I believe that the Fed will next increase the Fed Funds target range in the December meeting and dollar traders may begin to reposition for that this week. There has been a lot of chat recently about the prospect of a September rate hike. Let me say this now, that it will not happen.

1. Weekly Outlook
Monday 5th September by Richard Perry, Market Analyst
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ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such
transactions. You should first carefully consider your investment objectives, level of experience, and risk appetite and only
invest funds you are prepared to lose entirely. For our full risk warning, please go to the end of this report.
WHEN: Thursday 8th September at 1245BST
LAST: 0.0% & -0.40% (main refi & deposit)
FORECAST: 0.0% & -0.4% (main refi & deposit)
Impact: The ECB announces early amongst what could
be a crucial series of central bank policy meetings in
September. No change is expected to policy and so the
fun will come from the press conference. Draghi is likely
to be relatively non-committal but also leaning dovish
preferring a weaker euro. Focus will be on the stagnant
Eurozone inflation despite the increase in QE. Recent
PMIs have been solid if unspectacular and still point
towards a struggle for economic growth generation.
Bank lending will also be in focus as banks continue to
park money at the ECB with negative deposit rates.
Key Economic Events
Date Time Country Indicator Consensus Last
Tue 6th Sept 05:30 Australia RBA monetary policy +1.50% +1.50%
Tue 6th Sept 15:00 US ISM Non-Manufacturing 55.0 55.5
Wed 7th Sept 09:30 UK Industrial Production (YoY) +1.9% +1.6%
Wed 7th Sept 15:00 US JOLTS Jobs Openings 5.58m 5.62m
Wed 7th Sept 15:00 Canada BoC monetary policy +0.50% +0.50%
Wed 7th Sept 19:00 US Fed Beige Book
Thu 8th Sept China Trade Balance (Exports / Imports) -4.0% / -4.9% -5.4% / -12.5%
Thu 8th Sept 12:45 Eurozone ECB Monetary policy (refi & deposit) 0.0% & -0.4% 0.0% & -0.4%
Thu 8th Sept 16:00 US EIA crude oil inventories +2.3m
Fri 9th Sept 02:30 China Inflation (CPI / PPI) +1.7% / -0.9% +1.8% / -1.7%
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1N.B. Please note all times are BST (GMT+1), data source Reuters
Macro Commentary
I believe that the Fed will next increase the Fed Funds target range in the December meeting. There has been a lot
of chat recently about the prospect of a September rate hike. Let me say this now, that it will not happen. For one,
the market is not pricing it, with the CME Group FedWatch tool pricing in the probability of around 20% now in the
wake of the tepid Non-farm Payrolls report on Friday. The Fed likes to really stoke up expectations before it moves.
There has been talk that Yellen’s Jackson Hole speech could be construed as preparation for a hike. No, she would
have been far more explicit if a hike was imminent. Both Yellen and vice-chair Fischer suggested the Fed was
moving towards a rate hike, but did not say that it was there. This ambiguity meant that payrolls needed to be huge
on Friday but they were not. Add in the dip in average hourly earnings, disappointing ISM Manufacturing, slowing
prospects of Q3 GDP (according to the Atlanta Fed GDPNow model) and core PCE inflation refusing to budge,
whilst also notwithstanding the proximity of the Presidential election. The Fed will not hike in September. The recent
dollar rally may therefore begin to run out of steam and this could present some interesting trading opportunities on
forex and commodities as retracements kick in. We are now into September which is jam-packed with central bank
meetings. The RBA, BoC and ECB are all up this week, so the volatility on forex majors is likely to be high.
Must Watch for: ECB monetary policy announcement and press conference
Eurozone inflation
August inflation at +0.2% was lower than expected

2. Weekly Outlook
Monday 5th September by Richard Perry, Market Analyst
Foreign Exchange
After the dollar strength of the past few weeks, are we about to see some retracement moves this week? The
legacy of a rather drab payrolls report should put to bed the prospects of a September Fed hike and therefore
this dollar rally could begin to unwind. The lack of consistency with the economic data has driven some periods
of dollar strength and subsequent dollar weakness in the past few months, and now, once more we could be set
for a further dip. There are some key levels that need to be watched on the dollar pairs, with the euro holding up
above $1.1100 whilst Dollar/Yen is also showing some corrective signs around 104.00. The reaction of sterling
in the past few days would suggest that perhaps the pound is worth backing near term now and therefore we
need to watch the early August resistance at $1.3370. The central bank meetings for the Reserve Bank of
Australia, the Bank of Canada and European Central Bank will add in further volatility to major pairs this week.
The RBA cut by 25 basis points last month to fight low inflation but the strength of the Aussie has not been
curbed at all, whilst the bank is not expected to cut again this time the options are clearly open for further
moves. The Canadian dollar has been hit by the stronger dollar and decline in the oil price, however the BoC is
not expected to move either. The ECB has a problem with inflation and may cut again this year but not
expected to be this month.
WATCH FOR: Fallout from payrolls to hit USD and central bank meetings hitting EUR, AUD and CAD
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2
FX Outlook
GBP/USD
Watch for: The bears have lost control and the
market is now a medium term range play
Outlook: The prospect of a downside break to
new multi-year lows has waned in the past
couple of weeks as sterling has rallied above the
late August high of $1.3280. The move ends a
sequence of lower highs and with the price
having built strongly above a pivot now in place
at $1.3060, the outlook is no longer bearish. This
is reflected in the configuration of the momentum
indicators which are at post-Brexit highs. The
bulls will also be buoyed by the performance of
sterling on Friday amidst the dollar comeback.
They will be subsequently eying the resistance
of the early August high at $1.3370 this week, a
break above which opens $1.3470. The band
between $1.3060/$1.3160 is now supportive.
USD/JPY
Watch for: Breaching 104.00 needs to be
confirmed this week
Outlook: The long term trend channel lower has
been broken by Friday’s remarkable dollar
strength that came in the face of a somewhat
disappointing Non-farm Payrolls report, however
is it sustainable? The breakout on Dollar/Yen
above 104.00 needs to be confirmed and the
early signs are that the bulls are questioning the
move. There are also some key overhead levels
now that need to be breached to confirm the end
of a longer term bear phase. The falling 89 day
moving average has been a key basis of
resistance for major rallies in May and July, and
comes in c. 104.80. A key band of resistance
now 105.50/107.50 has also been pivotal during
much of 2016 and needs to be breached.

3. Weekly Outlook
Monday 5th September by Richard Perry, Market Analyst
Equity Markets
Equity markets have been remarkably muted in recent weeks resulting in a negative drift, however they sprung
to life once more in the wake of the disappointing Non-farm Payrolls report on Friday which seems to have ruled
out a September rate hike. Risk appetite benefits from looser for longer monetary policy from the Fed and
subsequently the markets have pulled higher once more. However, for me there is a feeling that whilst the
punch bowl remains in place at the party, it is running dry. The time for big bull moves is limited. There may now
be some room for upside, but I believe that market valuations look a bit heavy at these levels. According to
Reuters the FTSE 100 is priced on 21 times earnings, with the S&P 500 priced on 20 times. There will be talk of
complacency in the markets once more, with the VIX index falling back towards 12 again, which looks to be
excessively low on a historic basis considering the market is still priced for a likely Fed rate hike in December.
Whilst the VIX is not a predictive indicator (merely a confirmation), it does suggest there is little room for upside
potential on Wall Street now. There could subsequently be a near term uplift on equities in the wake of this
payrolls report, however upside potential could be limited and could be the precursor to a corrective move. Near
term levels to watch this week: DAX resistance at 10,688 and support at 10,443; FTSE 100 resistance at 6885
and support at 6723; with the S&P 500 once more within touching distance of the all-time high at 2193, with
support in the range 2148/2157
WATCH FOR: Central Bank meetings could drive the equity markets with the ECB especially the case
for the DAX and CAC.
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3
DAX Xetra
Watch for: The bulls will be eying the August
high at 10,800 again
Outlook: The big support band between
10,365/10,474 has held intact throughout the
recent corrective phase which is bullish for the
medium/longer term outlook. The technical
configuration of momentum indicators is
subsequently positive and corrections remain a
chance to buy. The strong end to Friday’s
trading will increase hopes of a push back
towards the recent August high around 10,800
this week. Longer term the resistance around
10,850 is also strong meaning around 50 ticks of
barrier to get past to open the key December
2015 high at 11430.
FTSE 100
Watch for: Eying the 6955 high again
Outlook: After a consistent three week
corrective phase for the FTSE 100 the bulls will
now be wondering whether a single strong
bullish candle can flip the outlook positive once
more. The support has been left at 6723 and this
will be seen as another higher low above the key
support at 6612. The momentum indicators have
responded by ticking higher and the technical
outlook has been positive for a while now with
the recent slide having helped to unwind a
bullish outlook. I believe that this move could
now be ready to eye the resistance of the August
high at 6955 once more and potentially above
7000. The technical outlook is still bullish but the
support at 6723 now needs to hold.
Index Outlook

4. Weekly Outlook
Monday 5th September by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Commodities are still being pulled around by the performance of the dollar. However, the recent dollar strength
could now be replaced with a corrective outlook for the greenback and this means that the slide on commodities
could be also set to turnaround. Gold and oil both reacted positively to the dollar weakness on Friday in the
wake of the payrolls report and pulled higher again after periods of decline. Gold pulling back to build from
support around the longer term breakout support range $1300/$1310 particularly catches the eye. I have been
discussing for a while about a retreat to the old breakout around $1306 being a longer term buying opportunity.
The rebound on oil is less certain as the price has been smashed in recent weeks and could still just be a
technical rally. The configuration on indicators remains weak and the market has been unwinding some lofty
expectations of a production freeze at a meeting of OPEC/Non-OPEC countries in Algeria between 26th/28th
September. The realistic prospects of a production freeze remain low and could limit any price rally.
We could see some interesting moves on Treasury yields following the payrolls report. The 2 year Treasury
yield had been tracking higher in August but unless some significantly strong US data comes out, could now
start to come under some corrective pressure. In the Eurozone, it is interesting to see if the German 2 year
Shatz yield drops below the August low at -0.643% as it could be a signal of expectations of a dovish Draghi.
WATCH FOR: Payrolls legacy to impact on commodities and bond yields, with ECB also in focus
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4
Gold
Watch for: Holding on to the support at
$1300/$1310 is key for the long term bull control
Outlook: We have now seen the correction back
to the support band around $1300/$1310 and
the bulls came back in at the end of last week to
prevent the correction from breaking the long
term bull trend. The trend comes in at $1297 and
this suggests that the corrective move should be
a chance to buy once more. The longer term bull
arguments all remain in tact and this support
around $1300 will become increasingly key this
week as a closing break below $1300 with a
breach of the downtrend would be a signal that
the bulls were losing their long term dominance.
Resistance at $1341 is key for a resumed bullish
medium term outlook as this is the resistance
from Yellen’s Jackson Hole speech.
Markets Outlook
Brent Crude oil
Watch for: Pivot bands are key with $45.75
supportive but $48.50 resistance
Outlook: The volatility on oil is ramping up again
and the bulls have still got work to do to confirm
the improvement after the recent correction.
Friday’s bull candle looks to be followed up
today however the configuration of momentum
indicators are still uncertain with the crossover
sell signal on the MACD lines is still a feature.
However, interestingly for the bulls, the RSI
found a low at 40 and if it can hold above here
then the outlook could continue to improve. The
old pivot at $45.75 inside the support band
$45.30/$46.00 is a key floor now, whilst the bulls
need to hold a move above a pivot band at
$48.50 to regain control.

5. Weekly Outlook
Monday 5th September by Richard Perry, Market Analyst
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5
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