US Drops China's Manipulator Status Ahead of Trade Deal

Okay, very good morning. It is Tuesday, 14th of January. Hope you're, you're doing well. Uh, got Sam back, so he's going to have a look at some technical levels after I give a bit of an overall macro update of what's going on. For me to talk about, of course, is really focus on the US-China confirmation of signing the deal, which is still set for tomorrow, and all things looking good for the moment. Other than that, having a look at the US-European trade talks, which are also ongoing over the next couple of days, and then some other things just to be aware from a calendar perspective. So that's kind of what I'm going to talk about. But first things first, quick look at the charts and an overall feel for sentiment And actually, index futures a little lower this morning. I mean, the Dow did finish up last night about 83 points, but since then we've kind of just drifted back south in the futures. S&P just finding a little bit of near-term support at its pivot level on the center-right chart. The DAX having a blip lower through the cash open, so the normal pickup in the volume through the futures. And we're just having a look down at the S1, which was the lower bound of yesterday's price activity. So worth keeping an eye there. I think really too much to speak of fundamentally there. But the general narrative this morning is a little bit of risk off in the equity market, which is quite unusual because overall the kind of vibe coming out of the US-China situation is fairly positive. But perhaps this is a little bit of that, you know, kind of buy the rumors, sell the facts. It's looking good at the moment that the deal, phase 1 at least, will get executed at this point. But maybe a little bit coming off the table and that consequently just seeing the US 10-year just claw back some overnight initial losses seen at the beginning of the Asia-Pac sessions. We're about to pivot flat essentially, having moved up 3 or 4 ticks from the low seen overnight. Pretty similar price action really in gold. I mean, we finished it really firm footing last night on Wall Street. So ever since that point, we've had a bit of reversal of those initial moves. And gold, which Sam will look at in more detail, after breaking through the early part of the Asia-Pacific session— you'll see on the daily pivots we broke a test that came pretty close proximity to the low that was seen back on what, last Thursday? That saw an extension of the run lower, the general lack of liquidity in the overnight session And then the, in the daily pivots, the S1 and, uh, 2 just working out as a nice range play, and we're just providing a bit of a support point now having got back above that S1 at the moment in the futures. Um, interestingly, from a, from a top level, uh, that with the macro themes at play, uh, it's almost like Iran never happened in respect to not only oil prices way lower than we were even before the initial flaring of that issue in the Middle East. But this is what I was trying to convey at the time with the kind of mantra of keep calm and carry on, is that, look, if you take yourself out of the intraday initial knee-jerk, almost emotive reaction, that in actuality, the, the, the probability of escalation is fairly limited. And as we, we did know at the time, these, these Washington high-level trade talks were happening. And almost right on cue, the spotlight has gone from Iran back onto China. It's not that Iran has gone away, it's just no one's talking about it anymore. And that's an important thing, I think, for any intraday trader, is that you've— it's almost not so much the news, it's the human behavior and the fact that we tend to be very blinkered in what we're looking at from subject matter. And that's an important thing to comprehend when you're looking at the, the short-term fundamental drivers in markets that are dictating sentiment and what asset class is really acting as the trigger point or the domino that leads then other correlations. And these are the ways and means that hopefully from watching these briefings you're getting a sense of, of how we kind of put things together. Otherwise, the only other thing before I get into the headlines to mention is the pound. Uh, still looking a little heavy, down 34 at the moment, so it is underperforming. Um, one thing that I did see in the FT this morning, economists are warning the next Bank of England governor, Sir Andrew Bailey, and the UK Chancellor have to take early measures to ensure the Bank of England has tools for the next recession. This of course then adds to that growing chorus of dovishness coming out of the likes of Flaggott at the weekend in the Financial Times, but Carnet and Railroad last week, and then Haskell and Saunders, who have been the dissenters with the weak economic data— contraction of 0.3% in GDP in November last year, weak industrial manufacturing production. This all coming— we've got CPI a bit later on in the week, got retail sales at the end of the week. There's a lot coming for the UK the economic data hasn't broken a trend. Generally speaking, the economy is deteriorating. People are bringing forward their, uh, potential for a rate cut from the Bank of England in the near term. Remember, this was way out into the future, but given these two factors of forward guidance almost from the bank, in addition to the quality of the, uh, the weakness of economic situation in the UK, The pound does remain, I'd say, quite biased to the downside for the moment. Trigger points, of course, might come that need to be overlaid then with any key technical levels of interest on the downside for an extension of this trend lower around the data points. Now today there isn't really any major UK data points. It's tomorrow, as I said, I think that's when the CPI is coming out, will be quite key, and then the retail sales number later on in the week. But we're just retesting that lower bound with the price activity yesterday, so worth keeping an eye here where we're trading at the moment. I had here previously marked up, you can see there was that area of consolidation at the high end of the range that we were trading on 23rd, 24th, uh, worth just keeping an eye on. Any further break beyond that point, I've already got marked here the lower of the price on the candlesticks to see on 24th on the uh, daily session. That'll be 1.2858, and then the prevailing low down on the 23rd, which would be today's S2 at 29.40. But perhaps a bit of a lack of any fundamental cue on the docket for the UK, so any continuation would be more trend, and then technical breaches might exacerbate some further movement if that was to be the case. Um, let's quickly update on the headlines then. It shouldn't take me too long. A few things though to be aware of, and I would say on the balance, my expectation now of the conclusion— because as I was indicating, there is potential of what if the trade deal doesn't get signed this week— but the headlines I'm about to go through kind of alleviates perhaps some of that uncertainty. I wouldn't discount that probability of it all coming undone, but I'd say it's now particularly more as a risk. That being because from the US's point of view, last night the Trump administration lifted its designation of China as a currency cheat, saying that the nation has made, quote, enforceable commitments not to devalue the yuan. This is quite symbolic, really. If you remember, the US have been quite forceful in their rhetoric that China is a currency manipulator and they put them on this kind of periodic report that the Treasury releases where it specifically outlines names of which are on the watch list, of which China was one, but they've removed them just before a deal is going to get signed. So overall, that's a net positive, if you like, for the idea that this could go through. Otherwise, what are the Chinese doing? Well, the Chinese have pledged to buy nearly an additional $80 billion in manufactured goods from the US over the next years, plus over $50 billion more in energy supplies. Beijing would also boost purchases of US services by around $35 billion over the same 2-year period, according to sources on Reuters. And you will remember that Phase 1 agreement calls for Chinese purchases of US agricultural goods to increase by some $32 billion over 2 years, or, or roughly $16 billion a year, way bigger than what they were previously purchasing. So overall, you know, I hate to say it without asking for Sam to toss me the MAGA cap, but I mean, there's some pretty punchy numbers that Trump's managed to deliver in regard to upfront commitments from China purchasing a variety of different goods. And certainly that does help in areas of which were feeling a bit of a strain from the ongoing escalation, particularly in the Farm Belt in America. So in this sense, yes, it's good. As I said, though, the bigger medium-term risk is whether China actually commit and follow through. And we see these types of kind of pledges materializing in practice and the money hitting the bank account as far as USA PLC is concerned is yet to be seen. But for the moment, the de-escalation almost is China making an olive branch. We're committing to buying much more in a variety of different ways of US goods. But then equally so, the US downplaying its rhetoric, saying, look, actually China is no longer the kind of top level in terms of being a currency manipulator. They're now acting in a more appropriate way and making enforceable commitments not to devalue their currency. So these are all positive signs for tomorrow, it being signed off by the Chinese vice premier and the authorities in Washington. One thing we've also had overnight is some Chinese trade data. Chinese exports year on year 7.6%, that's more than double forecast to 3.2%. Chinese imports 16.3% above the expected 9.6%. Something interesting to be aware of here, I mean, as you can see from this chart, that's quite a healthy situation in regards to a rebound slightly in the export number, which is a positive for further stabilization in China certainly helps things overall. But the European Union actually continues to be China's largest trading partner. China obviously set to announce its GDP numbers on Friday, so it's going to be interesting to see how that plays out. The, uh, Stats Bureau said at the weekend that the country is still on target to reach its economic growth quota, kind of 6 to 6.5%. So interested to see whether that or not materializes. China, of course, have been doing what they can ahead of the China New Year. Don't forget, Chinese New Year kicks off on the 25th, uh, of January. So we often get this kind of front-loading, if you like, of activity given that the whole country goes on lockdown for a prolonged period of time. China have been trimming their key interest rate this month looking to keep ample amount of domestic liquidity in order to circumvent then the disruption that New Year always has. This is quite a seasonal thing, so if you do start hearing of these big liquidity injections on behalf of the Chinese central bank, that's not unusual as we go into that Lunar New Year holiday. Um, so yeah, I mean, otherwise, trade-wise, where is Trump? What is his movements These are Eastern times, so this is obviously subbing out, what, 5 hours if it's New York, 6 Chicago from London. But you can see here Trump really just going about his business. There's nothing really direct where he's got specific interest with the trade stuff. That's kind of left to his advisory team. But the other thing that is happening, of course, at the moment is this You might not have recognized this chap, but he's a chap that you should start to get familiar with because he could be definitely important for the way of which European assets might react. And this is because obviously now we're seeing some kind of short-term resolution between the US and China. This is the chap who negotiates on behalf of Europe on trade negotiations with the US, and his name is Philippe Hogan. He's the European Union's new trade chief, and he's going to be in Washington for the next 3 days. Now, this chap's got his work cut out a little bit because if you remember, the last flashpoint was that the US said they wanted to apply duties of about $2.4 billion worth on French goods over disgruntlement on the digital services tax on some of the big tech names. That Europe were imparting on the likes of kind of Amazon, Google, and so on. So, you know, beyond China, one thing just to be aware of is how does that talk go, and that's ongoing. Seemingly they all want to do this at once. Europe talking to the US, and also China are looking to finalize and translate and sign the deal with the US as well. So just to keep an eye on. Other quick things that I thought I'd mention, um, I do talk to a lot of our junior traders because we are macro traders, so we're not looking at individual trading of single stocks, we're looking at overall indice movement. And one thing to be aware of in that regard is how to break through the noise and, and monitor what news is relevant for the index that you're trading. Well, for the S&P 500, in that fashion, it's got a little bit even more simplistic because The top 5 companies now in the S&P 500 account for nearly 20% of the entire S&P 500. So remember, there are, what, 505 actually listed entities on there, given some of the dual listings that appear. But overall, the top 500 companies, almost one-fifth is just the top 5 names, those that you would be familiar with— Microsoft, your Amazons, your Facebooks, and so on. One thing, I guess, from a macro point of view Small-cap underperformance, as it says here, is a bit of a concern, you know, in a healthy economic sense. To keep it simplistic, you would want smaller companies feeling like they're performing well, they're very positive about the future. The fact that they're getting dwarfed at the moment, um, could be a bit of a sign of the times where people are rotating more into some of these bigger, more safer names out of the, the more sensitive to the economy domestically, the smaller names, uh, which aren't performing so well at this point. Um, okay, I mean, that is pretty much it from me. So to finish off, from a calendar perspective, what have we got? US CPI, um, is the kind of dish of the day. That's coming out at 1:30. That's the major thing, uh, on the block. And then you've got, um, keeping an ear out for anything more in regard to the US-China situation in the afternoon. Then other than that, not too much. Weekly API inventory is not until after market, setting the scene then for the DOE's in Wednesday's session. Speaker-wise, ECB's Mersch speaking shortly. Fed's Williams, who is a voter, is going to be speaking at 2 PM London time this afternoon, 8 AM in Chicago. And then Fed's Georgia at 6 PM London time, but non-voter these days. Um, okay, just before I hand you over to Sam, had witnessed the equity indexes just coming under a little bit of further pressure. The DAX has broken technically that point, which gives it a nice little platform for the short on that S1. As I said, there's not really been anything fundamental of key significance But I guess the one thing I'd want to say, and, and just to finish, is if you just stick the S&P on a 90-minute, you know, take yourself out of this, the smaller time frames. Let's not forget where we are at the moment. I mean, we are literally at all-time highs. And so, you know, a little bit coming off the top I don't think is all that surprising. And as I said, if we did get a bit of buy the rumor sell-the-fact type price activity in the likes of the S&P. I don't think that that's a meaningful sign to worry. We do of course have— and final thing on the calendar— the big banks kick off earnings season. You'll get JPMorgan, Wells Fargo, and Citi. I'll have more details on those a bit, a bit later when we get close to the release. But earnings season not really looking to be particularly important this time around. Uh, I don't think it's going to be spectacular, but I don't think it's going to be a disappointment either. So I don't think it's going to really change the global order of things from a macro perspective. But really, there's an area there for me, and I'd be interested to see what Sam has to say, but I'd say that 60 to 68 in the S&P futures really is quite a decent area of support. And, and now I think we kind of play this kind of range between these levels here around 3300, that being the lower bound, and an area of consolidation here, um, could well be warranted at this point. So I'm not going to look to stress too much about trying to curve fit a narrative behind this sell-off this morning. I just think take yourself out a little bit of that short-term mindset and look at the broader picture. We are pretty mid-range of that range that's been in play the last couple of sessions. All right, hand you over to Sam and I wish you a good day ahead. Thanks very much, guys.

Hi guys. Hi guys, good morning. Start that again. Um, good to be on. I hope we all had a good weekend. Yeah, the DAX just, just picking up a touch. So we'll start off with the equities. You can see DAX and Eurostoxx has come under a bit of pressure here. A bit of support has gone. Um, however, if you are literally looking for short now. I would just hold off because we are about to come to quite a key level of support on the DAX that we had back on Thursday, uh, late Thursday. And of course, the first test of that, you would at least expect some kind of support to come through on that. So a bit of horizontal support there. Eurostox just also pushing through, and at a similar point where you have some of the, the highs that we had on the 8th, and then that sort of turned to a low there as well. So equities, yes, coming under a bit of pressure. Uh, the S&P I've got here, if you are still short and looking perhaps for a shorter-term bottom, worth having on the, the trend line from the 10th, it's Friday to Monday, and that would come in, uh, on the futures anyway, in a, in a couple of points. and I probably would have that marked up. However, uh, is this, you know, the top of the, the market for the week? You wouldn't, uh, you know, be too comfortable saying that now. Of course, there could be many twists and turns ahead of that. And mentioned 3260, uh, the low that we had on the 10th before that final push up towards 3300, uh, in the spot, uh, in the, in the spooze, sorry. And that is the high of the 3rd of Jan as well. It's a key level, one to, to have marked up. And you would say, uh, is if we were to get anywhere near there today, which would be around 15 points to the downside, it's not a bad place perhaps to find a bit of a bottom. But DAX and Euro stocks has come into an area of support. The S&P, in this case, that trend line worth having on, uh, the Dow Jones is right on the key level as well. The low that we had on the 10th and the low of the morning of the 9th, which is the high that we had on the 6th. So equities just coming to that support level now. Can we get a follow-through? Then fine, we might get a, another leg down, but this is quite a key level. Speaking of key levels, that's going to move over to the pound. It's got a— and this is on the 480, looks nice on the spot. I put it on my, uh, Twitter to have a look at, but you can just see starting on the, the beginning of November, the going to bring in this trend line which we tested, uh, yesterday and then a little false break this morning. But you know, this is all about where we close, of course. And you can see here, nicely respected, going up through November into December and then January as well now. But a break below there could, you know, lead to a further move down, be looking at that low that we had back on the 24th 3rd of December and then back towards November levels, uh, below 129 to 128 and a bit. So keep an eye on that trend line, whether it's to hold or not today will be pretty key. And here, this is just on a 480 chart, so keep a watch on that, um, as well. Going into more intraday, having a look at the 60, you can see that trend line just battling away with yesterday's lows, the S1. So First test of it rejected on all time frames. So whether we can get that close below or not will be pretty significant. Above where we're trading, if we are to get a retracement, uh, where would you feel more comfortable that maybe we can push higher? Well, the low that we had on the, the 9th, just that area X'd up there, we broke through yesterday, 1.3037. Uh, certainly one to, to keep a watch on. Uh, we are getting squeezed from both directions. I've got this on the 60 minute, but really it goes back onto that 480 as well. You can see from those highs, really priced from both directions, just getting squeezed in. So, uh, again, if we are later on to start to grind higher, it could well be that the top of this trend line is the low from the 9th and those highs from overnight as well, which would be a really key resistance point. Having a look over at the euro, um, we obviously broke that trend line last week and we are just recovering a touch on that. You can see it's starting to get choppy on the retests of those, uh, those levels. So just keep an eye just above where we're trading. I think if we were to get— and I'm just going to draw this line up and just mark it for the reasons why— the low that turned into the afternoon high on the 8th, we almost reached it yesterday. It's today's R1. I think if we can get back above there, you'd feel slightly more comfortable uh, in saying that maybe the, the next leg down in this market is, is a way away. You can see yesterday we came to test this trend line. It was very choppy, however, into late trade, but we are the other side of that now. So perhaps if you're looking for the euro and you're not in a trade now, you've almost got this new mini range to, to be aware of. Those highs of the R1 key level, if we can get back above there, then I think the euro could push higher. But if we are to, to break below the pivot, the lows from yesterday, uh, as well below 1.1172, then I would expect a bit of a quicker move down to yesterday's lows and the S1. So mini range there in play to keep an eye on there. Uh, just having a look now at gold. So it's just starting to push to the upside, or it has been doing so while equities have been coming down. So a bit of uh, that reverse or negative correlation, uh, coming through as money going into those safe havens. I would just say though, however, if stocks are to bounce on these very important, uh, support levels, it could be that we then at the same time find resistance on what was Friday and yesterday morning's lows. You can see the importance of that if we are to, to come back and test it. You'd expect a decent resistance level, uh, on there. Of course, from the, the spikes that we had back on the 3rd— we, uh, on the 3rd, yeah, the, the 5th and the 7th, I should say— uh, we have started to drift lower. And when we have this from those highs, it's worth getting on those trend lines. And quite well respected yesterday, uh, to get that third test. And we are now testing it right at this moment. So can we get maybe an hourly close above yesterday's lows, this trend line, and gold can continue to push higher. And maybe we have found a bit of a floor around here. If not, and we do look to push lower, I would say the next key support point below yesterday's low on the futures certainly is around $1,533. Was a high back on the 2nd of Jan before we broke through, and this would be the first real retest of that. So keeping a watch on there. But certainly gold at the moment is near a key level, and I'd say 1547 and 1533 resemble, you know, break above, you're happy to get in a bit of a long maybe through the back end of the week, and below there, well, gold could come under a bit more pressure. So keep a watch on that. Oil, I mean, what a rascal of a market. If you got long September off that spike, big loss. If you got long on the, the evening of the, of the 7th. Another big loss. I mean, must be down over 10% from that high here on the futures. Yeah, nearly 12%, and it's still drifting lower here. Keep a watch, of course, just below where we're trading. You've got, uh, the low that we had back on the 6th, uh, of December around 57.62, and an area which is pretty important, you would have to say, just looking previously into November's, December's. There's a lot of price action around that area. So keep a level marked up there to see what will happen. Today's, um, S1 also comes in the mix on that. However, not the biggest move this morning, only down 21% on the futures. Above where we're trading, pivot yesterday evening's highs, got to keep a watch on that. And above there, the original low at 58.60 from yesterday's Asian session trade, but has been drifting lower. I think You know, how much more is there in this market? Well, we'll have to wait and see, but I wouldn't really be too comfortable in getting long unless— and this isn't, you know, necessarily the best trend channel to the downside, but to the upside here you can see over the last few trading sessions going back to the 8th, unless we get above there, you know, I'm not, uh, not looking for, for any longs on that. Let's have a quick look over stocks to see how they responded to some of these, uh, levels. The, the Dow The Dow just finding a bit of support around that point. The DAX hit it to the tick and has had a 20-point and more bounce. So yeah, so definitely worthwhile just holding off. Eurostox perhaps the one that's just spiked through that level, but the DAX, keep a watch on that, especially if we come back to yesterday's low. It's also today's S1. You know, be an area where if you are looking to get short, could be an attractive point. But with this week, plenty more twists and turns to come, I am sure. Eyes and ears open going forward. Hope everyone has a good trading day. You know, I will be in the, the chat. Uh, any comments obviously on YouTube, please do get those in as well. But I hope you all have a good trading session and catch you all later on.