never know, you never know. But I hope you all have a good trading day and a great weekend from everyone at the Amplify team.