What To Look Out For In Markets This Week

Okay, very good morning. It's just gone 7 AM here in London on Monday the 10th of August. Hope you all had a fantastic weekend. Just quickly before I begin the briefing and look ahead for the week, don't forget to check out the AmplifiedTrading.com website, forward slash traders, for our trading development programs and Definitely worth checking out the Amplify Now product in particular, which is our online e-learning platform. And if you just hit that Start Now button, you can access some free content. So definitely worth checking out when you have time. Also as well, while I'm here, don't forget to like and subscribe to the channel. Really appreciate growing our online community and all the engagement that we get on all of our videos. So always ask questions. Absolutely, I'm happy to help myself and the rest of the team. But let's have a look then at what exactly is going on. And I guess best place to start is always the charts because they explain pretty much from a sentiment basis exactly what is going on. And we've got a marginal bid tone in US equity index futures. The DAX ends up about 100 points this morning. Elsewhere, gold has resumed its upward trend in the top right-hand corner here, up about $15.50. That came after quite a lot of heavy selling pressure we had on Friday, but we'll look at gold in a moment in a little bit more detail. The currency markets, the Dixie, uh, equally so, just reversing a bit of that strength that was seen initially after the non-farm payroll report, kind of reverting back to otherwise its trend. And as such, then both the major pairs in EUR/USD and Cable a little bit higher. And actually, just while we're on the currency front, let's just have a look at these currency pairs. In the euro, you can see here just clawing back some of that initial selling pressure that we had with dollar pop on the payroll, surprisingly strong print that we had at the end of last week. But on a weekly chart, this is that very long term going back to— this is 2008 price activity up here, right in the peak, that double top that we had, um, somewhat 12 years ago now, the retest in 2014. And interestingly, now 2 weeks back to back we've had rejections at that level on that long-term trend line and also that summer '18 high. Uh, which is around that 119 level. So, uh, interesting that, of course, because it also coincides then with a similar type of movement in Cable, where from a year-to-date perspective, um, this was back on the 31st, this was the high from last week. So again, also 2 weeks back to back, which is falling short of a retest on that 132, which is approximately the year-to-date high here for Cable. So At the moment, this pair trading a relative range now, really around 1.30 to 1.32. 1.30, you can see, is the lower bound of the price that we had from this time last week, in fact, and also a couple of retests. So worth keeping an eye on that for the, the week ahead within that area. Looking at the precious metals then, with gold, as I said, it is up this morning. If I make this a little bit bigger so you can see what I've been looking at. Kind of really two main areas of focus on any pullback on the downside. The lower bound here would encapsulate basically the, the 2000 price point and the way of which the market has responded. You can see here multiple times before we then got that definitive break that we saw on the 4th, and then to push up to the this, this all-time high at 2089, which we printed back on, what, last Thursday. Before then, payrolls kind of bumped us back down lower. And so at this point, a decent area of support, as I've got marked up here on the chart, at around 2027.5. The market respected that in the post-payroll price action, which was the respective high and low that we had back on the 4th and 5th. And we had a retest of that at the recommencement of trade on the open on Globex, and then we've just steadied it exactly around, around the same support area to where we are at the moment, which is around a $16.50 gain. So any further push up the upside now, be keeping on that Asia-Pac high that comes in around $3 above the current price area. You've got the pivot up at $53 today on the intraday, which would also put us up at around that low that we had on the 6th, which is when we were respecting that trend line on the the gradual move higher that we had for silver. That's the other one obviously that's been under observation of late, just given the extreme volatility that we've had in this particular precious metal. And as you can see here, the areas that we're still watching remain the same from a medium-term perspective for the week as a whole, that being $29.29, which the market did respect. I mean, we're looking at weeklies here, so these really key, quite definable levels that would go back to 2013-2012 type price action Still the key ones we're watching, and the main thing here is that, you know, silver's been trading very much in a momentum type way, and key breaches of long-term technical levels tend to be triggers then for these moves. And as we've had pretty much every time— $23, hesitation, break, run up to $25, pullback, run up to $26, pullback, push up to $28, and then a little bit of a pullback, push up to $30 last week, then a pullback to $28. So we continue to rise here this morning, uh, back up on the front foot. We're up around $1.20 already on the session this morning. So back up, keeping on that $29.29. But the week, uh, the key upside level should we look to retest up at the higher bound would be $30, because a breach of $30 again could open a significant period of kind of blue skies ahead with not much in the way of clear technical resistance. And if we continue to remain bid in that precious space, then I wouldn't discount then a move back up to that 2013 January high, up around 32.5, which would be incredible if you think about it. We're already up, you know, up around 50% or so in the last month or so for that, for that product. So it would continue in that fashion. So let's get stuck into some of the headlines then. Um, so overall, generally Slight, slightly neutral to mild positive risk sentiment. Equity index features slightly higher, as is oil, gold kind of in the precious space, silver resuming the upward trend, with the dollar also just weakening a touch, reversing course from Friday. And T-notes down just marginally. But let's have a look at the main news from the weekend, and probably the one that you've read about the most is certainly to do with Donald Trump. Um, so one thing is, for first of all, is in the Asia-Pacific session, um, Japan, Singapore was shut for holidays. And in terms of the Shanghai CSI 300, the Shenzhen listed shares, and also Hong Kong's Hang Seng, they both did dip initially at the open but did recover as the session progressed. A lot of that came after Friday. You probably saw, you know, last week was a bit of an escalation, uh, pickup in on the tech side of things with TikTok and WeChat from Tencent and so on. Friday as well, Trump did impose restrictions on 11 Hong Kong and Chinese officials, including Carrie Lam, who of course is Hong Kong's chief executive, and Liu Huiying, which is mainland China's top official in the city. And so a little bit of reaction to that in the localized region in the Far East. However, it did reverse course. Don't forget that US Trade Representative Robert Lighthizer and the Chinese Xi Jinping, the Chinese vice premier, they're going to be meeting to review the implementation of the phase 1 of the trade deal and likely air their mutual grievances during a video conference call that's going to be happening this Saturday, so the 15th of August. What I would suggest then is, going off historical precedence, whenever there is a defined date meeting like that, we tend to see a degree of turbulence, let's call it, because America likes to go into these kind of high-level talks as the aggressor on the front foot. And typically then that can mean that we could be in for some slight disruptive comments perhaps going into the call. I guess worst-case scenario, the call doesn't happen at all. That would be again just a breakdown and further pressure perhaps on the markets, which could be a catalyst towards the back end of the week. I guess my main point here is just look out for that type of news flow as the week develops because you're probably going to get press reports and leaks and rumors and these types of things. And it will be— the market, of course, is still quite sensitive to this. But over the weekend, some of the main things that we were looking at was, was from Trump. And following last week's congressional impasse, basically Trump has taken it upon himself to execute 4 executive actions on Saturday. And here they are: to provide $400 a week in jobless benefits, So obviously this is up from $200 that was tabled just a week ago, but it's down from $600 that was authorized back in March. So a little bit of a middle ground to some respect. The US Treasury will allow companies to defer payroll taxes for Americans making less than $100,000 a year until through to year end, deferring of student loans and interest, and extending the federal eviction moratorium. If you remember me talking about a few weeks ago, which was going going to put tens of millions of Americans potentially at risk of eviction. So yeah, this is, this is interesting. The main thing this is leading to really now is, okay, so that's that cliff-edge scenario taken care of. The worst economic realization of a lot of those programs finishing does take a little bit of sting out of the potential near-term risk, and hence the reason why overnight the reopening of trade, it was mildly positive. However, it was interesting because last Friday was payrolls. Obviously, it was, if anything, surprisingly on the strong side. People were kind of erring on the side of a downside surprise, and that failed to materialize. And if anything, that was almost like a negative for progressive nature of these talks happening on Capitol Hill, because nothing like sharpening the mind of a politician on either side of the floor than a significantly deteriorating economy, which is bad for both political parties in an election campaigning year. But however, the number was better than expected, so it could well draw this out a little longer. And the longer that does become drawn out, then the worse it will potentially be for markets, because markets are hungry for stimulus now, right? And the kind of Democrats back in, what, May tabled their proposal of $3.5 trillion, Republicans-led Senate coming back with just a trillion, and that's where they've got to meet in some kind of compromise at the moment. And on that front, US House Speaker Nancy Pelosi and the Treasury Secretary Steve Mnuchin said Sunday that they are open to restarting their COVID-19 aid talks after those failed negotiations prompted Trump to take that action on Saturday. I do think overall that it's in neither party's interest to not deliver something, because then it kind of would give the other side plenty of ammunition. Then if I were Trump, I would say, well, look, I wanted to pass more stimulus. It's the Democrats that weren't willing to be realistic and compromise that meant that this didn't go through. So any economic deterioration is their fault. So you could use it quite nicely to frame a certain situation. So such as politics though, looming deadlines and a negative market reaction, which isn't happening right now, and normally the things that then bring these guys to the table to cut deals. So I would imagine this is going to be drawn out a little longer. But as I said before, the longer this goes on, the more potential weight it could add to markets, which might get apprehensive of the lack of forthcoming fiscal stimulus. In that point of view, on that point then, a quick thing I wanted to mention was about the election, really. And one of the things I was looking at was here, and I was looking at this, this graphic that Reuters had over the weekend. I talk about it in my macro menu, so if you want to read my, my thoughts fundamentally about the week ahead, just remember on my Twitter account here I publish on Sunday a pinned tweet, which is like a short 3-4 minute read of what I'm thinking for the week ahead. But this is one of the charts that I was talking about, and it's looking at positioning that's happening now as people looking to hedge positions, and more so, I guess, portfolio managers rather than, say, short-term intraday traders who perhaps aren't looking that far ahead at this point in time. Remember, markets aren't yet election obsessed. They will become so. We've only got, what, less than 100 days now to the election. But at the moment, the market's been so COVID-focused and the shape of recovery has been so key. But certainly it's going to be inevitable at some point. But implied volatility rise that we've been seeing here looks especially steep because the VIX itself has, has been basically trading at a 5-month low. It's been particularly low as equity markets kind of put in this persistent recovery. But the spread between August and October VIX futures now is at 5.5 points, which is the widest these contracts have— they've been since they began trading, as focus may be less on the outcome of the actual election and more on the possible delays in tallying results due to widespread use of mail ballots this year. This is probably something you've heard Trump mentioning quite a lot. He's tried already given the fact that he is behind in the polls to Joe Biden, to cast doubt on the valid— how valid the election would be if done via a mail-in ballot system, deeming it in advance the most fraudulent in US history. Expectations are that actually, even though it's happening in early November, the election results could— might well not be out until Thanksgiving. Giving, which is the 26th of November, until actual official results are known. So yeah, not just the outcome, it's the lack of uncertainty then, one of the longest periods that would be in history to actually find out who's actually won, that could destabilize markets at that point in time. And so people kind of already moving to hedge against that expected volatility over that period. On the, the notion of, um, how are they faring in the polls, this is another thing I was writing about in the macro menu. And almost covertly, I think Trump has managed to close the gap a decent amount. If you look at the, the biggest kind of divergence, if you like, when, you know, here at this point Biden was, was ahead by 10-point-plus, you know, you can see here it's almost 11 points if you go back to end of June. But remember what was happening at that period, at the end of June going into the early part of July. That was when we were seeing a big acceleration in those Sunbelt states, particularly Florida, Texas, California, Arizona. And that was really impeding Trump's favorability in addition to the social unrest, obviously still the remnants of the Black Lives Matter movement immediately after the George Floyd death as well. Since that point though, I would say the media coverage of that social issue has probably died down. And then on the flip side, the COVID situation in those key American hotspots has actually started to decelerate. And so as such, we're starting to see Trump quite, as I said, silently just creeping back up. And he's actually narrowed it now on the average poll of polls on the RCP measure. It's now just 6.4, so he's almost halved it over the recent weeks. You know, The Hill, which was the last, one of the last polls that was out, had Biden ahead just by 3 points. So yeah, quite interesting to watch how that develops. It's obviously the Democratic convention happening this weekend, or I think it starts Monday next week, 17th. And what we're awaiting to hear from Joe Biden is who's going to be the potential running mate. And of course, just given the, the nature of what's been going on, particularly with some of those social issues, of course, then expectations are that he's going to pick a female of color in order to obviously appeal to a certain type of base. Leading the bookies' favorite at the moment is California Senator and Attorney General Kamala Harris. Second then potential is former colleague and the National Security Advisor during the Obama administration, which was Susan Rice. How much difference does this make in immediate effect to markets? I would say very little, but you know, just worth noting because you're probably going to see headlines about this ahead of that, um, that event for the Democrats happening in the coming week or so. Um, quick look at then at the equity markets, just given some of this discussion. First off, let's just have a look at the S&P 500. And yeah, it's just interesting looking at things at the moment. We're coming up to a fairly significant level of, of resistance that I've been keeping an eye on. These are kind of medium-term levels that I watch. I normally put out on a Sunday and I have them in play throughout the week as key kind of milestones to watch. We've already really tested that 3350 $3,730 I had marked up. Um, this is going back to that area of really support and resistance on the initial move to all-time highs that we saw back at the beginning of the year before the whole pandemic took hold. And so here, really, for me, this is the final barrier for the S&P. Uh, before then, if we break, we go back up to retest that all-time high that was printed back on late February, which would be just short of the $3,400 handle. So could we get up there this week? Sure we can, under the right circumstance. I mean, the trend now has been pretty definitive and in play for the last 10 days, and so why not? I mean, even if we got a pullback though, I guess key levels would be the reverse course of these defined resistance points, so $3,312, $3,284, Again, the real strong area of support on any more violent pullback comes down at the 3200 kind of level. That cluster of support that's held up the price activity since we broke higher around mid-July is such a strong level as well. So conditions are set here, I think, for these equity markets to claw it out and continue to move up. Obviously, markets generally from an equity constituents basis are so heavily, heavily tied to those big mega-cap tech names which are so dominant at the moment. You know, despite the lack of breadth of buying in these equity indices, I still think as long as those guys are performing, then we continue on up for the time being. In the NASDAQ, obviously that's the other one people will watch particularly closely, and this is the kind of near-term price movement that I've been watching. And it is that really key level of support that we've got, which was that failed breach on 3 occasions to get that all-time high. And then we popped above it back at the beginning of this month. And now, as you can see, that's provided an area of clear support for price. And so that'll be a key area if we can stay above there. Any break of that level, and I'd probably be looking back to around here, which was that high from the 23rd, uh, and also on the 31st, which would be 10,939, would be the next level on a break. But otherwise, all things remaining equal, I'd anticipate that that level to hold, and then gradually a push back up to the all-time highs here that we did print on Friday at 11,283 would be a key area I'd be watching. So again, for the moment, uh, the kind of underlying fundamental view remains the same. It's kind of bullish in view, and any pullbacks we would anticipate would find support lower down to be bought back into would be our mentality at this point. Okay, quick run through some of the other headlines, and we can incorporate some other charts as well. This is just some data that came out overnight. China consumer inflation accelerated, and factory price deflation eased in July as the country continues to show some recovery and stabilization post the worst part of the, the pandemic. CPI 2.7%, 0.1% higher than expected, so marginal. Food prices were pushed higher in the month, partly due to damage and transportation disruptions due to flooding in central and southern China. Pork prices were up 10.3% on the month. As we know, that narrative, given the situation with the previous outbreak of that African swine flu, which, which created a culling of all pig farming across the, the nation at the beginning of the year, still being a key component for pork, which is up about 86%, um, prices increased, that is, on the year. On the PPI side, -2.4%. So we have still got this divergence between CPI and deflation on the PPI metric, albeit the decline not as severe as some were anticipating. The slowdown then in factory deflation mainly due to higher commodity and industrial product prices. The PBOC did speak overnight, the Chinese central bank. They said monetary policy will be flexible, appropriate, and targeted. That was according to the bank the People's Bank of China Governor Yi Gang. However, these comments are pretty much a repetition of the comments the central bank made last week in its quarterly policy report. So I wouldn't over-interpret this. This is their kind of uniform forward guidance. The other thing in the oil market, Bloomberg are putting around this story. It's talking about Saudi Aramco predicted demand will continue to improve through the rest of the year. I wouldn't read too much into that. I think Bloomberg are doing a little bit of a curve-fit job to fit the fact that oil is trading a little higher this morning. Saudi talking up the demand side comes as absolutely no surprise because they had their earnings over the weekend. I'm not sure if you saw, but they had a net income for the 3 months ending in June fell to 6. $6.6 billion. Now, $6.6 billion sounds pretty decent for a net income figure, right? But that is actually down 73% from a year earlier, you know, so massive decline. They have actually still kept a, you know, a huge dividend payout that they've done, which is very different from some of the other oil majors that we have globally, as they want to appease then shortly after the IPO in which they've had their shareholders Um, so I think this is just a little bit of, um, just general management of the fallout of how severe their profits have declined, for them to talk up the market to appease their investors and keep them calm, uh, that things are going to be okay in the long run. So I wouldn't over-interpret that. Underlying this news elsewhere, one of the other major, uh, of course, OPEC oil producers is Iraq. And Iraq said Friday, if you missed it, that they would cut its oil output further by 400,000 barrels per day in August and September to compensate for its overproduction in the prior 3 months. Remember, part of the uniform agreement of OPEC+ and its allies was that any of those non-compliant countries— Iraq, which has typically been one of the worst culprits of this— would have to overdeliver on their supply cut. In order for them to be deemed part of the actual agreement. And so far they've made noises that they would follow that and become compliant to the deal. And that would mean that's a further 400,000 barrels per day cut. 400,000, we are talking about Iraq, who is the second largest producer within OPEC in the Persian Gulf. So that is significant if they adhere to that number. And then in the US on Friday, we still keep an eye on the Baker Hughes rig count figure. Active rigs declined by 4 to now 176, and to give that 176 figure some context, that's the lowest since July of 2005. So active rigs in the US are very low at the moment, and don't forget, it's— yes, some have been idle, but some have been closed, and they can't just switch on like that. Doesn't quite happen that quickly. And so if there is a more persistent renewed pickup in demand, then you would imagine then the price could well move higher under those conditions. But obviously it's dependent on really people's belief and confidence about the overall economic recovery in this post-pandemic kind of world now at the moment. From a, from a technical point of view, a quick look at oil— there certainly are some levels that I'm watching on a more medium-term basis Marked these up for this morning, and I'm looking at a few different things here. Basically, you've got the 21 DMA, which was a nice level to find some support, which then has acted as support as anticipated from Sunday's charts that I put out on Twitter around that 41 handle. So you've basically got 41, the 21 DMA, and Friday's low all coalescing in the same point of $41, which was also, if you look here, a decent level of resistance at the time because that was that previous low that we had on the 6th of March before that failed OPEC meeting that we had. So a really solid level there, um, in the short term to keep an eye on, definitely even for the range today. We're trading about 70 cents above that at the moment, but a good decent floor that should provide. On the upside 4236 encapsulates that kind of double top that we had back on the 21st, 22nd of July. Um, that would be the next upside target. So for the moment, within that range, 4105, 4236, any break above would bring in last week's high, 4332, which was that 2nd of March high as well. So any breakdown in price, you got the 50 DMA and that double bottom from those lows that we printed back on the 31st of July and 3rd of August would be a crucial level as well. So some nice technical levels here, both support and resistance, to act as either support points or targets depending on how your, your view is forming at the moment for that particular asset. And then finally, just a quick wrap-up of the the week. And then also, I just wanted to quickly point out a technical level in the Bund for any fixed income traders. But looking at the week ahead, obviously Mondays typically the market tends to start fairly slow and then pick up as the week progresses. This week is no different. Fed's Evans— I think it was Evans who spoke over the weekend on CBS in the US and was talking again about the pressure on Capitol Hill to deliver fiscal stimulus to accompany the monetary movements that have already had by way of the Federal Reserve. So today's pretty quiet overall. Then we go into Tuesday, you get the jobs data coming out of the UK, German ZEW, and then Wednesday UK GDP, the preliminary figure, and US CPI will be quite interesting to monitor of course. And you've got the RBNZ rate decision and a couple of Fed speakers on the docket. Thursday the Australian jobs data You then get the US initial jobless claims, and that could be quite an interesting one to follow. Of course, let me just transition my screen so you can see the calendar here. Uh, the US initial jobless claims could be quite interesting given the fact that they decelerated, um, quite significantly and surprisingly last week. So we've had kind of the shape in the curve of declining, we had a slight pickup in mid-July, and now we've dropped back down again. So is that pattern going to continue? Is there more to it than just last week's reading to, to turn that, that kind of 3 or 4 week pattern that we had seen of increases. Then on Friday, um, it's probably the most busiest day from a data point perspective. Chinese retail sales, industrial data, eurozone employment and GDP second reading. Then you've got US retail sales, industrial production, and the preliminary University of Michigan survey, which will again be quite interesting to map out consumer confidence, just given the, the now slightly evolved situation of the— yes, still not a great situation, but a somewhat improving one in the fact that COVID numbers in those key areas are declining. And then you've got the US-China meeting happening, of course, on the Saturday. As I mentioned, the quick look at the Bund— I just wanted to— there's quite a significant level we're trading close, boxing at the moment. I've got this on a 60-minute chart, and I just wanted to point out this level at 176.95 that we're trading right now. And you can see, I'm just going to put a rectangle there around the price activity, acted as a solid area of resistance through the back end of July, then turned support just before the end of that month. And we've come back for a retest around, what, Thursday last week, and then we've retested again today, which is also the daily pivots, the S1 level. And you can see the markets had a nice response out of there. And I know a couple of the guys are in the long already off that level, looking to manage that trade coming up. You've got the kind of Asia-Pacific highs we just got over now at the moment, so just keeping an eye on any further movement up towards probably this type of area, 77 720, which encapsulates some of that post-payroll volatility and then some of that previous area of resistance support going back through August. But yeah, nice entry and a good trade so far developing in the Bund this morning. Okay, that is it guys. Any questions at all, feel free to leave a comment and ask me a question. Always happy to help as usual. Also don't forget to like and subscribe to the channel, that'd be much appreciated and more content coming your way same time tomorrow. All right, take care guys, have a good week.