What To Watch: Last Trading Day Of The Month

Hi guys, good morning. Friday the 30th of August, just gone 8 AM here in London. We'll have a quick look over some of the headlines from overnight into the morning session. We'll have a look over the charts as well. Of course, it's the last trading day of the month and it's also the last day of our, of one of our summer intern groups, and they've got a trading competition all day. So we'll strive to make the most of the briefing, focusing on, on how to really prepare for this day. So we'll spend a bit of time on the calendar as well, as we do have a fair bit of data out today. And just having a quick look over at the charts before we go through some of these, these headlines, you'll notice the euro dollar is, is just on its low of the day. And if we put this this chart back longer term, or well, on an hourly, but just drifting it to, uh, the, the low of the month there. You can see we've now just made a new low for the year for the euro dollar. So if we just put this on the daily chart, that is now, and remove everything, you can see where— and I'm just going to draw a horizontal line here— we're now the lowest we've been since May 2017. So one of the articles we'll focus on is just some hawkish shots fired at Draghi. Well, listen, the market here is on the low of the year. You can tell already how we're taking in these headlines, I guess. And if we have a quick look back at that daily chart where, just before we go through the charts technically later, where we could really be looking to go to, we've got quite a key point just below where we're trading, which was the higher level from just before that big push-up that we saw back in May last— in 2017. So 4th of May, 110.33 would be a key level of support. If that was to go today, which isn't out of the question, I don't really see much stopping it for quite some time. Of course, comments can come out, and it wasn't too long ago, uh, if we look at last Friday that we had such a big push higher. And I remember, you know, when this was, was coming out, it was actually relatively, you know, late in the day, 3 o'clock, Jackson Hole speech. Okay, it's a bit of a nothing, uh, up and down exactly where we were, a bit of a doji. Then Trump comes out and his big, uh, big Twitter war, speech war, and, and the dollar weakened massively, uh, against the euro on, on the trade fears igniting, China weakening, and obviously the euro following suit. Before, well, strengthening to the upside there as the dollar weakened. And I've been long the dollar, short euro-dollar for a while, so seeing that was quite frustrating, and it was a long walk home thinking about what has Trump done to me here. I've given him nothing but praise over the last few years, and he's come out with one of these days where all he says is negative for the dollar. But the market at the moment Every time we even try to get higher in this euro, it's just met with a push down. You can see every single time. And even going back to that, that daily chart here, you can see just how any moment, even going back to January, push higher, and it's that breakthrough. And this market, despite what Trump wants, is, is pushing lower. And of course, over— well, within a couple of of weeks, 3 weeks or so, we do have the central bank meetings coming together again. ECB this time of first, so, um, obviously we've got that, that coming up, and, and the Fed and Bank of England as well on the 18th and 19th of September. So going to be certainly interesting as we've now wrapped up August from the end of today. September's coming, the volume, I suppose we can look to start coming back into the market. and people gonna have to start pricing in, uh, new events ahead of these, uh, these central bank meetings. And the hawks are trying to step it up from the ECB, but to no avail as of yet. And you can see as well, just this morning, uh, the DAX over the last, well, few minutes or so, just pushing to a new high, uh, well, here we go, since, well, pretty much the, yeah, the 5th of August there. So DAX pushing higher is a bit of a resistance point, and of course we're 10 minutes into that open where the volume is going to start picking up anyway. But that doesn't look like a hawkish ECB, right, does it? Despite what some of the comments have been yesterday and even this morning as well. S&P, you can see this, this really, really key level being tested late last night. Obviously there's no pivots on here, but you can just see the importance of this whole area Whether we can get above there this week will be absolutely massive for the month as well. 2943, the, the sort of top end, 2944, the top end of that range. And then even where we just sort of reached overnight, uh, in the Asian session, 34. So if we can clear that, uh, they'll be pretty, pretty important, uh, for the S&P. And what's been a pretty good, uh, last, last week really since Friday, yes, uh, last last week where obviously stocks came down pretty strong and Trump eased off the pedal. Maybe he saw the reaction to his favorite S&P and thought, well, hang on a minute, I need to just calm this down. We don't want to repeat of last— well, quarter 4 last year. And we've drifted higher, and that in turn has helped oil as well. The easing of the trade war fears has helped as oil is set for its biggest weekly gain since July. So if we just put the, the oil chart going on from that week, and of course with the trade fears that we had last Friday— if I just rectangle that now, you can see we came lower. So if the— off the, the trade fears, they're now easing a touch. Obviously oil has to repair some of that. So that's one of the reasons that we have pushed to the upside. And then of course on Tuesday evening as you can see highlighted here. Now we had the API that was confirmed on Wednesday with the DOE as a big draw, one of the, the biggest since December last year. That's another reason why oil has also pushed higher. And also there's a hurricane looming in, in Florida, and this has been priced into the markets. Of course, the week isn't over yet, and just looking at this from technical point of view You can see this trend line that was already marked up. I imagine this is from, uh, the session yesterday. Let's just put that on exactly the highs. This looks pretty key going forward from yesterday. You can see you've got those free tests now. So again, going into the week and the month would be massively important to see whether we can get above there. And then this is that trend line on a longer term coming in around 57.50. Something that I would focus on. So Hurricane, uh, what they named it this time, let me scroll down. Hurricane Dorian heading towards Florida raised fears of the offshore US crude producers may shutter output if the storm passes into the Gulf of Mexico over the weekend. So I know oil traders will be keeping a close eye on that, and it's just another reason why we are looking like we're going to have one of the best weeks uh, for oil since July. So a few weeks there, helped by hurricane fears, trade easing, and of course the draws that we saw in the weekly inventories for API Tuesday and DOE on the Wednesday as well. Having a look elsewhere just in the markets now, the stocks just trying to continue this, this push higher. Also with the, the pound as well, you can see on the fact that the dollar is slightly stronger today We are just drifting lower here as well. So the euro, as mentioned, making that new low for the year. The pound, thanks to, uh, some comments from Merkel last week, is still relatively elevated. It hasn't actually retraced all that move yet. If we were to make a new low for the week, however, you'd imagine that would come pretty quickly. You can see we're trading on the futures anyway, 1.2177, so a fair whack away from the low of the year that we had at 1.20 33, 34. Of course, that 120 level still very much a level of interest. Stories from overnight, what's feeding into, uh, the market. I think I didn't have the chart up there, so let me just go through that again. For the, for the pound, you can see trading 121.77. So there's those Merkel, uh, comments, there's the suspension of Parliament, and we pretty much reversed what almost to the tick here, those Merkel rumors coming through. So some important levels for the pound still, obviously, to have marked up. A couple of headlines overnight: UK and EU to step up Brexit talks as Parliament showdown looms. So I was speaking to Ant just before the briefing about this, and, you know, and certainly on, on Twitter, it, I mean, it depends what your agenda is, but there's certainly people and on one side of things that are very critical of Boris Johnson and what he's doing to their beloved Great Britain. But there's also people that say, well, we're finally getting someone that's actually, you know, sticking to what they're saying and not beating around the bush and, you know, sticking to their cunning plan, if you like. And Boris Johnson has got this set up here. So over, uh, well, the next month, Boris Johnson has ordered officials— they've said they will meet at least 8 times throughout September September in order to start a new deal, come to some sort of agreement. And this is to almost help the, you know, ward off the rebellion against that no-deal divorce. So at least he's trying, or this is the way it looks anyway, to get some sort of deal to avoid that no-deal. But at the same time saying, well, if we can't, if Europe aren't gonna play ball, well fine, we'll leave with that no-deal as well. So be interesting to see how that how that sort of develops certainly over the coming days as well. And for the interns obviously trading the pound, if we just have a look over the last couple of weeks, you've had comments coming out which have been pretty unscheduled. So that's a market where certainly today I'm just going to be in a bit more of an edge, and I'm only going to treat it as if I'm trading the pound. So we have got some dollar-related things out, so therefore euro, yen, or Aussie against the dollar is where I would focus there for the currencies rather than the pound, is treating it as almost a reaction to a news headline that you might happen to be at your desk for. Also headlines from yesterday that have drifted in, or worth keeping an eye on shall we say, is the speaker Bercow about how he's gonna try stop this suspension of the Parliament. He's gonna hold a vote next week to, well, to try and get an extension of Article 50 again. And whether that would happen or not may well help the Remain side of things. So that's, I think, expected to potentially take place next Tuesday or Thursday. I do believe I'll post the article in the chat later on. Um, with the Conservative side of the thing, or Boris's is camped now, I guess you could say, especially ahead of the next parliamentary votes. Of course, this recess happens every year between September and October, so it's actually nothing new. Yes, I know there's more at stake here, but you didn't really hear people talking too much about that. And there hasn't been a Queen's Speech for quite some time as well. So on the other side of things, it's kind of business as usual. This happens every year. But yes, of course, I do understand that there is bigger things at play for now. But also, Berko has been at the helm for over two stints already, which is the sort of the status quo. So it wouldn't surprise me to see a pickup in China almost out him from his seat. So I'll be keeping a watch on that certainly as we do go into the end of September and October, whether he still even has a role. And of course, he's been very, very vocal over the last few months of trying to stop this, this no deal and Brexit from, from even happening, even though not too long ago he was a Eurosceptic. But that's for another day, perhaps. I don't want to get too political. But certainly over the weekend, we want to see how this story plays out. You know, are there still going to be a rebellion against Boris? That no-confidence vote seems to almost just drifting away as maybe this plan for the Article 50 extension from Berko holding that vote next week is, is now at the forefront of, uh, of people's minds. Uh, data-wise as well, we'll come on to, uh, in a moment. Um, but also speaking of the weekend, worth keeping an eye on, on what's, uh, what's happening in, in Germany. You've got, uh The elections that find— well, these might be the elections that finally lead to Merkel's fall. The headline there perhaps insinuating too much in, in the way that that would be a development that I don't think is, is on the cards for, for now. Uh, the, the far-right AfD poised for major gains in coalition-run states. However, uh, the, the article goes on, and this is the really general consensus that even if the AFD becomes the strongest force in these elections, it is unlikely to be able to govern as no other party is willing to form a coalition with it. So, as has been the case really over the last couple of years, where within Europe you've had this build-up of the far right are going to have massive gains in these elections, blah blah blah, and it can then lead to this, that and the other. That's not really, uh, been the case. And it's almost some have won, some haven't. Um, so for me, a bit of a non-story for sure, worth keeping an eye on. And again, if it fits your agenda of, uh, the, the euro, uh, another sort of nail in its coffin, then fine. But for me, the euro, uh, obviously even with these hawkish comments, and it just seems destined that we are going to keep pushing lower as money just pouring into the dollar. What other currency really at the moment would you want to be holding, especially if we are going into that recession? I can argue obviously the yen and the franc, but certainly against the euro, the dollar looks like it is going to strengthen. And as mentioned on that daily chart, now we're at the lowest we've been since 2017. I mean, you can just see here, let me just make this a bit clearer. You can just see the direction of this market just trending down. Every time we even look to push higher, you can see the extent of that, that move to the downside there. So yeah, not looking too good for the euro. Quick look over the calendar as well. I'll just transition this. As mentioned, we do have a fair bit of data out. And speaking of the euro, it'll be worth keeping an eye on of course, what happens, uh, throughout the day as well. We do have some inflation data around 10 o'clock, uh, and the most recent reading of that wasn't too good at all. And you can see, uh, 1%, uh, was the July number, and it's been on a decline from a year ago where we were up at 2%. So not looking too good there. The, the range to keep an eye on there still, you know, not, you know, even if it was to, to get that top end, it doesn't look too rosy. But 0.9, the low end, 1.2, uh, the top end of that year-on-year, uh, figure. And for the excluding food and energy, uh, 1.1 is the expected figure. So to stay in line for both of those readings is the expectation at the moment. If we were to get a worse than expected reading, you can see here, just putting Trading Economics, the chart onto that 5-year, that would be the worst. Well, going back to late 2016, a bad reading is just gonna ignite the flame even further that come September there's going to be that rate cut that they kind of were in wait-and-see mode at the last meeting, or wait to see what the Fed did almost at the last meeting. So we're looking like there's going to be a rate cut And then how big is this QE package going to be? Of course, the hawks over the last couple of days have been saying we don't need it as of yet. Um, but, uh, just some of those hawks that have come out and said these things are not, uh, Weidmann, uh, and Lautenschlager. So just to bring up the, the Dove Hawk cheat sheet, which, uh, you can obviously find on ITC Markets— I'm sure we've gone through this before— but you can see not Weidmann, uh, and Lautenschläger, three of the most hawkish. So what you would expect. And then on the flip side, you've had Ren over the last couple of days saying they need this QE package. So as expected, there hasn't really been a surprise in the ECB hawk dove camp to suggest, uh, you know, that we aren't going to maybe have this package in September. But, you know, development certainly into the into those meetings will be key, um, and obviously worth keeping an eye on. Back to the, the calendar as we go through the morning, obviously the, the key event euro-wise is going to be, uh, that data at 10 o'clock. You've also got the unemployment figure as well, expected to stay in line at 7.5%. Uh, then probably a bit of a lull, probably a bit of a lull as we go into lunchtime. So certainly from a trading point of view, you'd be probably looking to exit the most part of those positions by midday and then let the market readjust, maybe almost take everything off the chart and reevaluate the positions. We've got to think about it is the last day of the month, so you can have that crazy month-end trading where you get erratic price behavior. But certainly worth looking at really key levels on your longer-term charts. So for example, if I was trading oil, I I need to be thinking, well, hang on, if we finish the week above this trend line, it's key and it's bullish. So above that trend line, you might well get a push. But also the longer-term one as well, which you can see here if I put it on the daily chart. If we can get anywhere near today, 57.54, massively important. And a break above there, you may well see a quick run through, especially the way oil, uh, and gold of course can move on a Friday. So that would be the time when I just want to, uh, around midday, just have a look at the charts as we only have a session or so left of the week to identify where they would be, these really key areas. Then heading back into the afternoon, or heading into the afternoon I should say, we got some inflationary numbers out of the US and we got some Canadian GDP data from quarter 2. So it's a bit you know, the Canadian data is always a, uh, an interesting one to trade. So for the interns, you know, you might be in a sticky position by then, but just be careful, as, uh, as we know how quickly that can, can spike to always come back again. So just wait for the retracement would be my advice on that. Inflationary numbers out of the US will be worth keeping an eye on. Those core PCE Index from July, 1.6 expected for that year-on-year. Personal income, 0.3, uh, as well. And then Chicago PMI, uh, got the chart up here. You can see it's been on a steady decline over the last 3 readings of this, below 50 now as well. So it's fallen into contraction for the last 2. That expected figure, still below 47.5. It would have to beat the top end of that range for some, I would say, consistent dollar strength. And then obviously that would be above 50 for the first time since May. So you may well see a further run through for, for the dollar if that number is to be good. And that really wraps up the, the afternoon. So 1:30 to, to 3 o'clock is going to be pretty key data-wise. And it's not necessarily a case if you're going to want to be holding positions for maybe a long time Uh, just a quick note that DAX is pushing above that resistance level. If that's going to confirm a break above, then it's always worth keeping an eye on the half-hourly close. So in 4 minutes you've got the, uh, 8:30 close. So a break above there and you can imagine stocks are going to have another go at pushing to this really key resistance. I can't stress how important I think this whole level is for the, for the week and month and, uh, well, for the rest of, uh, well, for the next few weeks anyway. Uh, going back to that Canada, that wraps it up then. Uh, no, uh, real speakers of note. However, we have had some unscheduled releases for sure over the last few days and weeks, and you've got to imagine Trump is going to be tweeting, and he does not want that dollar as strong as it is. So just be careful about holding positions over the weekend as well, I would say. Any questions, as usual, please do let us know. Also be on the mic throughout the day. And to the interns, good luck ahead of your, your trading competition.