Will OPEC Cut Production Again

Good morning, hope you are well. It is Thursday the 5th of December. Just having a quick review then of the charts this morning, and I'll run you through some of the main headlines that I'm looking at. Some German data this morning. You've had Japan unleash a new round of fiscal stimulus to keep recession at bay. You've got an update on the trade wars, and then British pound continues to extend on gains. And then seeing some fluctuation in the price of oil going into, of course, the first day of the OPEC meeting in Vienna, which commences today, first day of a two-day meeting. So that's what I'm going to talk about. So I'm not going to look at the charts in too much detail, I'll leave that to Sam. But overall, from a general sentiment this morning, relatively neutral or flat, I should say. Stock index futures marginally positive. You can see in the center here in the NASDAQ and the S&P coming up to around the high of the range from yesterday's session. Likewise in the DAX, pretty similar. Probably a bit of a standout is the top chart here, which is the British pound, which I got the call wrong. I have to put my hands up to that. I actually thought, you know, the pound would come under some pressure. I thought that, I thought that US data was looking pretty solid, as it had been for a period, and I thought that would exert a little bit of downside pressure. But the unwinding or flip-flopping of Trump on the trade war, in combination with some of the weak data that we had, ADP yesterday, and with the Conservatives whether or not somewhat assisted by that obviously horrific attack that happened on London Bridge, but have started to maintain now, uh, what is a double-digit gain, back a 10 percentage point lead in latest poll this morning. And all these factors helping lift the pound to a new high here this morning. So yeah, pound continuing to press ahead, but there's a few things I'll talk about there in a bit more detail in the options market. Which goes to show that people are, are not complacent. There's a lot of downside protection being taken in the options market for potential calamities that still could happen, with the prospects of a hung parliament probably more likely than anything else, of a Labour-led government, for instance. Otherwise, gold pretty flat, the US 10-year down a touch, just about 2 ticks. So we're going to jump straight into some of the news headlines and let's have a look what's going on on that front. Starting off with some German data, uh, let me just transition my screens. We had German orders this morning. To give you the data against market consensus, German industrial orders came in at -0.4%. As you can see here, forecasts were for a positive 0.4%, so pretty decent miss on expectations. One thing then, the decline driven by investment goods demand at home and overseas, defying the hope for a factory rebound. All of this, of course, sounds quite pessimistic and quite downbeat. And this is one of the things that I want to get anyone who's new to markets— you've got to put economic data into context. When you read headlines like this on Bloomberg, obviously it sounds pretty frightening. And it is a decent miss on expectations. It's a negative 0.4 against expectations of a positive 0.4. But the point being is, in context, um, let me show you a couple of different things. First of all, look at the data in terms of factory orders in itself on its month-over-month general change that we see. Yes, this was a miss on expectations, but as you can see here from the the last 12 readings, this data point does tend to fluctuate by quite a substantial degree. And as you can see here, minus or negative 0.4 is by nowhere near the worst print that we've had over the last 12 months. And so, you know, rather than getting drawn into a lot of the, you know, just looking blindly at headlines, this is why you've gotta do your due diligence and if you're preparing for economic data in the right way, then these sorts of things shouldn't come as a particular shock. And when I overlay this one as well, which looks at factory orders but on a year-over-year perspective, then you can see, well, actually this figure that we just had doesn't shake up the general pattern that we've had, which is that the German industry has taken a pretty sizable hit over the course 2019. So with all this being said, even though it was a miss on expectations, the data in itself is absolutely no surprise at all. So hence the reason why there's been no— little to no reaction in the euro. The Bund is in effect lower, not higher, as the data would suggest from a logical point of view. So again, my point here is always do your prep work, know your data sets, and put everything into context. The other thing, of course, is that from a macro perspective, there's a lot of other big things going on. And on that front, this of course is the biggest. This is the ongoing US-China trade war. There's not really too much new for me to report at this point. Obviously, Trump made a pretty prompt exit from NATO without giving his— what was a tentatively scheduled press conference. At the end of his discussions. That was after a bit of badmouthing coming by the way of other senior leaders. So he got a bit of a bee in his bonnet and just left town. With that being said, I would suggest remaining particularly vigilant on Twitter for any further updates out of the US president. As though he starts to head back home, and as per his tweets over the last couple of hours, He's been more tweeting about Ukraine and about the witch hunt, and obviously it's back to business on Capitol Hill, which is trying to avert this kind of impeachment claim that's ongoing at the moment. But nonetheless, I'd keep an eye out. What we had yesterday, of course, was a little bit of renewed optimism of otherwise what had been a fairly sizable sell-off at the beginning of the week on the deterioration of the situation. And this came by way of a Bloomberg source report talking about negotiators are getting closer on the amount of tariff relief, and Trump's comments are not indicative of talks falling apart. So this kind of idea of him trying to manage the situation coming back to fruition once again. However, what I did think was quite interesting was the, the Global Times editor, the kind of mouthpiece of the Chinese government on Twitter, Hu Xijin, said, I predict there is a high probability that President Trump or a senior US official official will openly say in a few hours that China-US trade talks have made big progress in order to pump up US stock markets. They've been doing this a lot, which is obviously the very much the common understanding in the marketplace of how Trump's been doing this. Now, the reason why I point this out, and I think it is quite interesting, is I would say the more the collective opinion becomes that Trump is basically trying to game the system the lesser impact he's going to have in his ability to be able to influence markets, perhaps so directly as he has done in the past. Because now people will start to read between the lines. And when he says that they're making kind of progression and it all sounds quite optimistic, at what point then does the market start to go, do you know what, this is kind of the boy who cried wolf syndrome and we don't believe you anymore. And then the market just continues to sell off. So he's gonna have to be quite, quite careful with this because at some point in time he's gonna have to deliver on something. Now the good thing about the Trump strategy and the way this negotiation is going is that you've got the potential temporary freeze and delaying of the December 15th tariffs, you've then got, which could formulate or comprise of Phase 1, you've then got the unwinding of the September tariffs, the unwinding of the tariffs at the beginning of the year, the unwinding of the Paris last year. So that's a multi-phased way of which you could gradually unwind what had been an escalating trade war of the last 18-24 months, which I think will likely happen in the medium-long term in order for him to really manage the market. So I think this is kind of very short-term, it's a little blip, but even if he gives a concession, I think he's got many other things that he can basically do this same process 4 times, and that buys him enough time then to see him through the election is kind of the way I see it at the moment. Moving elsewhere, not going to talk about this for too long, but as I mentioned earlier, the latest poll, opinion poll for the UK general election, which has kind of crept up really, it's not far off now. We are— this time next week, the polling booths will be open. So Johnson has a 10-point lead over Labour before the election, according to the latest ComRes poll. Come out overnight. And you'll remember this was after, uh, was it YouGov one yesterday that was similar, around a 9-point lead? So after it was narrowing to about 6-7 in some polls, it has now slightly re-widened and also stabilized with a rough double-digit lead for the Conservatives, and hence one of the main supportive factors for the pound. Now, as you can see here, the pound now on its highest level since May It's managed in the spot price to get above $130, which was the October peak. And obviously technically then kind of the— what had been restricting a bit of the price action over the last several weeks, and that opens us back up to an area where we haven't been for a while. I'll let Sam go over that chart in more detail. But one thing that, that has been interesting is that, uh, GBPUSD one-week risk reversals. So those people kind of looking now that we're in a weak proximity of the election to protect themselves, reflective of then potential downside surprises, has been increasing. So bearish bets basically have been picking up. So even though we're moving higher, remember, if the— if people become of a view that a Tory majority is locked in, that they already start buying the pound now in pre-positioning for that to materialize, that means then if Boris does not get a majority, all the bigger and more violent the sell-off will be, given the market's positioning on the pre-inbuilt pre-positioning that's happened. And so the higher we go, the more kind of people are taking a little bit of protection for the what-if. The hung parliament is probably the most realistic of those alternate scenarios to a Tory majority. Oil prices, um, yeah, decent lift in yesterday's session. And also a little bit of volatility this morning as we get underway for the meeting in Vienna. Now, Saudi's offering a carrot and a stick to get OPEC to defend oil prices. Well, really, I'm going to jump to this one. This came out of the FT last night, and this was Saudi Arabia, according to the FT, is pushing OPEC and its allies to announce a deeper oil production cut as the group meets in Vienna. In order to prop up prices ahead of a potential glut in supplies next year. The move comes as analysts have warned that the crude market could be heavily oversupplied in the first half of next year, and as the strength of the global economy has been undermined by the ongoing US-China and kind of global trade war emanating out of the US and their protectionist policy. So, uh, this is coming to, as I was kind of intonating toward at the beginning of the week, I just found it very hard to see how somehow Saudi don't try in some shape or form to try and lift the price of crude in order to then— given the pricing of their IPO of Aramco is today, and so when their shares do start trading in the coming days, they're going to want the best possible price just to have that kind of positive PR around the initial trading of their shares. Also following up from the FT article, short— well, last night we've had a short while ago OPEC+ to discuss deeper oil output cuts of more than 400,000 barrels per day as the main scenario according to a source as well. So one thing to be aware of, um, just because of these comments would be quite bullish for price I would be super cautious about sitting in a position for a more than longer necessary period of time. Those of you who've never traded an OPEC meeting before, this is very typical. Now you start to get these really positive comments for price, then it can flip and all the different oil ministers will have very different opinions. Uh, the Saudi oil minister arriving on doorstep comments this morning didn't really give anything away other than talking about the weather, but you can almost guarantee you're going to get lots of whipsaw price action before something a little bit more definitive comes out. So your kind of time frames of execution of trade need to be a little bit more sharper, I would say, given the propensity for the market to flip on itself. Now, this is the agenda for today. All of these times are Vienna, so 1 hour ahead of London. So at 2 o'clock you get the opening session today, so it's not until a bit later, but believe me, you're going to get lots of OPEC ministers talking to journalists, so tweets will be coming left, right, and center, I'm sure. The actual then closed session happens later on this afternoon. A press conference is expected to take place on conclusion of that meeting, so towards the end of the UK European session, if there is no leaks beforehand, then we're going to have a bit more, something conclusive perhaps at the end of the day. And then you've also got the opening and closed session of OPEC and non-OPEC producing countries, uh, in tomorrow's Friday's meeting. So today is OPEC and then they throw in non-OPEC. So very important, of course, because it starts to include people like Russia. So that's the full agenda there. I have tweeted this full tentative schedule as well if you need it to add to your calendars. Finally, for the calendar on the session, from an economic data point of view, what have we got? Let's just make this a bit bigger so we can see. Uh, going through now, the German data is out. You've got the eurozone Q3 revised figures with retail sales coming out at 10. You've then got the goods trade balance out of the US with the weekly jobless claims. We've also Canadian trade balance data coming out at 1:30. The OPEC meeting, as mentioned, start kicking off at 2:00, but just be vigilant for anything coming out beforehand as they go into that meeting. US factory orders will be watched now quite closely, just given the weakness of the data that we've had recently. And then from a speaker's point of view, Bank of Canada's Lane is speaking around midday and got a Fed speaker as well into the afternoon and quite a bit of supply coming into the market as well. That might be just weighing a little bit on the bund this morning. Because despite the DAX, as I'm delivering this, seeing a bit of a downtick, uh, Bunds are pretty unmoved. Maybe a bit of short setting just to take— make way for some of the large amount of supply cumulatively top end around €9 billion coming from France and Spain. Okay, that is it. Gonna hand you over to Sam. Perhaps he can talk about the DAX a little bit more as we test the— some of the range low from yesterday and the pivot in futures at the moment. And then I'll catch you later on. Thanks very much, guys.

Yeah, hi guys. Definitely worth keeping an eye on the DAX here for sure. It's just coming down to test that low of the day now and really call it a zone. Yesterday afternoon's low coming in at 13,097, and then a tiny bit below that you've got the high that we had back on Tuesday as well. So Uh, for a confirmed real break of this, this whole point, you're going to want it to go a bit lower down. And of course, keeping an eye, because we're only 27 minutes into that open on what were those previous lows, uh, we could easily snap back. It wouldn't be the most surprising thing in the world for that to happen. So yeah, levels to keep an eye on: that area here from yesterday afternoon, uh, the high from Tuesday, and also yesterday morning's high. So a fair bit of support for it to get 2, really, you have to say, before it could, could get quite interesting to the downside as well. Just putting on this potential trend line, worth keeping a watch to see if we do get a third test of that. Of course, at the moment, just with the 2, uh, we don't. You see here, there we go. So keeping a watch what happens there. And you can see that also lines up bang on with yesterday afternoon's low. So some key levels there to keep a watch on, of course. This move started from the failure really to get above the, the high that we had from yesterday. You can see that double top from this morning, but also yesterday's high and the failure to get there. So worth keeping a watch on. Obviously that goes lower, so may US equities as well, you could imagine, in the morning. The pound continued to push higher here. It's been on a, on a tear recently, up trading now 130, 150, the highest it's been in, uh, well, against the dollar anyway. If we go back here, it's bang a horizontal line. Yeah, beginning of May, uh, of this year. So decent move. I was looking at this yesterday, uh, the high that we've got from around 2014, uh, put on my Twitter. But this trend line here, you can see we'll be looking to come in not too far away from where we're trading. Narrow that down around 132. That trend line, or potential trend line I should say, also matches up if it was today with the high that we had on the 3rd of May. And if you remember, that was really the top before we started pricing in a no-deal possibility. So really key point I would say to keep a watch on, uh, and that marking up just about 50 ticks above where we're trading. If we were to find resistance there and drop down, obviously keep a watch on that previous range that we've been in. You can see any of those previous highs would be worth keeping a watch on. And then of course, if we put this on this longer term, you can see really that, that trend that broke through as well around 1.30 are really key levels. Above that trend line, the longer term one, I don't see much stopping it towards 1.3320. So another big push could come Of course, uh, it just takes one big headline and we come all the way back down. Euro pound, uh, before we come on to the euro, you can see euro pound here, the lowest it's been since— just bang a little line on there— yeah, May 2017. Um, it had a couple of attempts previously trying to break this area we had in January, February, March, and April, uh, 2019. Couldn't do it. Pushed all the way up to that multi-year high that we had on August 2017, one day above it, and then came all the way back down. Is this a, an amazing place to buy, or is this actually the start now of a complete change of this overall direction? We continue to push lower. Time will, uh, will tell. And of course, the election will have something to do with that. Having a look over at the euro, yesterday, uh, did reach some interesting levels. It could still get dragged higher by the euro— by the pound, of course, if it is of positive Brexit news. But what a key level it is. You can see here you've got the high, the low, a couple lows, a few highs, and more highs again before having a little false break yesterday. So keeping a watch on this, 1.1109, pretty important point has to be said. If that is to hold, not much really could stop it, you would say, until, well, I guess around 1.104 144, but 110 would be the target down to those lower points. Above it, then yeah, sure, we can, we can spread our, our wings and, and get a push, and maybe longer term looking for that 112. So quite well set, the euro, depending on, on your bias, and waiting to perhaps see what's happened if you didn't get in that short yesterday. Another test of that level which comes in just before the, uh, the R1, so be aware of that. And of course, yesterday's high as well. And then you can see on the shorter time frame, yesterday's low is Tuesday's low as well. Really key point if that is to go to the downside. You'll be pretty comfortable in, in holding this short, I would say, almost down to the highs that we had back on the 25th. That comes in around today's S2, whereas, uh, yeah, that high of yesterday above the R1. Also worth keeping an eye on— I, I on the double top we had from the second and the third, just a bit above where we're trading. But dollar a bit weaker, uh, the pound pushing things as well. So keep a watch on, uh, the euro. Of course, gold— yesterday we were talking on the, uh, the briefing just of how significant 1490 was, and you can see here just how well respected that support was before we broke through. First real test and it comes all the way down. However, of course, nothing to do really with that, with the technical side of things. We had the positive trade comments, and, uh, but then we had a bit of weaker US data, which just gave people another chance to get into that trade, and we came back lower. Couldn't break through the pivot, uh, not too surprisingly though. It was the previous high of, uh, of Tuesday as well. So there just shows the importance of that patience, and this was a around, yeah, 320. And we're saying, well, if that was to go, then we could see a further move lower. So that's still something I'd have marked up, 1476.7. To the upside now, uh, you're obviously keeping a watch on that 1490. Longer term, it's just absolutely massive. Uh, more intraday, a couple of decent points just above where we're trading, um, as well. The high of the day coming in around as well as yesterday's resistance, let's call it 1487, just under 85, 1484.7 as well. No real trend lines in the mix of where we're trading now, relatively choppy. It's up, uh, a dollar at the moment, so not too much going on for gold. However, if we just scoot it back a bit, can we get anything from those lows? Let's have a quick look. You can see we almost got a third test of that. So from the low, the second to the third Let's have a look to see what happens, uh, on the test of this low. Do we get an area of support? If we do, obviously could be a good opportunity on that short and break as well of 1476.7. Oil been on a bit of a tear as well. Is this the pound or is it oil? Big push over the last 24 hours. And, uh, let's put this on that 240. You can see if we were looking at this trend channel that we had on yesterday today. Again, I'll just roughly draw this on. You still see we've got a fair bit of, uh, fair way to go before we get the top end of that. But the highs of yesterday and also the highs that we had on the 27th and 22nd are very, very important. Also pretty much the high of the 20th. So 5873 is going to be big. Uh, keep a watch on that, uh, as if that is go and close above, well, $60 could well be the target that people look at. However, of course, it's not guaranteed that that is going to be, uh, well, the direction for the day. So keep a watch on some support levels below $57.50. I quite like the look of— you had all these lows around here from the 27th, broke through it like it was nothing yesterday. However, keeping a watch on that as well. And then also around the S1 looks like a pretty good point, I'd have to to say. Quick look over at equities in the US to, to think, finish things up. R1 important. You've got that retracement point that we had, uh, late trade on the 2nd. Also, you'd say yesterday's high is worth keeping an eye on as it's almost today's high as well. And actually, when you start drawing up these previous highs and lows, you can just see how technical these markets are actually at the moment. R1 yesterday, nice area to to have got short, it seems. But also you can see the low of today is the high of yesterday morning, 3100, well respected as well. 3095, we'll be keeping a watch on that. So, you know, while, uh, this market, you know, as I did recover a fair bit yesterday, still acting pretty technical for either the longs or the shorts. I think if we were to get above the, the high of yesterday, just be aware that kind couple of points above that, you do have the high of Tuesday as well. So it might make that a bit trickier, and maybe focus on the R1 is slightly better there as well. If we were to get a bigger move down in European equities, then, um, then short favoring a break of that level is, is, isn't a bad idea. But you can already see from the DAX there, hits the pivot, hits yesterday's low, almost hitting that trend line, and we bounced a fair bit already. So just shows how, you know, the patience and waiting is key. We actually can see, yeah, pretty much hit that trend line, didn't it? So let's, let's, you know, still have that on. And a break of that, I'll be targeting to the downside. I'm on about here, the previous high that we had around quarter past 5 UK time. Any questions, as usual, please do let us know. Euro pushing higher, the dollar weak, probably dragged high as well by the pound. You've got some key levels above where where we're trading for the euro. Be interesting to see what Alex says when he comes on. Oil could be a busy day, got some very important resistance. Let's just call it yesterday's high, a bit above that. Could really, if that's the break, lead a push towards $60. Equities, who knows, but positive sentiment ruling at the moment. Gold, $1,490, very key to the upside. $1,476.7 to the downside. That contain in that range. Should be a good day. I hope you'll, uh, have a good trading session. Let me know if you have any questions.